Consumer protection Introduction to consumer law consumer enforcement

Consumer protection Introduction to consumer law & consumer enforcement Jason Freeman (April 2016)

Did you know… You are all consumers… 2

Aims This session will provide you –as advisers in law centres- with an introduction to 4 laws that protect consumers. 3

Objectives By the end of this session you will be able to 1. Explain why consumer protection exists 2. Identify when a practice may infringe consumer law, who is responsible and what a consumer might be able to do about it. 3. Identify some routes that the consumer might be able to take to get their issue resolved 4

Agenda We will cover 1. The essentials • Why consumer law? • What is consumer law? 2. A deeper dive into the tools • Advertising and unfair trading • Quality – sale of goods, services and digital content • Unfair terms • Distance selling, information and cancellation 3. Consumer enforcement • Who can enforce and what tools are available? • What remedy? • What is a CMA consumer enforcement case? 5

The essentials Section one

Overview This section will cover • Why consumer law? • What is consumer law? By the end of this section you will be able to • Explain why consumer law exists 7

Session 1 Why consumer law?

What makes markets work well? Consumers drive competition • Access, assess and act on information Firms compete fairly • On price, quality, range and service • Rewarded for best satisfying consumers’ needs Virtuous circle delivers growth • Innovation • Value • Choice 9

Why do some markets not work well? Traders’ practices may exploit consumer behavioural biases Access • Information asymmetry • Consumer myopia Assess • Price framing • Consumer anchoring Act • Switching costs • Consumer inertia This harms consumers and the market 10

A scenario Explain The practice The theory of How it harm exploits a behavioural bias Its impact on consumers Its impact on the market / other competitors 11

Session 2 What is consumer law?

Unfair contract terms Anti-competitive agreements Abuse of dominance Merger control Market studies and Investigations Unfair commercial practices Quality rules Information & cancellation rules Guidance Advocacy Consumer enforcement Competition enforcement Different tools to solve different problems Softer non-enforcement tools 13

What does EU consumer law cover? ECommerce & payment services Credit Basic contractual rights Essential contractual information Consumer law Aggressive practices Unfair terms Distance selling Advertising Doorstop selling 14

EU and UK consumer law EU consumer & competition policy • Consumer protection • Level playing field • Full harmonisation of laws EU consumer law • • Directives Regulations EU court judgments Guidance from Commission UK consumer law • Consumer & competition policy (BIS) • Consumer legislation • Court judgments • Sectoral rules • Guidance from enforcers 15

UK specific rules Competition remedies • • Point of sale warranties Home collected credit Payment protection insurance Payday lending Sectoral rules • Information Commissioner • Financial services • Energy, telecoms, rail, airlines, water Self regulation • Advertising Standards Authority • Phone Pay Plus • Codes schemes 16

Protection for traders Consumer law also helps traders by • Creating a level playing field • Preventing traders gaining an unfair advantage Business protections • • Contract law rights and remedies regarding quality Unfair terms (Unfair Contract Terms Act 1977) Misleading marketing and comparative advertising Consumer credit 17

Consumer or Trader? Consumer Trader Private individual Any legal person Wholly or mainly outside course of business Acting for purposes related to business, trade or profession 18

Challenging areas… Mixed use contracts Preparatory activities Economically active consumers Consumer to business transactions (C 2 B) Consumer to consumer transactions (C 2 C) Should consumer law apply? Why? 19

Enforcing consumer law Criminal prosecution • Misleading and aggressive practices (Consumer Protection from Unfair Training Regulations 2008) • Misleading practices (Business Protection from Misleading Marketing Regulations 2008) Enterprise Act 2002 Part 8 • CMA (and other enforcers) can seek an Enforcement Order to stop traders breaching the law and secure redress for consumers • Relates to Enforcement UK (domestic infringements) and European (Community infringements) consumer protection laws • Failure to comply with Enforcement Order is contempt of court 20

Deeper dive into the tools Section two

Overview This section will cover • Four main consumer protection laws By the end of this section you will be able to • Explain what rights and duties the Consumer Protection from Unfair Training Regulations 2008 (CPRs) create • Explain what unfair terms rights and duties the Consumer Rights Act 2015 (CRA) creates • Explain what consumers can expect from traders when they buy goods, services or digital content under the CRA • Explain what information, delivery and cancellation rights consumers enjoy under the Consumer Contracts (Information, Cancellation and Additional Charges) Regulations 2013 (CCRs) 22

