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Another retailer fined under consumer protection legislation

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24/07/2019

A Walker Morris’ Commercial Dispute Resolution and Retail specialist reports on the latest case in which a retailer has been fined for misleading sales practices.

What do retailers need to know?

Earlier this year Walker Morris reported on the H Samuel case, in which the high street jeweller was fined for providing misleading pricing online.  We anticipated that a new focus on compliance with consumer protection laws would result in increased scrutiny of retailers’ sales and marketing practices; we summarised some of the key aspects of the Consumer Protection from Unfair Trading Regulations 2008 (the CPRs) of which retailers should be aware; and we offered some practical advice.

Just a few weeks later, and the Yorkshire Post has reported that Trading Standards have hauled another retailer before the courts – this time, The Energy Saving Centre Limited (t/a EnergiGlass), a company which sells and fits replacement windows.

As well as highlighting some key legal and practical points for retailers to note, this case is further evidence of a nationwide drive to investigate and ensure retailers’ compliance with consumer protection laws.

What happened in this case?

In the EnergiGlass case, the company was found guilty of using misleading sales practices – notably because it falsely claimed that customers would be entitled to receive government grants, subsidies and reimbursements if they replaced their windows.

The case highlights a number of key points:-

  • Definition of ‘consumer’
    • Under the CPRs, consumers are any individuals acting outside their trade, craft or profession.
    • Where a commercial practice is aimed at a target market, the definition of consumer will refer to a member of that particular market.
    • Where a group of consumers may be vulnerable in some way, for example first-time buyers or the elderly or infirm, the standards required of the business will be higher. That was particularly relevant in this case, where a number of EnergiGlass’ affected customers were elderly and included a Multiple Sclerosis sufferer and a blind woman.
    • Crucially, consumers are not only those people who actually buy from or pay a business – they also include anyone who is a prospective customer. That means that offences can be committed even where no sale is actually concluded.
  • Enforcement
    • EnergiGlass was fined £48,000
    • EnergiGlass was ordered to pay victim compensation of £17,400
    • EnergiGlass was ordered to pay prosecution costs of £57,402.08
    • The sole director was personally sentenced to a 16 week suspended prison sentence and disqualified from acting as a director for 4
    • EnergiGlass and its director pleaded guilty – the fine, orders and sentence could all have been higher had they pursued an unmeritorious defence.
    • Breach of the CPRs can attract both civil and criminal liability and it can attract liability both for the company and for individual directors personally. In this case:
  • Trading Standards Officers (TSOs) have a right of entry to businesses, along with powers of inspection, seizure, detention of goods and documents (including computer records). TSOs can also require employees to attend interviews under caution. Disruption to the running of a business under investigation can therefore be significant.
  • Obstructing a TSO or making false or reckless statements can incur penalties in the £000s and conviction for breach of the CPRs can result in unlimited fines and/or up to 2 years’ imprisonment.
  • Additional consequences can (non-exhaustively) include: orders banning from undertaking certain work; orders revoking/varying/suspending credit licences; orders cancelling or varying permission to broker mortgages; and consumer redress schemes can require apologies, the payment of compensation of up to £25,000 and/or dismissal from the scheme – to mention but a few.
  • Reputational consequences can potentially also, of course, be devastating.

Further advice

There are a number of practical steps that retailers can take – both to prevent breaches of consumer protection legislation and to mitigate any disruption or harm caused if and when any complaint or investigation is instigated. Such action can include ensuring that staff at all levels are properly trained; ensuring that proper policies and procedures are in place to govern sales practices and complaints protocols; ensuring that marketing materials are accurately drafted and maintained; and keeping a comprehensive audit trail that could demonstrate that all reasonable precautions were undertaken to try to avoid commission of the offence in the first place (so as to assist with any ‘due diligence’ defence that may be required).

Walker Morris’ Litigation & Dispute Resolution and Retail specialists are able to deliver expert, tailored advice and training to businesses concerned to ensure their compliance with consumer protection legislation. For further information or assistance, please do not hesitate to get in touch.

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