Consuming passion
7 September 2007
By James Purnell
Credit card issuers have been feeling the heat in a raft of recent cases brought by disgruntled customers. In Office of Fair Trading v (1) Lloyds TSB Bank Plc (2) Tesco Personal Finance Ltd and (3) American Express Services Europe Ltd [2006] EWCA Civ 268 the Court of Appeal ruled that connected lender liability under s75 of the Consumer Credit Act 1974 applies to all transactions entered into using credit cards issued under consumer credit agreements regulated by the 1974 Act, whether they take place within a three- or four-party structure and whether they are entered into in the UK or overseas.
Consequently, credit card companies are now liable to compensate customers for defective products and services supplied abroad and paid for by credit card. The credit card company may then be indemnified by the supplier for loss suffered.
This ruling suggests that future claims may be brought by credit card issuers on a more regular basis, such companies being perceived by the Court of Appeal to have deeper pockets to bring claims outside of the jurisdiction. The credit companies have appealed to the House of Lords, and will be heard in October 2007.
Satisfactory quality
The case of Friarwood Ltd v Champagne Cattier SA [2006] EWCA Civ 1105 raised the different issue of what constitutes “satisfactory quality”. F had bought non-vintage champagne from C. F brought proceedings claiming damages based on s14(2) of the Sale of Goods Act 1979. C’s expert had considered that the wine was satisfactory for its age. The trial judge had concluded that C’s expert had applied the wrong test, by applying the standard of a sophisticated consumer rather than the average consumer.
The Court of Appeal allowed C’s appeal and ordered a re-trial holding that the judge had been wrong to reject the evidence of C’s expert. The question was whether the champagne sold to F had aged more than could reasonably have been expected and therefore not of satisfactory quality. All the experts should properly be asked to do is to describe the champagne at the time of tasting, comment on its qualities in the light of its age, and assist the court about the way that non-vintage champagne developed over time – but the question of whether the champagne was of satisfactory quality when delivered and thereafter were questions for the judge to decide.
Legislative proposals
On 25 April 2007, the European Parliament passed a resolution approving the various recommendations made by the European Commission in its Green Paper on Damages Actions for breach of the EU anti-trust rules. Among those recommendations is the proposal that victims of anti-competitive behaviour should have the right to bring collective actions. The Green Paper suggested two options:
• a cause of action for consumer associations without depriving individual consumers of a right of action for damage for breach of competition law; and
• provision for collective action by groups of purchasers other than end-users.
In April 2007, the Consumer Affairs Commissioner announced that she was considering new rules to give consumers the opportunity to pursue collective actions against companies that have produce faulty goods or supplied unsatisfactory services through representative bodies.
On 14 February 2007, the Commission adopted a Regulation intended to make the Mutual Recognition of goods work better in the EU. The proposed Regulation applied to the ‘non-harmonised’ field of goods, and does not apply to goods that are already subject to EU harmonising legislation (such as the EU Directives on toy safety, machinery, medical devices, pharmaceuticals).
Following on, in February 2007, the Department of Trade and Industry (DTI) launched a public consultation on the European Commission proposal. Broadly speaking, the proposal:
• sets out a procedure that market surveillance authorities will have to follow if they want to use national technical rules in order to prevent goods being marketed in their territory; and
• obliges member states to set up product contact points to provide information to businesses on their national technical rules.
The consultation has closed and awaits publication of the government’s response.
On 29 May 2007, the DTI published a consultation on the draft regulations intended to implement the Unfair Commercial Practices Directive. The Directive introduces a general prohibition on traders not to treat consumers unfairly and applies to all “business-to-consumer commercial practices”. The DTI’s draft regulations adopt the language of the Directive more or less verbatim.
The DTI proposes that the Office of Fair Trading and local trading standards authorities enforce the regulations, including criminal sanctions and/or civil actions under Part 8 of the Enterprise Act 2002. It also proposes the power for the enforcement agencies to enter premises without a warrant to determine even whether a breach of the regulations not amounting to a criminal offence has occurred. The government aims to implement the directive in April 2008.
Stricter enforcement
It is clear that the momentum at the Commission is currently in the direction of providing an active means of redress for consumers and consumer groups. Legislation allowing for collective or representative actions in respect of defective products is therefore now a real possibility.
Any entity whose activities have the potential to affect consumers is within the scope of the Unfair Commercial Practices Directive. Traders and producers should consider now whether their practices are compliant.
