OATA Best Practice Guide 2: Fair Trading

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1 O R N A M E N T A L A Q U A T I C T R A D E A S S O C I A T I O N L T D The voice of the ornamental fish industry Wessex House, 40 Station Road, Westbury, Wiltshire, BA13 3JN, UK Telephone: Fax: info@ornamentalfish.org OATA Best Practice Guide 2: Fair Trading The following guidance is applicable to our members in England, Scotland and Wales. If businesses trade fairly then consumers can be confident when buying goods or services. A fair trading environment also makes sense for traders because when everyone is following the same rules no-one is disadvantaged. As an OATA member operating as a commercial practice selling goods or services to consumers you will have certain legal obligations. Failure to comply with these requirements can lead to both criminal sanctions, fines and damage to the reputation of your business. In following the OATA general guidance notes your business will be able to show it has acted in accordance with all applicable legal requirements. These notes have been prepared in association with our Primary Authority partner Cambridgeshire and Peterborough Trading Standards. We are able to provide additional support and guidance to members on specific issues through this partnership. General updates on any current fair trading issues that face our industry will be posted on the OATA website. The main legislation covering unfair trading practices in the UK is The Consumer Protection from Unfair Trading Regulations 2008 (known as the CPRs) which control unfair practices used by traders when dealing with consumers, and create criminal offences for traders that breach them. This legislation covers a wide area of trading practices but other more specific fair trading regulations exist to cover areas such as price marking, selling goods and services online and age restricted sale products. As a trader to a certain extent you will be relying on information provided to you by your suppliers but you are responsible for ensuring a fair trading environment by providing clear information to consumers that does not mislead them in any way in order to gain a commercial advantage. Certain goods will also be restricted to young people so traders have a responsibility to protect these individuals by verifying their age before allowing a sale.

2 The Ten Steps to Compliance 1. Have an awareness of the regulations that may apply to the products and services that you supply see attached further reading and annex Before selling a product, where possible try and check a sample from the supplier and check the marketing material provided to see if it s labelled correctly and not misleading in any way from a customer s point of view. 3. Only source products from reputable suppliers who provide records of purchase, receipts and invoices. 4. Does the customer know who they are buying from? Are business details displayed within your premises? 5. How is the product/service described? Is it clear and accurate or false and misleading? 6. Is there any missing information that the customer needs when making a decision to buy the product or service? 7. Is the product clearly priced including VAT? If the product has been discounted is the previous price clearly displayed? 8. Make sure any sales terms/conditions such as delivery costs, cancellation rights and refund policies are clear and in accordance with the law particularly when selling online. 9. Monitor and record feedback from customers (both good and bad) to highlight any issues and evidence your response with any corrective actions taken. 10. Contact OATA with any concerns you may have. What is unfair trading? Consumer Protection from Unfair Trading Regulations 2008 (the CPRs) replaced a lot of consumer protection legislation including the majority of the Trade Descriptions Act They control unfair practices used by traders when dealing with consumers, and create criminal offences for traders that breach them. There are three main sections in the Regulations. These are as follows: A general ban on unfair commercial practices. A ban on misleading and aggressive practices which are assessed in light of the effect they have, or are likely to have, on the average consumer. The 'blacklist' of 31 commercial practices which will always be unfair and so are banned outright. There is also a general duty not to trade unfairly.

3 Under the Regulations, a commercial practice is 'unfair' if it fits both of the following requirements: It falls below the good-faith standards of skill and care that a trader in that industry would be expected to exercise towards customers, and It affects, or is likely to affect, consumers' ability to make an informed decision about whether to purchase a particular product A trader will be committing an offence under the Regulations if he knowingly or recklessly engages in an 'unfair' practice. Misleading Action It is an offence under the Regulations for traders to use misleading or underhand tactics to get consumers to part with their cash or make some other transactional decision that they would not otherwise have made. Misleading actions include advertising goods that don't exist, or offering just a few items at the advertised price with no hope of meeting large demand. Traders are also banned from making misleading comparisons, so a trader cannot claim 'product A lasts twice as long as product B' if in fact Product A lasts only slightly longer. If a trader has signed up to a code of practice, then if it fails to follow this code, it could be a breach of the Regulations. For example, if a garage has signed up to the Motor Industry Code of Practice for Service and Repair, failing to follow it could constitute a breach of the Regulations. Traders are also banned from giving false information about the characteristics of goods (for example 'we only sell genuine, branded parts', when in reality they are selling non-branded spare parts) and about whether a product needs servicing or replacing. It is also unlawful for traders to mislead consumers about their legal rights or for a trader to give false or deceptive information about his business, status or qualifications. Misleading Omission Sometimes it's not what's actually said that's the problem. Sometimes it's what's been left out that's the issue. The Regulations also offer protection against traders who are economical with the truth, or miss out key information that you might need to make an informed decision. Traders must make sure the information is provided in a timely manner - and not so late that it's of no use to you.

