Consumer redress for misleading and aggressive practices
Professor Hector MacQueen
Gillian Swanson, Project Manager
Julie Davidson, Legal Assistant
This project is now complete. On 28 March 2012, we published our joint Report on Consumer Redress for Misleading and Aggressive Practices (Scot Law Com No 226, Law Com No 332). A news release, summary and impact assessment are also available. Our recommendations have been implemented by the Consumer Protection (Amendment) Regulations 2014 (SI 2014/870) which came into force on 1 October 2014. A further news release was issued on that date.
The current law
Misleading and aggressive commercial practices are a major problem. Under the existing laws that govern misleading and aggressive practices it is difficult, if not impossible, for consumers to get their money back. In May 2008, the Consumer Protection from Unfair Trading Regulations implemented the Unfair Commercial Practices Directive in the UK. The Regulations provide that traders must not use “unfair commercial practices” against consumers. Whilst the Regulations cover many of the unfair practices consumers complain about, they do not, however, provide consumers with a direct cause of action where they have suffered loss as a result of an unfair commercial practice. Consumers must rely instead upon the remedies which they are afforded under the existing law; for example, under the law of misrepresentation. Our review of the current private law in this area found that it was fragmented, complex and unclear.
We recommended limited reform, targeting the most serious cases of consumer detriment due to unfair trade practices. These are already criminal offences, but we recommended a new right of redress for consumers, which would give them the right to a refund or a discount on the price. Also, damages may be recoverable where consumers have suffered additional loss.
In particular, we recommended that:
• There must be a contract between the parties or a payment made by the consumer. Thus consumers would not, for example, be entitled to compensation if they visited a shop in response to a misleading advertisement but did not buy anything. Nor would consumers have a separate right to compensation for being misled about their rights.
• The consumer would only have a right against the other party to the contract, usually the retailer or service provider. The legislation would not provide additional rights against others in the supply chain, such as producers or against individual directors.
• The list of banned practices under the Regulations would not give rise to automatic redress; they would only be covered by the new right if they would affect an “average consumer”.
• The general prohibition against commercial practices which are “contrary to the requirements of professional diligence” should not give rise to redress. It is too uncertain.
• Land transactions and financial services should not be covered. Instead the existing law should remain.
In recommending a new statutory right of redress for a consumer against a trader, the consumer would need to show that:
• The trader carried out a misleading or aggressive practice;
• this was likely to cause the average consumer to take a decision to enter a contract or make a payment he or she would not have taken otherwise; and
• the misleading or aggressive practice was a significant factor in the consumer’s own decision to enter the contract or make the payment.
Under the new legislation consumers would have two tiers of remedies. Tier 1 remedies would be the standard remedies and would apply on a strict liability basis. The amount would be based on the price paid and would not require evidence of loss. By contrast, Tier 2 remedies would apply only if the consumer proved additional loss; they would also be subject to the trader’s due diligence defence.
Tier 1 remedies
The type of Tier 1 remedy would depend on how soon after the event the consumer complains and whether the consumer has fully consumed the product:
• The right to unwind. If the consumer raises a complaint within three months, and is able to reject some element of the goods or service, then the standard remedy is to unwind the contract. This means that the consumer can get a refund.
• Discount. If the consumer waits more than 3 months to sue or if the goods or services are fully consumed, then the consumer can claim a discount on the price.
Tier 2 remedies
Tier 2 remedies provide damages to compensate for indirect losses, including economic damage and distress and inconvenience. They are provided only if the consumer can prove that the unfair practice caused actual loss, meeting a “but for” test of causation. Furthermore, the trader can avoid this consequential liability if it can establish a due diligence defence.
For further details, please see the joint Report.
Further resources and updates
Feedback from stakeholders – October 2010.
Joint Consultation Paper on Consumer Redress for Misleading and Aggressive Practices (DP 149; CP 199) - April 2011. A summary, news release and impact assessment.
The Unfair Commercial Practices Directive can be found at: http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=CELEX:32005L0029:EN:HTML
The Consumer Protection from Unfair Trading Regulations 2008 can be found at: http://www.legislation.gov.uk/uksi/2008/1277/contents/made
Update on Australian consumer law: in part 11 of our Consultation Paper we refer to the Trade Practices Act 1974 which has been amended and renamed the Competition and Consumer Act 2010. For further information see the Australian Government’s website at http://www.consumerlaw.gov.au/content/Content.aspx?doc=the_acl/legislation.htm
If you require any further information on this project, or if there are matters you wish to raise, please email: email@example.com.