www.lawsociety.org.uk
21st Century Consumer Markets A new framework for consumer protection
Contents Forward
2
Policy recommendations
3
Introduction
4
Context The importance of a robust policy regime More complex consumer markets The current consumer policy regime Objectives of reform The wider legal context of reform Structure of the pamphlet
4 4 4 4 5 6 6
Consumer Contract Law
7
Regulating consumer transactions Problems with the consumer contract law framework Examples of problems with the current law Reform of consumer contract law: a new model Sale of Goods Supply of services Digital content Unfair contract terms
7 7 8 9 10 10 11 13
The Enforcement Regime
15
Reforming the enforcement regime Effectiveness of state enforcement A new approach to consumer enforcement Structural reform: the right enforcement institutions Consolidating investigatory powers Moving towards more civil enforcement Private redress
15 15 15 16 16 16 17
Conclusion
18
Annex I: The quality standard for services Annex II: Membership of the Consumer Law Reform
19
Annex III: New public enforcement structure
21 22
Endnotes
24
Reference Group
Foreword The Law Society established the Consumer Law Reform Reference Group (CLRRG) in 2011 when it became clear that the Department of Business, Innovation and Skills (BIS) were planning to overhaul the UK consumer policy framework. The role of the CLRRG is to give expert input into the Law Society’s policy work on consumer policy reform (see Annex II for membership details). The CLRRG contains a wide range of expertise and experience from both the sharp end of practice and policy making. The Group includes:
Commercial solicitors in private practice who advise both businesses (operating in consumer markets) and consumers, who for example, are in disputes with traders;
A number of in-house lawyers from leading (national and international) consumer-focussed businesses.
Lawyers who have extensive litigation experience in consumer law issues (both prosecution and defence); and
Representatives from the consumer charity sector and academia.
The CLRRG is therefore perfectly placed to consider the full-range of policy issues that will inevitably be involved in a wide-ranging overhaul of the consumer policy framework and offer constructive advice to the Law Society on what the Society should say in the reform debate.
Reduces the unnecessary burdens on businesses, which the current regime places on traders.
I was asked to be Chairman of the CLRRG at the time of its establishment and have been pleased to lead the CLRRG through what has been a very busy two years. The debate among the members of the CLRRG has been lively and informed and has helped the Law Society to produce some important, considered and constructive outputs. The latest of these outputs is this short pamphlet, which aims succinctly to make the case for reform of the consumer policy framework and broadly outline some suggestions as to what that reform might involve. The hope is that this pamphlet can contribute to stimulating further debate over the direction and shape of reform and generate more discussion on some of the detailed aspects of reform. The CLRRG and I hope to continue to input into the ongoing work the Law Society is doing on this issue. In the immediate future this means contributing to the public discussion about the draft Bill and in the longer-term the Bill itself.
Fraser Whitehead Chairman, Law Society Consumer Law Reform Reference Group Partner, Head of Group Litigation and Commercial Services Department, Slater & Gordon Lawyers (UK)
The Law Society and the CLRRG are broadly supportive of the Government’s aims to radically overhaul the existing framework. Numerous studies over the last decade have shown that while the UK policy framework is, in general terms, a good one and well regarded internationally, it could be better. The Law Society is keen for the reforms to result in a more effective consumer policy framework, which:
Facilitates the operation of competitive markets;
Enables more consumers to access the redress they need (when they have suffered detriment); and
2 © 2013 The Law Society. All rights reserved. www.lawsociety.org.uk
Policy Recommendations Recommendation 1: Create a new consolidated law setting out a comprehensive set of statutory consumer guarantees, covering the sale of goods, supply of services, digital content and unfair consumer contract terms. Recommendation 2: Align the terminology, definitions, evidential tests and quality and other standards across as much of the law as it is practical so to do.
Turn the new National Trading Standards Board (NTSB) into a powerful national consumer enforcement body, with a remit to not only support and help coordinate the work of Local Authority Trading Standards Services (LATSS) but also undertake national and international enforcement activities. Recommendation 9: Increase the resources available to LATSS and the NTSB, with a particular focus on:
Improving the gathering and utilisation of intelligence by the authorities;
Increasing the breadth and depth of the training of Trading Standards Officers (TSOs); and
Simplify the sale of goods regime, ensuring greater certainty and clarity in the law, in particular in relation to remedies.
Pursuing a policy of greater specialisation among TSOs.
Recommendation 4:
Recommendation 10:
Reform the law governing the supply of services to consumers by simplifying and clarifying the existing law and making it stronger where it currently contains gaps, to ensure the new law offers a comprehensive regulatory framework for the provision of consumer services.
Modernise the investigatory powers available to TSOs and consolidate them into one comprehensive law.
Recommendation 3:
Recommendation 5: Bring fully within the consumer protection regime the supply of digital content to make sure consumers buying digital content are fully protected and no longer have to rely on an ad hoc mix of EU and UK law, encompassing intellectual property, unfair contract terms, distance selling and e-commerce rules and general contract law.
Recommendation 11: Encourage a shift towards greater use of civil enforcement by making more civil enforcement powers available to the regulatory authorities. Recommendation 12: Create an environment where it is easier for individuals to get redress by:
Taking forward plans to facilitate private collective actions in competition cases in the first instance, with a view to possibly extending such rights e.g. to infringements of consumer law;
Helping consumer and traders to make more and better use of Alternative Dispute Resolution (ADR) for low value businessto-consumer disputes; and
Avoiding measures which will disincentivise individuals from bringing legitimate claims.
Recommendation 6: Align the digital content regime with the goods and services regime where this is practical, but make sure the new consumer protections take into account the unique attributes of digital content. Recommendation 7: Consolidate, clarify, update and enhance (where necessary) the current law on unfair business-to-consumer contract terms. Recommendation 8:
3 © 2013 The Law Society. All rights reserved. www.lawsociety.org.uk
innovation if consumers are active and willing to adopt these new products. In this respect, consumer protection can ensure that competition results in the 'right' kind of innovation, aimed at addressing consumer demand and improving processes, not at obfuscating consumers.2
Introduction Context The Government recently published its draft Consumer Rights Bill.1 This very significant piece of legislation offers an opportunity to radically reform the UK’s consumer protection framework. The Law Society has been closely involved in the public debate on reform over the last two years. Taking inspiration from the Government’s draft Bill, this short pamphlet considers why the consumer policy framework needs reform and what kinds of changes would help to create a more effective regime fit for 21st century consumer markets.
The importance of a robust policy regime It is vital to have an effective consumer policy regime that sets the parameters within which competitive markets operate. This result can only be achieved through having a clear legal framework to govern business-to-consumer transactions alongside a robust enforcement regime to ensure businesses trade fairly with consumers. A strong legal foundation plays a key role in generating the right incentives for businesses and consumers. It can have a significant effect on behaviour, enabling or deterring consumer choices by:
Facilitating the trust needed by the consumer initially to engage in consumer transactions; and
Underpinning consumer confidence in all consumer markets, over the long-term.
The benefits of high levels of trust and confidence are substantial:
This strong relationship between a clear, simple and effective consumer policy and a range of positive economic outcomes, such as a strong and sustainable demand side, better and more intense competition in consumer markets, has recently been reiterated in a report by ICF/ GFK for BIS.3 4
More complex consumer markets Consumer markets have become much more diverse and complex over the past 50 years. This is due to a number of factors, including:
Ever faster rates of technological change leading to an exponential growth in the availability of consumer products and services;
Diversification in consumer tastes; and
The development of more sophisticated ways of reaching and selling to the consumer, by businesses.
The acceleration in these trends over the last 20 years in particular has resulted in the consumer legal framework lagging behind the market. The existing regime has become less and less capable of dealing with the problems which arise in consumer markets.5 Sensible reform, to create a durable and effective consumer policy framework, will help reduce the total number of problems experienced and the quantity of detriment suffered by consumers for decades to come.
The current consumer policy regime When consumers trust firms and markets (because of consumer protection) and when consumers actively choose and buy what is best for them (with the aid of consumer protection), then firms will compete fairly to deliver what consumers want, in order to gain business from each other...Active consumers with the confidence to engage in markets will, in turn, act as a driver for economic growth. Firms can only gain from
A simplified overview of the current consumer policy regime is given in Diagram 1 (below). It breaks it down into three key component parts: the public enforcement authorities (their organisation and powers), fair trading laws (mainly enforced by the public authorities) and rules regulating the business-to-consumer transaction (some of which are enforced by the public authorities and some which rely on private enforcement).6
4 © 2013 The Law Society. All rights reserved. www.lawsociety.org.uk
Each of the three component parts has evolved rather piecemeal over a considerable period of time through:
Numerous domestic legislative initiatives;
Domestic case law; and
The growth of the European Union (EU) legislation, including the ‘consumer acquis’7 and other relevant rules.8
This fragmented and disjointed development has resulted in a policy framework with:
A general lack of coherence;
Gaps in the law, which need to be filled; and
Unnecessary complexity, which requires simplification.
Diagram 1: main components of UK consumer policy
If some of these negative consequences could be reduced there would be considerable gains to be had for consumers, businesses and the wider economy. BIS for example have estimated that their proposals for consolidation and simplification, in the draft Consumer Rights Bill, could result in a net benefit to the economy of £4bn over ten years.11
Objectives of reform An ambitious reform agenda must have a set of clear and achievable high-level objectives to guide policy development. The overall objectives of reform of the consumer policy framework must be:
A stronger rule of law to underpin consumer markets and the reinforcement of the principle of free and equal contracting parties;
Greater access to justice for consumers who suffer detriment and businesses trying to compete fairly; and
More efficient and competitive consumer markets.