4 A trader will be committing an offence if it does any of the following: omits material information that the average consumer needs, according to the context, to make an informed decision about a transaction hides or provides material information in an unclear, unintelligible, ambiguous or untimely manner fails to identify that a transaction has a profit-making motive (where this isn't already apparent from the context) Information must also be displayed clearly - obscure presentation is tantamount to an omission. Aggressive practices Sales tactics can greatly influence a consumer's decision. Traders who fail to take no for an answer, refuse to leave until a contract is signed or use threatening behaviour will be committing an offence under the Regulations. A commercial practice is considered aggressive if, by means of harassment, coercion or undue influence, it significantly impairs (or is likely to significantly impair) the average consumer's freedom of choice or conduct, which then leads the consumer to take a transactional decision that they would otherwise not have made. The legislation contains a list of criteria to help determine whether a commercial practice uses harassment, coercion, including physical force, or undue influence. Undue influence is defined as 'exploiting a position of power... 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.' In practice if a trader is accused of misleading consumers or acting aggressively, it's not enough to simply demonstrate the activity. It also has to be shown that the practice influenced the consumer's decision, or that the practice is likely to influence consumers' decisions. This doesn't necessarily mean that the consumer has to have entered into a contract, just that their actions were influenced in some way. It could be enough that the consumer phoned the trader or decided to go into their shop. 31 Banned Practices In addition to tackling misleading and aggressive behaviour, the Regulations ban 31 practices that are always considered to be unfair and therefore are banned in all

5 circumstances. A trader taking part in any of the blacklisted practices is committing a criminal offence. The list of banned practices includes the following: Bait advertising - Luring the consumer with attractive advertising around special prices when the trader knows that he cannot offer that product, or only has a few in stock at that price. Bait and switch - Promoting one product with the intention of selling you something else. Limited offers - Falsely stating that a product will only be available for a very limited time, or that it will only be available on particular terms for a very limited time, in order to elicit an immediate decision and deprive consumers of sufficient opportunity or time to make an informed choice. False free offers - Describing a product as free or without charge if the consumer has to pay anything other than the unavoidable cost of responding to the offer and collecting or paying for delivery of the item. Pressure selling - Creating the impression that the consumer cannot leave the premises until a contract is formed. Aggressive doorstep selling - Conducting personal visits to the consumer's home ignoring the consumer's request to leave or not to return. False endorsements/authorisations - false claims of membership of trade associations or claiming a product has been approved by a public or private body when it has not. Consumers' right to redress In addition to the criminal offences created by a breach of the provisions described above, the Regulations also provide consumers with rights of redress enforceable through the civil courts. What remedies are available to a consumer? There are three main remedies available to a consumer: the right to unwind a contract, the right to a discount, and the right to damages. Trading within the EU The Regulations implement the European Unfair Commercial Practices Directive (2005/29/EC), which aimed to clarify consumers' rights and simplify the process of trading within the EU. The Unfair Commercial Practices Directive gives you the same protection against unfair practices and rogue traders whether you're buying from your corner shop or purchasing from a website based in Spain. This also means that businesses can

6 advertise and market to over half a billion consumers in the EU, in the same way they do to domestic customers. The principle aim is to boost consumer confidence and give businesses a uniform and transparent EU wide set of rules. Enforcement action by Regulators A breach of the Consumer Protection from Unfair Trading Regulations 2008 is a criminal offence. The maximum penalty is a fine and two years' imprisonment. Enforcers can also apply for a court order requiring you to comply. If the order is not complied with the maximum penalty is a fine and two years' imprisonment. Trading Standards have powers to enter premises and inspect goods, require a trader to produce documents, seize and detain goods. The CPRs also contain criminal offences that can be prosecuted by the Competition and Markets Authority, Trading Standards Services and the Lord Advocate in Scotland. Additional Fair Trading Requirements As well as the CPR s above traders need to be aware of other Fair Trading laws such as: Price Marking Traders are required to display clear prices within their businesses so consumers know the cost of goods or services before completing a transaction. Prices should be all inclusive of VAT with no hidden charges. In certain circumstances a failure to display a price could also be deemed an offence under CPR s as a misleading omission. For example, failing to display the price of drinks in a bar (see further reading). Displaying business ownership details The trading name of your business needs to be displayed in a prominent position within your premise and on relevant paperwork such as invoices or receipts making it clear who the customer is doing business with (see further reading). Age-Restricted Sales There are many laws that deal with the sale of age-restricted products and services such as knives and aerosol paint, and the minimum age of the young people you can legally sell them to. Ensure you and staff know the legal age limits for age-restricted products. If you sell age-restricted products to a person under the minimum legal age, you may commit an offence under the relevant law. The penalties can include a fine or even imprisonment. There are laws that give you a legal defence, which is

