IP News – Trade Descriptions Guide Law and Penalties
Traders are responsible for making sure the products they offer and sell to consumers are accurately described. It is important to ensure that consumers have the right information about the products they are being offered so that they can decide whether or not they want to purchase them.
The Consumer Protection from Unfair Trading Regulations 2008 (CPRs) prohibit traders from misleading consumers by falsely describing products. ‘Product’ is defined very broadly and includes:
- digital content
- immoveable property – for example, sales or leases of houses and flats
- rights and obligations – for example, being able to use a caravan for a period of time
- demands for payment, such as for parking on private land
The CPRs also prohibit traders from hiding information, giving insufficient information or giving information in an unclear manner about products. See ‘Consumer protection from unfair trading’ for more information.
What does the law require?
The CPRs cover commercial practices, which include any act, omission, course of conduct, representation or commercial communication (including advertising and marketing) by a trader that is directly connected with the promotion, sale or supply of a product to consumers.
A trader must not mislead a consumer about a product in any way by giving false or deceptive information about a number of specific matters. They must also not omit information about a product that a consumer would need in order to make an informed decision.
It should be noted that to breach the majority of the Regulations the misleading information given (or information that has not been given) to a consumer must cause, or be likely to cause, the average consumer to make a different transactional decision. An example of this would be the consumer making a purchase that they would not otherwise have made. Transactional decisions also include decisions made after a consumer has bought a product – for example, the decision whether to return a faulty product or to accept an offer of redress.
The Regulations are not intended to cover insignificant inaccuracies, but ultimately only a court can decide whether the actions of a trader would affect the average consumer in an adverse way.
Some practices are prohibited in all circumstances, and these are covered in ‘Consumer protection from unfair trading’.
If a trader makes a false representation that was dishonest, and by making the false representation intended to gain for themselves or another (or cause loss to another), then they may commit an offence under the Fraud Act 2006 (the Fraud Act does not apply in Scotland; instead, it is the common law offence of fraud).
What are the specific breaches of the Regulations relating to products?
It is a breach of the Regulations (and potentially a criminal offence) to engage in an ‘unfair commercial practice’. In relation to the description of a product, a practice is unfair if it is either of the following:
- a ‘misleading action’ (it contains false or misleading information, and is therefore untruthful in relation to a list of specified matters, or its overall presentation in any way deceives or is likely to deceive the average consumer)
- a ‘misleading omission’ (it omits or hides material information or provides material information in a manner that is not clear)
In addition, for a practice to be unfair the trader’s misleading action or omission must cause, or be likely to cause, the average consumer to take a different transactional decision (as above, this could be to buy as opposed to not buy, having work done or not, or paying a different amount for goods). The law also introduces a general duty not to trade unfairly.
How can a misleading action or omission be given?
Misleading actions and omissions can be given in any of the following ways:
- in writing (for example, in an advert or brochure, or on an invoice or order form)
- by illustration (for example, in advertisements or on packaging)
- by implication
In addition, if goods are supplied in response to a request that includes a specific description (for example, a customer specifies they want a granite worktop) it is possible that it would be held that the supplier of the goods has applied the description themselves.
What descriptions are covered by the Regulations?
The following matters are specifically covered when looking at a misleading action:
- the existence or nature of the product
- the main characteristics of the product, which include:
- after-sales service
- handling of complaints
- method and date of manufacture
- method and date of provision
- fitness for purpose
- geographical or commercial origin
- results to be expected
- results and material features of tests or checks carried out
- the extent of the trader’s commitments
- the motives for the commercial practice
- the nature of the sales process
- any statement or symbol relating to direct or indirect sponsorship or approval of the trader or product
- the price or the manner in which the price is calculated
- the existence of a specific price advantage
- the need for a service, part, replacement or repair
- the nature, attributes and rights of the trader, which include their:
- affiliations or connections
- ownership of industrial, commercial or intellectual property rights
- awards and distinctions
- the consumer’s rights or the risks they might face
Who can commit an offence under the Regulations?
A ‘trader’, which means any person who, in relation to a commercial practice, is acting for purposes relating to their business, and anyone acting in the name of or on behalf of a trader. This would include directors, managers and all levels of employees.