EU Law UK Law
Enforcement Agencies
Fair trading laws
Public enforcement
Consumer contract law
Private redress
While it is important not to overstate the problems with the current policy framework for example, the level of consumer protection is relatively high9 - it is clear that the system overall is not as effective as it could be, due to those deficiencies identified above. The consequences of the continuation of the current consumer policy framework include:
Significant numbers of consumers not getting the redress that they deserve, thus limiting their access to justice;
Decreasing confidence in the rule of law10 as it continues to be undermined by significant levels of infringement;
Reduced confidence in consumer markets resulting in consumers purchasing less and making more risk averse decisions;
An uneven playing field for those businesses that are trying to compete fairly, with good businesses being undermined; and
A ‘chilling effect’ on the competitiveness of markets.
To achieve these high-level objectives consumers and businesses need a clear and simple legal framework, which:
Both consumers and businesses can understand and have confidence in;
Increases consumers' knowledge and understanding of their rights;
Makes compliance easier for businesses;
Increases consumers’ access to redress and reduces the quantity of consumer detriment;
Enables consumers to be the central driver of more competitive and dynamic markets, through creating a better incentive structure, which generates high levels of trust and confidence in consumer markets; and
Helps reduce the number of poor businesses in consumer markets, which undermine genuine competition based on quality, price and innovation.
5 © 2013 The Law Society. All rights reserved. www.lawsociety.org.uk
problems with minimising the burden on business.
The wider legal context of reform Consumer policy is a shared competency under the EU Treaties. Therefore UK consumer policy has to be conducted within the limits laid down by the EU.12 In recent decades the UK Government has implemented a significant number of statutes resulting from EU legislation (e.g. the Unfair Terms in Consumer Contracts Directive, the Unfair Commercial Practices Directive, the Distance Selling Directive, the Package Travel Directive and the E-Commerce Directive13 to list only a few14). Cumulatively these and other EU measures constitute a significant proportion of the body of UK consumer law. However, the most recent and directly relevant example of EU legislation in the area of consumer law is the Consumer Rights Directive (CRD).
The second discusses some of the deficiencies of the current public enforcement regime and outlines ideas as to how those problems might be ameliorated through the creation of a stronger and better coordinated enforcement regime, supported by a reformed set of powers for the enforcement authorities along with the encouragement of more individual redress.
The proposals argued for in this pamphlet are made in light of this wider legal context. The implications of this approach are that:
In some areas the UK Government is bound by EU policy and cannot deviate from it or legislate on an issue; and
In other areas it makes sense to align UK law with EU law in order to achieve simplicity. This is particularly the case when it comes to some of the basic concepts, which cut-across the whole of consumer law (e.g. definitions of key terms such as ‘trader’, ‘consumer’ etc).
Structure of the pamphlet This pamphlet summarises some of the key deficiencies in the current regime and suggests some directions for reform which will lead to a more effective consumer policy regime for the 21st century. To do this, this pamphlet is divided into two parts:
The first deals with the issue of consumer contract law and some of the most salient problems with the current regulatory regime and suggests ways that these might be remedied in order to create, in the UK, one of the most robust and modern consumer contract frameworks in the world. A framework appropriate to modern and complex consumer markets, balancing the need to correct market
6 © 2013 The Law Society. All rights reserved. www.lawsociety.org.uk
Consumer Contract Law
A simpler legal framework that is easier to comply with, reducing compliance costs; and
A more robust demand side, as a consequence of the higher levels of trust and confidence consumers will have and a greater willingness among consumers to risk making purchases of new products and services from new providers.
Regulating consumer transactions Consumer markets suffer from a number of widely identified shortcomings. These include: imperfect information about products and market prices; the search and other costs which consumers incur trying to obtain market information; behavioural biases among market actors; the costs to suppliers of marketing; the incomplete knowledge and bounded rationality of consumers. In addition, consumer contracts are asymmetric in nature15 i.e. they:
Are pre-drafted by one party;
Cannot be altered or re-negotiated. i.e. the transaction is usually on a ‘take-it-orleave-it’ basis;
Are executed between unfamiliar parties with unequal market power and sophistication; and
Are often offered by agents who act on behalf of the seller.
The asymmetric nature of consumer contracts compounds the various shortcomings of consumer markets outlined above. Together these factors offer a strong set of reasons why a sensible and modern framework of consumer protections is required. Having such a framework in place will increase the levels of trust and confidence among consumers in both individual transactions and consumer markets in general and uphold the principle of freedom of contract (among equal contracting parties) in the face of ever more complex consumer markets. As well as the benefits to consumers there are also considerable benefits for business from a strong and clear set of rules governing business-to-consumer contract formation, as long as:
The regulation is measured in its extent and in the obligations it places on sellers;
Any rules are drafted as simply as possible; and
Implementation and enforcement is consistent and robust.
The benefits for business include:
The overall result will be a consumer better able to drive competition in consumer markets. At the same time good businesses, who are concerned with their customers and who can offer quality products at prices consumers want to pay will be supported through a set of strong minimum standards, underpinning the market.
Problems with the consumer contract law framework The current consumer contract framework can be seen as comprising four main (and interlinked) components:
Laws on the sale of goods;
Laws governing the supply of services;
An ad-hoc mix of EU law and UK law (e.g. distance selling rules, e-commerce laws, intellectual property law, unfair contract terms rules and general contract law) governing the purchase of digital content; and
Laws regulating unfair contract terms in business-to-consumer contracts.
While the UK consumer contract regime offers a relatively high degree of protection it does contain a number of identified failings. The laws governing consumer contracts - such as the Sale of Goods Act 1979 and the Supply of Goods and Services Act 1982, among others are overlapping, complex and expressed in outdated language.16 There are at least twelve pieces of legislation17 covering the main four components that constitute the body of consumer contract law, which is an unnecessarily complex legal landscape. The consequence is that it is difficult for consumers to understand their rights and enforce them. It is also unnecessarily burdensome for business to comply with.
7 © 2013 The Law Society. All rights reserved. www.lawsociety.org.uk
Rights that are not understood are harder to claim. This results in a situation where they are of little practical value: So long as consumers’ rights are not transparent, they will not be accessible by consumers. In turn, having rights that are not accessible can be tantamount to not having any rights at all. Therefore, for consumer empowerment, not only should consumers have the necessary rights, but they should also be aware of these rights and be able to access these rights when they need to.18 Research by the Office of Fair Trading (OFT) found that a high proportion of consumers (37%) were not knowledgeable about their consumer rights. Just under a quarter of consumers claimed they would not feel confident exercising their rights.19 Of equal concern was the fact that the OFT found that 48% of consumer-facing businesses did not know any areas that consumer protection rules applied to.20 Consumer Focus’s ‘Consumer Detriment 2012’ report estimated that there were nearly 16 million problems, related to the purchase of goods and services, experienced by consumers in 2012.21 This equated to approximately £3.08bn worth of financial detriment. The average amount of financial detriment per person (who experienced a problem) was £196. In over a third of cases the problems remained unresolved and over 10% were only partly resolved.22
Examples of problems with the current law Illustrations of how the current legal framework results in such large figures for overall consumer detriment can be found in relation to the issue of the supply of consumer services and digital content.
Specific problems with the current law: services Consumer Focus commissioned research23 found that, overall 30% of all problems reported by consumers relate to services. The research showed that there were an estimated 5.8 million problems experienced by consumers in the regulated services sector24 in 2012 and 2.4 million in both the leisure sector25 and financial and professional
services sector.26 Approximately 7% of consumers experienced a problem with regulated services, 4% with financial and professional services and 3% with personal goods and services.27 28 A report for BIS by Professors Geraint Howells and Christian Twigg-Flesner29 highlighted that consumers find it very difficult to understand their legal rights under the current law. Furthermore, the absence of clear statutory remedies makes services law even less comprehensible, effectively disenfranchising consumers from exercising their rights.30 The opacity and complexity of the law needs to be reduced, in particular: the ability of service providers to exclude or limit liability needs to be tackled and the lack of a clear set of available remedies.31 Reform which simplifies the current law on services making it more transparent and plugs the gaps where they exist would have a number of positive outcomes for consumers, service providers and consumer services markets, by:
Increasing the trust and confidence that consumers have in service providers, incentivising more purchases and less risk averse purchases, reducing the risk of trying a new service or switching service provider; and
Enabling individual consumers, who suffer detriment, to more easily get redress and help drive out poorly performing providers from the market.
Specific problems with the current law: digital content The failure of the law to keep pace with technological changes is particularly noticeable in relation to the purchase of digital content. The law in this area is very unclear leading to a good deal of unnecessary uncertainty. For example, it is not clear in consumer law what constitutes digital content and what specific remedies are available for the typical consumer if digital content is defective.32 Indications of the need for reform are reflected in recent data collected by Europe Economics.33 They found significant levels of detriment experienced among UK consumers who purchase various types of digital content. The data suggests relatively high and
8 © 2013 The Law Society. All rights reserved. www.lawsociety.org.uk
consistent levels of problems occurring across a number of digital content markets. Chart 1: Problems experienced by consumers: digital content
components (the sale of goods, supply of services, digital content and unfair contract terms) of consumer protection law. It should be a statute which sets out a comprehensive set of consumer guarantees35 and move away from the current implied terms model. Similar to the New Zealand Consumer Guarantees Act 1993. The new statute should apply narrowly to business-to-consumer contracts. In order to be as simple and clear as possible the terminology, definitions, quality and other standards and evidential tests should be harmonised to the greatest extent possible. The new law of consumer guarantees should also codify and align (to the greatest extent possible) all remedies, which should reflect the reality of business practice.
