The Government calls it ‘a whole system of consumer protection that can provide a robust response to both local and national threats’. The planned new enforcement system doesn’t exactly trip off the tongue, but there is much to welcome in the Modernising Consumer Markets Green Paper, published in April 2018.
With the White Paper expected later this year, among other proposals, the prospect of a central enforcement body with legal standing and backstop powers at stake, all eyes are on the Department for Business, Energy & Industrial Strategy (BEIS). Depending on what Ministers decide, this could be a game changer for trading standards.
Craig McClue is Head of Policy at CTSI. He says: “The big question for us is around what they might propose to do with a national enforcement framework. The trajectory has been for local authority trading standards services to be cut, cut, cut. With that in mind, we have such a degraded capacity at local level which has continued in that vein.
“Our concern would be that if you create a national trading standards body with statutory functions then there need to be clear messages to local decision-makers that this is not the solution to all their consumer enforcement or regulatory problems, and in fact they can cut further because there’s a national solution. That is one of our main concerns.”
A BEIS spokesperson said: “Last year we published a Consumer Green Paper and will follow that with a White Paper, setting out how we can best respond to the opportunities and challenges of modern consumer markets. It will look at the most effective ways to protect consumers, including strengthening our system for enforcing consumer rights.”
According to the National Audit Office (NAO), in 2016 an estimated £4.2bn of the total £15bn of consumer harm comprised activities such as mass marketing scams and the sale of fake and counterfeit goods, which require nationally coordinated enforcement. However, as the Green Paper states, ‘Local Authority Trading Standards departments are the primary enforcer of consumer law and have 75% of total resources’.
The Paper goes on to say that ‘the system of public enforcement is under considerable pressure’, something that will come as little surprise to trading standards officers and is highlighted in CTSI’s response to the Green Paper: ‘The proposed framework set out in the Green Paper is a positive initial step; however, it does not go far enough to resolve the issues facing the consumer protection system (as highlighted by
the NAO). In particular, the impact of local trading standards cuts of 50% is not addressed and the Government needs to better define how local services can be sustained under any new framework.
“In our view the Government must, via whatever national accountability framework they chose, set out a roadmap by which services can be combined to create larger services: defining the role that trading standards is expected to fulfil at a local level.”
Among its proposals the Government has suggested ‘a strong national body with statutory powers and duties that could provide leadership and specific expertise and lead complex national enforcement where necessary’. Officials envisage an organisation that, like the current system, continues to have a close relationship with local authorities, and ministers want local authorities to continue to focus on issues affecting their own areas.
Room for improvement
Wendy Martin, director of National Trading Standards (NTS), agrees that there are weaknesses in the current system. But she goes on to say that “the current system is a lot better than what we had in 2011 when there was, arguably, a somewhat arbitrary split between local authority trading standards services and the Office of Fair Trading about who dealt with what. It’s a lot easier to prioritise work collectively with the trading standards system.”
She continues: “At the time NTS was set up, a decision was taken by government not to create us as any form of public authority or legal entity. What that has created is a situation where NTS does administer quite a lot of public money in a way that while it is entirely accountable. So one can understand that the White Paper offers an opportunity to make the sort of accountability for what is going on clearer.
“We also struggle with two particular elements that we think a change in status would improve. One is the ability to share data. We have to find a number of workarounds in the current system because NTS doesn’t exist as a legal entity or a public body which can make data sharing complex. It would be a lot simpler if we were a beast of statute with statutory functions.”
However, Martin is not in favour of creating a new centralised body, preferring to maintain the commissioning of all NTS work through the current trading standards system. “If you create a centralised body, you’re going to recreate what existed in 2011, which they got rid of because it was creating these gaps between organisations.”
Meanwhile, Which? is pushing for some fairly radical reforms, including more robust central regulators. In a policy report published in February 2019, Which? pointed to a number of issues with the current enforcement system, not least the depletion in skills and expertise in trading standards services due to the loss of staff over the past decade. It cites a 2016 report by the NAO which found that 20 services had been subject to a cut in funding by more than 60% since 2011 and some only have one qualified officer. In addition, some 43% of services said they cannot deal with consumer detriment in their area.
All told, Which? says in some parts of the country trading standards is forced to be increasingly reactive and complaints-led rather than being able to take a proactive look at consumer enforcement.
“At the same time, the challenges are becoming more complex – the way that we shop, the markets that we operate in are increasingly cross-border,” says Sue Davies, Strategic Policy Partner at Which?. “There are still an awful lot of local issues but many issues are complex and often involve multi-national companies.
“We need to make sure that we’ve got the right balance in terms of what sort of expertise and skills are needed at national, regional and local levels. With Brexit as well, we have been concerned that the UK works as part of many networks within the EU and there are networks that enable reciprocal enforcement to take place, and we’d be coming out of those. So for a whole range of reasons we feel that it’s a really important time to be thinking of how we make sure we’ve got a system that’s really fit for the future.”
While acknowledging the work of the existing NTS, Which? believes that change is vital. Davies explains: “We feel we need something more fundamental that really shows how important consumer enforcement is. In terms of the enforcement of consumer rights and fair trading issues, we think it makes more sense if the Competition and Markets Authority (CMA) has an expanded role so it’s like a Consumer and Competition Authority but still working closely with local authorities.”
Need for change
But what does the CMA think? Recent proposals laid out by the competition watchdog’s chair, Lord Andrew Tyrie, for reform of the UK competition regime recognised the need for an overhaul of the CMA’s consumer protection powers. He pressed for earlier and more robust intervention and, among other things, new statutory duties on the CMA to take action against firms supplying misleading or false information.
Lord Tyrie says: “The UK is an excellent place to do business, one in which innovation and dynamic companies can thrive. But the growth of new and rapidly emerging forms of consumer detriment, partly caused by digitisation, and the public’s increasing doubt about whether markets work for their benefit, both now require a response. We have an analogue system of competition and consumer law in a digital age. Similar observations are being made about comparable regimes elsewhere in the world.”
In addition, in a letter to Business Secretary Greg Clark sent in February and detailing the CMA’s review of the current system, Lord Tyrie wrote that “the legal framework is not broken, and the CMA is effective – and domestically and internationally respected – for its deployment”. He conceded, however, that “carrying on roughly as we are is not a prudent option”.
Put simply, the CMA wants a new statutory duty, both for itself and the courts, to treat consumer interests and their protection from detriment as paramount, backed up by new functions and powers, including powers to investigate and intervene quickly. If the CMA’s plans are adopted, it believes that consumer law enforcement would be strengthened and, it hopes, be stringent enough to deter wrongdoing.
So, where does this leave trading standards? Over the past three years, NTS has worked with local authorities to tackle £472m in consumer and business detriment with a core budget of £40m. That’s according to the Green Paper which also notes that it has become more challenging for NTS and TSS to pursue more complex enforcement cases such as online and economic fraud, product safety and use of unfair terms. This is where the aforementioned ‘strong national body with statutory powers and duties’ comes in. There’s an opportunity here to align trading standards’ regulatory and enforcement capability as it faces new and ever complicated challenges. But until we see the White Paper, it’s all to play for.