New UK law of fair dealing

United Kingdom

Consumer Protection from Unfair Trading Regulations 2008 (“CPRs”)

Unlike most of the EU, the UK has never had a general law requiring fair dealing in business to consumer transactions. Instead, consumers have had to rely on a patchwork of laws and industry codes of practice. This is about to change with the implementation of the CPRs.

There are broadly three categories of commercial practice that will be treated as unfair. These fall within the general prohibition; practices that arise by misleading acts or omissions and/or aggressive commercial practices; and an annex of 31 practices that will always be deemed unfair.

The general prohibition will apply to commercial practices that fall below the standards of honest market practice and are likely to distort the economic behaviour of the average consumer. In other words, using a business practice to impair the typical consumer’s ability to make an informed decision, and so causing them to make a transaction they would not otherwise have made.

A commercial practice will be a misleading act if it contains false information. However, even if it is factually accurate it can still be a misleading practice if it is likely to deceive the average consumer. A commercial practice will also be misleading, for example, if it is likely to cause the average consumer to confuse a trader’s product or trademark with that of a competitor. A misleading omission, on the other hand, will involve omitting, or hiding material information, or providing it in an unclear manner. In contrast, aggressive commercial practices will in general impair the average consumer’s freedom of choice.

It should be noted that in each of these cases the test is an economic one. It is not enough for the consumer to be misled; their transactional decision must also be affected. However, this is not the case for the 31 “always unfair” practices in Annex 1. These prohibit various unfair sales practices, such as prize draw scams, bogus closing down sales, and aggressive doorstep selling.

A breach of any of the prohibitions is likely to be a criminal offence, with hefty penalties possible. It is thus vital for all businesses that deal with consumers to have a good understanding of the CPRs and how to avoid breaching them. Businesses should review their consumer-facing business practices to assess their fairness and ensure they don’t include banned practices. They should consider their omissions as well as their actions to check if anything they are failing to do will amount to a misleading omission.

Business Protection from Misleading Marketing Regulations 2008 (“BPRs”)

The BPRs, on the other hand, will become the main legislation regulating unfair business-to-business practices in the UK. They will not alter businesses’ obligations not to use advertisements that mislead other businesses. As before, comparative advertising will only be allowed if certain conditions are met. These include that it is not misleading; that any goods or services compared meet the same need or are intended for the same purpose; and that it objectively compares material, relevant and verifiable features of those goods or services, which may include price.

The main change from existing legislation, though, is that these rules apply to “indications” and not merely traditional advertising. These are essentially any kind of promotional representations, so it may become possible that they will catch, for example, businesses that pose as customers to hype their business on online forums through fake reviews.

Misleading indications are criminalised alongside traditional advertising, so businesses should review all their business-to-business promotional practices to ensure they could not fall foul of the new regulations.