October 1, 2015, by Peter Cartwright

Enhanced Consumer Protection?

The much-trumpeted Consumer Rights Act 2015 comes into force today (1st October). The Act involves a major shake-up of consumer law. It brings together areas of law previously dealt with by different statutes (in particular the Sale of Goods Act, the Supply of Goods and Services Act and the Unfair Terms in Consumer Contracts Regulations) but also reforms the content of consumer law in those areas. A good deal of attention has been paid to the ways in which consumer contract law has been reformed. For example, rights relating to digital content are clarified, and a 30 day right to reject and system of tiered remedies are introduced. However, also of great significance are changes the ways in which consumer law can be enforced through the use of a new tool entitled Enhanced Consumer Measures (ECMs).

A long-standing criticism of consumer protection law is that it relies too heavily on the criminal law. Statutes such as the Consumer Protection from Unfair Trading Regulations 2008 (and before those the Trade Descriptions Act 1968) had prosecution at their core even if trading standards officers in fact prosecuted in only a minority of cases. The weaknesses of prosecution as a regulatory tool have long-been known and were admirably examined by Professor Richard Macrory in a series of studies leading to the Macrory Report. Other studies (including some by myself) have investigated how effective the criminal law is as a consumer protection tool. Although prosecution is appropriate in some cases, it has significant limitations. For example it is expensive, frequently inadequate as a deterrent, and ill-suited to achieving specific outcomes (such as obtaining redress for consumers). While trading standards officers do have other tools (including the ability to seek undertakings and obtain enforcement orders under part 8 of the Enterprise Act) these powers are also lacking in several respects.

It is in large part these weaknesses that have led to the creation of ECMs by the Consumer Rights Act. Where a court makes an enforcement order or accepts an undertaking under part 8 of the Enterprise Act it will be able to attach enhanced consumer measures to them. Similarly, where an enforcer (such as a trading standards officer) obtains an undertaking that too may include ECMs. There are three categories of ECM:

  •  The redress category;
  • The compliance category; and
  • The choice category.

The redress category is aimed to ensure that consumers who suffer loss as a result of breaches of consumer law are able to receive redress (in particular compensation, but also the right to terminate a contract). In cases where this is not viable or proportionate (for example because consumers cannot be identified or can only be identified at a disproportionate cost) an ECM can require a payment to be made “in the collective interests of consumers” (for example, to a consumer charity). The compliance category concerns measures which are intended to prevent or reduce the risk of a business breaching the law in future. The focus is therefore forward-looking and preventive. For example, a firm might be required to give a member of staff responsibility for supervising particular matters and to improve staff training. The choice category includes measures to enable consumers to choose more effectively between providers. An example might be to require a firm to advertise the fact that it had breached the law and explain the steps it had taken to address this.

ECMs raise a range of issues into which we cannot delve here, from the mechanics of consumer redress schemes to the relationship between the choice category and reputational sanctioning (“naming and shaming”). However, a few issues will be flagged up. First, ECMs can only be used where they are proportionate. It is expected that firms will frequently contest the proportionality of ECMs (probably at the earliest stage) and that this will act as a brake on some proposals. Second, while there are formal mechanisms through which ECMs can be imposed, it is expected that in many cases enforcers and traders will negotiate and agree a course of action less formally. The Government has suggested that traders themselves might suggest ECMs rather than waiting for enforcers to act. Third, ECMs complement and do not replace prosecution. Although the Government appeared originally to view ECMs and prosecution as incompatible, it has since recognised that there will be cases where ECMs can be obtained alongside prosecution.

It remains to be seen how frequently ECMs will be used and how effective they will be. But they do represent an interesting and potentially fruitful way of better-fulfilling the aims of consumer protection law.


Posted in EnforcementUnfair Practices