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The Fair Trading Act 1973
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This has been called the most comprehensive measure ever passed to protect the economic interests of the consumer. The Act establishes the position of the Director General of Fair Trading (DG), the Consumer Protection Advisory Committee (CPAC) and reconstitutes the Monopolies and Mergers Commission (MMC).
Under the Fair Trading Act the DG has the following main duties:
(i) regulating monopolies, mergers and restrictive and uncompetitive practices;
(ii) supervising trading practices;
(iii) reporting bad trading practices to the DTI and making recommendations;
(iv) taking action against traders who are persistently unfair to the consumer;
(v) encouraging trade associations to produce voluntary codes of practice;
(vi) publishing information and advice to consumers.
Control of Rogue Dealers
Under Part III of the Act the DG has a “bloodhound” as well as a “watchdog” function with regard to persons carrying on a business who persist in a course of conduct which (a) is detrimental to the interests of UK consumers, whether economic or relating to health, safety or otherwise, and (b) is to be regarded on the criteria stated as unfair to consumer. These criteria involve either contraventions of duties, prohibitions or restrictions imposed by the criminal law and also breaches of contract, or other breaches of duty enforceable by civil proceedings.
The DG’s first line of attack is to obtain a satisfactory written assurance that the trader will refrain from continuing the course of conduct and from carrying on any similar course of conduct in the course of that business. Should the DG fail to achieve the written assurance or if such an assurance is broken, he may either bring proceedings in the Restrictive Practices court or, in smaller cases, in the county court for the district in which the practice is carried on. The power of the courts specified include (a) the obtaining of an undertaking to refrain from the specified course of conduct or (b) the making of an order on similar terms. The court also has power to obtain undertakings from or make orders against accessories, directors or officers of companies and other members of a group of interconnected bodies corporate. Legal aid is generally available to defend these actions and appeals lie to the Court of Appeal. Breach of an undertaking given or order made constitutes contempt of court punishable by imprisonment or a fine.
Monopolies
The whole area of the law is now within the Fair Trading Act 1973 under control of the DG and the MMC. This consists of not less than ten and not more than 27 members appointed by the Secretary of State. Its principal functions are to investigate and report on any question referred to it under the Act.
Mergers
The power to order that a merger shall not go ahead lies with the Secretary of State; the duty to keep situations under review where there might be a merger situation calling for investigation is on the DG. Many companies seek the confidential guidance of the OFT as to whether the DG might advise the Secretary of State to make a merger reference to the Commission. It is the duty of the DG to make a recommendation to the Secretary of State, who will in turn make any reference to the Commission – the DG may not refer merger situations personally. The Secretary of State may make a reference when it appears to him that two or more enterprises (one at least in the UK) have ceased to be distinct enterprises. He must also be of the view that, as a result, either a monopoly situation is or would be created (that is, one-quarter of the market would be supplied) or the value of the assets taken over exceeds £5m. If the merger has already taken place, it must have been within the six months prior to the reference.
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The procedure is that the DG as Chair of the Interdepartmental Mergers Panel is normally able to complete his preliminary investigations and advise the Secretary of State within four weeks. If the Secretary of State decides to make a reference, the Commission must report within six months, with a possible extension of a further three months. It normally reports within three to four months. The Commission must then both establish that a merger situation exists and that it operates or may be expected to operate against the public interest. The Secretary of State has power to make orders as a result but more usually the DG is requested to obtain undertakings.
As regards newspaper mergers, the transfer of a newspaper or its assets to a newspaper proprietor whose own newspapers have an average daily circulation of 500 000 (including that of the newspaper concerned in the transfer) is unlawful and void unless written consent is given by the Secretary of State.
The Consumer Protection Act 1987
Under the Act a person who is injured by a defective product has a right of action against the manufacturer irrespective of whether or not the manufacturer was negligent. The basis of the claim is s.2, which requires the plaintiff to establish four things:
(a) that the product contained a defect,
(b) that the plaintiff suffered damage,
(c) that the damage was caused by the defect,
(d) that the defendant was producer, own-brander or importer into the EC of the product.
Defective product
A product is defective ‘if the safety of the product is not such as persons generally are entitled to expect’. Safety includes risks of death or personal injury but also extends to cover risks of damage to property. In determining whether a product is defective all the circumstances must be taken into account including:
(a) the manner in which, and purposes for which, the product has been marketed, its get-up, the use of any mark in relation to the product and any instructions for doing or refraining from doing anything with the product;
(b) what might reasonably be expected to be done with or in relation to the product; and
(c) the time when the product was supplied by its producer to another; and nothing in this section shall require a defect to be inferred from the fact alone that the safety of a product which is supplied after that time is greater than the safety of the product in question.
Products are widely defined and include goods, electricity, gas and vapours. There are three exceptions: land, primary agricultural products and unprocessed game. The definition of land includes “things comprised in land by virtue of being attached to it”. This includes buildings and excludes builders from liability under the Act for any defects. Agricultural products are excluded from liability unless they have undergone an “industrial process” giving them “essential characteristics”. This presumably includes any processing of the product such as freezing, canning or otherwise transforming the product – meat into sausages, potatoes into frozen chips – when the processor is the producer for liability purposes, not the farmer.
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Questions.
1. How does Competition law protect the interests of the consumer?
2. What are the main duties of the Director General of Fair Trading (DG)?
3. How does DG act to control rogue dealers?
4. How many members does the MMC consist of?
5. In what situations may the secretary of State make a merger reference to the MMC?
6. What things must be established by the plaintiff in order to make a claim under the Consumer Protection Act 1987?
7. In what case is a product considered defective?
8. What products are excluded from liability under the Consumer Protection Act?
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