Consumer Law
Enforcement of regulations is, in whichever field of industry, an ever ongoing problem. Consumer regulations and legislation have been around for many years and yet there remains an element of doubt as to whether or not they are effectively enforced by the relevant authorities.
Certainly, without effective enforcement any piece of legislation becomes merely an anecdote in the statute books. Within the field of Consumer law, the primary organisations of enforcement are the Office of Fair Trading (OFT) and the local Trading Standards, which are normally under the control of the local authorities. It is their task to follow up complaints and to investigate them. Trading Standards officers have wide powers of investigation, including the search of business premises of those suspected of breaching trading legislation, and the confiscation of documents.
There has been some criticisms of the present legislation which, despite the amount and depth of the statutes, are still full of holes which can allow sneaky rogue traders to exploit often vulnerable consumers. The nature of these gaps in the legislation and regulations vary from allowing a trader to give carte blanche to his or her obligations, to allowing them to trade in the same way as previously with minimal penalties from past trading offences. In response to this, in 1999 the DTI launched its White Paper, Modern Markets: Confident Consumers. Its purpose was to outline the changes that the Government felt were needed in consumer legislation to afford proper recourse for people harmed by rogue traders and to extend the powers of enforcement by the OFT, Trading Standards plus other consumer groups.
In recent years the OFT and Trading Standards have become increasingly busy in dealing with complaints by consumers. For some time the OFT and Trading Standards used their powers freely and unhindered. Amongst the powers they enjoyed was that to search premesis and seize property if they had reasonable suspicion to believe that offences were taking place.
In Dudley Metropolitan Borough Council v Debenhams plc1 case, they received a bit of a shock and had their wings clipped. A challenge had previously been made in Toys'R'Us v Gloucestershire County Council2 regarding the use of the powers of the local Trading Standards. The challenge arose out of the lack of consideration of the Police and Criminal Evidence Act 1984 (PACE) by Trading Standards when performing their duties. In Toys'R'Us, the issues were given a cursory glance, but Debenhams was the first case to truly examine an issue that, by all rights, should have been examined by the courts much sooner.
Although the Police and Criminal Evidence Act 1984, due to its title, has always been held to make provisions for the Police when conducting criminal investigations, section 67(9) of PACE contains the following wording:
Persons other than police officers who are charged with the duty of investigating offences or charging offenders shall in the discharge of that duty have regard to any relevant provision of such a code.
The code mentioned in this section is the Police Code of Practice. Something to note from the wording is the fact that such people who have a duty of investigating offences 'shall have regard' to any relevant provision. This subtle wording suggests that Trading Standards do not have to follow the code in every instance. What it actually means is that, unlike police officers who fail to follow the code, Trading Standards officers are not liable to have any sanction imposed on them for failing to adhere to the code.
In Debenhams, it was finally made clear that PACE and the Police Code of Practice did apply to Trading Standards officials, and presumably also those operating as part of the OFT. But is this good for consumers? Certainly there are still police officers who begrudge having to adhere to such provisions of PACE and the Code of Practice as they feel it makes their task of apprehending and prosecuting criminals that much harder. However, such provisions are there for a reason. Businesses and suspects in criminal investigations have an expectation to avoid malicious or over-zealous attempts at prosecution ...
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In Debenhams, it was finally made clear that PACE and the Police Code of Practice did apply to Trading Standards officials, and presumably also those operating as part of the OFT. But is this good for consumers? Certainly there are still police officers who begrudge having to adhere to such provisions of PACE and the Code of Practice as they feel it makes their task of apprehending and prosecuting criminals that much harder. However, such provisions are there for a reason. Businesses and suspects in criminal investigations have an expectation to avoid malicious or over-zealous attempts at prosecution by powerful national authorities. Sweet and Maxwell's Current Law statutes clarifies the wording of section 67(9) of PACE.
Subs. (9)
Persons other than police officers: Immigration officers, customs and excise officers, forensic scientists.
Charged with duty of investigating offences: Including therefore doctors and nurses.
This is undoubtedly a non-exhaustive list and it is clear that the OFT and Trading Standards should be subject to PACE and the Code of Practice.
The question of course is where does the intervention of PACE leave consumers? Although it does make life a little harder to the relevant authorities, it doesn't necessarily hinder them in their work and it could be argued that enforcement is no more difficult than it used to be prior to Debenhams. Certainly, Mrs Justice Smith did not consider it to be a difficulty. What is perhaps interesting in Debenhams is that it does seem to throw up a potential difficulty for the courts.