Session 1 Advertising and unfair trading

Overview This part will cover • The Consumer Protection from Unfair Trading Regulations 2008 (CPRs) By the end of this part, you will be able to apply to a problem the law that governs • Misleading actions • Misleading omissions • Aggressive practices • Professional diligence • Consumer rights to redress 24

How would you… Draft a law to stop unfair trade practices? …think about • Scope • The standard of protection • How you define what is harmful • What is the consequence if the law is infringed? 25

The CPRs – Key facts Implement the Unfair Commercial Practices Directive (UCPD) Intended to provide a high level of consumer protection Sets the legal standard across the whole EU 26

What do the CPRs cover? Commercial Practices Basically everything a business does Act, omission, course of conduct, representation or commercial communication (including advertising & marketing) By a trader Directly connected with the promotion, sale or supply of a product to or from consumers Before, during or after a commercial transaction (if any) 27

What is the standard of protection? Must (be likely to) have an effect on The decision making Of the average (vulnerable / targeted) consumer 28

What is actually illegal? General prohibition (Regulation 3) Contrary to the requirements of professional diligence (Likely to) appreciably impair the average consumer’s ability to make an informed decision And as a result Misleading action (Regulation 5) False or deceptive practice (list of key factors) And Misleading omission Omission (or unclear / (Regulation 6) untimely provision) of material information And Aggressive practice (Regulation 7) Aggressive practice by (Likely to) significantly impair harassment, coercion or the average consumer’s undue influence freedom of choice or conduct And as a result Banned Practice (Schedule 1) One of 31 specified practices Causes (or is likely to cause) the average consumer to take a different transactional decision No impairment or transactional decision tests 29

What are the consequences of infringement? 1. Criminal prosecution • Most infringements are criminal offences 2. Consumer’s private right of redress • If a consumer entered into a contract with, or made a payment to, a trader after 1 October 2014 as a result of a misleading action or an aggressive practice • Potential remedies • Unwind the contract and get money back • Discount on the purchase price • Damages 30

John and the Garage On 1 st November 2015 John took car to garage to be fixed. Garage said it would cost about £ 100. When John picked up car, garage said they had to do extra work –bill was now £ 500. If John did not pay, he could not get car back. John needed the car for work, as well as to take his elderly mother to her day care centre, so he paid the £ 500. What do you advise? 31

Session 2 Fundamental contract rights

Overview This part will cover • Part 1 of the Consumer Rights Act 2015 (CRA) By the end of this session you will be able to apply to a problem the law that creates legal obligations when traders supply • Goods • Digital content • Services 33

What is a contract? “Give me £ 2. 50 and I will get you a coffee. ” • Is this a contract? • What sort of contract is it? 34

Features of a contract Think about “Give me £ 2. 50 and I will get you a coffee” 1. Invitation to treat or Offer? 2. Acceptance? 3. Consideration (moving from promisee)? 4. Intention to create legal relations? 5. Certainty of terms? 35

What terms get into a contract? Express • Oral or written Implied under common law • Course of dealing • Intention of the parties Implied by statute • Cannot be excluded from consumer contracts 36

Terms implied by statute 37

Goods contracts -rights Goods must be satisfactory quality (s. 9) • Reasonable person’s view taking into account description, price, any public statement. • Consider –fitness for purpose, appearance/finish, freedom from minor defects, safety, durability • Exemption for any defect specifically drawn to C’s attention, or which C ought to have seen on inspection Fit for purpose that C made known to the T (s. 10) • Unless C did not rely on T’s skill or judgment, or unreasonable to so rely As described (s. 11) • Includes information on main characteristics of goods required by CCRs Match sample (s. 13) & Model (s. 14) Properly installed (s. 15) Any digital content included works properly(s. 16) T has the right to supply (s. 17) • Unless C and T expressly agreed for T to supply limited title 38

Digital Content “data which are produced and supplied in digital form” Where supplied for a price, or free with something C has paid for. The Duties (cannot contract out) –s. 47 • Satisfactory quality • Fitness for purpose • DC being as described • CCRs pre-contract information • The trader’s right to supply the DC The Rights where T fails in duties • right to repair/replacement (1 st tier) (Section 43) • right to price reduction (up to 100%) (Section 44) • NB –no right to reject stand alone DC Any later updates must not stop DC from conforming to the contract. 39

