Consumer protection: business briefing
To help businesses to comply with their obligations under consumer protection legislation solicitor James Johnston has produced a business briefing which explains what unfair commercial practice is.
Businesses that sell directly to consumers should be made aware of a Court of Appeal decision which held that a "commercial practice" can refer to a single act or incident, as well as repeated conduct. This case involved the supply of a CCTV system, security equipment and services to an elderly consumer. Although the consumer was regarded as a vulnerable consumer, due to his age and infirmity, there is no suggestion that this interpretation would be limited to cases only involving vulnerable consumers.
This decision means that it is even more important for businesses selling directly to consumers to ensure that they, and their sales teams, do not engage in any act that may constitute an unfair commercial practice. To help businesses to comply with their obligations under consumer protection legislation solicitor James Johnston has produced a business briefing which explains what unfair commercial practice is.
Unfair commercial practices
Consumer protection legislation provides a general prohibition on unfair commercial practices.
Misleading acts or omissions
A business must not mislead consumers through acts or omissions. For example:
• A business falsely tells a consumer their boiler cannot be repaired and they will need a new one. This constitutes a misleading action.
• A business sells a satellite television package to a consumer, without indicating that sports channels are only available at an additional subscription cost. This constitutes a misleading omission.
Aggressive commercial practices
Businesses must not subject consumers to aggressive commercial practices (for example, bringing a consumer to a holiday club presentation with no means of getting home unless they sign a contract).
Definitively unfair commercial practices
Consumer protection legislation contains a list of 31 commercial practices that are always unfair. These include:
• Displaying a quality mark without authorisation.
• Falsely claiming to be a signatory to a code of conduct.
• Falsely claiming a product is able to cure illnesses.
Who can take action for a breach?
• A business will commit an offence if it engages in unfair commercial practices.
• The OFT and the Trading Standards Services can take enforcement action against a business if the business breaches consumer protection legislation.
• Penalties include:
o a fine not exceeding the statutory maximum on summary conviction; and
o a fine of up to two years imprisonment or both on indictment.
Unfair terms in consumer contracts
• Consumers can challenge contract terms on the basis that they are unfair.
• Consumer protection legislation applies to any unfair terms in contracts between a consumer and a business selling goods or services.
• A term will be regarded as unfair if it causes a significant imbalance in the parties’ rights and obligations under the contract in favour of the business.
• If a term is unfair, then it is not binding on a consumer, although the remainder of the contract will continue in force if it is capable of doing so.
• When deciding whether a term is unfair, a court will take into account:
o the type of goods and services being provided;
o the circumstances surrounding the conclusion of the contract; and
o all the terms of the contract, or of another contract on which it depends.
Potentially unfair terms in consumer contracts
Consumer protection legislation provides a non-exhaustive list of potentially unfair terms. The types of terms identified are those that, in effect, are trying to achieve the following:
• Make a consumer pay an unfair penalty.
• Mislead a consumer about his legal rights, or mislead him about the contract.
• Deny a consumer full redress.
• Tie a consumer into a contract unfairly.
• Allow a business to not perform its obligations.
• Not allow a consumer to recover his prepayments on cancellation.
• Allow a business to vary the terms after the contract has been agreed.
James Johnston is a solicitor in Burnetts’ dispute resolution team. For further information on consumer protection for businesses, contact James on 01228 552222 or by email email@example.com"> firstname.lastname@example.org .
About the author
James is a Partner and Head of the firm’s Dispute Resolution team.
Published: Friday 2nd August 2013
Categorised: Commercial Dispute Resolution