The Consumer Council is calling for substantial changes in the regulation of deceptive, misleading and unfair practices in consumer transactions.
It has proposed a package of legislative initiatives, providing both immediate action and long-term solution to this growing problem of trade malpractices.
Implementation of the package, presently under consideration of the Government, will effectively deter a myriad of sharp practices that consumers are now faced with in the purchase of goods and services.
At a press conference today (May 11), the Council's Chairman, Prof. Andrew CHAN Chi-fai, and Vice Chairman, Dr. John HO Dit-sang, jointly unveiled the recommendations in the package heralding them the beginning of a new era of legal sanctions against deceptive, misleading and unfair business conduct, including bait advertising.
"In the past 26 years, we have witnessed significant development of consumer protection legislation in the area of consumer product safety as well as contract law relating to consumer sales," they pointed out.
"But more needs to be done in the development of laws for the purpose of curbing deceptive conduct and unfair practices which are harming the economic interest of the consumer."
Such practices harm not only the interest of individual consumers but also honest businesses "who may face the dilemma of either adopting similar tactics or losing market share," they added.
Deceptive and unfair practices, they agreed, are not uncommon in the marketplace raising considerable public concern and tainting Hong Kong's image.
In this aspect of consumer legal protection, Hong Kong is lagging behind more advanced jurisdictions. In the US, Australia and UK, common law actions for consumers have been considered inadequate.
This is because most consumers injured by the unfair or deceptive trade practices of a seller, will find it onerous to plead and prove a common law action for fraud.
Further, most criminal laws dealing with dishonest conducts such as sales abuses require that, on the one hand, the seller be shown to have an evil intent and that, on the other, the consumer to prove justifiable or material reliance on the deceptive representation of the seller. Thus consumers need a statutory course of action to protect their interest.
In the year 2000, the Council received a total of 18,932 consumer complaints. Of the 4,574 consumer complaints received in the last quarter of 2000, it was found that over half (52%) of these complaints would have been "prima facie actionable" under trade practices laws in Australia, Britain and the United States.
Prominent among these complaints are: misleading price indication (21%), and false or misleading representation (16%). Others are: accepting payment without intention to supply (8%), bait and switch (6%), and undue harassment or coercion (1%).
According to the analysis, the types of goods or services most susceptible to deceptive and unfair practices are: electrical appliances, audio and visual goods, medicines and Chinese herbal drugs, beauty saloons, modelling and talent hunt, time sharing holidays. Further, 70% of the complaints are related to the supply of services while 30% to sales of goods.
In its study, the Consumer Council has drawn on extensive reference to the relevant laws in other jurisdictions, notably, the Federal Trade Commission Act 1970 in the US, the Trade Practices Act 1974 in Australia and the Consumer Protection Act 1987 in the UK.
In its recommendations, the Council has called for both immediate action and long-term measure to reform Hong Kong's regulatory framework in this area of legislation in an effort to meet the challenges of to-day's market and closer to the practice of other major world cities.
As an immediate measure, the Government is urged to take action to strengthen the existing provisions contained in (1) the Trade Descriptions Ordinance, (2) the Summary Offences Ordinance and (3) the Unconscionable Contracts Ordinance.
First, the scope of the Trade Descriptions Ordinance (Cap. 362) should be extended from goods only to cover false or misleading trade descriptions of services, accommodation and facilities (such as those related to resort houses on rental and not the usual transactions of property in the market).
The definition of "false trade description" should also be extended to cover misleading indication as to the price of goods and services. This will have the effect of prohibiting misleading price indications, for example, by some seafood and ginseng shops, and audio and video retail outlets in the tourist districts.
Further, a review on the ordinance should be conducted to examine, in particular, the enforcement of the offence of application of false trade descriptions by means of oral statement and possible legislative improvement for better consumer protection in such cases.
Second, new sanctions should be created under the Summary Offences Ordinance (Cap. 228) against unscrupulous traders for: - enticing customers by bait-and-switch tactics (as distinct from incentive or bonus schemes to promote sales. In one jurisdiction, bait-and-switch tactics are defined as 'the trader advertises and/or promotes the sales of his goods or services when there is no reasonable ground to believe that he is able to offer the goods or services at the advertised/promoted price for a reasonable period and at a reasonable quantity.'); - accepting payment for goods or services that they do not intend or are not able to supply; and - using physical force or undue harassment or coercion against a customer.
Such sanctions are consistent with consumer protection laws in Australia, the UK and the US. An important element of these laws is that a seller is obliged to prove that he will be able to supply the goods or services as advertised.
This is because such information is only privy to the trader and it is impossible to expect the consumer to come up with such proof. The creation of such criminal offences will facilitate the consumer's access to justice and enable the police to act more effectively than it is now in their operations.
In addition to imposing criminal penalties, the court should be specifically empowered to order judicial redress by: (a) compensation order, (b) restitution order, (c) repair order, or (4) any order.
Third, the Unconscionable Contracts Ordinance (Cap. 445) should specify certain trade practices to be unconscionable such as (a) bait and switch tactics, and (b) misleading representation relating to the price of goods or services.
Such malpractices should be clearly specified in the list of matters that the court may take into consideration in determining whether a contract is unconscionable in the circumstances.
Further, in addition to the private right of action of the injured consumer, designated public agencies should be empowered under the ordinance to initiate civil proceedings on behalf of the injured individual against the unethical trader.
But, as a long term goal, the Consumer Council asks the Government to consider enacting one single piece of trade practices legislation by incorporating all relevant laws into it and adding new provisions to cater for changing needs of the market. Such an approach will have many advantages: - It ensures coherency, consistency and ease of access of the law. - The regulatory function can be more efficient and cost effective as it will be dealt with under one roof. - The regulatory mechanism becomes more transparent as the standards of trade practice are clearly spelled out in the law. - The provisions in the law serve also the purpose of providing comprehensive guidelines for the traders in different sectors.
The full text of the research report "Regulating Deceptive, Misleading and Unfair Practices in Consumer Transactions" is available at the Consumer Council website.