New criminal sanctions for misleading marketing

Aug 7 2008 by Alistair Houghton, Liverpool Daily Post

BUSINESSES can now expect more than a slap on the wrist from the Advertising Standards Agency if they engage in misleading marketing.

New Consumer Protection from Unfair Trading Regulations, which came into force earlier this year, saw the first court order upheld last week.

Creative agencies working for blue-chip clients with compliance teams are already feeling the effects, but all businesses should be aware of the changes.

The new regulations represent a move away from specific legislation focused on a particular sector, towards a general duty to trade more fairly.

The good news is that compliance will no longer involve trawling through complex legislation in order to define responsibilities. The challenge is that more simplified legislation is more likely to be subject to interpretation.

The new regulations, governing what is described as “blacklisted, misleading and aggressive” practices, mean marketeers and their clients will have to ensure they comply if they are to avoid prosecution under new criminal or civil sanctions.

Of course, most businesses would dismiss blacklisted practices such as pyramid selling. However, businesses could easily fall foul of requirements relating to, for example, direct exhortations to children to buy or persuade their parents to buy.

Most businesses will also know that misleading actions and omissions may lead to compliance issues, but what they might not be aware of is that harsher penalties for inaccuracy, ambiguity or exaggeration now exist.

Finally, it should not be news to businesses that aggressive practices which impair freedom of choice through harassment, coercion or undue influence are outlawed, but they need to make sure that all staff are aware of this.

The new law poses challenges and businesses will, in the short term, be heavily reliant on their compliance officers and legal advisers to assist with interpretation. That said, there are a number of practical steps businesses can take to mitigate risk.

Businesses should make staff aware of requirements and penalties if they fail to comply, and training should be provided if necessary.

They should also undertake a review of existing policies and draft new procedures which might, for example, include a new policy on tactics if it includes activities which amount to aggressive practices.

JEFF VERNON is an associate at DLA Piper, in Liverpool.