Aligning terminology, definitions, standards and tests
34
Data: Europe Economics
In order to reduce these relatively high levels of problems, a clear regulatory framework can only help. The current ad hoc mix of laws which apply to the purchase of digital content and inevitable gaps in coverage not only curb the ability of consumers to obtain redress when they experience a problem but are likely to have an inhibiting effect on the demand for digital content, in particular discouraging consumers from taking chances on purchasing from new entrant providers. While reform of the law would not solve all the problems, a clear and simple set of new laws to govern business-to-consumer transactions for digital content could help reduce the levels of detriment experienced by consumers.
Reform of consumer contract law: a new model A new model of consumer protection that is more appropriate to consumer markets of the 21st Century will be simpler and clearer, consistent across the four categories (which constitute consumer contract law), relevant to how modern markets work and as future-proof as possible, in order to ensure the new regulatory framework endures over time. A reformed consumer contract law should be a single statute covering the four main
The first step in simplifying and rationalising the consumer policy regime is to align as many of the basic cross cutting concepts as possible. This should include the key definitions (e.g. consumer, trader, good, service and digital content etc.36 37) across as much consumer legislation as possible. Harmonising the language and the definitions of the key common terms in new consumer legislation will bring considerable simplification benefits to public enforcement agencies, businesses and consumers. The constitutional position of EU law means that the objective of simplicity is, on most occasions, likely to require the alignment of domestic law with EU definitions, standards and tests where they exist. In some cases harmonisation with EU law may mean a practically inferior definition, standard or test. There may also be more than one EU definition, for example, ‘consumer’ is defined slightly differently in different EU Directives. While alignment should not be indiscriminately practised the presumption should be for alignment, subject to a rigorous analysis in each case. On balance, the advantages of alignment are in most cases likely to outweigh the disadvantages of an inferior definition, standard or test, but not in all situations. In cases of numerous inconsistent EU definitions, standards or tests, then the best option is likely to be to adopt the most futureproofed and most recent definition, with the
9 © 2013 The Law Society. All rights reserved. www.lawsociety.org.uk
hope that at some point in the future, the EU may rationalise and consolidate some of these key concepts. Where no EU definition, standard or test exists but there are multiple versions in domestic law, one domestic definition or test should be chosen to be the definition across all consumer law. That definition should be the most neutral and future-proof definition possible. Policy makers should not shy away from creating new definitions where circumstances make that the most effective way forward.
Sale of Goods Simplification and rationalisation Of the four key areas of consumer contract law, the rules relating to the sale of goods are in least need of extensive reform. The law relating to the sale of goods is fairly well established and comparatively (e.g. to the laws on services and digital content) clear and comprehensive. For example, the existing rules offer a tried and tested quality standard, clear liability for problems and a well understood set of remedies. However, with nearly a third of problems reported by consumers related to goods38 there is still some room for improving the framework through some specific changes to the rules on the sale of goods. The main changes needed in relation to the sale of goods are:
Clarification;39
Alignment of terminology and definitions;
Consolidation into one statute; and
Modernisation of remedies to reflect business practice.
For example, repair and replacement should be recognised as the first tier of remedies (within a two-tier structure) available to consumers, with clear rules around the use of the remedies e.g. fixed rules on the period for the rejection and return of faulty goods and on the number and time allowed for repairs or replacements before second-tier remedies become relevant.
The Supply of Services The wide variety of consumer services requires careful changes to the law There are over three hundred thousand businesses in the UK providing services to consumers.40 This equates to approximately 72% of business selling into consumer markets. Overall, services (of one sort or another) make up 77.8% of UK Gross Domestic Product (GDP).41 Consumer services can be broken down into distinct types:
Services that lead to the production of goods;
Services that involve working on existing goods such as repair services; and
Services that involve no physical item at all e.g. the delivery of telecommunications services.42
The wide variety of activities that fall within the definition of a service illustrates how widely the services framework has to apply. In contrast to the law on the sale of goods, the law on the supply of services is in need of more extensive reform in order to make it fit for the 21st century consumer economy. Reform has to be undertaken carefully in order to avoid unintended consequences. The law governing the supply of services is currently very complicated and unclear to both consumers and businesses. The incoherent and disjointed rules which govern the supply of services reduces the incentives faced by the consumer to drive the market in services towards greater efficiency, higher levels of consumer satisfaction and lower levels of consumer detriment. The existing law incentivises consumers, for example, to be risk averse, stick with who they know and tolerate problems because of the uncertainty they face as to whether they can take action to try and get some form of remedy. Consequently the state of the current law undoubtedly contributes to the relatively high levels of consumer detriment experienced by those purchasing consumer services.
Simplicity and clarity As with the law on goods the first important step is to make the law as simple as possible through re-drafting and consolidation, as part
10 © 2013 The Law Society. All rights reserved. www.lawsociety.org.uk
of the creation of a comprehensive set of consumer guarantees. Such a simplification should include the alignment of terminology, definitions, quality and other standards and evidential tests where practical to do so. Changes along these lines would create a much more transparent law on the supply of services and bring substantial benefits, including:
A better understanding by consumers of their rights in relation to the purchase of services;
Better access to redress, where the current law makes redress difficult for all but the most determined consumers; and
Easier and less burdensome compliance for business.43
Unlike the law on goods where, at worst, there were some easily solvable deficiencies, which needed to be corrected, the law on services effectively raises obstacles for new firms trying to reach out to potential new customers and through increasing the risk factor faced by consumers who may be looking at alternative suppliers. Closing these gaps can facilitate a more effective demand side. Particular attention needs to be paid to:
Creating a clear set of remedies, aligned with those of goods, to the greatest extent possible;44
Clarifying the quality test with regards to services, which is currently opaque and often means that neither supplier or consumer has much idea of the standards they are expected to provide or receive and therefore what might constitute a breach of the statutory terms45 (for further discussion on this please see Annex I);
Ensuring that suppliers cannot limit their liability in relation to statutory consumer guarantees;46 and
Ensuring there are clear rules on precontractual information.
information, which should require key contract terms to be presented in a clear and prominent manner a reformed law on the supply of services will transform the incentives consumers face, enabling them to be much more discerning and adventurous consumers of services and create the demand for more and new services.
Digital content The biggest gap in the current legal framework The area of consumer contract law most in need of reform is that of digital content. Currently there is at best only a partial set of specific protections in the law governing the supply of digital content to consumers. These largely derive from EU measures, such as the Distant Selling Regulations (soon to be superseded in UK law by provisions in the Consumer Rights Directive) and the Unfair Terms in Consumer Contracts Regulations (UTCCRs) 1999. Those aspects not covered by specific EU law are governed by IP law, domestic rules on unfair contract terms and general contract law. Professor Robert Bradgate analysed the current state of the law in relation to digital content in a comprehensive report for BIS, published in 2010.47 He concluded that the current law does not offer adequate protection for consumers and that there is a significant gap in the current framework governing contracts for the supply of digital content to consumers.48 Professor Bradgate’s arguments appear to be consistent with the data from Europe Economics, which uncovered relatively high levels of consumer detriment in relation to a number of types of digital content.
The ‘unique’ nature of digital content In contemplating change to the law governing the purchase of digital content the first task is to define digital content. The EU defines digital content as something sui generis i.e. something qualitatively different to both a good and a service.49
Sensible changes to incentivise more confident consumers
On balance a sui generis definition will help the law take account of some of the inherent differences between digital content and traditional goods and services. These include:
Sensible reform, along the lines described would be a positive development. In conjunction with reforms to contractual
It is more difficult to return faulty digital content;
11 © 2013 The Law Society. All rights reserved. www.lawsociety.org.uk
It is more difficult to test for and prove the existence of a fault;
The barriers to copying and unlawful reproduction are much lower;
The complicated supply chain and technological interdependencies involved in delivering digital content blur the lines of liability for breach of contract;
The business model most widely used to supply digital content is one of licensing the content. As part of this model content is often published containing imperfections but later ‘repaired’ or is updated to ensure continued operability; Both hardware and software develop rapidly, which can make laws that are too narrow or rigid outdated very quickly.
For the above practical reasons and because EU law has created a separate definition, there are good arguments for following the latter and adopting a sui generis definition across all UK consumer law and thus creating a third category of consumer product. There is a good argument for adopting the definition used in the Consumer Rights Directive50 and thus creating a separate and third type of product. While the EU definition is not the best possible definition (e.g. it is vague) but the benefit of simplicity in this case is likely to outweigh the downsides of developing a different domestic (albeit superior) definition.
Technological neutrality New rules for regulating the purchase of digital content should be formulated in as technologically neutral a way as possible. This should be possible by focussing on behaviour rather than referring to specific technologies or attributes. Such neutral drafting will help guard against the law becoming outdated too quickly.51
Specific adaptations of the law may be necessary As with goods and services, alignment where practical, should be the rule in relation to digital content too. For example, there could be some alignment in relation to remedies:
Repair and replacement are reasonable remedies for digital content (albeit replacement is likely to be more widely used);
As with goods, it is likely to be sensible to limit the number of times such remedies can be offered (before moving onto second tier remedies of refund;52 53
Similar to the goods regime liability should fall on the merchant.54
Despite the general rule of alignment, the nature of digital content means that there is a strong case for some adaptations to be made to the basic regulatory framework in order to take into account the unique aspects of digital content. For example:
The right to reject is unlikely to be appropriate;
The quality standard55 is likely to need to be adapted;56 and
The law will need to accommodate the common industry practice of continuous updating and repairing of software by the publishers.
Business models which offer ‘free’ content or open source pose further issues for policy makers. The free model is often paid for either by advertising or the collection of a consumer’s data. This raises the question as to what kind of remedy should there be for consumers of ‘free’ digital content? This issue requires consideration by Government but the driving principle should be that where there is a contract57 there should be a remedy if there is breach of that contract.
