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Two new sets of regulations come into
force on 26 May 2008: The Consumer Protection from Unfair Trading
Regulations (CPRs) and The Business Protection from Misleading Marketing
Regulations (BPRs). Both deal with unscrupulous advertising and
marketing practices and introduce criminal penalties for such. Their aim
is the protection of consumers and traders from unfair trading and improved enforcement.
Business Impact
- From next week, engaging in misleading advertising in
contravention of these new Regulations may be a criminal offence,
punishable with a fine of up to £5,000 or up to two years
imprisonment (a neglectful, consenting or conniving officer of a
company can be punished individually as well as the company being
fined).
- Businesses should assess their marketing and advertising
activities against the new standards prior to their introduction in
order to avoid a finding of recklessness in relation to those
activities that may carry criminal penalties.
- The scope of what is an unacceptable comparative advert will be
broadened to incorporate the Unfair Commercial Practices Directive's
fair trading criteria; in addition to the old Control of Misleading
Advertisements criteria, the advert must not be a misleading act or
omission (as defined by the CPRs).
- These regulations may provide an additional or alternative means
to deal with copy-cat products and situations that have
traditionally been tackled using the law of passing off or trade
mark infringement. For example, BERR guidance cites the copying of
product get-up as an example of a breach of the Regulations.
- There had been a strong lobby from consumer groups and
intellectual property right owners to allow direct enforcement but the Government have not accommodated these
requests. Instead only the OFT and Trading Standards have powers of
enforcement for now. However, as recommended by the Gower's Review
of Intellectual Property, this approach will be reviewed in three
years' time. Intellectual property right owners may wish to consider
planning a thorough case with which to lobby for direct enforcement
rights when this comes up for review in 2011.
Background
The new Regulations implement the Unfair Commercial Practices Directive
2005/29/EC (UCPD) and the Misleading and Comparative Advertising
Directive 2006/114/EC (MCAD). The UCPD harmonises unfair trading laws
across the EU and introduces a prohibition on the unfair treatment of
consumers by traders. MCAD requires Member States to take measures
against business-to-business misleading advertising and lays down
conditions for permissible comparative advertising (both that aimed at
consumers and that addressed to businesses).
Regulations implementing the Directives in the UK
The implementing Regulations are
The CPRs prohibit "unfair commercial practice" and the
promotion of such in relation to consumers.
A commercial practice is unfair if:
- it contravenes the requirements of professional diligence and
materially distorts or is likely to materially distort the economic
behaviour of the average consumer with regard to the product.
- it is a misleading action or omission or is aggressive or is one
listed in Schedule 1 to the Regulations.
Schedule 1 practices are automatically deemed unfair. The Schedule
largely lists practices which are obviously unfair or reprehensible but
includes practices with parallels to passing off such as
promoting a product similar to another product from a particular
manufacturer in such a way as deliberately to mislead a consumer into
believing a product is made by the same manufacturer.
Misleading actions can involve false product information or
deceptive presentation or failure to comply with any applicable code.
Misleading omissions include omitting or hiding material
information or unclear or ambiguous use of such or failure to identify
commercial intent. The Regulations are very specific and cover a wide
range of situations and possible marketing angles.
Aggressive commercial practices are those that significantly
impair (or are likely to) the average consumer's freedom of choice or
conduct in relation to the product concerned through use of harassment,
coercion or undue influence and thereby cause him to make a
transactional decision that he would not have taken otherwise.
It is an offence under the CPRs to knowingly or recklessly engage in
commercial practice materially distorting a consumer's economic
behaviour. Thus traders should consider whether their marketing
practices contravene requirements in order to avoid being considered
reckless in this regard.
The BPRs prohibit advertising which misleads traders, regulate
business-to-business marketing and set out the conditions under which
comparative advertising is permitted.
- They reproduce the criteria for an advert to be a satisfactory
comparative advert which were previously laid down in the Control of
Misleading Advertisements Regulations 1988 (CMAs) (which are
repealed by the CPRs) but also add the requirement that the
comparative advertisement must not be a misleading act or omission
as set out in the CPRs.
- This broadening of the scope of what can be interpreted as
unacceptable comparative advert to include aspects of unfair trading
set out in the CPRs may turn out to be significant, although the
CMAs did have a fairly wide definition of "misleading" already and
this as been reproduced in the BPRs as well.
- However, engaging in such misleading advertising will become a
criminal offence, punishable with a fine or up to two years
imprisonment (a neglectful, consenting or conniving officer of a
company can be punished individually as well as the company being
fined).
Enforcement: The CPRs and BPRs will be enforceable by the
enforcing authorities only (the OFT and Trading Standards) and cannot be
enforced directly by consumers or any other persons, including
intellectual property right holders. However, the
enforcement authorities are given the power
to take proceedings seeking an injunction to secure compliance with the
Regulations and investigatory powers including test purchases and powers
to enter premises with or without a warrant.
Penalties can be extended to officers of a company and include fines of
up to £5,000 and prison terms of up to 2 years in respect of both CPR
and BPR offences.
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The content of this article does not constitute legal advice and should not be relied on as such. Specific advice should be sought about your specific circumstances.
Herbert Smith LLP, Gleiss Lutz and Stibbe are three independent firms
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© Herbert Smith LLP 2008
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