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Misleading marketing - the cost of getting it wrong

07 August 2008

The Business Protection from Misleading Marketing Practices Regulations ("BPR's") and the Consumer Protection from Unfair Trading Regulations ("CPR's") came into force on 26 May 2008. Both sets of Regulations play a part in harmonising laws across the EU.

Many businesses will be aware that the BPR's and CPR's seek to restrict any and all unfair marketing practices, however, the full significance of the BPR's may have been overlooked. To date, much of the publicity surrounding these Regulations has been focussed on the CPR's, but the BPR's will be of great importance for business to business dealings.

The BPR's ban "misleading advertising", which is defined very broadly as being advertising which "deceives or is likely to deceive the traders to whom it is addressed". Being so wide in scope, the Regulations may cover almost all statements made prior to entering into an agreement that may affect the manner in which the agreement is conducted.

For example, if Business A made a statement to Business B during a tender process, stating that the work in question would be completed or prepared by a particular time, the subsequent failure to do so may constitute misleading advertising.

Under the BPR's, the penalty for being found guilty of misleading advertising is up to two years' imprisonment or a £5,000 fine, depending on whether or not the accused party has a good "due diligence" defence. For an effective defence, one must prove that the offence was a mistake, a cause beyond one's control, or through the reliance of information supplied by another, and that one took "all reasonable precautions and exercised all due diligence" to avoid the offence from being committed.

This final requirement is particularly onerous, and may be a cause of considerable concern. Due diligence is a defence based on proving one's case on the balance of probabilities, and as such, charges could be brought forward even where there is no significant certainty of an offence having been committed.

The enforcement authorities of the BPR's will include the Office of Fair Trading ("OFT"), who are not likely to intervene save for instances of the clearest examples of wrongdoing. Instead, the OFT will probably permit most problems to be resolved by way of civil claims, as to do otherwise would lead to an inordinate number of cases for the OFT to deal with.

On paper, the BPR's are very worrying. Practically however, they may not be as menacing to business practices. Nonetheless, businesses should remain wary of these Regulations, and keep afloat of any case law developments in the next few months.

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Robin Webb

Associate
T: 08700 86 4183
I: +44 (0)121 625 4183
E: robin.webb@shoosmiths.co.uk