The Consumer Council has put forward a package of recommendations for a new cross-sector legislative framework in a significant boost to consumer protection against unfair, misleading or deceptive marketplace conduct as well as to enable fair competition among traders.
It has recommended the creation of a comprehensive Trade Practices Statute administered by a public enforcement body in the new regulatory regime.
The proposed Statute will combine a 'catch all' prohibition provision against unfair trade practices to cover all manners of consumer goods and services, from low-cost items to valuables such as car, private residential property, and contractual rights and obligations.
Under the Statute, offenders will be sanctioned mainly by a combination of administrative measures and civil liabilities. Only if the unfair practices are so morally reprehensible or have caused so great a social harm will criminal sanction be considered, such as coercive sales tactics.
The law will apply to only business (a trader) to consumer transactions.
Existing sector-specific legislations, industry self-regulation, and common law rights currently available to consumers will remain unaffected, to operate alongside the proposed Statute within the recommended framework.
The Government has already taken the initiative to rectify deficiencies in the existing Trade Descriptions Ordinance (TDO). It is hoped that the TDO Amendment Bill presently before Legco will soon be approved and implemented as an expeditious and practical tool to address the problem.
The Council's recommendations - altogether 12 in total - were contained in a 180-page report entitled "Fairness in the Marketplace for Consumers and Business", and submitted to the Commerce and Economic Development Bureau for consideration.
The report was initiated in response to the then Financial Secretary's call in his 2007-08 Budget: "To review existing measures to protect consumer rights, including ways to improve the relevant legislation to combat misleading and undesirable sales practices".
Releasing the report at a press conference today (February 25), the Chairman of Consumer Council, Prof. Anthony CHEUNG, urged all stakeholders to give their views and opinions in a public debate of the various issues involved in this proposed legislative reform.
"The report is intended to serve as a useful document and as the basis on which to hold wide public discussion on such important issues as the scope, the enforcement, and the sanctions of such legislation," he said.
"We firmly believe that fairness in the marketplace serves the interests of not only consumers but those of business. It's a win-win situation for all, and for the ultimate well-being of the Hong Kong economy".
"The Council is fully committed to improving legal consumer protection to all members of the public, including our visitors. We will be canvassing for your support, the support of the community as a whole, to turn this into reality in the very foreseeable future," pledged the Chairman.
The report seeks to focus, for the purpose of maintaining a fair marketplace, on establishing a mechanism in the new legislative regime that is more flexible and inclusive in sanctioning unfair trade practices.
The current legislative framework is regarded as sector-specific, piecemeal and unco-ordinated, leaving gaps for unscrupulous practices to slip through the net.
The recommended framework will serve effectively as a basic 'safety net' that can adapt to the many situations that arise in a vibrant and creative economy.
A broad range of areas of long-standing unfair trade practices that need urgently to be addressed, has been identified in the report:
- false or misleading descriptions of goods and services
- insufficient information
- misleading advertisements
- aggressive or high pressure tactics
- bait and switch
- accepting payment without ability or intention to supply
- adopting unfair terms in standard contracts
On the issue of an appropriate enforcement mechanism, the Council considers that it should seek the most cost-effective outcomes for the enforcement agency and be responsive to the needs of consumers for a swift resolution to their problem.
This mechanism should also, at the same time, offer traders who find themselves at risk of a breach of law, an uncomplicated way to resolve the issue.
The report notes that both the Consumer Council and the Customs and Excise Department (C&ED) possess the experience and resources to take on the role of enforcing the proposed Statute.
But it gives no hint on whether the Council, as a strident advocate for consumers, should assume an enforcement role.
As the author of this report, the Council believes that in order to avoid criticisms of conflict of interests and perceptions of bias, the matter is best left open for further public deliberation.
With regard to sanction power, the Council recommends a measured approach that relies heavily on administrative measures to secure improvements in marketplace behaviour, with court sanction as the backing.
To improve consumer access to legal redress, the Council also suggests that consideration should be given to a number of options, for example, establishing a Consumer Tribunal to consider matters under the proposed Statute and existing legislation that currently provides rights of private action regarding consumer transaction disputes.
Alternatively, other options are to expand the scope of the Supplementary Legal Aid Scheme, or enhance the availability of the Consumer Legal Action Fund to a wider range of consumers.
It is the Council's view that the establishment of the proposed Statute should not affect trade practices provisions in existing statutes regulating specific sectors which offer similar level of protection, parallel to and compatible with the proposed Statute, and the relevant enforcement agencies have the expertise and resources to administer the law.
Secondly, professional bodies (not trade associations) with existing self-regulatory regimes will continue to be regulated by their respective rules and regulations because enforcement requires specific professional and specialized knowledge that the new enforcement agency under the proposed Statute would not have.
Accordingly, they will be exempted from the proposed Statute.
Nonetheless, the Council also sees the need for improvements in the current legislative and regulatory frameworks of some sectors, for example, in the telecommunications and broadcasting industries which attracted a consistently high level of consumer complaints over recent years with a total of 15,634 cases in 2007.
The Council and both the Telecommunications Authority (TA) and the Broadcasting Authority (BA) are concerned with the prevalence of unfair sales tactics involving aggressive, harassing and deceptive practices being perpetrated on consumers by sales people in these sectors.
Urgent action is needed to stop the problems, and in view of the pending creation of a Communications Authority (merging the TA and BA), the Council is proposing a number of short-term measures.
The Council recommends the expansion of the s.7M of the Telecommunications Ordinance to expressly cover all unfair trade practices as prohibited under the proposed Trade Practices Statute before, during and after transaction, and that it covers the conduct of the licensees and their agents.
The same legislative provision is recommended to be extended to cover the broadcasting sector.
The Council is also concerned that given the rapid growth of the service economy and proliferation in the use of standard-form consumer contracts, the rights and interests of consumers have been seriously jeopardized by the inclusion of unfair terms in this type of contracts, such as unilateral price variation in fixed-term contract.
Notwithstanding the existence of the proposed Statute that will regulate unconscionable conduct, the Council recommends that separate legislation be introduced to regulate unfair terms in standard consumer contracts (i.e. those contracts not individually negotiated).
Such legislation may be modeled upon the UK Unfair Terms Regulations, with an indicative and non-exhaustive list of potential unfair terms.
An Executive Summary of the report in both English and Chinese can be viewed on the Consumer Council website. Copies of the report are available for distribution at the press conference.