The OFT has a range of sanctions at its disposal where trading practices breach its rules. New proposals could see these extended with the introduction of fines of up to £500,000 for misleading marketing practices. Below we discuss these as well as the OFT's new policy on criminal prosecutions for consumer law breaches.
Proposals for new fines and compensation
The Government is proposing to pilot the use of a range of civil sanctions in consumer cases and is seeking views on the proposals by 14 February. If adopted, the pilot will begin in April this year and run for two years. The OFT and Trading Standards Services in 14 districts in England Wales and Scotland will benefit from the trial powers. These relate to the CPUTRs (discussed in the article above) and to product safety and weights and measures legislation.
The new sanctions are designed to provide "a proportionate alternative to criminal prosecution in appropriate cases" as well as restitution for consumers. The proposed sanctions (which will be introduced by secondary legislation due to be laid before Parliament in February) are:
enforcement undertakings under which a trader could agree to, among other things, putting breaches right;fixed monetary penalties of up to £3,000 for "relatively minor cases of non compliance";
variable monetary penalties of up to the lesser of £500,000 or one per cent of the trader's turnover;
compliance notices requiring that the trader takes specified steps to avoid breaches of the rules, with a £2,000 penalty for failure to comply;
restoration requirements aimed at remedying a consumer's financial or non financial losses;
stop notices, to prevent serious harm to consumers (e.g. the use of false endorsements in advertisements); and
discretionary requirements.
These new sanctions could be used alone or in combination. The existing enforcement powers – for example the criminal offences under the CPUTRs and injunctive action under the Enterprise Act 2002 – will remain in force alongside the new pilot powers; participating enforcers will decide which sanctions are appropriate in any given case. See below for the OFT's recently published policy on the use of its criminal enforcement powers.
The consultation document "Civil sanctions pilot: joint consultation by the OFT and LBRO on the operation of the BIS civil sanctions pilot" sets out more details on how the new powers would be used and fines calculated. The retail industry, in the form of the British Retail Consortium, is already involved in discussions about the pilot scheme. Views on the proposals should be sent to the OFT by 14 February.
OFT sets out policy on use of criminal sanctions
In September 2010 the OFT published its policy regarding criminal enforcement. This states that the OFT will generally use its criminal enforcement powers when:
civil enforcement is unlikely to be effective in achieving a change in behaviour; and/orthe breach is sufficiently serious that conviction and punishment ought to be pursued (e.g. to protect the public and to deter others from offending).
The guidance also sets out a number of specific circumstances in which the OFT is likely to commence a criminal investigation into a particular trading practice. These include circumstances where traders deliberately or recklessly use deceptive, misleading, fraudulent, aggressive or intimidating practices; circumstances where a particular unlawful practice is widespread or is likely to become widespread (and therefore criminal enforcement will send a strong message to others who are infringing); or circumstances where a particular unlawful practice is novel or unusual (and therefore criminal enforcement will act as a precedent to prevent such practices continuing). In deciding whether to prosecute after a criminal investigation, the OFT will use the two tests set out in the Code for Crown Prosecutors (i.e. whether there is a realistic prospect of conviction and whether prosecution would be in the public interest).
If the business activity in question does not have any of the features above, or any combination of them, it appears that the OFT is unlikely to launch a criminal investigation. However, this does not, of course, mean that businesses are "off the hook" for what they might consider to be more minor breaches of the CPRs. The new guidance confirms that the OFT will, in cases where it determines that a criminal investigation is not appropriate, consider alternative means of ensuring compliance, including civil enforcement.
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