Transparency in the online purchase process The final element that is vital to the creation of an effective new set of rules to govern the purchase of digital content is clear and sensible provision of pre-contractual information to consumers. Distance purchasing of digital content, where the consumer is unable to examine the content before downloading it, makes good pre-contractual information a vital factor for the consumer. As a consequence businesses need to give the consumer clear information. The rules governing the provision of precontractual information need to ensure that:58
The seller offers a transparent purchase confirmation process;
Content for purchase is accurately described; and
12 © 2013 The Law Society. All rights reserved. www.lawsociety.org.uk
The online business identity is clear.
In this area EU law creates the context. Additional UK rules will have to work with what the EU has prescribed. The rules are about to change with the imminent implementation of the Consumer Rights Directive (CRD).59 While some of the details of the CRD may be open to criticism, the underlying principle it embodies is a sensible one i.e. that the online shopping experience needs to be as transparent as possible and those shopping online need to be able to access the right information to be able to make an informed choice about their purchase.
Unfair contract terms Clarifying the current regime The final area of consumer contract law which needs reform is the set of rules which relate to unfair consumer contract terms. Extensive analysis has already been done in this area. The Law Commission recognised the need for reform back in 2005 when it published a set of proposals to consolidate the Unfair Contract Terms Act (UCTA) 1977 and the Unfair Terms in Consumer Contracts Regulations (UTCCR) 1999.60 More recently BIS asked the Law Commission to look again at their 2005 proposals with the intention of reforming the current law, based on revised proposals from the Law Commission.
The importance of protections against unfair contract terms Laws protecting consumers from unfair contract terms go back a relatively long way in the UK (e.g. the UCTA became law in1977). Such protections are important in the context of consumer contracts because they are asymmetrical, being pre-drafted and offered on a ‘take-it-or-leave-it’ basis. Thus they both reflect and compound the inherent imbalance in the business-to-consumer transaction. The imbalances have worsened over the last few decades, as the complexity of such contracts has grown enormously, through the growth in the availability of more and more sophisticated and complicated consumer products and services. In the face of such rapid change, preserving the principle of free and fair contract (i.e. equal parties able to freely enter into a contractual relationship with each other) requires
consumers to be granted some protection against unfair terms. The problems that unfair terms create are evidenced by Consumer Focus research. They found that between four and ten percent of all consumer problems are related to unfair contract terms.61 The position has not been helped by case law, as recent case law has further complicated some aspects of the law on unfair contract terms.62 By reinforcing the principle of freedom of contract, protection against unfair terms enhances the trust and confidence consumers have in businesses operating in consumer markets. It strengthens the incentives to be active consumers willing to take more risks and be more discriminating (e.g. try new products and explore new suppliers) helping drive market competition. Rules against unfair terms also help level the competitive playing field for businesses, leaving space to compete on price, product and added value, in the knowledge that the opportunities for the competitor businesses to ‘game’ consumers through obscure and opaque contract terms are reduced.63
How unfair contract terms rules should be changed The EU’s Unfair Terms in Consumer Contracts Directive (UTCCD) sets down minimum standards in relation to unfair contract terms, which the UK cannot derogate from. The minimum harmonisation nature of the Directive leaves some room for the UK Government to make some enhancements Consistency, simplicity and greater transparency need to sit at the heart of a reformed set of rules on unfair contract terms. To achieve these ends a number of changes should be made the current law. These are likely to require the careful and detailed redrafting of a number of aspects of the current framework. The priorities areas for reform should include:
The consolidation of the two major pieces of legislation (the consumer parts of the UCTA 1977 and the UTCCRs) into the new comprehensive set of statutory consumer guarantees alongside the reformed rules on sale of goods, supply of services and digital content, ensuring the harmonisation of terminology, definitions and evidential standards;
13 © 2013 The Law Society. All rights reserved. www.lawsociety.org.uk
Clarification of the law where it is currently unclear and creates uncertainty. This should include: o
o
o
Elucidating more strongly what constitutes a ‘core term’ of a businessto-consumer contract and what is a ‘non-core’ term64; Creating a more certain standard for evaluating the transparency and prominence of contractual terms; and More certainty as to the status of the ‘Grey List’ i.e. all the types of contract term contained within it should be considered unfair by the law65.
14 © 2013 The Law Society. All rights reserved. www.lawsociety.org.uk
Public enforcement and private redress Reforming the enforcement regime The other two elements in the consumer policy framework are the fair trading laws and the powers and organisation of enforcement by the authorities. An effective consumer policy regime needs an appropriately resourced and capable state enforcement apparatus, with the right powers at their disposal, to work alongside and support empowered and active consumers. Under the Government’s newly reformed enforcement regime, the bulk of the responsibility for enforcement is split geographically between Local Authority Trading Standards Services (LATSS). The LATSS are supported by the new National Trading Standards Board (NTSB) providing assistance and facilitating coordination between the LATSS with some national enforcement capability. In particular the new structure is aimed at helping cross boundary cooperation and encouraging the ‘lead authority’ model.66 While these reforms are likely to improve enforcement at the local and regional level, they are unlikely to deal as effectively with national and international enforcement activity as a strong national authority.
Effectiveness of state enforcement In 2011 the National Audit Office (NAO) outlined a host of problems with the then public enforcement regime suggesting there was considerable scope for improving its performance.67 The NAO report described an uncoordinated system where the vertical and horizontal splits in responsibility between different enforcement authorities resulted in enforcement gaps at the regional and national levels. The reliance on a highly localised structure, with LATSS of varying degrees of size and capability, incentivised the prioritisation of local issues over regional and national problems68. The NAO suggested that the result of the complexity and unevenness of the institutional make-up resulted in around £4.8bn worth of
consumer detriment per annum69 that was not being effectively dealt with. Consumer Focus found a similar figure for total consumer detriment in the UK due to the use of unfair commercial practices by businesses, of somewhere in excess of £3bn.70 Tackling unfair commercial practices is largely a task for public enforcement authorities. This figure can be seen as a useful proxy for the extent of the detriment consumers are experiencing as a result of a poorly performing public enforcement regime. An area which has been identified as being particularly deficient in the recent past is enforcement against online businesses, which are breaching consumer regulations.71
A new approach to consumer enforcement The Government reforms are still ‘bedding-in’ but while they offer the prospect of better coordination between LATSS at the local and regional level, there is still likely to remain a national (and international) enforcement gap. In addition to a continuing enforcement gap at the national level, BIS have correctly identified that:
There are considerable problems with the current law in relation to the investigatory powers available to enforcement agencies;72 and
There is scope for making available a wider range of sanctions and remedies to enforcement bodies.
Reform should rest on four equally important components if a step-change in consumer enforcement and access to redress is to be engineered in the UK. The four components are:
Strengthening the recent institutional changes to the enforcement regime, to improve national enforcement capability;
Simplifying the rules governing the investigatory powers of enforcement officers. The current situation can be described as disjointed at best with powers spread out across approximately 60 different pieces of legislation.73 The statutory framework needs consolidation. There are also sensible modernisations that can be made to some of the powers available to enforcement officers;
15 © 2013 The Law Society. All rights reserved. www.lawsociety.org.uk
Facilitating a shift towards greater use of civil enforcement by TSOs. This will result in more civil enforcement that is swifter and cheaper for enforcement authorities than criminal actions and can result in just as good outcomes in most cases; and Enabling the individual consumer to have more of a role in enforcement by avoiding measures which make it harder for consumers to take action to get redress and taking positive but measured steps to facilitate it where it can improve on the status quo.
Structural reform: the right enforcement institutions The Government’s reforms to the institutional make-up of the consumer enforcement regime are likely to lead to some improvement in terms of reducing the current levels of detriment identified by the NAO. However, the reforms risk leaving a considerable capacity gap at the national level and in the resources available to both the NTSB and the LATSS. A relatively weak national authority that focuses mostly on supporting the work of the LATSS is unlikely to be enough to create the step-change in enforcement that is needed. The new structure needs to be built on by significantly strengthening the NTSB. The goal should be to create a genuinely effective national authority largely concentrating on consumer enforcement along with supporting the LATSS with expertise, intelligence, funding and spreading best practice. More details on how such a system might be organised are set out in Annex III. The new regime would need to be accompanied by a number of other changes to make it truly effective. These should include:
Professionalising further the role of the TSO, raising skill levels with high quality basic qualifications and encouraging a more highly-specialised profession by expanding the specialist training opportunities and qualifications available;
Examining the case for the creation of specialist prosecutors for consumer offences to better support both local and national enforcement activities; and
A significantly improved intelligence gathering, analysis and sharing capability, with the NTSB at the centre.
Consolidating investigatory powers The second step towards a more effective consumer enforcement regime is to make sure agencies have a clear set of robust and up-to-date investigatory powers at their disposal, which enable them to adequately investigate rogue traders. The fragmented framework of investigatory powers unnecessarily complicates enforcement and hinders effectiveness. It would be considerably easier if there was a single consolidated law, with consistent drafting, which sets out clearly and comprehensively the powers of consumer enforcement bodies.74 The creation of a single statute of investigatory and enforcement powers for TSOs should be an opportunity for simplification and modernisation.75 Having all the powers available to TSOs in one place, at the same time making sure they are adequate to dealing with the diverse types of problems present in 21st century consumer markets, should help the enforcement authorities immeasurably in policing markets.
