2016: A year for untangling the Consumer Rights Act

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New rules set out in the CMA are likely to lead to some head-scratching for British operators in 2016, as the onus falls on them to interpret the consumer’s response to advertising and promotions, says IBAS’ John Samuels.

 

Happy New Year and good luck to all of those who have resolved to make positive changes or improvements in 2016.

For those who have a duty to compile and review operators’ trading terms and conditions, perhaps the recent introduction of the Consumer Rights Act (CRA) 2015 might be the catalyst for change.

Having read through the advice produced by the Competition and Markets Authority (CMA), the following is my interpretation of what the act attempts to achieve.

In the main, the CMA advice reaffirms what most of us know; namely that the law is open to interpretation and each individual’s understanding of what it means to act ‘fairly’ or ‘transparently’. However, there are some explicit requirements that may end up being relevant to the gambling industry. For example, paragraph 69 of the Act reads:

(1) If a term in a consumer contract, or a consumer notice, could have different meanings, the meaning that is most favourable to the consumer is to prevail.

Of course, it’s always open to interpretation whether something is ambiguous in the first place! That’s where lawyers make their money, but this is a point IBAS is bound to take into account when considering these types of dispute.

The Act is likely to have some impact in the area of offers and promotions. I understand that research has been conducted into how offers are presented to consumers and the CRA recognises that businesses are not ignorant of how consumers are likely to behave when seeing an offer.

The CMA advice is that the clarity and transparency of offers should be judged by the expectations one would make of the ‘average consumer’. According to the CMA, this would mean:

“A consumer who is reasonably well informed, observant and circumspect”, before explaining that the consumer’s “level of attention is likely to vary according to the category of goods or services in question”. So there is a duty on the operator to make their terms clear and a duty on the customer to take reasonable care to explore them.

The CMA guidance note continues to say consumer contracts, presumably including those relating to gambling, must “avoid significant imbalances”, that “key terms” must be “fair and transparent” and that contractual clauses must be designed “in good faith”.

There is lot for an ADR service such as IBAS to absorb.

On the subject of promotions, I read recently how consumers tend to ignore potential long term onerous caveats for the sake of taking advantage of short term gains. Apparently, this is known in the marketing and advertising industry as ‘hyperbolic discounting’.

I would be interested to know whether the gambling industry could be considered to practice this in its numerous and seemingly successful welcome bonus offers. Given the focus on fairness in the CRA it would be interesting to know whether such practices could or would ever be deemed unfair by virtue of being potentially misleading.

The CRA does deal at length with aspects of advertising, a subject no doubt for more detail in a future article. Reports of a voluntary code of standards for operators, instigated by the ABB and RGA, are to be warmly welcomed.

However, for the time being, operators may want to note that the Act states that appropriate prominence should be given to terms which might operate disadvantageously to the consumer, and any important terms should be brought to the attention of the customer, particularly if the term would be likely to surprise the consumer.

From an IBAS perspective we can only urge operators to do all they can to ensure that consumers have seen and understood the most important terms binding a particular promotion before they agree to participate in it. Sometimes we see crucial, fundamental terms listed as one of 40 or 50 in an unwieldy ‘Terms and Conditions’ document.

There are other issues besides that the CRA may raise for the industry. For example, in addressing the service industries, the CRA talks about the importance of services being provided “with reasonable care and skill”. One is therefore tempted to ask whether operators could and should try harder to eradicate errors made by their staff and systems so as to decrease the number of occasions when they rely on what is commonly known as the palpable error rule.

It will be interesting to see what impact the 2015 Consumer Rights Act has on the way that gambling disputes are handled.


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