3â Prohibition against unfair commercial practices

3â Prohibition against unfair commercial practices

The basic prohibition against unfair commercial practices is to be found in regulation 3(1), which states simply that ‘unfair commercial practices are prohibited’. This catch-all provision serves two useful purposes. First, it encompasses any unfair practices that do not fall within the specific prohibitions against misleading actions, misleading omissions and aggressive commercial practices to be found in regulations 5, 6 and 7, respectively. Secondly, it introduces an element of future-proofing as it is broad enough to include unfair commercial practices that have not yet been recognised and may develop in the future. This should prevent the legislation becoming dated and less relevant in the future.

A commercial practice is deemed unfair if:

(a)it contravenes the requirements of professional diligence; and

(b)it materially distorts or is likely to materially distort the economic behaviour of the average consumer with regard to the product.34

33 CPUT Regulations 2008, reg. 2.â 34â Ibid. reg. 3(3).

358 The Consumer Protection from Unfair Trading Regulations 2008

The concepts of the average consumer and materially distorting have already been considered but paragraph (a) of this definition raises the concept of ‘professional diligence’. This requires the trader to demonstrate a level of special skill and care towards consumers which is commensurate with either honest market practice in the trader’s field of activity or the general principles of good faith in the trader’s field of activity.35 The acid test would seem to be ‘Is the trader acting to a standard that a reasonable person would expect?’36 The inclusion of this requirement for traders to act within the requirements of professional diligence when dealing with consumers is to be welcomed.

The concept of professional diligence in this context is not dissimilar from the concept of good faith to be found elsewhere in English law. However, here it is firmly embedded in the central provision of the CPUT Regulations 2008 while, in English law, the concept of good faith is more specialised in application. Of course, the average consumer will still be required to exercise care for his own safety and wellbeing, but the trader will now be expected to exercise the special skill and care appropriate to his professional ability in all of the commercial practices with which he is involved. While the definition specifically refers to the standard in the trader’s field of activity, the common standard to be expected in all industries remains the same, namely, that of professional diligence. Standards do not vary depending upon the type of business with which an individual trader is involved. In assessing the relevant standard, regard may be had to things such as industry codes of practice, compliance with which is to be expected within the relevant sector. However, this does not necessarily equate with professional diligence, as the code, which is indicative only, may set a standard below that which a reasonable consumer has a right to expect. Equally, if poor standards of practice are common across a sector, a trader cannot simply comply with those low standards and then claim that he is acting in accordance with professional diligence.37

For a practice to be deemed an unfair commercial practice, such as to be in breach of regulation 3, the practice in question must breach both parts of the regulation. Thus, it must not merely offend against the requirements of professional diligence but must also materially distort the economic behaviour of the average consumer or be likely so to do. There is no requirement that a consumer has actually been affected by the practice; it is the likelihood of impact that is assessed and it is only the consumer’s likely economic behaviour that is considered as opposed to their health and safety or any other aspect of their life. It follows that if the practice would not be likely to affect the transactional decisions of the average consumer, there will be no breach, even if the practice falls significantly below the standard of professional diligence.38

If a breach does occur, there is a twofold outcome. First, a breach of regulation 3 will be a criminal offence under regulation 8(1), and, secondly, it will also constitute a Community infringement contrary to Enterprise Act 2002, Part 8.39 The offence under regulation 8 requires mens rea, unlike the other offences in the CPUT Regulations 2008, which are strict liability40 and for which only an

actus reus is required. Regulation 8(1) provides that:

A trader is guilty of an offence if:

(a)he knowingly or recklessly engages in a commercial practice which contravenes the requirements of professional diligence under regulation 3(3)(a); and

(b)the practice materially distorts or is likely to materially distort the economic behaviour of the average consumer with regard to the product under regulation 3(3)(b).

The meaning of ‘knowingly’ is self-evident but the term ‘recklessly’ is less clear-cut and is defined in regulation 8(2) as occurring when a trader engages in a commercial practice and:

without regard to whether the practice contravenes the requirements of professional diligence [he] 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.

What is clear is that there is no need for full mens rea in that, while the trader must clearly have intended to undertake the commercial practice in question, there is no requirement that he knew that the action would be prohibited as unfair and contrary to the CPUT Regulations 2008. Each case will need to be decided on its facts, as the test is whether the act contravenes the requirements of professional diligence as defined above.

The term ‘recklesly’ is the same as that used previously in the Trade Descriptions Act 1968, section 14 as it related to false trade descriptions applied to services, accommodation or facilities. As such, cases decided under that section are arguably instructive here. One of the leading cases on section 14 was MFI Warehouses Ltd v. Nattrass41 in which the court confirmed that ‘recklessly’ does not connote dishonesty so much as that the defendant did not pay due regard to the matter in hand, exactly the approach that is being taken to regulation 3 of the CPUT Regulations 2008. Lord Widgery CJ opined that:

I have … come to the conclusion that ‘recklessly’ in the context of the 1968 Act does not involve dishonesty. Accordingly it is not necessary to prove that the statement was made with that degree of irresponsibility which is implied in the phrase ‘careless whether it be true or false’.42

39Enforcement provisions under the Enterprise Act 2002 will be considered in more detail below.

40CPUT Regulations 2008, regs. 9, 10, 11 and 12, which relate to the other unfair practices, and will be discussed below.

41 [1973] 1 All ER 762.â 42â Ibid. 768.

an agreement or set of rules (which is not imposed by legal or administrative requirements), which defines the behaviour of traders who undertake to be bound by it in relation to one or more commercial practices or business sectors.

As such, codes of practice are voluntary and reflect the agreed practices of an industry. Typically, they are promoted by a professional body or trade organisation who, for the purposes of the Regulations, acts as the ‘code owner’, a role defined in regulation 2 as meaning ‘a trader or a body responsible for the formulation and revision of a code of conduct, or monitoring compliance with the code by those who have undertaken to be bound by it.’

The role of codes of practice in consumer law has been enhanced by the involvement of the OFT in their Approved Codes of Practice Scheme, which recognises various industry codes of practice as requiring higher standards of service from their members than are required by the law. Indeed, to gain recognition as an OFT approved code of practice, the code owner must demonstrate that members complying with the code will:

•provide customers with good standards of customer service;

•give customers clear information about the goods or services they are selling;

•use clear and fair contracts;

•have user-friendly and prompt procedures for dealing with customer complaints and provide access to low cost, independent advice to resolve disputes;

•have a commitment to providing customers with adequate information about goods and services;

•use clear and fair contracts;

•ensure protection of deposits or prepayments;

•provide low cost, independent dispute resolution if a complaint is not dealt with satisfactorily.46

In promoting good practice, codes of practice are invaluable as part of the strategy for controlling and negating unfair commercial practices, although their role is limited to regulating the activities of their members and, in practice, it is likely to be those businesses that are not party to a professional organisation and not bound by a code of practice that will engage in unfair practices. However, as a code of practice reflects the agreed stance of the organisation’s members with no requirement that it stipulates the highest standards possible, it is possible, though not likely, that a member could comply with a code and still be involved in an unacceptable and unfair commercial practice.

Regulation 4 adds some legal controls to the role of codes by prohibiting the promotion of any unfair practice by a code owner in a code of practice. Given the generally positive rationale behind codes of practice, it is to be hoped that no code would actively promote unfair practices, but regulation 4 actively

46 See ‘OFT Approved Codes Explained’ at www.oft.gov.uk.