Selling rules: the end of aggressive sales techniques

Radical changes to the law concerning consumer protection will bring an end to aggressive sales techniques. Failure to comply will cost you – and your clients – time and money.

Individuals working in a business can now face prison sentences and unlimited fines if they break new rules relating to protecting the consumer ¬ your clients. This applies to directors and managers as well as shadow directors who may be involved in the business.

On 26 May 2008 the Consumer Protection from Unfair Trading Regulations 2008 came into force. The new regulations are concerned with the promotion, sale or supply of products or services to ensure sales techniques are not unfair, misleading or aggressive.

In conjunction with these regulations, the Business Protection from Misleading Marketing Regulations 2008 were introduced to address comparative advertising that creates confusion between the marketing of competitors or is undertaken to damage another’s reputation in any way or abuse intellectual property rights of others.

Implications

In the case of an accountancy firm the assertion could be made to one of your clients that the current economic climate has driven up accountants’ fees, thereby enabling you to increase the fees you charge to that client. However, should your interpretation of the market conditions be materially inaccurate, then such a statement could give rise to an offence that, for the first time, is specifically mentioned and expressly prohibited under the new law.

The likelihood of being investigated for potential breaches has now increased, as has the scope for being found guilty. Almost all businesses will have to advertise their services or products and engage in activities to promote sales. Whether dealing with new or existing clients, it is important that you recognise the impact of the new regulations to limit potential breaches within your firm and recognise how your clients might be affected.

Key changes

The regulations consist of a general prohibition, a prohibition against misleading and aggressive practices and a further 31 specific practices that are forbidden in all circumstances. Highlighted below are some of the most relevant, which you need to look out for:

Passing on materially inaccurate information on market conditions: persuading a client to instruct those with higher levels of expertise, and therefore costs, under the false impression that current events necessitate a higher level of service and experience, would be in breach of the regulations.
Claiming to be a signatory to a code of conduct when the trader is not: for example, members of the Association of Chartered Certified Accountants (ACCA), who do not comply with the code of practice, may be in breach of the regulations and subject to the penalties imposed in addition to any action taken by the governing body of the ACCA.
Advertorials that do not make it explicitly clear they are advertisements: an advert must not imply that it is an unbiased review of a product or service.
Making persistent and unwanted solicitations: this may be applied to cold calling and so could have severe ramifications for the numerous businesses that adopt such marketing tactics.
Indicating that a product will only be available or listed at a discount for a limited time: persuading a consumer to make an immediate decision and therefore depriving them of the opportunity to make an informed choice.

This last point in particular could have a significant impact, as many promotions or offers place great emphasis on their limited availability.

Enforcement

The authorities are compelled to enforce the regulations. You can therefore report the unfair practices of your competitors and the prosecuting authorities will be obligated to order an investigation. And, given that smaller firms will no longer have to shy away from bringing claims against their rivals, due to a lack of available funds for litigation, the number of investigations will inevitably increase.

It is worth mentioning that legal advice should always be obtained before reporting any breaches of your competitors, to help minimise the risk of repercussions. If the authorities wrongly seize records or goods as part of an investigation, compensation can be sought from the party that reported the possible breach. The risk of liability when reporting a business therefore needs to be assessed and you should always err on the side of caution.

Penalties

A partner, director, manager or other familiar officer can be prosecuted if found to have conspired in one of the new offences. If the case is heard at the Crown Court, you could be liable to an unlimited fine and imprisonment for a maximum of two years. Prosecutors can also seek and obtain injunctions.

An investigation alone can have devastating consequences, irrespective of guilt. An enforcement officer has the power to enter business premises during reasonable hours to conduct an inspection. Copies can be made of any documents and goods or records even seized if thought necessary to prove a breach. The time taken to deal with such an investigation could have a significant impact on productivity.

The Office of Fair Trading has an obligation to publicise the result of any prosecution and so business reputations are at risk.

Advice

The penalties for breaching the regulations and consequences of an investigation alone mean that ensuring complete compliance should be at the forefront of your objectives.

Caution should be taken before reporting competitors’ potential breaches to ensure there are no repercussions upon you or your firm. An understanding of these regulations is therefore beneficial in not only safeguarding your own firm, but also in recognising the impact it may have on your clients.

Beware the shadows

A person who is not a director of a company but who nevertheless gives i nstructions (rather than professional advice) upon which the directors are accustomed to act is classed as a shadow director.
A person not officially appointed a director but whose opinions are influential in the company’s decision making process.
Shadow directors assume the responsibility of directors under company law even though they have not been formally appointed as a director of the company

Accountancy Age [2008-07-31]