Part IV Unfair Commercial Practices defines unfair commercial practices used by traders when dealing with consumers.
Next to general prohibition, aggressive practices, misleading actions and omissions this part defines 31 specific practices that are prohibited in any circumstances. The ordinance creates a criminal offence for breach of the unfair or prohibited practices.
Commercial practice means:
- Any act, omission, course of conduct, representation or commercial communication (including advertising and marketing) by a trader,
- Which is directly connected with the promotion, ale or supply of a product to or from consumers,
- Whether it happens before, during or after a commercial transaction
Prohibition of the unfair commercial practices
Unfair if they cause a consumer to take different decision
Contrary to the requirements of professional diligence
List of banned practices in all circumstances
- A commercial practice is unfair if:
- It is not professionally diligent, and
- Materially distorts, or is likely to, the economic behaviour of the average consumer.
- Professional diligence means the standard of special skill and care that a trader may reasonably be expected to exercise towards consumers, which is commensurate with either honest market practice in the trader's field of activity or the general principle of good faith in the trader's field of activity.
- Materially distort the economic behaviour of the average consumer (or are likely to) with regard to the product - that is, appreciably to impair the average consumer's ability to make an informed decision, thereby causing them to take a transactional decision that they would not have taken otherwise.
- Average consumer - means someone reasonably well informed, observant and circumspect.
- Targeted average consumer:
- Applies when the practice is directed to a particular group of consumers,
- Average consumer will mean an average member of that group.
- Vulnerable average consumers:
- Applies to clearly identifiable group of consumers, which due to their mental or physical infirmity, are or credulity, is particularly vulnerable to the practice in a way that the trader can reasonably foresee and the practice only distorts the economic behaviour of that group,
- Average consumer will mean an average member of that group.
- A misleading action occurs when a practice misleads through the information it contains or its deceptive presentation (even if the information is factually correct) and causes, or is likely to cause, the average consumer to take a different transactional decision.
- Misleading action - information about this must not deceive document contains information relating to the product and the trader that can be misleading.
- A commercial practice is a misleading action when it concerns any marketing of a product, including advertising, which creates a confusion with any:
- Trade marks,
- Trade names,
- Other distinguished marks of a competitor.
- A commercial practice is a misleading action when a trader fails to comply with a commitment contained in a code of conduct which they has agreed to comply with.
- To contravene this requirement the trader:
- Has to be signed up to code of conduct,
- the commitment is firm and verifiable, not just aspirational, and the trader fails to meet those commitments.
- It is a to fail to give consumers the information they need to make an informed choice in relation to a product if this would cause, or be likely to cause, the average consumer to take a different transactional decision.
- The breach covers practices where the trader:
- omits material information,
- hides material information,
- provides material information in a manner that is unclear, unintelligible, ambiguous or untimely,
- fails to identify the commercial intent (unless this is apparent from the context).
- Material information is the information required by a consumer to make an informed decision and any information required by any other local law. It covers information detailed in Misleading omission - material information that must not be omitteddocument.
- Limitations of communication methods
- If the medium used to communicate a practice has a limitation e.g. space or time, then the trader has to make the information available to consumers by other means e.g. on their website.
Aggressive commercial practice
- Aggressive commercial practices are practices that intimidate or exploit consumers, by use of:
- Coercion (including physical force)
- Undue influence
- restricting their ability to make free or informed choices.
- In order for an aggressive practice to be unfair it must cause, or be likely to cause, the average consumer to take a different transactional decision.
- Undue influence means exploiting position of power in relation to the consumer so as to apply pressure, even without using or threatening to use physical force, in a way which significantly limits the consumer's ability to make an informed decision.
- To determine an aggressive practice the following would be considered:
- Timing, location, nature or persistence, e.g. presentation to buy goods given in remote location, where the consumers will not be returned to starting location until they commit to purchase goods,
- Use of threatening or abusive language and behaviour,
- Exploitation of specific circumstances misfortune, or circumstance, of such gravity as to impair the consumer's judgment, of which the trader is aware, to influence the consumer's decision with regard to the product, e.g. Staff working in a funeral parlour put pressure on a recently bereaved consumer,
- Any onerous or disproportionate non-contractual barriers imposed by the trader where a consumer wishes to exercise rights under the contract, including rights to terminate a contract or switch to another product or trader,
- Any threat to take any action that cannot legally be taken.
Schedule 6 banned practices
- Commercial practices which are considered unfair in all circumstances and which are prohibited.
- There is no need to consider the likely effect on consumers.
- The list of banned practices can be found in the Schedule 6 - Commercial practices which are in all circumstances considered unfair document.
- Inertia selling
- Inertia selling is listed under schedule 6 and it creates an offence - demanding immediate or deferred payment for goods delivered but not solicited by the consumer is not allowed.
- Consumers who receive goods via inertia selling are not required to make any payment for those goods and may also use or dispose of them freely, as a gift.
Consumers rights to redress in Part IV
- Ordinance recognises that, while prosecution may deter future acts, it does not in itself provide redress to consumers who were victim of the offence.
- Rights to redress provided in the case of misleading action or aggressive practice.
- Three rights to redress either right to unwind, right to discount, right to damages.
- Rights enforceable by civil action by the consumer.
- Right to unwind
- Puts both parties into the position they would have been in had the contract not been entered into.
- Right to discount
- Assessed by reference to the behaviour of the person who engaged in the practice, the impact of the practice and the time since the practice took place.
- For goods and services costing less than £5,000 there is a fixed-percentage discount ranging from 25% for more-than-minor issues to 100% for very serious cases.
- Above £5,000, if the misleading or aggressive practice led the consumer to pay more than the market price for the product, the price is reduced to the market price. Otherwise, the fixed-percentage discounts will still apply.
- Discount levels:
- 25% is practice more than minor but not significant,
- 50% if significant but not serious,
- 75% if serious but not very serious,
- 100% if very serious.
- Right to damages
- Where the consumer has incurred financial loss or suffered alarm, distress or physical inconvenience because of the prohibited practice that was reasonably foreseeable.