7 often referred to as the 'due diligence' defence. Basically you must prove that you took 'all reasonable precautions/all reasonable steps' and exercised 'all due diligence' to avoid committing an offence. What does this mean? It means that you are responsible for making sure that you and your staff do not sell age-restricted products to people under the minimum legal age. You can do this by setting up effective systems within your business (see further reading). Distance Selling Distance selling covers the sale of goods, services or digital content where there is no face-to-face contact with consumers such as internet, phone sales, mail order and TV shopping sales. There is some very specific information you must give to consumers, including your trading address, pricing, complaint-handling policy and cancellation rights. It must be clear, legible and understandable, and be appropriate for the way you distance sell. This information must be given before you enter into an agreement with the customer. If you do not give certain parts of this information the consumer does not have to pay. As with CPR s the subject areas above are covered by legislation where offences committed can result in criminal sanctions including fines and imprisonment. Further Reading The Business Companion is an online resource and a good source of additional guidance and advice on trading law. Advice on Fair Trading Law can be found at: Consumer Protection from Unfair Trading Price Marking Displaying Business details Age Restricted Products Distance Sales

8 Annex 1 Fair Trading The relevant legal requirements around fair trading within the UK are as follows: 1. The Consumer Protection from Unfair Trading Regulations 2008 (SI 2008 No. 1277). The Consumer Protection from Unfair Trading Regulations 2008 apply to commercial practices before, during and after a contract is made. The CPR s contain a general prohibition of unfair commercial practices and, in particular, contain prohibitions of misleading and aggressive commercial practices. They also prohibit 31 specific commercial practices. Guidance on Consumer Protection from Unfair Trading Regulations The Price Marking Order 2004 (SI 2004 No.102). The Price Marking Order 2004 states where goods are offered for sale to consumers they must have their price clearly indicated and be inclusive of VAT. This is controlled by the Price Marking Order 2004, which applies to products only and is limited to sales between traders and consumers. It does not apply to services or products supplied in the course of the provision of a service; nor does it apply to sales by auction or sales of works of art or antiques. Although the Price Marking Order does not apply to services or products supplied in the course of providing a service, there is a requirement under the CPRs to make sure pricing information is given clearly if it would affect a consumer's decision to buy. The CPRs also prohibit giving misleading information to consumers about prices. Guidance for Traders on Pricing Practices, produced by the Chartered Trading Standards Institute (CTSI), contains information for traders on good practice regarding giving information about prices, price promotions, reference prices, etc. 3. Companies Act 2006 (SI C. 46) The Companies Act 2006 covers requirements relating to the name a business chooses to trade under and rules to prevent the use of names that could mislead the public. This legislation gives detailed requirements regarding names that businesses can choose to trade under and how particular details about businesses have to be disclosed to their customers. The provisions apply to: individuals who trade under a name that is not their own partnerships that do not operate under the names of the individual partners companies / limited liability partnerships Further requirements for the use, display and disclosure of company, business and trading names are also detailed in three pieces of legislation:

9 Limited Liability Partnerships (Application of Companies Act 2006) Regulations 2009 (SI 2009 No. 1804). Limited Liability Partnerships (Application of Companies Act 2006) Regulations 2009 Company, Limited Liability Partnership and Business Names (Sensitive Words and Expressions) Regulations 2014 (SI 2014 No. 3140). Company, Limited Liability Partnership and Business Names (Sensitive Words and Expressions) Regulations 2014 Company, Limited Liability Partnership and Business (Names and Trading Disclosures) Regulations 2015 (SI 2015 NO. 17). Company, Limited Liability Partnership and Business (Names and Trading Disclosures) Regulations Electronic Commerce (EC Directive) Regulations 2002 (SI 2002 No.2013) The Electronic Commerce (EC Directive) Regulations 2002 apply to traders who sell / advertise goods or services to businesses or consumers on the internet or by . Traders must provide the following information (this is not an exhaustive list), some of which overlap with the Consumer Contracts (Information, Cancellation and Additional Charges) Regulations 2013: the full name of your business. If you are a limited company you will need to state this or if you are an individual / partnership you will need to state the name of the individual / partner(s) the geographic address at which your business is established your contact details, including address details of any publicly accessible trade or similar register with which you are registered if your service is subject to an authorisation scheme or if you are a member of a professional body, details of the relevant supervisory authority or body details of any code of practice to which you subscribe your VAT registration number where you refer to prices, a clear and unambiguous indication of those prices and whether the prices include taxes and delivery costs details of stages involved in the ordering process, including any costs involved in distance communication if the cost is anything other than a standard rate 5. The Consumer Contracts (Information, Cancellation and Additional Charges) Regulations 2013 (SI 2013 No.3134) The Consumer Contracts (Information, Cancellation and Additional Charges) Regulations 2013 apply to contracts made both on and away from business premises, as well as contracts made 'at a distance'; there are also rules for businesses providing digital content. These Regulations affect most businesses that contract with consumers, irrespective of where and how the contract is entered into. The Regulations require detailed information to be given to consumers and give them a

10 14-day cancellation period. In addition, the Regulations prohibit the use of premiumrate telephone helplines (for customers contacting you in connection with a contract that they have with you) and the use of so-called negative options to sell additional products to consumers that are incidental to the main contract. The Regulations also deal with the time that you take to deliver goods and who takes the risk when goods are being delivered to a consumer.