Moving towards more civil enforcement In addition to a simplified set of investigatory powers, an effective consumer enforcement regime requires the authorities to have available to them a proportionate range of sanctions against those who do not comply with the law. While enforcers have significant criminal powers, use of civil enforcement powers is less extensive in the consumer area. Greater use of civil enforcement would not only reduce the cost of enforcement, enabling existing resources to stretch further but would also enable swifter action. A civil response to an infringement of the law can be a more a proportionate response than a criminal action, while delivering an equally satisfactory outcome. Encouragingly both the current and the previous governments recognised the need for more civil enforcement powers in the area of consumer policy:
16 © 2013 The Law Society. All rights reserved. www.lawsociety.org.uk
The current Government has proposed extending the use of Part 8 of the Enterprise Act 2002;76 77 while
The previous Government proposed a new regime for civil sanctions in the Regulatory Enforcement and Sanctions Act 2008 (RESA).78
Both measures have merit and would be likely to improve the civil enforcement regime. Although RESA, in particular, is a well drafted law and offers a proportionate and effective way forward to encourage the use of civil enforcement.79 Extending use of Part 8 of the Enterprise Act 2002 could give the authorities more flexibility in their use of civil enforcement. However, Part 8 requires reform if it is to play an expanded role.80 The extension of the use of civil sanctions must avoid putting too much discretionary power into the hands of regulators, with the Court playing a pivotal role in their wider use.
positive step towards creating a strong enforcement regime. An important move in improving access to redress is the proposed package of reforms to facilitate private collective redress actions, in cases of breaches of the competition rules.83 There are strong arguments for the Government to consider widening the grounds for actions and to include breaches of consumer law. Greater scope for private collective action needs to be complemented with more opportunities for private individual redress (e.g. through the encouragement of the use of consumer ADR mechanisms, for low value business-to-consumer disputes). In addition, changes which damage or undermine the capacity of consumers to bring private actions where necessary (e.g. to litigation funding) need to be avoided.
Private redress Public enforcement authorities will never be able to tackle all infringements and remedy all of the detriment that consumers experience. This inevitably means a continuing enforcement gap. The consequence will be that some miss out on accessing the justice they deserve. Therefore, in order to reduce the instances of detriment that remain unremedied (even after the types of reforms supported in this pamphlet) more scope should be given to private enforcement.81 Enabling consumers to bring their own actions when they have suffered detriment would:
Reduce pressure on the public authorities;
Result in more consumers being able to access redress in more instances; and
Mean that greater numbers of businesses, who are not fully complying with current rules, are deterred from continuing to do so. While those businesses that are complying and trying to compete on quality, price and through innovation will have their position bolstered.
Measures which facilitate the ability of an individual to seek redress directly e.g. by reducing the cost barriers and making it more economical,82 would therefore be a further
17 © 2013 The Law Society. All rights reserved. www.lawsociety.org.uk
Conclusion There is considerable evidence to suggest that the current framework which regulates business-to-consumer transactions contains a number of weaknesses. In particular there are a number of areas where it has fallen behind the rapid evolution of consumer markets and technological change and as a result it no longer offers a comprehensive and effective regulatory framework for governing modern consumer markets. The enforcement regime also suffers from similar deficiencies. It is not working as well as it could, with relatively high levels of detriment in the economy not being tackled. Specific parts of the enforcement regime need strengthening through simplification and modernisation in order to make it fit for 21st century consumer markets.
o
Become less risk averse and more discriminating in their purchasing behaviour (e.g. being more confident about trying new products and providers);
More intense competition as businesses providing sub-standard goods and services are driven out of the market creating a more level playing field for those who are competing on price, quality and innovation;
Greater access to justice for those consumers who suffer detriment and currently do not get the redress they deserve; and
Lower costs for business as they have to comply with a simpler and clearer regulatory framework.
Inspired by the Government’s publication of the draft Consumer Rights Bill, which aims to comprehensively reform consumer law in the UK, this pamphlet has briefly explored some ideas for reform to both the law in relation to consumer contracts and to the organisation and powers of enforcement agencies. The proposals set out in this pamphlet will strengthen the UK consumer regulatory environment by:
Consolidating it;
Making it simpler by clarifying it where there is ambiguity and removing unnecessary overlap and inconsistency; and
Modernising it where necessary i.e. plugging a number of the identified gaps where developments in consumer markets have outstripped the current legal framework.
The result of reform, along the lines outlined in the preceding pages, will be better functioning and more dynamic consumer markets as a result of:
The greater trust and confidence engendered by a reinforced rule of law and the likely positive impact on the willingness of consumers to: o
Increase the amount they consume; and
18 © 2013 The Law Society. All rights reserved. www.lawsociety.org.uk
(compared to goods) given the range of possible expectations that a customer may have. For example, the quality of a service which does not have a physical product (e.g. education, a hair cut or beauty treatment) is more difficult to assess than a service that does have a physical product/result at the end of it, such as the building of a new wall or the painting of a room or a car repair;
Annex I: The quality standard for services Clarification of the existing law The first priority of reform must be to clarify the current reasonable care and skill quality standard. The current standard can be ambiguous, which makes it doubly difficult for consumers to judge whether they have a case or not. If the reasonable care and skill test is made clearer and applied robustly, along with a host of other changes, such as transparency in precontractual information about the service being offered, it will - in the majority of cases - lead to the same result as an outcome based standard without imposing unrealistically high burdens on business.
A workable ‘satisfactory outcome’ test might have to involve trying to differentiate between different types of services. This would result in the creation of another complication in another part of the law;
A risk of traders being held to unrealistic standards because there will be matters out of the control of the trader that will mean that they will not be able to meet the pre-contractually negotiated outcome. For example, a student attending a university course may expect to receive a certain qualification at the end, but this is subjective, and will largely depend on the ability of the student and the efforts that the student personally puts into the course. In addition, different individuals will have different expectations for the level of service they receive. This would be very difficult to manage in practice on an objective basis;
Greater use of disclaimers by businesses is likely to cause more confusion for consumers as to what their legal rights are;
A possible polarisation of providers in the market between those companies that will provide ‘premium’ quality services (likely to be at significant cost to consumers); and those companies that are not concerned with the quality and offer ‘budget’ services at low costs. This type of market would likely offer less choice.
SMEs are likely to find it harder to absorb the financial risk of refunds etc. compared to larger providers. This type of pressure will help drive competitors out of the market;
Traders might end up being liable for service failures they are not directly responsible for which e.g. if (non-package) travel companies were to be liable for injuries to tourists that were caused by their subcontractors. At the moment the test is based on negligence (so if the travel company exercised reasonable care and skill in selecting their subcontractors
In addition to clarification and reformed rules on pre-contractual information, changes to the availability of remedies and liability will considerably improve the law on services. Such a package is likely to result in more consumers being able to take remedial action than feel able under the current law.
Take an evidence based approach to further reform A move towards an outcome based standard for quality would be a considerable leap from what the current law is and should be approached in an evidence based way. Therefore this further step should only be taken after the first raft of changes have had time to bed-in and evidence can be gathered as to the difference (if any) the reforms make to consumers. While an outcomes based standard would be likely to further increase the ability of consumers to take action against suppliers of services that breach their statutory obligations, reform should be balanced and proportional. Implementing an outcomes based standard comes with a number of potential problems, which have to be carefully weighed against the positives for consumers of such a change. These potential problems include:
The appropriateness of such a standard to the wide variety of consumer services e.g. it is often much more difficult to judge what is a satisfactory outcome for services
19 © 2013 The Law Society. All rights reserved. www.lawsociety.org.uk
they won’t be liable). In addition, an outcomes based standard would be impossible to implement for travel services which will involve overseas contractors;
The cost of insurance would no doubt rise and it could even force some service providers out of the market, potentially leaving only very high end service providers or ‘cowboys’, which may cause significant consumer detriment;
Confusion over compliance with sector specific requirements, particularly in sectors such as financial services, utilities and telecoms. It is vitally important that the general consumer obligations dovetail with the sector specific legislation e.g. if mobile phone operators meet the standards required by OFCOM would this mean that they have met a satisfactory quality test? How this would work in practice warrants detailed consideration; and
neither should be contemplated until there is a body of evidence which shows further reform is needed, after the strengthening of the current law has had a chance to be properly tested.
How any new standard would interact with the law on misrepresentation? This would need also to be considered carefully.84
Before going down this route the Government should look in great detail as to how an outcomes based standard has worked in New Zealand over the past three decades.85 86
A third option: the middle way Given the potential downsides of an outcomes based standard, a third option is worth considering. This third option would continue with the ‘reasonable care and skill’ standard only but create a ‘rebuttable presumption of breach’ of the quality standard, which the trader could refute. The advantage of this alternative is that it retains the benefits of the reasonable care and skill standard, such as avoiding making suppliers liable for outcomes beyond their control, while reducing the hurdles consumers face if they are trying to bring a genuine action against a supplier of services who has breached their statutory obligations. This third option should be considered alongside any proposals to bring in an outcomes based quality standard as it offers a workable third way between the status-quo and full shift to an outcomes based quality standard and the risks associated with that. However,
20 © 2013 The Law Society. All rights reserved. www.lawsociety.org.uk
Annex II: Membership of the Law Society consumer law reform reference group Name
Law Firm/ Company/ Organisation
Fraser Whitehead
Slater & Gordon Lawyers (UK)
Alan Conroy
Church Court Chambers
Beverley Whittaker
Stevens Bolton LLP
Candice Macleod
BT PLC
Chris Warner
Which?
