Update your business - unfair trading law changes

The revised Consumer Protection from Unfair Trading Regulations will now come into force on 26 May 2008. This new date gives traders much needed extra time to get their houses in order.

Last week, the Department for Business, Enterprise and Regulatory Reform (BERR) reported on research revealing that 53% of small business leaders think their profits are impacted by rivals using unfair trading practices. Of these, nearly half thought they were losing 10% of their revenue or more!

The new legislation, and enforcement action under it, may serve to counter this perception. But it is not just small business and rogue traders that are affected – every business, including the biggest brands, needs to pay attention or they could find their sales practices land officers in jail.

In a sea-change from the previous system, even advertising issues which previously might have been expected to attract little more than a slap on the wrist from the Advertising Standards Authority (ASA) (read our alert on how the ASA is taking a tougher line), could now attract criminal penalties.

For a reminder of how the Consumer Protection from Unfair Trading Regulations (CPRs) will usher in a new regime read our latest alert. Changes have been made following the consultation exercise undertaken by BERR and the key amendments are considered further below.

Enforcement

The revised CPRs further increase the already substantial investigative and enforcement powers available to the regulators, by sweeping away several key restrictions and limitations.

Authorities now have the power to enter business premises, with or without a warrant, to investigate any breaches of the CPRs. This is regardless of whether they suspect that a criminal (or merely a civil) offence has been committed. As a result, there is much greater scope for the authorities to exercise their powers of entry to seize goods and documents. As any business which has suffered such an intervention previously will know, no one should under-estimate the disruption which can be caused by an enforcement agency on the doorstep…

Authorised officers have now also been given the power to break open containers to inspect documents (as well as to seize goods), if there is reasonable suspicion of a breach of the CPRs. This change arose as a result of Trading Standards arguing that an officer dealing with alleged breaches will need to inspect documents more often than goods and it is documents which are more likely to be locked away in secure containers.

Finally, both Trading Standards and the Office of Fair Trading were concerned that the penalty for obstruction was lower than other offences, which might operate to encourage businesses to obstruct the regulators, so as to avoid other offences being uncovered. As a result, the penalty for obstruction has been increased to a fine of up to level 5 on the standard scale (£5,000).

Other

Several more minor changes have been made. In addition, wording which, it was argued, could have made it necessary to judge the unfairness of every sales practice by reference to the average member of a vulnerable group of consumers (e.g. the elderly) has been amended.

A key change which has been rejected in the revised draft regulations is the right for businesses to directly enforce the provisions relating to comparative advertising and competitor products that create confusion with their products, trade marks etc. Similarly, consumers have been denied the right to directly enforce the CPRs. Enforcement therefore remains the preserve of the regulators.

Impact

Given the increase in enforcement powers and offences under the CPRs, businesses would be well advised to make use of the last month before implementation of the new regulations to prepare and put procedures in place to ensure compliance. They should be aware that authorities have greater scope to enter premises, and remove any items or documents, whether they are locked away or not. Remember that senior managers and directors have direct accountability for their business' sales and marketing activities. Time is of the essence to get those procedures, practices and policies in place. From 26 May, there will be nowhere to hide…