How can a trader avoid committing an offence?
In the first instance, the trader should ensure that all descriptions are not misleading. This means that not only should they be accurate, but they should be presented in a way that would not mislead – for example, by being understood in the wrong context. To avoid committing misleading omissions, traders should ensure that they are open and honest with customers, including anything that might make the product or the offer less attractive.
The Regulations therefore provide a trader with the defence that the commission of an offence was due to a mistake, or to reliance on information supplied to them, or the act or default of another person, an accident or some other cause beyond the trader’s control; and that they took all reasonable precautions and exercised all due diligence to avoid the commission of such an offence by themselves or any person under their control.
In simple terms, this means that a process should exist to avoid unfair commercial practices and that the process should be followed by all employees.
Purchasers of misdescribed products are likely to seek redress through the civil courts. In particular, these Regulations provide specific rights to redress for consumers. Where there has been a misleading action (or an aggressive practice), the consumer may be entitled to claim compensation and/or a reduction in price or to cancel the contract completely.
The Department for Business, Energy and Industrial Strategy (BEIS, which was known as the Department for Business, Innovation and Skills at the time) has produced guidance on consumers’ rights to redress under the Regulations: Misleading and Aggressive Commercial Practices: New Private Rights for Consumers.
Failure to comply with trading standards law can lead to enforcement action and to sanctions, which may include a fine and/or imprisonment. For more information please see ‘Trading standards: powers, enforcement and penalties’.
What powers do they have?
In most cases, TSOs have powers under Schedule 5 to the Consumer Rights Act 2015. Depending on the legislation they are enforcing, they may have additional powers or powers that are slightly different. A TSO’s main powers include the power to enter premises, powers of inspection and powers to secure or seize material that might be required in evidence:
- a TSO can at any reasonable time enter premises to observe the carrying on of a business, to inspect goods or documents, to test weighing or measuring equipment, or to make a test purchase. Refusal of entry could be viewed as obstructing an officer, which is a criminal offence
- a TSO can enter your home, or any other premises used solely or mainly as a dwelling, but only with a warrant issued by a court. A TSO can also obtain a warrant to enter any premises by force if necessary, and this might be done, for example, where it is expected that entry will be refused or obstructed
- if the entry is for a routine inspection then the TSO must give you two days’ written notice of the inspection before entering your premises. However, notice is not needed if:
- you have waived the need for it to be given to you
- the TSO has reasonable suspicion that you have broken the law
- giving notice would defeat the purpose of the visit
- it is not practicable to give you notice (for example, there is an imminent risk to public health or safety)
- the entry is for the purposes of market surveillance activities under safety legislation
- where a breach of trading standards law is suspected, a TSO can seize goods and documents
How will I know that they are genuine?
Genuine TSOs will always carry photographic identification, which will usually show their name, department and the local authority they work for. If you have any doubts then call your local authority right away.
Can they close businesses down?
No. Trading standards services have no direct powers to order you to stop trading. However, they can apply to the courts for orders, which may restrict your activities.
What can trading standards services do to stop businesses that break the law?
There are a wide range of options available, although the precise options vary depending on the nature of the breach of trading standards law.
In most cases, businesses are keen to comply with the law and to avoid the risks and expenses of formal enforcement action. Many breaches of trading standards law are resolved through advice and agreed remedial actions by the business (which might include changing products, systems, labelling or advertising and/or arranging redress for customers who have been affected by a breach).
However, trading standards services always have formal enforcement options available to them. The decision to take formal action lies with the local authority, but it is likely that formal action will be taken in cases where there is a serious breach (in terms of the detriment to customers or to other businesses through unfair competitive advantage) or where the business has failed to respond to or engage with informal attempts to secure compliance.
Formal enforcement and penalties
Each trading standards service has an enforcement policy, which explains how they seek to ensure that the action they take is fair and proportionate. This can be requested from your local authority.
The main formal enforcement options include the following.