Claire Hyatt
Stevens Bolton LLP
Daniel Lloyd
BT PLC
Eve England
Eversheds LLP
Fiona Carter
Browne Jacobson LLP
Hugh Rowland
Gotelee Solicitors LLP
Joanne Bone
Irwin Mitchell LLP
Keith Etherington
Slater & Gordon Lawyers (UK)
Mark Dewar
Simmons & Simmons LLP
Matthew Gough
Eversheds LLP
Michiko Jo
Simmons & Simmons LLP
Pauline Munro
Pinsent Masons LLP
Professor Peter Cartwright Sharon Barton Stephen Mason Victoria Spellman
University of Nottingham Vodafone Ltd Travlaw LLP Gotelee Solicitors LLP
Title and area of expertise Partner, Head of Group Litigation and Commercial Services Department Barrister Partner, Head of Commercial and IT Commercial Lawyer, Consumer - BT Retail Commercial & Legal Lead Lawyer, Policy, Advocacy & Enforcement Associate, Commercial Department Head of Consumer Law Senior Associate, Consumer Law Group Partner, Head of Corporate Regulation Partner, Business Crime and Regulatory Enforcement Partner, Head of IP and IT Associate and Civil Mediator Partner, Corporate and Commercial Group Partner, Head of the Consumer Law Group Supervising Associate, Corporate and Commercial Group Legal Director, Litigation and Compliance Professor of Consumer Protection Law Counsel for Consumer Senior Partner Partner, Dispute Resolution and Business Advice
Position Chairman Member Member Member Member Member Member Member Member Member Member Member Member Member Member Member Member Member Member Member
Disclaimer: The Consumer Law Reform Reference Group advises the Law Society on consumer law reform issues. The reform suggestions set out in this pamphlet do not necessarily reflect the views of the individuals on the reference group and should not be seen as representing the corporate position of the various organisations which employ them. They do reflect the approved policy position of the Law Society of England and Wales. The position regarding reform to the institutional structure of the enforcement regime was agreed by the Law Society before the Consumer Law Reform Reference Group was established. Fault for any errors in the pamphlet lies solely with the author.
21 © 2013 The Law Society. All rights reserved. www.lawsociety.org.uk
Annex III: New public enforcement structure Diagram 2: simplified schematic of a reformed consumer enforcement regime
NTSB
Governance
National (and int’l) enforcement
Funding and operational support
LATSS
LATSS
Continued local and regional enforcement work
The role of a new national enforcement body There is a need for a robust and credible national consumer enforcement body. The new national authority should have four main functions:
First, to have the resources to undertake its own investigations into consumer problems of national scale and significance and to coordinate international consumer enforcement;
Second, support the work of the LATSS through the provision of additional funding and expertise and helping them organise regionally and coordinate activity;
Third, to act as an intelligence gathering and analysis hub; and
Fourth, to help spread best enforcement practice among LATSS.
In its role of supporting LATSS, it must not only have the authority to direct LATSS activities in certain circumstances but must also be able to offer direct financial support, man-power and expertise to LATSS as well as operating as an intelligence ‘hub’ for LATSS and for spreading best practice among all LATSS. The OFT in the past was a distinct body to the LATSS. This separateness helped create some of the enforcement gaps in the previous regime. The new national authority should be set up to act as the national enforcement body of the LATSS and be closely integrated into the LATSS structures. A strong and well resourced national body is important to take on those significant national cases that a network of local or regional bodies might not be able to mange. It is also needed to help take forward and coordinate action with consumer enforcement authorities in other countries. As the proportion of consumer activity taking place cross-border becomes greater international inter-country cooperation is going to become more important. A well resourced body will be needed to cope with the increasing workload in this area. A well resourced national authority will help minimise the disincentives to bringing actions in complex cases and against large and powerful businesses, which may otherwise not take place, if it was left to
22 © 2013 The Law Society. All rights reserved. www.lawsociety.org.uk
LATSS. For the latter, the upfront costs and the uncertainty over the outcome - no matter how big the covered risk through insurance - would inevitably act as disincentives to LATSS. A well resourced national body mitigates these risks to a much greater extent than relying on indemnity insurance buttressed by limited pots of reserved national funding.
Governance of the national enforcement agency Governance of any national enforcer is vital to ensuring a joined-up, coherent system. There must be:
Clear rules outlining the division of responsibilities between national, regional and local;
Inbuilt incentives which facilitate sharing of intelligence, ideas and practice. Part of this must come from a high degree of transparency in structure and decision making. This should include accountability for LATSS who are reluctant to be involved in coordinated cross-boundary action and the incentives for LATSS who do so. Incentives might take the form of access to hypothecated resources for cross-boundary actions, to reduce the impact of cooperative activity rather than such activities eating into the core budgets of the LATSS;
A full-time CEO and staff in the national authority. A proportion of the board of directors should be made up of senior TSOs from LATSS, drawn from an oversight Council, made up of senior representatives of all the member LATSS.
Clear lines of communication and cooperation between the national consumer enforcement authority and new Competition and Markets Authority (CMA).
Further complementary reforms Finally, the NAO, in their report on UK consumer enforcement, reports significant gaps in consumer detriment analysis. Access to relevant consumer intelligence for any new national authority is essential. There should be formal arrangements in place for the enforcement authorities to be able to access regularly relevant sources of consumer intelligence. Further, they should have freedom to interrogate any relevant intelligence to uncover emerging consumer problems. This should sit alongside a significant increase in the capacity of the enforcement authorities through greater professionalisation of the post of the TSO and the development of more prosecutorial capacity. One way of developing such a capacity would be for an approved list of experienced and effective prosecutors and specialist training to help develop such specialist skills. It is also very important that whatever body leads on consumer enforcement at the national level it has access to high quality as well as external legal specialists.
23 © 2013 The Law Society. All rights reserved. www.lawsociety.org.uk
Endnotes 1
BIS (2013). ‘Draft Consumer Rights Bill’, pub: SO: London, can be accessed: https://www.gov.uk/government/uploads/system/uploads/a ttachment_data/file/206367/bis-19-925-draft-consumerrights-bill.pdf 2 Office of Fair Trading (2011). ‘Competition and Growth’, pub: OFT: London. 3 ICF/ GHK (2013). ‘Consumer Rights and Economic Growth: final report’, pub: BIS. 4 The study by ICF/GHK supports the observations long made by Professor Michael Porter who has argued that a strong and sophisticated demand-side in the domestic market is a key factor in both the setting of sound foundations for exporters (of consumer goods) and in driving overall economic development. Source: Porter, M (1990). ‘The Competitive Advantage of Nations’, pub: Macmillan. 5 Office of Fair Trading (2011). ‘Competition and Growth’, pub: OFT: London. 6 Competition law also plays a vital role in consumer markets and could be seen as an additional component of the consumer policy framework. However, for the purposes of this pamphlet competition policy is not the main focus and so for brevity and simplicity reasons it has not been included. Although its importance should not be underestimated. 7 Bradgate, R et al (2005). ‘Review of the Eight EU Consumer Acquis Minimum Harmonisation Directives and their Implementation in the UK and Analysis of the Scope for Simplification’, pub: Department for Trade and Industry. 8 It should be noted that the term ‘consumer acquis’ does not include all consumer related EU legislation. The Unfair Commercial Practices Directive for example, is often not considered to fall within the term and neither does sector specific laws. 9 UEA (2008). ‘Benchmarking the UK Framework Supporting Consumer Empowerment’, pub: University of East Anglia. 10 The rule of law is usually considered to include: rules published and thus readily accessible; rules which are reasonably certain, clear and stable (thus excluding decisions of unconstrained discretion); mechanisms ensuring the application of rules without discrimination; binding decisions by an independent judiciary; limited delay in judicial proceedings; effective judicial sanctions; compliance by, and accountability of, the government and its officials in relation to relevant rules. Source: World Bank (1992). ‘Governance and Development, Washington DC’, pub: World Bank: New York; World Bank (1997). ‘World Development Report 1997: The State in a Changing World’, pub: Oxford University Press: Oxford; Posner, R.A. (1998b) “Creating a Legal Framework for Economic Development”, World Bank Research Observer, 13: 1-11. 11 This figure does not include the harder to quantify but undoubted indirect benefits, which include: better understood rights and more assertive consumers rewarding and driving innovation and efficiency among traders. Source: BIS (2013). ‘Draft Consumer Rights Bill: Government response to Consultations on Consumer Rights’, pub: BIS, can be accessed: https://www.gov.uk/government/uploads/system/uploads/a ttachment_data/file/206373/bis-13-916-draft-consumerrights-bill-governemnt-response-to-consultations-onconsumer-rights.pdf 12 Article 114 TFEU is the legal basis for the harmonisation measures aimed at establishing the internal market and Article 169 TFEU complements the former and extends its remit beyond single market issues to include social policy aspects of consumer issues, such as access to goods and
services. It further states that EU competence is this area does not preclude EU Member states taking additional action, in these areas, above and beyond EU requirements. 13 Another EU proposal currently under discussion is the Common European Sales Law (CESL). This is a proposal with many flaws. It is an unnecessary and disproportionate measure. It is not the solution to any particularly clear and identifiable problem with the Single Market and does little to solve any of the actual deficiencies of the Single Market. It does however create considerable uncertainty and will lead to significant implementation and compliance costs and has a dubious legal basis in the Treaties. 14 A fairly comprehensive overview of how a number of EU laws have been implemented in EU Member States can be found in the ‘EC Consumer Law Compendium’. Source: Schulte-Nölke, H et al eds (2008). ‘EC Consumer Law Compendium – comparative analysis’, pub: European Commission, can be accessed: http://ec.europa.eu/consumers/rights/docs/consumer_law_ compendium_comparative_analysis_en_final.pdf 15 Bechar, S.I. (2009). ‘A “Fair Contracts” approval Mechanism: Reconciling Consumer Contracts and Conventional Contract Law’, pub: Social Science Research Network. 16 UEA (2008). ‘Benchmarking the UK Framework Supporting Consumer Empowerment’, pub: University of East Anglia. 17 BIS (2013). ‘Draft Consumer Rights Bill: Government response to Consultations on Consumer Rights’, pub: BIS, can be accessed: https://www.gov.uk/government/uploads/system/uploads/a ttachment_data/file/206373/bis-13-916-draft-consumerrights-bill-governemnt-response-to-consultations-onconsumer-rights.pdf 18 BIS (2012). ‘Enhancing Consumer Confidence by Clarifying Consumer Law: consultation on the supply of goods, services and digital content’, pub: BIS. 19 OFT (2011). ‘Know Your Consumer Rights Campaign’, pub: Office of Fair Trading. 20 Synovate (2006). ‘Competition Act & Consumer Rights’, pub: Office of Fair Trading. 21 36% are considered unresolved and 13% only partly resolved. Source: TNS BMRB (2012). ‘Consumer Detriment 2012’, pub: Consumer Focus, can be accessed: http://www.consumerfocus.org.uk/files/2012/10/TNS-forConsumer-Focus-Consumer-Detriments-20121.pdf 22 13% were partly resolved. Source: TNS BMRB (2012). ‘Consumer Detriment 2012’, pub: Consumer Focus. 23 TNS BMRB (2012). ‘Consumer Detriment 2012’, pub: Consumer Focus. 24 Regulated services includes: gas and electricity, water, postal services, communications (covering fixed landline telephones, mobile telephone, broadband, Internet service providers and broadcast services –TV and radio), public transport (covering rail, bus, tram, underground/metro) and UK airports. Source: TNS BMRB (2012). ‘Consumer Detriment 2012’, pub: Consumer Focus. 25 Leisure largely covers services. The category contains the following: holiday caravan renting, caravan\camping sites and boats, time share, holidays, entertainment, catering and accommodation, Internet facilities, books, newspapers and magazines, sports and hobby equipment and services, toys, games, CDs, games, video tapes, video games software, computer (non-operating system) software, DVDs, pets and veterinarian products\services, betting, competitions, prize draws and business guides, photography. Source: TNS BMRB (2012). ‘Consumer Detriment 2012’, pub: Consumer Focus. 26 Financial and professional services category contains: personal banking, hire and unsecured credit, ancillary credit business, insurance, mortgages and secured credit, pensions, estate agents and house purchase services,