In Debenhams, a Trading Standards officer had entered the store unannounced and began looking around. He had not gone there due to a complaint or a suspicion that Debenhams were breaching any regulations. The purpose of the visit was purely to see if he could notice anything untoward which might give rise to suspicion of wrongdoing by the company. Debenhams successfully argued that merely looking around amounted to a search and, as a result, he should have adhered to PACE. The difficulty that this potentially raises is what ought to happen if an off-duty Trading Standards officer decided to have a look around and then report his findings to his superiors later. That is a method employed by the Consumer's Association (CA) on a regular basis when conducting their own independent research or investigations, with any evidence of rogue trading often passed on to Trading Standards or the OFT (or other relevant industry watchdogs) for their examination.
The Consumer Association's role may soon change and they too may be subject to PACE. Following the White Paper several of the recommendations made to the DTI by the OFT could be implemented in due course. One such measure is to transfer the power of prosecution to various consumer bodies, such as the CA.
There is some hope where the CA is concerned that consumer protection and consumer rights will be vigorously enforced. Due to its independence and the nature of its work, the Consumer's Association is likely to be proactive if given such powers. But the same cannot be said of some of the other bodies who may be given powers of prosecution.
A significant problem with these proposals would be the potential for fragmented decision making by the expanded authorities and the judiciary. There would be a very real risk that consumer law enforcement would become split between the various bodies and sectors of industry, leading to uncertainty within the law.
One of the proposals of the Paper is to ensure that there is more in the way of information available to consumers. We in the UK are notoriously bad at complaining. There is some merit in providing more information to encourage complaints, but that information has to be clear and to the point. A very much underestimated but nonetheless extremely important path towards effective enforcement of consumer regulations is the encouragement of complaints. Without complaints, there is very little that the OFT and Trading Standards can actually do to force rogue traders to comply with those regulations. There's not a lot that can be done if the authorities don't know that regulations are being abused in the first place.
The Competition Act 1998 provides some consumer protection along such lines but which encourages 'whistle blowing' where a party to a price fixing racket can offer to provide information upon other parties of any illegal arrangements in return for immunity from civil action or a reduced fine. Through this method, the OFT has enjoyed some success whereby multi-million pound fines have been greatly reduced as a result of the inducements under this Act bearing fruit. One such example was where an alleged cartel containing the likes of Manchester United and JJB Sports were fined in excess of £????? For allegedly fixing the prices of football kit. Some of the parties in the cartel received greatly reduced fines as a reward for their 'co-operation' in the OFT's investigations.
The Enterprise Act 2002 boosts the OFT's arsenal by allowing them to issue a 'no-action letter' to the first cartel member who blows the whistle3. The OFT's criminal investigative powers are also enhanced. Section 193 of the 2002 Act gives the OFT powers to require individuals to produce documents and answer questions. Failure to do so would constitute a criminal offence. However, unlike a police investigation, the OFT cannot use whatever is said in the course of the investigation if a case goes to trial4. The OFT also has the power to apply to a High Court judge for a search warrant5. This prevents the issue of the warrant being challenged by judicial review as a High Court judge is unreviewable. The most striking power of all falls under section 199 which gives the Chairman of the OFT the power to authorise the bugging of premises6. The OFT is also seeking to have this extended to include the use of an 'informant' within the cartel to report back to the OFT on a periodic basis. With these additional powers, there can surely be no excuses for the OFT if they fail to live up to the expectations of the 1999 White Paper.
The Internet is the next big challenge for the authorities. The advantages for the budding online entrepreneur are obvious. There are far fewer overheads and so an online business is very easy to set up with a minimum of technical knowledge and money. In fact, an online business can be set up for nothing at all through the use of free web software tools and no-frills free web hosting. In addition, there is now a thriving business in providing online payment methods for small traders. These additional services, which include allowing credit card7 and debit cards8 to be accepted by people without either high-street bank merchant accounts or the funds to use an online merchant account provider9, are usually again free to join and to set up an account with.