Many breaches of trading standards law are criminal offences and can be prosecuted in the Magistrates’ Court or Crown Court. A successful prosecution may have a range of consequences, including the following:
- the trader will have a criminal record
- a punishment or sentence. Trading standards offences can usually be punished with a fine, and in many cases the amount is unlimited. For the most serious cases imprisonment is an option, with maximum periods of up to two years for some trading standards offences. Where a business is prosecuted for fraud, theft or money laundering in addition to or instead of trading standards offences, or for offences under intellectual property law (trade marks and copyright), maximum penalties can be very high indeed (up to 14 years’ imprisonment)
- an order to pay compensation to victims
- an order to pay the costs of the investigation and prosecution
- a ‘criminal behaviour order’ restricting future conduct (for example, a ban on making contracts in consumers’ homes)
- disqualification as a company director (where the offence was connected with a company) or from driving (where there is a good reason – for example, where the offence included bad driving or was facilitated by the use of a vehicle)
- confiscation of assets and money under proceeds-of-crime legislation
- forfeiture of any illegal or infringing goods and any equipment used in committing the offence
This is a formal warning, which may be offered as an alternative to prosecution, where it is in the public interest to do so.
There is no obligation on trading standards services to offer a caution, but it might be offered for relatively minor first-time offending.
For a range of breaches, trading standards services can apply to the County Court or High Court for an enforcement order requiring the business to comply with the law. This may include the following consequences:
- the order itself. A breach of the order is contempt of court, which carries a maximum penalty of a fine and two years’ imprisonment
- an order to take ‘enhanced consumer measures’, including changes to business processes and paying compensation to victims
- an order to pay the costs of the investigation and the court proceedings
- a requirement to publicise the order
This is a formal promise by the business to comply with the law and, where appropriate, to take enhanced consumer measures.
There is no obligation on trading standards services to accept an undertaking, but it may be accepted if the business genuinely appears to be committed to making amends.
In some cases, trading standards services can issue a notice requiring the business to take action or to stop doing something, without the need to apply to court for an order. These notices have different names and different conditions depending on the law they are made under.
In general there will be a deadline to comply with the notice. If a business fails to comply with a notice, this can lead to court action; if the business disagrees with the use of the notice, it usually has the opportunity to apply to the court or a tribunal to appeal against it.
Compliance notices are available under a range of laws, including food standards, animal health, product safety, weights and measures, and fair trading.
In some cases, trading standards services can issue a penalty notice, in effect imposing a fine directly on a business without the need for court proceedings.
Such notices are available under a range of legislation, including laws relating to letting agents, secondary ticketing, single-use carrier bags and (in some areas) underage sales of alcohol.
The business can usually appeal to the court or a tribunal against the use of such a notice or against the level of penalty imposed.
Can trading standards services intervene to get redress for a consumer?
Trading standards services cannot order redress for individual consumers or take court action on their behalf, although they may offer advice and assistance to consumers making their own claims in court or through an alternative dispute resolution service (see ‘Alternative dispute resolution’).
However, in the event of prosecution or an application for an enforcement order, trading standards services can ask for a court order requiring compensation to be paid.
Aren’t trading standards services just there to protect consumers rather than businesses?
No. Although most trading standards law is intended to protect consumers, breaches of trading standards law put honest, reputable, compliant businesses at a disadvantage. In addition, trading standards services enforce legislation that protects businesses (such as the Business Protection from Misleading Marketing Regulations 2008, covered in the ‘Business-to-business marketing’ guide) and give advice to businesses. Local authorities have a statutory duty to have regard to the desirability of promoting economic growth in their area, and trading standards services are therefore keen to promote successful, compliant business.
Primary Authority is a scheme run by local authorities to offer advice to businesses. For more information see ‘Primary Authority’.
The Department for Business, Energy and Industrial Strategy (BEIS, which was known as the Department of Business, Innovation and Skills at the time) has produced detailed guidance on how the Consumer Rights Act 2015 affects trading standards officers’ powers: Investigatory Powers of Consumer law Enforcers: Guidance for Businesses on the Consumer Rights Act 2015.
BEIS has also published guidance on the ‘enhanced consumer measures’ brought in by the Consumer Rights Act 2015: Enhanced Consumer Measures: Guidance for Enforcers of Consumer Law. As the document’s title suggests, it is primarily aimed at TSOs but it may also be of interest to businesses in their dealings with trading standards services.