24 © 2013 The Law Society. All rights reserved. www.lawsociety.org.uk
letting and property management services, legal services, estate agency and accountancy services. Source: TNS BMRB (2012). ‘Consumer Detriment 2012’, pub: Consumer Focus. 27 The personal goods and services category contains: clothing and clothing fabric, disability aids, medical goods and services, toiletries, perfumes, beauty treatments and hairdressing, jewellery, silverware, clocks and watches, tobacco and related products, footwear, nursery goods and services, home-working schemes and gifting schemes. Source: TNS BMRB (2012). ‘Consumer Detriment 2012’, pub: Consumer Focus. 28 It is worth noting that BIS identified that the Consumer Focus commission research showed that 51% of the total problems within the ‘other household requirements’ area and 58% of the problems identified by those questioned within the ‘transport’ sector. Source: TNS BMRB (2012). ‘Consumer Detriment 2012’, pub: Consumer Focus. 29 Howells, G and Twigg-Flesner, C eds (2010). ‘Consolidation and Simplification of UK Consumer law’, pub: BIS. 30 Howells, G and Twigg-Flesner, C eds (2010). ‘Consolidation and Simplification of UK Consumer law’, pub: BIS. 31 As noted by BIS in their Impact assessment of the Consumer Rights Bill: ‘When a business includes a contract term excluding or limiting liability, a consumer might think he/she is not entitled to anything if the service has been supplied inadequately, when in fact he/she will be entitled to a remedy if the term is unreasonable. The need to refer to three pieces of legislation (Supply of Goods & Services Act, Unfair Contract Terms Act and Unfair Terms in Consumer Contracts Regulations) to determine whether the term is valid makes this area of the law inaccessible to consumers’. Source: BIS (2013). ‘Consumer Rights Bill: proposals on services – Impact Assessment’, pub: BIS. 32 Bradgate, R. (2010), ‘Consumer Rights in Digital Products: A research report prepared for the UK Department for Business, Innovation and Skills’, pub: BIS, can be accessed: http://www.bis.gov.uk/assets/biscore/consumerissues/docs/c/10-1125-consumer-rights-in-digital-products 33 Europe Economics (2011) ‘Digital Content Services for Consumers: Assessment of Problems Experienced by Consumers – Final Report’, pub: DG Justice, European Commission. 34 Europe Economics (2011), ‘Digital Content Services for Consumers: Assessment of Problems Experienced by Consumers – Final Report’, pub: DG Justice, European Commission. 35 The New Zealand Consumer Guarantees Act 1993 is a sensible model to try and follow in this regard. In developing a new model based on a comprehensive set of consumer guarantees it must be built on the strengths of the existing framework and the over 100 years of accumulated legal experience embodied in the current law. 36 The Consumer Protection from Unfair Trading Regulations 2008 defines a trader thus ‘trader’ means any person who in relation to a commercial practice is acting for purposes relating to his business, and anyone acting in the name of or on behalf of a trader’. Source: The Consumer Protection from Unfair Trading Regulations 2008, can be accessed at http://www.legislation.gov.uk/ukdsi/2008/9780110811574/ contents 37 Part 1 Regulation 2(1), Consumer Protection Against Unfair Trading Regulations 2008, can be accessed at http://www.legislation.gov.uk/ukdsi/2008/9780110811574/ contents 38 TNS BMRB (2012). ‘Consumer Detriment 2012’, pub: Consumer Focus.
http://www.consumerfocus.org.uk/files/2012/10/TNS-forConsumer-Focus-Consumer-Detriments-20121.pdf 39 Consolidation of the general goods regime should include harmonisation between the sale of goods regime and other goods related transactions, such as contracts for the hire of goods as well as reform of the rules on the passing of title over property, which are in need of significant simplification and clarification, as noted by Howells, and Twigg-Flesner in their 2010 report for BIS. Source: Howells, G and Twigg-Flesner, C eds (2010). ‘Consolidation and Simplification of UK Consumer law’, pub: BIS. 40 According to research commissioned by BIS there are 325,483 consumer services businesses in the UK. Source: IFF Research (2013). ‘Consumer Rights and Business Practices’, pub: BIS. 41 http://www.ons.gov.uk/ons/rel/ios/index-of-services/april2013/stb-ios-april-13.html#tab-background-notes 42 The law should avoid confusing digital content, which transfers a copy of content wholly to a user in a way akin to the passing of title, with a service (e.g. the delivery of content to the user's device on a temporary basis). The best way forward is by analogy to existing practices. Therefore, the law should maintain a clear difference between a service and content. This approach is the best way to ensure the law remains as simple and clear as possible in the complex and interdependent world of online services, while avoiding placing unrealistic burdens on various parties in the supply chain. 43 The New Zealand Consumer Guarantees Act 1993 places a number of sensible and clear requirements on suppliers of services. It requires that they: must be provided with reasonable care and skill; they must be fit for purpose; provided within a reasonable time and at a reasonable price. Source: Consumer Guarantees Act 1993, can be accessed: http://www.legislation.govt.nz/act/public/1993/0091/latest/ DLM311053.html 44 Statutory remedies for sub-standard services should be as similar as possible to those of goods. This will result in greater simplicity in the law. There is no reason why consumers should not be entitled to a repair if it was a service providing a good that was faulty or have the service provided again (effectively a replacement) as a sensible first tier remedy. The number of times repair or replacement is available should be limited as in the goods regime. The second order remedy should be a refund of the money spent by the consumer on the service. 45 Supply of Goods and Services Act 1982 (ss12 – 16) implements the standard of reasonable care and skill. The Act requires the trader to use ‘reasonable care and skill’. It states that any materials or goods must be of satisfactory quality, be fit for purpose and as described. Finally, unless a specific date is agreed for a service to be provided, it must be carried out within a reasonable time. Sensible requirements and very close to those required by the NZ Consumer Guarantees Act 1993. 46 In the Supply of Goods and Services Act 1982, the current requirement in the law is that services are carried out within a reasonable period of time. There is a strong case for moving away from the ‘reasonable time’ standard to one that is much more definitive and thus clearer. 47 Bradgate, R (2010). ‘Consumer Rights in Digital Products: A research report prepared for the UK Department for Business, Innovation and Skills’, pub: BIS, can be accessed: http://www.bis.gov.uk/assets/biscore/consumerissues/docs/c/10-1125-consumer-rights-in-digital-products 48 It is notable that both the NZ Consumer Guarantees Act 1993 classifies digital content as a good. Further, Professor Bradgate in his review of the law relating to digital content recommended that digital content, while qualitatively different to goods in terms of a number of its
25 © 2013 The Law Society. All rights reserved. www.lawsociety.org.uk
attributes, should be treated as similar to goods as possible. 49 Article 19 of the Consumer Rights Directive sets out that digital content embedded on a physical object such as a DVD should be treated as a good. Source: OJEU (2011). ‘Directive 2011/83/EU of the European Union’, pub: Official Journal of the European Union: Brussels. 50 The limitations of the proposed definition in the draft Consumer Rights Bill – taken from the EU definition – have to be acknowledged. It is not the best definition possible and is, in fact, rather vague. However, the benefit of one definition across all the relevant consumer law (i.e. simplicity) outweigh, in this case, concerns about the particular definition. 51 Professor Chris Reed argues strongly and persuasively that behaviour based and technology neutral models of regulation are the only sustainable ones in a world of rapidly changing technology. Source: Reed, C (2012). ‘Making Laws for Cyberspace’, pub: OUP. 52 The remedies for digital content should follow the basic two tier remedy structure that goods and services should follow i.e. in the first instance repair or replacement and subsequently refund. Repair and replacement are likely to be the most frequently used remedy. It is relatively straight forward to replace an item of digital content. The marginal cost of an additional item is very nearly zero. Replacement is also the remedy least open to gaming by unscrupulous individuals. 53 In the longer run, after the current proposals have had time to bed-in and if they fail to produce the expected results (e.g. in terms of greater access to remedies for consumers and falling levels of consumer detriment) then the Government should review the wider legal framework to look at how it might be further reformed such as the law on joint-liability and third-party contracts. 54 If a song is purchased from an online store then the merchant should, when there is a breach of the statutory guarantees, be liable under the law for the breach and to offer remedies, as with the goods regime. 55 A consumer should be able to rely on the new statute of consumer guarantees setting some minimum levels of quality and performance for digital content. These could include: A quality requirement to ensure that ‘...the content should be adequate to fulfil its main function’. The quality standard needs to be supported by requirements to provide adequate pre-contractual information in particular regarding what steps the seller or creators of the content may take to correct any subsequent faults and a requirement to set out a nearly comprehensive list of the minor defects a consumer may encounter. This may mean building on the informational requirements in the CRD. 56 The NZ Consumer Guarantees Act 1993 sets a standard of ‘acceptable quality’, which is widely understood to mean that the software need not operate perfectly. The extent to which it operates acceptably is determined by the circumstances. 57 A contractual relationship requires three elements to be present: an offer, an acceptance of that offer and consideration. Source: Chen-Wishart, M (2011). ‘Contract rd Law: 3 Edition’, pub: OUP. 58 The OECD set out a number of very sensible key principles which should frame the regulation of online business- to-consumer transactions. Two of those related to the provision of information to consumers by an online trader. The OECD suggested that consumers need: clear information about online business identity, the goods and services on offer and the terms and conditions of the transaction and a transparent confirmation process. Source: OECD, (2009). ‘Conference on Empowering EConsumers: strengthening consumer protection in the Internet economy’ pub: Organisation for Economic Cooperation.
