It is the most significant change in advertising and marketing rules since the 1968 Trade Descriptions Act. It effectively harmonises legislation across Europe and could make retailers vulnerable to hefty fines and even imprisonment if they contravene it. So why have the Consumer Protection from Unfair Trading Regulations (CPR) barely caused a ripple in retail?
The regulations came into force on May 28. Effectively, they implement the EU Unfair Commercial Practices Directive in the UK. The statute applies to all businesses that deal directly with, or whose goods are sold to, consumers – in particular retail, advertising and marketing.
Essentially, the CPR pulls together a lot of rules that previously existed in a number of separate statutes into one coherent set of regulations, says Stephen Groom, head of marketing and privacy law at law firm Osborne Clarke. The amalgamation of existing laws doesn’t sound like a huge shake-up, but he says that, in practice, “it raises more pitfalls and traps for the unwary”.
According to Groom, there are two main aspects to the CPR that make it potentially troublesome for retailers. Firstly, there is the fact that it will change the way the rules are enforced. And, secondly, for the first time in the UK, there is a list of specific banned practices set out in stone, as opposed to just broad principles.
In terms of enforcement, what was once purely the domain of Trading Standards will now also be regulated by the Office of Fair Trading (OFT) and various other consumer protection bodies. This could not only lead to an increase in the volume of prosecutions, but also change the nature of them.
Cobbetts LLP partner Susan Hall says putting the OFT in a position to take direct action could have big consequences. Whereas Trading Standards operates on a local and individual basis, the OFT operates on a national scale, targeting whole sectors at a time. As Hall says: “The OFT crusade on particular markets. People could find themselves being targeted by sector and across the whole country – I think that would make a very major change.”
She adds that it is likely retailers will not be prepared for this. “I wouldn’t say I’ve seen a lot of preparation,” she says. “People have relied on the fact that Trading Standards is always overstretched and resources limited, with local, patchy enforcement.”
The new provision for the protection of what is termed “vulnerable people” – young children, the elderly and even foreign tourists fall under this category – is one area both Groom and Hall highlight as being a potential minefield for all retailers, even those that operate at a particularly high standard at the moment. “If you are targeting these people, you will need higher standards,” says Groom.
Retailers will also have to be careful in circumstances where they are trying to create a buzz around a product. In the present market, this could be particularly relevant to those that claim their products are green or organic. In this respect, Hall believes the rules on “misleading omissions” could prove particularly interesting. She says: “Even quite large retailers tend to be a little complacent about how far they can get away with things until there is a problem.”
This is compounded, she adds, by the high turnover among buying and sales staff in retail. “You have to keep training to have good internal standards,” she explains. Good intentions will not be enough; attention to detail and foolproof practices will be essential. “It isn’t enough to pay lip service at the top. It could easily turn around and bite people,” adds Hall.
Some of the terminology in the new legislation is confusing too, says Groom. If your promotional material constitutes “an invitation to purchase”, it is now necessary to include a lot of other information in your promotion material and terms and conditions. However, the legislation does not clearly spell out exactly what “an invitation to purchase” is. He says: “That’s something we’ll have to wrestle with – it’s already confusing.”
Time to bed down
As with all new legislation, there will be a certain amount of waiting to see how the courts interpret the laws. A year or two of bedding down is expected. “It will probably be a while until we see cases coming through, showing how rules will be applied and how strict the courts will be,” says Groom. However, he adds: “They have given no indication that they will be lenient in the first few months.” In addition, Hall warns that custodial sentences might be given out straight away, because the courts will be allowed to take old records into account when dealing with repeat offenders.
But are retailers worried? Asda’s view typifies that of a number of major retailers. A spokesman for the grocer says: “We have nothing to hide, so we welcome and embrace the new regulations. We are compliant in our communications to customers, so it won’t affect our day-to-day work greatly.”
Peter Atkinson, partner at law firm Pinsent Mason, says it is difficult to assess what impact the CPR will have. “In itself, it is a milestone in consumer law, but whether it is going to make a difference to the way retailers operate and the way Trading Standards enforce is another matter,” he says.
He believes that, because the UK has been fairly well-regulated to date, the regulations may not change fundamentally the way lawful companies do business. “If you traded lawfully under the old legislation, you will continue to trade lawfully,” he says.
Most large law-abiding retailers will have well-established and appropriate due diligence practices in place, according to Atkinson. This will include the careful scrutiny of ad material and terms and conditions, as well as the training of staff on these issues and keeping records of all training.
Atkinson is also dubious about whether the OFT will embrace its new powers. “The OFT has had that ability to a limited extent under the Enterprise Act to date. My guess is that it will not be too fussed about the regulations and it will still be left to the Trading Standards to enforce.”
However, he believes the clear outlining of 31 banned practices will make a significant, positive difference to both consumers and companies. “This is new and helpful – now you have 31 practices that are a complete no-no,” he explains.
Surprising though it sounds, there may well be some concrete reasons why the sector should welcome the new legislation. In theory at least, regulations such as these should benefit all good businesses, because they will no longer have to face competition from traders that use underhand practices. And bringing together a number of different pieces of existing legislation and harmonising laws with the rest of the EU ought to make life easier for retailers and those advising them, too.
After less than a month on the statute books, it is impossible to tell just what impact the CPR laws will have. But, whatever the outcome, any retailer that prides itself on its high standards in this area would be well advised to take the opportunity to check that their practices really are as up to date and robust as they think they are. And they should be asking themselves whether these principles are ingrained throughout the business, from the head office right down to the shopfloor.
The CPR laws: what you need to know
Targeting vulnerable people This is the first time that UK law will include specific protection for those termed “vulnerable” consumers. The term vulnerable includes not only young children, but also the elderly and even foreign tourists.
Product lookalikes This could potentially put supermarkets’ own-brand products in the dock. To promote a lookalike product so as to “deliberately mislead” the customer into believing it is made by another manufacturer is one of the 31 banned practices under the new laws.
“Buy now while stocks last” calls to action The new legislation makes it a criminal offence to “falsely state that a product will only be available for a limited time”.
Blogging for business purposes Anyone blogging on behalf of a commercial entity or conducting other types of word-of-mouth or buzz marketing without making it clear that they are doing so on behalf of a brand owner will now find themselves on the wrong side of the law.
Online activity Advertising Standards Agency rules have, until now, never applied to online marketing activity. UK marketers and advertisers will need to take as much care that their web campaigns are compliant with the law as they do with radio and TV advertising.
Product placement Paid-for product placement in TV programmes has long been outlawed, but this is not the case for online. The new regulations mean that those that offer internet-only TV programmes on their web sites will have to have visible information about any deals they enter into.
Spam and cold calls The new rules outlaw “persistent and unwanted solicitations by telephone, fax, e-mail or other remote media”. For example, if someone has requested to receive no further e-mails from a company, it will be a criminal offence to contact them again in any way.
Incentive-based promotions It will be a criminal offence to either fail to award a prize in a promotional prize draw or competition, or create the false impression that a person has won. In the event that a company is unable to contact the winner, it will have to have made provisions to be able to award the prize to someone else.
Severe penalties On top of significant fines, it will also be possible for directors and managers to be found personally liable for offences under the new rules and they could face up to two years behind bars.