Consumer Protection: New Regulations - Don't Get Caught Out

Article excerpt

Consumer protection law is on the brink of a radical and wide-ranging transition. Marketing law experts Nick Johnson and Stephen Groom from Osborne Clarke assess the critical changes and what they mean for marketing campaigns.

The sweeping changes to the rules designed to protect consumers from misleading advertising and unfair selling techniques are the biggest shake-up to consumer protection laws in the past 20 years. The Consumer Protection from Unfair Trading Regulations 2008, which are due to come into force on 26 May, will relegate the Trade Descriptions Act, Control of Misleading Advertisements Regulations and large sections of the Consumer Protection Act to the pages of history.

Not surprisingly, many businesses assume that the new law is not relevant to them, but this is not the case. It will also have significant practical implications for many businesses, with marketing directors and other senior staff facing potential criminal sanctions if they slip up.

Under the regulations

- Ads that include product details, price and a response mechanism, enabling consumers to make a purchase, must now also include certain compulsory disclosures.

- 'Buy now while stocks last' will be a high-risk promotional message if stock availability is in fact likely to remain good. The new regulations make it a criminal offence to state falsely that a product will be available for only a limited time to elicit an immediate decision from consumers.

- Product placement in made-for-internet programmes will be unlawful unless disclosed. UK equivalents of lonelygirl15 will need to be transparent about placement arrangements.

- Presenting consumers' existing statutory rights as a distinctive feature of your product or service will be a criminal offence. So ecommerce sites, telephone and catalogue ordering services will need to be very careful how they describe consumers' cancellation rights.

- Other areas where the law is likely to have an impact include comparative advertising, commercial blogging, advertising to children and web content (see Essentials for more detail).

There are a number of areas of ambiguity in the legislation. One example is the prohibition on offering a prize in a promotion without actually awarding it. The wording suggests this could catch many kinds of instant-win promotions, as not all prizes offered will in fact be claimed. Although it is unlikely that the authorities would enforce the legislation in this way, the lack of a transitional period means that marketers need to take a view on these ambiguities and ensure they are fully compliant with the rules from the outset.

Punishments for non-compliance are potentially high; they include fines of up to pounds 5000 per offence in the Magistrates' Court and even imprisonment. These penalties can be imposed on companies or individual directors and other senior individuals who 'consented or connived' in the offence.

Practical consequences

In practice, the key enforcement bodies - the Office of Fair Trading and Trading Standards officers - are obliged to have due regard to 'established means' of enforcement. This means that many of the new criminal offences will be exercised only for matters outside the scope of the ASA, or where its adjudications have not dealt effectively with a problem - and for that reason, many expect the Committee of Advertising Practice (CAP) to amend its codes in response to this legislation.

However, even if no prosecution is brought, a practice deemed illegal under the regulations could lead to other practical consequences Insurers may disclaim liability for any related losses. Suppliers may argue that they have a right to walk away from particular contracts. Bodies such as the Financial Services Authority and the Consumers' Association also have statutory powers to apply for injunctions to enforce this law.

Given the potential ramifications of the new regulations, marketers would do well to liaise with their legal departments to review the legislation and assess its impact on their businesses and marketing campaigns. …