59
Chapter I of the CRD sets put the common definitions and a common set of rules for all Member States; Chapter II sets out the key information traders have to provide to consumers before a purchase is entered into. Chapter III applies to distance and off-premises contracts. It sets out provisions for requiring traders to give specific types of information to consumers and rules regarding the right to withdraw; Chapter IV outlines rules governing the delivery of products bought at a distance and the passing of risk applicable to contracts for the sale of goods and further rules regarding all consumer contracts in relation to costs for using particular methods of payment, among other things. 60 Law Commission and Scottish Law Commission (2005). ‘Unfair Terms in Contracts’, pub SO. 61 TNS BMRB (2012). ‘Consumer Detriment 2012’, pub: Consumer Focus. http://www.consumerfocus.org.uk/files/2012/10/TNS-forConsumer-Focus-Consumer-Detriments-20121.pdf 62 Office of Fair Trading v Abbey National plc and Others [2009] UKSC 6. Source: BIS (2013). ‘Consumer Rights Bill: proposals on unfair contract terms – impact assessment: final’, pub: BIS. 63 The OFT describe that it is in the area of non-core or ancillary terms that businesses make extra rents out of customers because consumers do not focus on these elements of the contract when making purchasing decisions. Therefore there is little impetus for competition in relation to these aspects of the consumer contract. Source: OFT (2011). ‘Consumer Contracts’, pub: Office of Fair Trading. 64 The OFT note that the main subject matter of a consumer contract is the key focus for consumers and the aspect on which business compete. The OFT consider that a large number of consumer markets work relatively well in this respect. Source: OFT (2011). ‘Consumer Contracts’, pub: Office of Fair Trading. 65 The ‘Grey List’ contains 17 different types of contract term that, under the current law, are considered ‘under suspicion’ of being unfair. They are set out in Schedule 2 of the Regulations. However, it is a ‘grey list’ and not a ‘black list’ therefore currently they are not automatically considered unlawful. Their indicative nature means they occupy a somewhat ambiguous space in the law at the moment. Source: OFT (2008). ‘Unfair contract terms guidance: Guidance for the Unfair Contract Terms in Consumer Contracts Regulations’, pub: OFT. 66 Perhaps the most successful example of such an authority is the Birmingham LATSS, which developed considerable expertise in and a deserved reputation for, tackling illegal money lending. 67 NAO (2011). 'Protecting consumers - the system for enforcing consumer law', pub: SO. 68 NAO (2011). 'Protecting consumers - the system for enforcing consumer law', pub: SO. 69 NAO (2011). 'Protecting consumers - the system for enforcing consumer law', pub: SO. 70 Bello, L (2009). ‘Waiting to be heard’, pub: Consumer Focus. 71 Office of Fair Trading (2010). 'Protecting consumers online: a strategy for the UK', pub: OFT: London. 72 The BIS consultation on consolidating the powers of the enforcement authorities sets out succinctly the evidence, showing why the current disparate and incoherent framework of powers hinders enforcement. Source: BIS (2012). ‘Enhancing Consumer Confidence Through effective enforcement: consultation on consolidating and modernising consumer law enforcement powers’, pub: BIS. 73 Enforcement powers are scattered across approximately 60 pieces of legislation. Source: BIS (2012). ‘Enhancing Consumer Confidence Through effective enforcement:
26 © 2013 The Law Society. All rights reserved. www.lawsociety.org.uk
consultation on consolidating and modernising consumer law enforcement powers’, pub: BIS. 74 This approach was proposed by BIS in their consultation ‘Enhancing Consumer Confidence Through effective enforcement: consultation on consolidating and modernising consumer law enforcement powers’. Source: BIS (2012). ‘Enhancing Consumer Confidence Through effective enforcement: consultation on consolidating and modernising consumer law enforcement powers’, pub: BIS. 75 Reform should encompass the alignment of definitions, terminology and evidentiary tests with the rest of the body of consumer law where appropriate and with other laws and regulations where there are obvious overlaps e.g. the civil procedure rules have a useful definition of ‘document’. It makes sense for the new consolidated statute of investigatory and enforcement powers to borrow such tried and tested concepts. 76 This was proposed by BIS in their consultation ‘Civil Enforcement Remedies: consultation on extending the range of remedies available to public enforcers of consumer law’. Source: BIS (2012). ‘Civil Enforcement Remedies: consultation on extending the range of remedies available to public enforcers of consumer law’, pub: BIS. 77 Any enhancements to the civil sanctions regime would benefit substantially from better and clearer guidance. Due to the lack of a common framework for the enforcement and defence of Part 8 EA2002 any confusion that exists now is likely to be exacerbated with the introduction of further measures. 78 The civil sanctions were first proposed by Professor Richard Macrory in a 2006 report. Source: Macrory, R B (2006). ‘Regulatory Justice; making sanctions effective’, pub: Cabinet Office. 79 Strengths of RESA as a tool for enforcement that balances the need for effective enforcement and due process RESA has a number of advantages to recommend it as a measure: Regulators must go through a clear process before they can impose sanctions, including an avenue of appeal for traders who have had a sanction imposed on them; It is a useful alternative to criminal prosecution, while maintaining a number of important safeguards e.g. in terms of criminal evidential requirements; It is a well drafted law, clear in its scope. This compares favourably to Part 8 of the EA 2002, which is much more ambiguous and broad in its wording. 80 Part 8 of the Enterprise Act 2002 needs further reform to make it a better law and a more suitable home for an enhanced range of sanctions. Reform could begin by redrafting more tightly. The current Part 8 is considered by many to be too loosely drafted and leads to some uncertainty. The checks and balances on the use of Part 8 could also be enhanced alongside much better guidance for traders, the legal profession and the Courts. 81 We note for example that the OFT has also argued for an expanded role for private actions. In their response to the Law Commission consultation ‘Consumer Redress for Misrepresentation and Aggressive Practices’ the OFT stated that: ‘…an effective redress system in relation to unfair commercial practices would cover the whole scope of the Consumer Protection from Unfair Trading Regulations 2008 ('CPRs'). Redress should be available for all the prohibited practices in the Regulations. Broadly speaking, if a consumer is subjected to an unfair commercial practice, then they should be able to seek redress from the trader’. Source: OFT (2011). ‘Response to the Law Commission and Scottish Law Commission on Consumer Redress for Misleading Aggressive Practices’, pub: Office of Fair Trading. 82 This might involve measures such as cost-shifting mechanisms and starting a public debate on the potential costs and benefits of the OFT proposal of expanding
private enforcement to all unfair commercial practices, as suggested in their Law Commission response and quoted in footnote 5 above. Source: OFT (2011). ‘Response to the Law Commission and Scottish Law Commission on Consumer Redress for Misleading Aggressive Practices’, pub: Office of Fair Trading. 83 A broadly sensible set of reforms, to help collective actions, were proposed by BIS in their 2012 consultation on private actions for breaches of competition law. Source: BIS (2012). ‘Private Actions in Competition Law: a consultation on options for reform’, pub: BIS. 84 If a consumer has been promised a particular outcome and this is not delivered, there may be an issue of misrepresentation. Ss 5 and 6 of The Consumer Protection from Unfair Trading Regulations 2008, which set out the rules on misleading omissions and misleading actions. The CPRs can be accessed: http://www.legislation.gov.uk/uksi/2008/1277/regulation/5/ made 85 The relevant liability standards are set out in the NZ Consumer Guarantees Act 1993, ss 28-31. 86 The NZ law is drafted such that the guarantee in law is that the supplier has to meet the pre-contractually given description. However, this is subject to the appropriateness of the pre-contractual discussions and where the service provider has informed the consumer that it is unlikely that the consumer’s desired outcome can be achieved. Consumer Affairs (No date given). ‘Consumer Guarantees Act 1993’, pub: CA, accessed at: http://www.consumeraffairs.govt.nz/forconsumers/law/consumer-guarantees-act/guarantees-forservices
For further information, please contact: Richard Hyde Consumer and Economic Policy Officer Law Society of England and Wales, 113 Chancery Lane, London. WC2A 1PL t: 020 7320 5752
e mail:
[email protected]
27 © 2013 The Law Society. All rights reserved. www.lawsociety.org.uk
113 Chancery Lane London WC2A 1PL Dx 56 Lon/Chancery Ln t: 020 7242 1222 f: 020 7831 0344 www.lawsociety.org.uk
