Consumer Protection from Unfair Trading Regulations 2008

rose to move, That the draft regulations laid before the House on 3 March be approved. The noble Lord said: My Lords, I shall also speak to the Business Protection from Misleading Marketing Regulations 2008. Both sets of regulations implement EC directives and are being made under Section 2(2) of the European Communities Act 1972. The consumer protection regulations implement the unfair commercial practices directive. The regulations prohibit traders in all sectors from engaging in unfair commercial practices with consumers. Commercial practices are acts or omissions by a trader directly connected to the promotion, sale or supply of products to or from consumers. The regulations will operate flexibly to catch unfair practices. At their heart is a prohibition on the use of unfair commercial practices. A commercial practice is unfair if it amounts to conduct below a level that may be expected towards consumers in accordance with honest market practice or good faith. This is intended to act as safety-net protection for all consumers. This broad category of unfair commercial practices is supplemented with more specific categories concerning misleading actions and omissions and aggressive practices. The vast majority of practices that would be considered unfair would fall under these provisions. For a practice to be unfair under these rules, it must harm, or be likely to harm, the economic interests of the average consumer—in effect, they make a choice that they would not otherwise have made. The normal benchmark for determining the likely effect of a practice is the average consumer. However, where a practice is targeted at particular groups of consumers, or is likely to adversely affect the economic behaviour of only a clearly identifiable group of vulnerable consumers in a way that the trader could reasonably foresee, the average member of this group is the one who becomes the benchmark against which the effect of the practice will be assessed. The regulations also ban 31 specific practices in all circumstances, irrespective of whether they may affect consumers’ economic behaviour. These include prize-draw scams, bogus closing-down sales, and preying on elderly people’s fears about their personal security to sell them burglar alarms. The prohibition on the use of unfair commercial practices will be enforceable through the procedure for the enforcement of Community infringements in Part 8 of the Enterprise Act 2002. This enables the Office of Fair Trading, Trading Standards, and designated—mainly sectoral—enforcers such as Ofgem to apply to the courts for enforcement orders to prevent or stop the use of unfair commercial practices. In addition, with limited exceptions, a breach of the prohibition on unfair commercial practices will be a criminal offence. Most of the offences follow the general approach of strict liability, which requires proof only that a commercial practice is prohibited. However, there will be no offence merely because a commercial practice falls within the broad category of those falling below honest market practice or good faith, unless the trader knowingly or recklessly engages in this conduct. This is because of the wide-ranging nature of this category. The Office of Fair Trading and Trading Standards will have a duty to enforce the regulations. However, where there are effective systems of self-regulation, such as those administered by the Advertising Standards Authority and PhonepayPlus, we would usually expect complaints to be referred to them in the first place for action, as established means under both these regulations and the business protection regulations. A supplementary objective in transposing the directive was to achieve some regulatory simplification, where that was possible without reducing consumer protection. The consumer protection regulations repeal provisions in a number of laws, including most of the Trade Descriptions Act 1968 and the provisions on misleading price indications in Part III of the Consumer Protection Act 1987. The consumer protection regulations represent the biggest change to the UK consumer protection framework for almost 40 years. They will put in place a more comprehensive framework for tackling sharp practices and rogue traders who exploit loopholes in the existing prescriptive legislation. They will also deliver a big part of BERR’s simplification plan. This is a good law for both consumers and honest businesses. Consumers will obtain better protection from unfair practices. Honest businesses will no longer have to face unfair competition from traders who use underhand tactics. The changes will also simplify consumer protection, making it clear which commercial practices are, and are not, allowed. I turn to the second instrument under discussion today. The business protection regulations implement the 2006 misleading and comparative advertising directive. That directive consolidated the previous 1984 directive on the subject with amendments made to it by other directives, including the UCPD. The previous 1984 directive is currently implemented by the Control of Misleading Advertising Regulations 1988, which will be repealed by the consumer protection regulations. The business protection regulations prohibit advertising that misleads traders and set out the conditions under which comparative advertising is permitted. Comparative advertising is advertising that identifies a competitor or a competitor’s product. A trader who engages in advertising which misleads traders will be guilty of a criminal offence. The OFT and Trading Standards have a duty to enforce the regulations. Those enforcement authorities are given the power to apply to the courts for injunctions to secure compliance with the regulations. Making misleading advertising a criminal offence, and giving Trading Standards a duty to enforce the regulations, will ensure that there is no reduction in business protection following the repeal of certain laws, such as most of the Trade Descriptions Act, which protects businesses as well as consumers. There has been extensive consultation on the transposition of the unfair commercial practices directive into UK law and on these two sets of regulations. I therefore commend the regulations to the House and beg to move. Moved, That the draft regulations laid before the House on 3 March be approved. 13th Report from the Joint Committee on Statutory Instruments.—(Lord Tunnicliffe.)