Services T to perform with reasonable Care and Skill (s. 49) T to comply with any information given to C, which C has taken into account when making a decision to enter the contract, or about the service (s. 50) Price will be reasonable, if not agreed (s. 51) Service to be performed in a reasonable time, if not agreed (s. 52) 40

What if I don’t get my rights? Trader is in breach of contract Remedies • Specific performance • Damages • Special statutory rights 41

Remedies for Goods Problem in 1 st 6 months – goods presumed to be defective Tier 1 Tier 2 Problem Right to reject 1 st 30 days Repair or Replacement (only have to accept one) Is repair/replacement • disproportionate • impossible • significantly inconvenient • taking an unreasonable time Has the same or different fault reappeared? Final right to reject Price reduction (no deduction within first 6 months – except for cars) (but you keep the item) Remember: the trader must bear any costs or repair/replacement or the return of faulty goods 42

Remedies for Digital Content Problem Tier 1 Repair Replacement This can be a 100% refund + repair/compensation if your hardware or other digital content is damaged because Trader didn’t use reasonable care and skill Remember: the trader must bear the cost of any repair or replacement Is repair/replacement • Disproportionate? • Impossible? • significantly inconvenient? • taking an unreasonable time? 43

Remedies for Services Remember: the trader must bear cost of repeat performance (including labour and materials) Is repeat performance • impossible ? • significantly inconvenient? • taking an unreasonable time? This can be a 100% refund 44

Anne’s dress Anne sees a dress, tries it on and buys it. Later she notices stitching coming loose, and wiring digging into her flesh. Takes it back. The shop says she can’t have any refund, since she tried it on before purchase, and should have noticed any defects. What do you advise? 45

Mobile phone scenario What types of contract are involved? Is there any breach of contract? Are there any remedies? Are there any other problems here? 46

Session 3 Unfair contract terms

Overview This part will cover • Part 2 of the Consumer Rights Act 2015 (CRA) By the end of the session you will be able to apply to a problem the law that requires terms to be • Transparent • Clear • Fair And explain when a term is exempt from the fairness test, and when it is blacklisted 48

The Consumer Rights Act Part 2 implements EU Directive on unfair terms Includes protections specific to UK Replaces UTCCRs 1999 and UCTA 1977 Can be enforced under CRA or EA 02 49

Is it unfair…? • A term that makes you responsible if you get injured • A very clear notice, in a sale, excluding any right to a refund • A charge of £ 150 for staying more than 2 hours in a parking space • A requirement that you take out a mobile phone contract for 3 years What factors do you think are relevant to deciding? 50

What the law says Certain terms are Blacklisted • Eg excluding right to satisfactory quality All terms must be Transparent • So consumer can understand what their rights and obligations actually are Is the term objectively weighted against the consumer? (Significant imbalance) • • Balance risks to trader vs benefits to consumer Changes ordinary legal position? Does it defend a legitimate interest of trader? Is it surprising? Does the term exploit the consumer? (Fair dealing) • Behavioural biases • Strength of bargaining positions Is the term presented openly? (Openness) • Did consumer actively negotiate the term? • Does it act as a trap? 51

What terms are covered by the fairness test In Out Big print Price – if transparent & prominent Small print Oral terms Notices Negotiated terms Anything on the Grey List Main subject matter – if transparent & prominent Statutory rules – if properly explained 52

Examples of unfair terms (Grey List) Exclusions One sided obligations or rights Penalties / compensation Lock ins & Auto rollovers Incorporation & Variation of terms Dispute resolution Assignment of rights 53

Gym scenario Are any terms unfair? • Imbalance • Contrary to fair dealing • Openness Are any terms on the Grey List? Could any terms be exempt (price / main subject matter)? 54

Also in the Consumer Rights Act Lettings Agents • New obligations re fee transparency – agents must provide fee information upfront Student Complaints Scheme • Enables students at privately run HE providers to take complaints to the relevant ombudsman (Office of the Independent Adjudicator) Secondary Ticketing • New transparency obligations re • material ticket information (e. g. seat location, face value, any restrictions on use) • Identity of seller (where connected with secondary ticket site) • Ban on resold tickets being cancelled (except where this is allowed in the T&Cs and the relevant term is fair) • Review of Secondary Ticketing market (report due by end of May 2016) 55

Session 4 Information and cancellation

Overview This part will cover • The Consumer Contracts (Information, Cancellation and Additional Charges) Regulations 2013 (CCRs) By the end of this session you will be able to explain what rights consumers have regarding • Information • Delivery • Cancellation Where they enter into contracts • On premises • At a distance • On the doorstep 57

