339 |
4â Criminal law controls |
|
|
|
Given this policy consideration, the development and use of civil law |
|
enforcement powers is particularly significant. The use of the powers in the |
|
Enterprise Act 2002 in respect of breaches of the Consumer Protection from |
|
Unfair Trading Regulations 2008, and the use of injunctions and undertakings |
|
for breaches of the Business Protection from Misleading Marketing Regulations |
|
2008 are positive moves. This permits enforcement bodies to seek assurances |
|
from traders and obtain injunctions as a means of bringing undesirable prac- |
|
tices to an end without incurring the expense and delay necessary to pursue a |
|
criminal prosecution. If the underlying rationale of good enforcement in this |
|
area is to protect purchasers by prohibiting and removing unfair commercial |
|
practices, a civil injunction may be more effective than a criminal prosecution. |
|
Q2 Do you consider that the use of civil law enforcement in addition to crim- |
|
inal law enforcement is a positive move in enforcement strategy? |
4â Criminal law controls
(a)â Offences
Both the Consumer Protection from Unfair Trading (CPUT) Regulations 2008 and the Business Protection from Misleading Marketing (BPMM) Regulations 2008 create criminal law offences. The CPUT Regulations 2008 create offences in regulations 8–12 inclusive, while the BPMM Regulations 2008 contain an offence in regulation 6. In addition to these main offences, both sets of regulations contain the normal provision holding the officers of a corporation liable for the criminal actions of the corporation18 and, also, a provision allowing enforcement authorities to prosecute another person whose act or default caused the original offender to commit the offence.19
The offences fall into two categories, those that require mens rea and those that are strict liability offences only requiring proof that the offending actus reus has occurred, without any need to consider the mental intent of the defendant. This is not unusual, as strict liability offences are very common in trading legislation.
The only offence requiring proof of mens rea is in regulation 8 of the CPUT Regulations 2008, which makes it an offence to breach the regulation 3 prohibition against unfair commercial practices. Regulation 8(1) provides that a trader commits an offence if he knowingly or recklessly engages in a commercial practice which contravenes the requirements of professional diligence under regulation 3(3)(a); and, further, that the practice materially distorts or is likely to materially distort the economic behaviour of the average consumer with regard to the product.
18CPUT Regulations 2008 reg. 15 and the BPMM Regulations 2008 reg. 8.
19CPUT Regulations 2008 reg. 16 and the BPMM Regulations 2008 reg. 9.
340 |
Policy on unfair commercial practices |
|
|
The meaning of the key concepts ‘commercial practice’, ‘professional diligence’ and ‘materially distorting the economic behaviour of the consumer’ will be dealt with in detail below. What concerns us here is the phrase ‘knowingly or recklessly’ which delineates the mens rea aspect necessary to prove the offence. ‘Knowingly’ clearly connotes actual knowledge by the defendant or someone acting on his behalf, such as an employee. By contrast, ‘recklessly’ is a more nebulous concept, which has been interpreted judicially in the past when considering alleged offences against the Trade Descriptions Act 1968. Arguably, ‘recklessness’ requires a lesser element of mens rea, given that the court in MFI Warehouses Ltd v. Nattrass20 held that recklessness does not imply dishonesty, merely that the defendant has not paid due regard to his actions. This approach has been reinforced by regulation 8(2) of the CPUT Regulations 2008, which states that:
a trader who engages in a commercial practice without regard to whether the practice contravenes the requirements of professional diligence shall be deemed recklessly to engage in the practice, whether or not the trader has reason for believing that the practice might contravene those requirements.
Knowledge is not relevant, it is the lack of care that creates the offence. It is reasonable to assume that the new law will follow the previous approach in that a defendant should not be held liable for a commercial practice that was acceptable when he did it but was rendered unfair by the subsequent act of a third party.21
The remainder of the offences created by the CPUT Regulations 2008 and that to be found in regulation 6 of the BPMM Regulations 2008 are strict liability offences. Hence, there is no mens rea requirement, and liability follows if the defendant has committed the offending action irrespective of his intentions. However, as the relevant offences are strict liability as opposed to absolute liability, defences are permitted and both sets of Regulations contain statutory defences, of which the due diligence defence is the most important.22
The offence provisions are relatively straight-forward, each creating a strict liability offence for contravention of a specified regulation. Thus, regulation 9 of the CPUT Regulations 2008 makes it an offence to breach the requirements of regulation 5 relating to misleading actions; regulation 10 makes it an offence to breach regulation 6 on misleading omissions; regulation 11 makes it an offence for a trader to engage in an aggressive commercial practice contrary to regulation 7; and, finally, regulation 12 makes it an offence for a trader to engage in one of the inherently unfair commercial practices detailed in paragraphs 1 to 10, 12 to 27 and 29 to 31 of Schedule 1 to the CPUT Regulations 2008.
