European Unfair Commercial Practices Directive

Overview
The Unfair Commercial Practices Directive ensures that consumers are not misled or exposed to aggressive
marketing and that any claim made by traders in the EU is clear, accurate and substantiated. It seeks to
enable consumers to make informed and meaningful choices.
The Directive also aims to ensure, promote and protect fair competition in the area of commercial
practices.
Analysis
The Unfair Commercial Practices Directive (2005/29/EC), replacing Europes patchwork of national regimes
with a standardised set of EU-wide regulations, will be transposed into UK law by June 2007 and come into
force by December 2007. So, what will it mean in practice?
By harmonising the EUs unfair trading laws, the new Unfair Commercial Practices Directive (the Directive)
will clarify consumer rights and so facilitate cross-border trade; its ruling concept of maximum
harmonisation will in most cases also prevent Member States from applying provisions stricter than those
required by the Directive. In essence, the new Directive imposes a general obligation on all businesses not
to treat consumers unfairly. In so doing it will capture a very wide range of unfair conduct across all
business sectors including unfair practices that have not yet been dreamt up. It will also prohibit
businesses from misleading consumers or subjecting them to aggressive selling techniques. There are extra
protections for vulnerable consumers, so often the primary target of unfair commercial practices.
Even though the Directive applies only to business-to- consumer commercial practices, the DTI has already
indicated that, even where the consumers only direct commercial contact is with a retailer, it will apply
the law further up the supply chain, for example against a manufacturer who falsely labels its products.
The Directive contains clear rules to determine when a commercial practice will be deemed unfair. These
fall broadly into three categories:
general prohibitions;
specific examples of misleading actions/omissions and aggressive commercial practices;
an annex of 31 practices that will be deemed unfair in any circumstances.
General prohibition
An "unfair commercial practice" is one that runs contrary to the requirements of professional diligence and
which materially distorts a consumers economic behaviour, or is likely so to do.
This benchmark will normally be judged by the standards of "the average consumer", although in certain
circumstances it will be adjusted to the more exacting standards of "the vulnerable consumer".
Misleading and aggressive
The vast majority of commercial practices defined as unfair under the general prohibition will fall into two
categories; they will be "misleading" and/or "aggressive". An important objective of the Directive is to
create greater legal certainty, so the ways in which a commercial practice can stray into this territory is set
out in detail.
A misleading commercial practice will contain false information (i.e. be untruthful) or will in some way
deceive, or be likely to deceive, the average consumer into taking a transactional decision that he would
not otherwise have made. An aggressive commercial practice achieves much the same outcome but by
means of harassment, coercion (including physical force) or undue influence so as to significantly impair (or
be likely to impair) the average consumers freedom of choice or conduct.
Always unfair
The list of the 31 practices which will always be considered unfair contains both misleading and aggressive
commercial practices which are all too common, including:
falsely claiming to be a signatory to a code of conduct or to be approved by a recognised body;
advertising a product as a special offer without disclosing that it may in fact be unavailable (these
are called bait advertising scams);
falsely stating that a product will be available for a very limited time in order to obtain an
immediate decision;
falsely claiming that a product facilitates success in games of chance;
significantly misrepresenting the risk to the consumer or his family of a decision not to purchase the
product in question;
creating the impression that the consumer cannot leave the business premises until a contract has
been formed;
making personal visits to the consumers home and ignoring the consumers request to leave
and/or stay away;
failing to respond to pertinent correspondence in order to dissuade a consumer from exercising his
contractual rights;
demanding payment for products supplied even though they were not ordered by the consumer in
the first place (inertia selling); and
establishing, operating or promoting a pyramid promotional scheme.
Enforcement
The government has plans for an enforcement regime which, it says, will tackle unfair practices without
over-burdening businesses that trade fairly. It is likely to include the use of civil sanctions (including
injunctions brought under the Enterprise Act 2002) as well as criminal penalties (the results of a
consultation on criminal sanctions are yet to be published).
The Directive also allows for enforcement action to be taken against groups of traders who are all using
similar unfair practices. Individuals or organisations considered under national law to have "a legitimate
interest in combating unfair commercial practices" consumer organisations, for example are also
entitled to apply to the courts for orders halting or preventing unfair commercial practices.
UK implementation
The DTI has issued consultation documents on the implementation of the Directive and is currently
investigating whether or not criminal sanctions are required to help enforce its provisions. Draft legislation
is expected in early April 2007.
Maximum harmonisation
The UK is one of the few EU countries not to already have some form of general fair trading duty
incorporated into its national law. Instead we rely mainly on sector-specific legislation. The Directive will
become the mainstay of the UKs fair trading legislation, and the maximum harmonisation approach will
require the government to undertake a wide-ranging simplification of existing consumer laws (in particular
the Consumer Protection Act 1987, Trade Descriptions Act 1968 and the Weights and Measures Act 1985)
to ensure that where they overlap with the new Directive they conform to its principles.
Impact on businesses
Put succinctly, if your business supplies or markets goods and services to or for consumers then the
Directive may well have an impact on your operations and you would be wise to familiarise yourself with
the new legislation, in particular the general prohibition on treating consumers unfairly.
A simplified legal framework could be good news, improving the business communitys understanding of
consumer legislation, making it easier to conform and, therefore, reducing time spent on compliance.
However, there will be initial costs associated with familiarisation and the repeal of some long-standing
consumer legislation could lead to legal uncertainty where, for example, old prescriptive rules are replaced
by a general duty. In some situations this new uncertainty may not lift until the courts examine some
individual test cases.
An important development
So, this is an important Directive for three main reasons:
Its scope and the principles-based approach mean that it will catch unfair practices which currently
fall between existing UK and EU rules. It also sets a standard against which all new practices will
automatically be judged.
The general prohibition on unfair trading means that there should be no need to introduce specific
regulations against new unfair practices as they emerge.
It strengthens and harmonises consumer rules across the EU helping to build consumer confidence
in the internal market.