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Published online by Cambridge University Press: 02 January 2018
This paper argues that adverse publicity can fulfil two crucial roles in consumer protection law and policy. First, it can operate as an effective regulatory sanction in its own right; secondly it can play a vital role in helping consumers to exert market discipline by making informed choices about suppliers. However, there are significant risks to using adverse publicity to achieve these ends and it is imperative that any regulatory regime addresses these. Studying this topic now is particularly important for three main reasons. First, there has been widespread recognition that the regulatory offence, typically backed up with fines, is not the most effective form of sanction. More flexible, targeted and responsive options are required. Secondly, there is now ample evidence that regulated information, for example in the form of mandatory disclosure, frequently fails to help consumers to make fully informed choices. Finally, there are some highly significant very recent examples of enforcers using publicity in ways that can be viewed both as a sanction and as an information tool. The need to sanction responsively and to bolster consumer sovereignty demonstrates the potential for adverse publicity as a tool of consumer protection policy.
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9. Ibid.
10. See eg Warning! Too Much Information can Harm (London: Better Regulation Executive/National Consumer Council 2007).
11. Note in particular the publication of financial complaints data and the introduction of the National Food Hygiene Rating Scheme discussed below.
12. Although the distinction is an imperfect one. See K Yeung Is the Use of Informal Adverse Publicity a Legitimate Regulatory Compliance Technique? Australian Institute of Criminology Conference, Current Issues in Regulation: Enforcement and Compliance (Melbourne, 2002). The problems with informal publicity are also examined by Fisse, B and Braithwaite, J The Impact of Publicity on Corporate Offenders (Albany: State University of New York 1983)Google Scholar ch 20.
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20. Macrory, above n 8, para E7.
21. Ibid.
22. OFT Drivers of Compliance and Non-compliance with Consumer Law (report by Ipsos MORI) OFT 1225a, May 2010 para 1.9.
23. OFT, above n 19, para 1.19.
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32. Fisse and Braithwaite, above n 12. Yeung correctly notes that the firms in questions endured media disasters and that any generalisation from the study should be undertaken with caution. Yeung, above n 12, at 12.
33. Rourke, above n 30, at 241–242.
34. Yeung, above n 12, at 12–14.
35. Wells, above, n 14, p 37. Of course, this desire may also result from the fear of losing business.
36. Kagan and Scholz, above n 15.
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44. Duff and Garland, above n 41, p 24.
45. Fisse and Braithwaite, above n 12, pp 233–236.
46. Ashworth, above n 39, p 1100.
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50. Ibid, at 382. See also Cowan, above n 27, at 2401 citing Fisse and Braithwaite, above n 12, pp 108–109.
51. Curcio, above n 49, at 383.
52. BERR Regulators Compliance Code (December 2007) para 1.2.
53. Ibid, at para 8.2. The Code states that the paragraph does not apply ‘where immediate action is required to prevent or respond to a serious breach or where to do so is likely to defeat the purpose of the proposed enforcement action.’
54. Reiss, above n 17, pp 23–24.
55. Macrory, above n 8, executive summary. The Compliance Code requires enforcement authorities to ensure that their sanctions and penalties policies are consistent with the Principles.
56. In championing its emphasis on ‘credible deterrence’, the FSA's Chief Executive famously declared that firms should be ‘very frightened’ of the FSA. See H Sants ‘Delivering intensive supervisions and credible deterrence’ Speech to Reuters Newsmakers, 12 March 2009.
57. Braithwaite, above n 38, p 42.
58. Regulatory Enforcement and Sanctions Act 2008 Pt 3.
59. Fisse and Braithwaite, above n 12, pp 261–262.
60. The FSA's consumer protection functions are to be carried out by a new financial conduct authority.
61. FSA Transparency as a Regulatory Tool (DP/03, May 2008) para 2.14.
62. Public censure includes a statement published under s 205 and a statement of misconduct published under s 66 of FSMA.
63. See http://www.fsa.gov.uk for details.
64. OFT Statement of Consumer Protection Enforcement Principles (OFT 964) December 2008, para 2.23.
65. Ibid.
66. OECD Report on the Effectiveness of Enforcement Regimes (Paris: OECD) at 43 Google Scholar.
67. Below, n 71.
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72. For an excellent summary of these issues see Ramsay, I Consumer Law and Policy (Abingdon: Hart Publishing, 2nd edn 2007) pp 71–84 Google Scholar.
73. See London Economics, above n 1.
74. Ibid.
75. Brooker, S Regulation and Reputation (London: NCC 2006) p 7 Google Scholar.
76. Ibid, p 1.
77. Ibid, p 3.
78. These were: (1) animal rights in product testing; (2) the use of animal by-products; (3) product biodegradability; (4) products made from recyclables; (5) the provision of product safety information; (6) human rights; (7) packaging recyclability; (8) product disposability; (9) the payment of minimum wages; (10) whether unions are allowed; (11) whether minimum living conditions are met; (12) sexual orientation rights; (13) the guarantee of safe working conditions; (14) the use of child labour in production; (15) genetically modified material usage; and (16) gender, religious and racial rights. Devinney, T, Auger, P and Eckhardt, G The Myth of the Ethical Consumer (Cambridge: CUP 2010) pp 140–141 Google Scholar.