Regulation 6 of the BPMM Regulations 2008 is also straight-forward, simply stating that it is an offence to engage in advertising which is ‘misleading’ under
20 [1973] 1 All ER 762.â 21â Sunair Holidays v. Dodd [1970] 2 All ER 410. 22 See below.
341 |
4â Criminal law controls |
|
|
|
|
|
regulation 3 of those Regulations. The meaning of ‘misleading’ advertising in |
|
|
this context will be considered in detail below.23 |
|
|
Q3 Are strict liability offences acceptable in trading law? Consider why the |
|
|
offence in regulation 8 requires mens rea. |
|
|
(b)â Defences |
|
|
The criminal offence under regulation 8 of the CPUT Regulations 2008 requires |
|
|
proof of mens rea, the offence being to ‘knowingly or recklessly engage in a |
|
|
commercial practice’ which breaches regulation 3. The requirement for mens |
|
|
rea means that the due diligence defence, which is the defence commonly sup- |
|
|
plied for strict liability offences in trading law, is simply not relevant. As such, |
|
|
regulation 8 falls outside the regime of defences included in regulations 16 to 18 |
|
|
of the Regulations. |
|
|
(i)â Due diligence defence |
|
|
The main defence to offences under regulations 9 to 12 of the CPUT |
|
|
Regulations 2008 and regulation 6 of the BPMM Regulations 2008 is the due |
|
|
diligence defence, to be found in regulation 17 and regulation 11, respectively. |
|
|
Unlike the due diligence defence in product safety legislation, which is a single |
|
|
strand defence only requiring the defendant to show that ‘he took all reasonable |
|
|
precautions and exercised all due diligence to avoid committing the offence’,24 |
|
|
the version of the due diligence defence in both the CPUT Regulations 2008 |
|
|
and the BPMM Regulations 2008 is a two strand defence derived from the |
|
|
Trade Descriptions Act 1968.25 |
|
|
The defence provides that in any proceedings against a person for an offence |
|
|
under regulations 9 to 12 of the CPUT Regulations 2008 or regulation 6 of the |
|
|
BPMM Regulations 2008, it is a defence for that person to prove: |
|
|
(a) that the commission of the offence was due to: |
|
|
(i) |
a mistake; |
|
(ii) |
reliance on information supplied to him by another person; |
|
(iii) |
the act or default of another person; |
|
(iv) |
an accident; or |
|
(v) another cause beyond his control; and |
|
(b) that he took all reasonable precautions and exercised all due diligence to avoid the commission of such an offence by himself or anyone under his control.26
Given that this defence is identical to that under the Trade Descriptions Act 1968, it follows that the case law interpreting that defence is equally applicable
23 See Part 5 Chapter 3.â 24â General Product Safety Regulations 2005, reg. 29.
25Trade Descriptions Act 1968, s. 24(1).
26CPUT Regulations 2008 reg. 17(1) and BPMM Regulations 2008 reg. 11(1).
