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What does the future hold for the Office of Fair Trading, and what impact will this have over advertising regulations? Watch this space!

In line with the Government’s endeavours to transfer “decision-making powers and services to those at local level best able to exercise them to meet public need and then giving citizens the ability to hold the local decision-makers to account.[1], the Government welcomes the fact that consumers are becoming increasingly empowered in making wise and informed decisions when purchasing goods and services.  The Department for Business Innovation & Skills (BIS) published a proposal in June 2011[2] stating, “Empowered consumers demand choice and by exercising it, stimulate competition and innovation as well as high standards of consumer care.  Without informed consumers driving a hard bargain, businesses can become complacent and lose focus on becoming more efficient or investing in better goods and services.”  The Government therefore commends the positive effect of organisations such as Which? and in providing more vigilant consumers with independent advice and information; and third sector bodies like Citizens Advice and Citizens Advice Scotland for the more vulnerable consumers.  Similarly it welcomes the increase in “the use of e-commerce and internet-based information and comparison sites by consumers to enable them to get the best deals.

Furthermore the BIS points out that if the law is “too prescriptive”, it will run “the risk of dampening competition and innovation”.  “Excessive regulation may limit consumer choice and, even if intended to protect consumers, can end up costing them more than the benefit it brings.

A general re-structure of the current system has therefore been suggested by the Government, whereby “responsibility for each aspect of consumer advice, representation and enforcement should be clear and should rest principally with one of three key institutions”.  These three institutions would be: (i) The Citizens Advice Service; (ii) “Trading Standards comprising Local Authority Trading Standards Services (LATSS), the Trading Standards Institute (TSI), the Association of Chief Trading Standards Officers (ACTSO) and the support infrastructure offered by the Local Government Group”’ and (iii) a new Competition and Markets Authority (CMA), created by merging the competition functions of the OFT and the Competition Commission.

With regards advertising, under the current structure businesses are largely trusted to ensure their advertisements are “decent, honest and truthful for the benefit of consumers, business and society”.  They may draft their own code designed for the protection of their consumers, subject to approval from the Office of Fair Trading (OFT); or they may ensure that they abide by the codes and guidelines developed by the Advertising Standards Agency (which have of course, also been approved by the OFT).  The OFT has statutory powers to prosecute any advertiser in breach of these codes.

The BIS proposes the creation of a single Competition and Markets Authority, whereby “the OFT will be merged into the new body which will have a principal focus on competition and markets.”  On the basis that a “role in consumer codes approval does not seem appropriate for the CMA”, the BIS suggests instead that businesses’ consumer codes need no longer be approved by the OFT, but by other means.  The Kitemark® accreditation system is proposed as one option; or alternatively an increased role by non-public bodies such as Which? The OFT’s other main function – that is, to prosecute offending advertisers – is also to be revised.

In October 2011, The Advertising Standards Agency (ASA) published a response to the BIS proposal, which largely defends the current system.  The outcome is yet to be decided…

For more information see:

[1] Edward Davey MP (Minister for Employment Relations, Consumer and Postal Affairs)

[2] “Empowering and Protecting Consumers: Consultation on institutional changes for provision of consumer information, advice, education, advocacy and enforcement”

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