What is “buyer’s remorse” & what causes it? Prize for best definition… Prize for best cause, with most tech speak in it… When is buyer’s remorse a real problem? 58

How does the law help? Pre-contract Information Telephone helpline charges Cancellation rights Control over surprising charges Delivery rights 59

What are the information rules? Clear and prominent Information to consumers • Price, delivery charges, what product is, who trader is • More information for distance and doorstep contracts Information cannot be changed without consumer’s consent Information is a term of the contract Implied term that the trader has complied with information requirements 60

Surprising charges online Clear and prominent information, directly before consumer places order • Price • Total costs per billing period of a subscription • Minimum duration of consumer’s obligations Information must be confirmed on ‘durable medium’ Consumer must ‘explicitly acknowledge’ the obligation to pay ‘Express consent’ for any payments going beyond trader’s main contractual obligations Cannot use preticked boxes 61

Cancellation rights Applies to Distance Digital content – consumer may lose right to cancel Off Premises Services – consumer may have to pay for services provided before cancellation 14 days right to cancel Extends to 1 year If trader fails to give the statutory information Consumer must generally return goods delivered Trader refunds cost of delivery Consumers pays costs of returning items Consumer gets full refund But may have to pay for any diminished value of the items 62

Delivery Goods must be delivered • Without undue delay and • within 30 days of entering into the contract (unless otherwise agreed) • Goods remain at trader’s risk until they are delivered Goods supplied to the consumer, but not ordered, are a gift See also CRA sections If goods are not delivered when agreed, consumer can treat contract as at an end and get refund 63

Telephone helplines Consumer must not be charged more than the basic rate Any costs above this must be refunded to Consumer 64

Subscription traps scenario What has the trader done wrong? What rights does the consumer have? 65

Consumer enforcement Section three

Overview This section will cover • Who enforces consumer law • What enforcement options are available • How the CMA enforces consumer law By the end of the session you will be able to • Explain to a consumer who might be able to help them to solve their dispute 67

Who enforces consumer law? Trading Standards Most compliance activities nationally Sectoral regulators Airlines, telecoms, water, energy, rail Established means Industry bodies Consumer education and advice EU CPC enforcers Obligation to act where appropriate ICPEN members Including bilateral requests for action Local and regional enforcement Code schemes Campaigns 68

Who can resolve my dispute? Retail Ombudsman Financial Ombudsman Service Parliamentary and Health Ombudsman Energy Ombudsman Communications Ombudsman Legal Service Ombudsman Furniture Ombudsman The Property Ombudsman Housing Ombudsman Phone Pay Plus The Glazing Ombudsman The Removals Industry Ombudsman Tenancy deposit protection schemes European Consumer Centres Citizens Advice TSI Approved Code Schemes – Eg removers, will writers, debt managers, cars… New ADR providers 69

Is it for CMA? CMA tackles big problems Competition being harmed Eg online reviews Systemic issues in market Eg cloud storage Precedent setting Eg higher education Securing redress Enhanced consumer measures 70

Who should enforce? Look at the scenarios Who is best placed to act? What sort of tool should they use? 71

Session 1 Enforcement under Part 8

Overview of the power Secures future change Tackles past misconduct Sets precedent Targeted Proportionate Cases generally in High Court Enforcement against selected traders Infringement causes harm to collective interests of consumers Civil Order ECMs redress measures ECMs Compliance and choice measures 73

Enhanced Consumer Measures Enterprise Act 2002 Part 8 (s. 219 A): court can now order traders to • Give redress to consumers who have suffered loss • Permit consumers to terminate contracts • Do other things in the collective interests of consumers • Take compliance steps to reduce risk of repetition • Take steps to facilitate consumers’ ability to make choices between traders Where the remedy is • Sought by an enforcer • Just and reasonable • Not disproportionately costly Trader can also undertake to do these things 74 74

Stages of the Part 8 process Intelligence gathering Pre-investigation Evidence gathering • Information notices • Onsite powers • Test purchases / covert investigations Undertakings Public commitment to change Case opened Consultation Court action? Specific targets identified based on analysis of potentially illegal conduct Try to stop infringement voluntarily No public commitment to change 75

Lets now consolidate What have you learnt

Let’s check 77

Action plan 78

Summary

Next steps 80

Thank You Good luck