342 |
Policy on unfair commercial practices |
|
|
|
|
|
here. Both strands of the defence, (a) and (b), must be satisfied before the |
|
|
defence is proved. It is not sufficient for the defendant to prove only one of |
|
|
them. |
|
|
|
Under paragraph (a), the defendant must show the existence of one of the |
|
five listed criteria. The ‘mistake’ referred to in paragraph (a)(i) must be a mis- |
|
|
take by the defendant and not that of some other person.27 By contrast, the |
|
|
next two criteria revolve around the relationship between the defendant and |
|
|
‘another person’. The second criteria requires that the defendant relied on |
|
|
information supplied to him by another person, while the third deals with the |
|
|
act or default of ‘another person’. This raises the key issue of who is ‘another |
|
|
person’ for these purposes. Given that the defendant will be a trader, defined |
|
|
as being someone ‘acting for purposes relating to his business, and anyone act- |
|
|
ing in the name of or on behalf of a trader’, it follows that the key issue is who |
|
|
will be classed as ‘another person’ when dealing with alleged offences commit- |
|
|
ted by companies. |
|
|
|
The leading case on this point is Tesco Supermarkets Ltd v. Nattrass.28 The case |
|
related to a ‘flash offer,’ which involved the advertising and supply of cartons of |
|
|
soap-powder at a reduced price, there being a poster in the store advertising the |
|
|
offer. Unfortunately, the store ran out of the reduced price cartons and a shop |
|
|
assistant put some full price cartons on display without removing the advertis- |
|
|
ing poster. The store manager, who was responsible for ensuring that everything |
|
|
was in order on the premises, did not notice this. When a customer was charged |
|
|
full price for the product, the enforcement authority prosecuted for an offence. |
|
|
The House of Lords held that the offence had been committed by the store man- |
|
|
ager who was ‘another person’ for the purposes of the defence. When consider- |
|
|
ing the structure of companies, the company itself only comprises those persons |
|
|
who would be classed as the alter ego of the company, i.e., those persons such as |
|
|
the directors and company secretary who have a direct impact on the decisions |
|
|
and actions of the corporation. Indeed, those people can be charged separately |
|
|
if a body corporate has committed an offence due to their consent, connivance |
|
|
or neglect. Anyone, such as a store manager or employee, who falls outside the |
|
|
alter ego is ‘another person’ for the purposes of the defence.29 However, if a com- |
|
|
pany wants to rely on the actions of another person as part of their defence, it |
|
|
must identify that person to the prosecutor at least seven days before the date of |
|
|
the hearing.30 |
|
|
|
The final two criteria relate to an accident, within the normal meaning of that |
|
term, and another cause beyond the control of the defendant. |
|
|
27 |
Birkenhead and District Cooperative Society v. Roberts [1970] 3 All ER 391. |
|
28 |
[1972] AC 153. |
|
29 |
See also M. Griffiths, and I. Griffiths, Law for Purchasing and Supply (3rd edn, Pearson Education |
|
|
Ltd, Harlow, 2002); and P. Dobson, and R. Stokes, Commercial Law (7th edn, Sweet & Maxwell |
|
|
Ltd, London, 2008). |
|
30 |
CPUT Regulations 2008, reg. 17(2) and BPMM Regulations 2008, reg. 11(2). |
343 4â Criminal law controls
Assuming that the defendant can satisfy the first strand of the defence, he must also prove that he took all reasonable precautions and exercised all due diligence to avoid the commission of the offence by himself or anyone under his control. This effectively requires that the defendant establish a suitable quality control system to avoid the commission of the offence and, thereafter, regularly monitor it to ensure that the system works. In practice, each case will depend on its facts, with the burden on the defendant to show that his actions satisfy the due diligence requirement. Further, setting up a suitable system may allow the defendant to claim the benefit of the defence when the failure by an employee to comply with the system has caused an offence.31 That assumes, of course, that the defendant has issued adequate instructions to his employees about the system and the need to comply with it.32
The taking of ‘reasonable precautions’ in paragraph (b) raises issues about the onus on defendants to sample the products that they supply. The Divisional Court in Garrett v. Boots Chemists Ltd33 felt that there is a duty on traders to carry out some random sampling even if the trader has instructed their supplier to comply with certain standards. The defendant had offered pencils for sale which exceeded the permitted levels of chromium and/or lead, despite the fact that the contract with the suppliers required compliance with the relevant regulatory standards. The defendant had not done any independent testing to ensure compliance with the contractual and regulatory requirements and was found guilty of an offence against the Pencil and Graphic Instruments (Safety) Regulations 1974.34 Arguably, the simplest tests can always be undertaken irrespective of the size or resources of the trader.35
Q4 Does the two strand due diligence defence provide an appropriate level of protection for innocent traders charged with a strict liability offence?
(ii)â Innocent publication
A further defence relates to the innocent publication of an advertisement.36 This defence is available to, a publisher who demonstrates that he is a person whose business is to publish or to arrange for the publication of advertisements and, further, that he received the advertisement in question in the ordinary course of business and had no reason to either know or suspect that its publication would amount to an offence under the respective Regulations.
31Newcastle-upon-Tyne City Council v. Safeway plc (unreported, 27 June 1994, DC). See Griffiths and Griffiths, above n. 29.
32 See Dobson and Stokes, above n. 29.â 33â Unreported, 16 July 1980, DC.
34SI 1974/2406.
35See Sherratt v. Gerald’s the Amercan Jewellers Ltd (1970) 114 Sol. Jo. 117, in which the Divisional Court held that a trader, charged with an offence under s.1(1)(b) of the Trade Descriptions Act 1968 for supplying a diver’s watch falsely described as ‘water-proof’, could easily have tested the accuracy of the statement by submerging the watch in a container of water.
36CPUT Regulations 2008, reg. 18.