Due to the ease by which internet companies can be set up, it is a proverbial magnet for those who wish to exploit it and those who use it. Internet fraud is at epidemic proportions. Use if the internet is at an all-time high and is growing rapidly each year. As a result of this, and no doubt the improvement in Internet technology, an increasing number of people are now staying at home to shop. It may not be too long before the streets of Britain's cities are emptied of all but the hardened window shopper, particularly in bad weather. Virtually all the high street stores now have a web site from which customers can purchase most, if not all, the goods available in their physical stores. So why does anyone need to leave the house to shop? Especially when they can check the availability of products online when they would probably be out of stock in the local branch.
So the Internet has many attractions to the consumer. However, as mentioned, it is a magnet for rogues. As a result of highly publicised issues such as online credit card fraud and the recent spate of 'fake' e-mails purporting to be from the high street banks asking people to re-complete their banking details at a fake web site, there are still those who are very wary of purchasing online. This places limits on the growth of the online economy which, in turn, is not good for business. People who buy online are more likely to buy more items more often than someone who has to drive to the nearest shopping centre.
The lack of consideration for online consumers within the White Paper is, in this scenario, perhaps a little baffling - notwithstanding the fact that it was published in 1999 when the UK population was still trying to find its feet in the online community. With that said, many of the proposals of the White Paper could be transposed from the high street and onto the super highway.
Enforcement of consumer legislation against rogue internet traders is perhaps harder for the authorities. A simple scam needs to be running for only a couple of months, with fake or temporary addresses and the rogue can safely disappear into the ether before the authorities get a whiff of what he has been up to.
But the Internet seems to be causing some problems for the authorities in areas where enforcement would appear to be working against the interests of the consumer. A recent high-profile case between Internet music retailer CD-Wow and the British Phonographic Industry (BPI) was settled two weeks before the matter went to court, when the retailer caved in. CD-Wow, a company based in Hong Kong, had been sourcing their products from non-European distributors. This had allowed them to sell items to customers within the United Kingdom and Ireland at a substantially lower price than otherwise available within the UK itself.
In a bid to combat what has been dubbed the 'grey market' in consumer goods, the EU prohibits the import of certain items, including music CDs. The arguments on both sides are valid. Consumer groups say that prices in the United Kingdom are simply artificially high. Trade bodies and the authorities on the other hand point out that, particularly where CD and DVD media are concerned, there's no guarantee that the products are genuine and not counterfeit. Should the OFT or Trading Standards therefore have become involved? The Internet shows the present weakness of the primary consumer protection legislation and the authorities. At present, they can only take on investigations where the alleged perpetrators are based in the United Kingdom. Offshore companies which appear to be UK based (many consumers would have been under the mistaken belief that CD-Wow are a UK based company) cannot at present be investigated.
In conclusion, it must be said that the OFT has been particularly active in meeting some of the aims of the White Paper. Its battle against price fixing cartels has, in particular, borne some fruit. Trading Standards, on the other hand, don't appear to be bearing up quite so well. It is often the case that consumers find them difficult to contact. This may well be down to the number of complaints they receive and it is clear that some assistance is required, as the OFT has already suggested. Whether or not the Consumer's Association will receive the powers mentioned remains to be seen.
Bibliography
Francis, S., et al, Disclosures to regulators, 153 NLJ 1636
Peretz, G., Go Directly to Jail: Losing Badly in "Monopoly", 153 NLJ 99
Holgate, G., Consumer Protection: Trading Standards Officer, Enforcement and the Police and Criminal Evidence Act 1984, 159 JP 284
Burroughs, E., The Seller is not Liable for ..., 145 NLJ 1367
Holgate, G., Consumer Protection: Bargain Offers and Price Comparisons, 142 SJ 208
Electronic Sources
http://www.paypal.com (visited 10.02.2004)
http://www.ebay.co.uk (visited 10.02.2004)
http://www.nochex.co.uk (visited 10.02.2004)
http://www.worldpay.com (visited 10.02.2004)
Dudley Metropolitan Borough Council v Debenhams plc (1995) 159 JP 18
2 Toys'R'Us v Gloucestershire County Council (1994) 158 JP 338
3 Enterprise Act 2002, section 190(4)
4 This is due to the European Convention on Human Rights. See Saunders v United Kingdom (1997) 23 EHRR 313
5 Enterprise Act 2002, section 194
6 Under the Regulation of Investigative Powers Act 2000.
7 http://www.paypal.com
8 http://www.nochex.co.uk
9 http://www.worldpay.com
