UK Government Proposals to Assist Consumers

The Government published its White Paper "Modern Markets: Confident Consumers" in July 1999. This contains a wide range of proposals aimed at strengthening the consumer interest, and in some cases the role of consumer representatives, in a wide range of aspects of business practice. Important aspects include fair trading practices and review of Parts II and III of the Fair Trading Act 1973, proposals to regulate e-commerce, and to revise the law on consumer credit. This paper will give a summary of other aspects relating to regulation, enforcement and liability.

Codes of Practice

There has been a long and inconclusive national debate about how best to improve industry practice in promotion and marketing. Some sectors, such as pharmaceuticals, have specific legislation. Other horizontal legislation or mechanisms exist, such as under codes of practice relating to advertising standards which are enforced by the newspaper and communications media. Directive 97/55/EC amends Directive 84/450/EEC concerning misleading advertising so as to include comparative advertising: this is now being implemented through The Control of Misleading Advertisements (Comparative Advertisements) (Amendment) Regulations 2000. Some industry sectors, such as medical devices amongst a large number of others, are effectively untouched by specific regulation. The White Paper says that the Government proposes to provide core principles for effective voluntary codes of practice and to encourage trade associations to tailor principles for their sectors, to ensure members stick to them, and to take effective action if they do not. The Office of Fair Trading would be enabled to approve effective and acceptable codes.

There is a considerable amount of scepticism amongst certain sectors as to the effect of this policy. A number of trade associations say privately that they do not want, and cannot afford, to take on an enforcement role, but this runs contrary to the Government's policy. It may be that some sectors may be identified which would have difficulties in operating a code and this problem could be brought to the attention of Government. The danger is that others might step into this vacuum, either to bring about specific legislation or to provide alternative mechanisms - for example, the National Consumer Council (NCC) or Consumers' Association might propose to the Government or the European Commission that consumers should provide this judicial and enforcement function if industry (such as the CBI) did not provide a mechanism. The NCC is about to publish the principles on which it believes effective codes should be based. The CBI is considering the extent of research on the effectiveness and operation of existing codes.

ABHI has decided as a matter of policy that it wishes to introduce a code of practice but details, mechanisms and costs need to be considered.

Strengthening consumer contract legislation

A sequence of Directives have gradually increased the consumer position during the 1990s. Whilst some present individually no enormous extension over national law provisions, others are more innovative and together their implications are significant.

Directive 93/13/EEC made unenforceable certain unfair terms in consumer contracts. This included terms which excluded or limited legal liability of a seller/supplier in the event of death or personal injury of a consumer resulting from an act or omission of the seller/supplier.

The UK implementing legislation (the Unfair Terms in Consumer Contracts Regulations 1994) is being extended by the Unfair Terms in Consumer Contract Regulations 1999 because of objections that they do not properly implement the Directive. The new Regulations include a power for nominated regulators and the Consumers' Association to apply to the court for an injunction that a particular contract term is unfair. The injunction may relate not only to use of a particular contract term but to any similar term, or a term having like effect, used or recommended for use by any person. This power would permit the courts to injunct the activities of third parties. The power was intended to be used to injunct individual companies in circumstances when the previous Regulations could only have applied to a trade association which recommended the use of unfair contract terms. However, this may be an unfortunate precedent if the principle is extended into an ability for consumers to take action against industry activities in relation to other aspects of regulation outside the field of unfair contract terms.

Directive 1999/44/EC harmonises legislation on sale of goods which generally has existed under member states' national laws for some time. Consumer goods must comply with descriptions given by the seller, possess qualities of any samples held out, must be fit for any particular purpose for which the consumer requires them and which he has made known to the seller, be fit for the purposes for which goods of the same type are normally used, and show the quality and performance which are normal in goods of the same type and which the consumer can reasonably expect. The consumer is given various rights of redress. Guarantees and similar statements are made legally binding.

Directive 98/27/EC enables consumers' organisations to apply for an injunction in another member state if the authorities of that member state have not brought about resolution of a problem in relation to certain issues arising under specific consumer protection directives, including medicines advertising.

Product safety regulation

The European Commission (DGXXIV) is currently working on proposed amendments to Directive 92/59/EEC on general product safety. Their main objectives are to strengthen the enforcement capabilities of member states' authorities, particularly in southern European countries. There is also a policy of imposing greater focus on post-marketing vigilance and activity by manufacturers. This policy can be seen both under the GPS Directive and in sectoral legislation, such as moves within the medical device, cosmetics and other vertical regulated sectors.

The policy is further exemplified by "good practice guides" on product recall which are currently being produced by the UK Department of Trade and Industry (DTI) and Medical Devices Agency (MDA).

Changes in the litigation environment

The UK Government has implemented a massive reform programme of civil litigation procedure and public funding of civil litigation. First, entirely new Civil Procedure Rules have been implemented from 26 April 1999 which aim at making litigation simpler, more informal, quicker, cheaper, involving greater proportionality between the amount at stake and the costs, more transparent in relation to costs of both sides as the case continues, encouraging early investigation of claims by both sides, encouraging early disclosure of relevant facts and evidence by both sides through pre-action protocols and encouraging early settlement through mediation or other ADR mechanisms. Second, the public funding rules have been reformed by the removal of legal aid for personal injury claims from April 2000, the introduction of conditional fee agreements (CFAs) (effectively a privatisation of the legal aid system in which claimants' lawyers and insurers now have to undertake objective risk assessments and investigate cases at the start).

These changes would increase access to justice by enabling more people to bring litigation but to have it resolved quickly through mediation rather than through the courts. Expenditure which under the legal aid system used to be directed at consumer solicitors has now been freed up to be redirected at other social priorities, such as by funding the development of local advice bureaux. This will expenditure will encourage different sorts of consumer complaints, even though the system might constrain lawyer-led personal injury claims.

Public funding will, however, continue to be available for "public interest" claims. A new Rule of Court will be introduced in April 2000 to facilitate the management of multi-party claims. The White Paper also signals a Lord Chancellor's consultation paper on representative actions by consumer organisations to be published in December 1999. This is an idea which was examined by a working party of the Lord Chancellor's Department in 1997/98 but which ended entirely inconclusively: the development is of some concern.

Cross-border civil litigation and enforcement of judgments will be facilitated by the Commission's current review of the existing Brussels and Lugano Conventions, with the aim of producing a Directive to facilitate such activity.

The European Convention on Human Rights is being introduced into the UK in 2000 through the Human Rights Act 1998. This may lead to a considerable increase in litigation in a number of civil and regulatory situations. For example, anyone subject to a criminal charge is entitled to a fair and public hearing within a reasonable time by an independent and impartial tribunal established by law (Article 6). Everyone has the right to freedom of thought, conscience, religion and expression (Articles 9 and 10).

Conclusion

Overall, consumers and consumer organisations are emerging with increased power at European and national level. They may have an effect on complaints, compensation claims, and enforcement of regulation. Industry should be preparing to evolve so as to respond to these developments.

Christopher J S Hodges
14 September 1999