REGULATION OF DIRECT SELLING
The marketing licence conditions were introduced,
in light of experience in the early stages of the new domestic
gas market, to supplement existing general regulations on direct
selling and to provide Ofgem with powers to protect consumers.
The licence conditions were introduced into the gas and electricity
licences in 1998 and further enhanced in 2001.
The licence conditions introduced in 1998 required
supply licensees in respect of direct sales to ensure that:
staff are properly selected and trained;
agents are readily identifiable and
contact takes place at reasonable times;
sales on the doorstep or by telephone
reasonable steps are taken to cancel
contracts when requested by the consumer; and
complaint handling facilities are
to be set up.
In light of Ofgem's experience with the market
and the licence conditions, in January 2001 we introduced the
a requirement on suppliers to ensure
consumers had understood they had entered into a contract;
an extension of the current requirements
on electricity suppliers to send out terms and conditions following
a telephone sale to gas suppliers;
widening the licence requirements
to cover sales in shopping centres and other public places; and
made suppliers provide appropriate
on-going management of sales agents (including those employed
A person is guilty of forgery if he makes a
false instrument, with the intention that he or another shall
use it to induce somebody to accept it as genuine, and by reason
of so accepting it to do or not do some act to his own or any
other person's prejudice. Instrument includes any document, whether
of a formal or informal character.
The Act can be enforced by the police or Trading
Standards Officers. As outlined in the report, it is difficult
to obtain prosecutions and many suppliers report that police forces
do not consider prosecuting sales agents to be a high priority
given that the consumer has often not made any monetary loss (often
they are better off).
This prohibits the mis-descriptions of goods,
services and accommodation; and prohibits false indications as
to the price of goods and requires information to be published
about advertised goods. Criminal proceedings may be instigated
against agents, agencies or trainers or the company itself. This
legislation is enforced by Trading Standards Officers.
In 1999, Cheshire Trading Standards successfully
prosecuted Northern Electric and Gas plc for a number of offences
under the Trade Descriptions Act for doorstep mis-selling during
the year. Customers were told they were signing for information
only when in fact they were entering legally binding contracts.
The company pleaded guilty and was fined £12,000 plus costs.
1987, KNOWN AS
The Regulations give consumers the right to
a seven day cooling-off period during which they can cancel an
agreement to buy goods or services. In addition, the Seller must
provide consumers with a notice setting out their cancellation
rights. Failure to do so makes the agreement unenforceable against
As some doorstep sellers used unscrupulous practices
and exploited apparent loopholes to the detriment of consumers,
the DTI consulted and introduced enhancements in 1998. These created
a new criminal offence where a trader fails to deliver to consumers
the required written notice of cancellation rights. Trading Standards
Departments will be responsible for enforcement of this aspect
of the new Regulations.
These came into force on 31 October 2000. They
implement the EU Distance Selling Directive, and give the Director
General of Fair Trading and trading standards departments new
powers to stop suppliers harming the interests of home shoppers.
The new regulations address the gulf between the comprehensive
information consumers have when shopping conventionally, and the
relative lack of transparency when buying at a distance. They
give consumers a clear understanding of their transaction, whether
buying by post, phone, fax or Internet.
Under the regulations suppliers must provide
the following information before a sale: name of supplier, description
of the goods and services, price, arrangements for payment, the
right to cancel and how long the offer or price remains valid.
After the consumer has decided to buy the supplier should confirm
the earlier information in a written or durable form such as fax,
letter, contract or e-mail. The confirmation should include: details
of when and how a contract can be cancelled (under the regulations
consumers have up to seven working days from the date of contract
for services to cancel); a postal address for the suppliers to
which complaints can be addressed and details of after-sales services
(EU DIRECTIVE) REGULATIONS
This will allow bodies such as the OFT, Trading
Standards departments, consumer organisations and regulators (Ofgem)
to have the right to seek injunctions for breach of certain directives.
The directives covered will include misleading advertising, distance
selling and unfair contract terms in consumer contracts.
There are a number of bodies involved in regulating
the activities of direct marketing through the use of codes already
in place. Many suppliers are members of one or more of these bodies:
Direct Marketing Association (DMA)
are the largest marketing trade association, representing companies
that use direct marketing or who supply direct marketing services.
The DMA has a Code for Direct Marketing, which helps to ensure
compliance with key legislation and to ensure best practice;
Direct Selling Association (DSA)
aims to promote high standards in direct selling. The DSA's consumer
code has been developed as a generic code for direct selling of
all consumer goods and services. The code deals with methods of
selling, advertising and identification of direct sellers, cancellation
rights and administration; and
Association of Energy Suppliers (AES)
was established in 1997 with the aim of bringing together all
energy suppliers to promote good practice in the marketing of
electricity and gas and associated goods or services. A Panel
made up of consumer groups and suppliers with an independent chair
enforces its Code of Practice for Marketing.
9 May 2001