79. BRE/NCC, above n 10.
80. Ibid, p 11.
81. Devinney, Auger and Eckhart, above n 78, p 116.
82. Yeung, above n 12, at 18.
83. Macrory, above n 8, para 4.18. Macrory referred to the powers as enforceable undertakings in his report.
84. BERR Regulatory Enforcement and Sanctions Act 2008 Guidance to the Act (July 2008) para 60. See RES Act s 50.
85. RES Act s 42(3)(c).
86. Above n 6.
87. OFT, above n 22, para 1.22.
88. See Brooker, above n 75, p 16.
89. Rourke, above n 30, at 231.
90. van Erp, J ‘Effects of disclosure on business compliance: a framework for the analysis of disclosure regimes’ (2007) 5 European Food and Feed Law Review 255 Google Scholar.
91. A Fels ‘Australia's competition regulator and the media’ cited in Yeung, above n 12, at 3.
92. Brooker, above n 75, p 10.
93. Borrie argued that fines are sometimes viewed by traders as ‘tiresome pinpricks, minor inconveniences that are shrugged off and the fines put down as a business expense.’ Borrie, G The Development of Consumer Law and Policy – Bold Spirits and Timorous Souls (London: Stevens and Stevens 1984) p 56 Google Scholar.
94. See below.
95. Coffee, JC Jr ‘No soul to damn no body to kick: an unscandalized inquiry into the problem of corporate punishment’ (1981) 79 Mich L Rev 386 CrossRefGoogle Scholar at 427–428.
96. Whitman cited in Yeung, above n 12, at 40.
97. Better Regulation Task Force Avoiding Regulatory Creep (Cabinet Office, 2004).
98. Yeung, above n 12, at 41–42.
99. Van Erp, above n 90, at 259. The author illustrates this with the example of the several hundred employees and proprietors of Chinese restaurants in Rotterdam who protested against what they saw as disproportionate action by the Food Safety Authority.
100. See eg Painter, AA ‘Why prosecute?’ (1974) British Food Journal 38 Google Scholar.
101. Fisse and Braithwaite, above n 12, p 310.
102. The Economist ‘The blog in the corporate machine’ 9 February 2006. Cited in Brooker, above n 75, p 19. Note also the concern about websites such as Trip Advisor.
103. Brooker, above n 75, p 10.
104. Ibid, p 15.
105. Ibid.
106. Ibid, p 19 for discussion.
107. For example trading standards. See BERR A Guidance Note on Information Disclosure to Consumers and Intellectual Property Rights Holders for Civil Proceedings March 2008 URN 08/718.
108. Brooker, above n 75, pp 14–15.
109. BERR Regulatory Enforcement and Sanctions Act 2008 Guidance to the Act (July 2008) para 71.
110. The FSA defines a complaint as: ‘any oral or written expression of dissatisfaction, whether justified or not, about the firm's provision of (or failure to provide) a financial service which alleges that the customer has suffered (or may suffer) financial loss, material distress or material inconvenience.’ Firms are not obliged to report complaints that are resolved to the customer's satisfaction by the close of the business day after the complaint was made.
112. For the background to the FSA's thinking on transparency see FSA, above n 61.
113. FSA Treating Customers Fairly: The Consumers' View (FSA Consumer Research 38, June 2005) p 37.
114. See eg P Cartwright ‘Conceptualising and understanding fairness: lessons for and from financial services’ in Kenny, M, Devenney, J and Fox O'Mahony, L (eds) Unconscionability in European Private Financial Transactions: Protecting the Vulnerable (Cambridge: Cambridge University Press 2010) pp 222–225 CrossRefGoogle Scholar. The FSA's Consumer Protection Strategy also seeks to ensure that consumers receive prompt and effective redress.
115. See eg ‘Complaints over PPI rise sharply’Guardian 10 February 2011, available at http://www.guardian.co.uk/money/2011/feb/10/consumer-complaints-financial-services-rise.
117. Hampton, above n 7, recommendation 11.
118. FSA ‘National Food Hygiene scheme launched’ 30 November 2010.
119. Requiring businesses to disclose their ratings on the premises would require legislation.
120. Weil et al, above n 7, at 169. See also Fielding, JE, Aquirre, A, Spear, MA and Frias, LE ‘Making the grade: changing the incentives in retail food establishment inspection’ (1999) 17 American Journal of Preventative Medicine 243 Google Scholar.
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122. Weil et al, above n 7, at 169.
123. Fisse and Braithwaite, above n 12, p 308.
124. Brooker, above n 75, p 13.
