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Trading Standards Investigations – do not take them lightly

What to look out for if you are the Director of a company facing a Trading Standards investigation. Director disqualification or criminal proceedings might be the outcome.

In this article we look at the type of investigations commenced by Trading Standards, how they relate to Section 447 of the Companies Act 1985 and to investigations by the Insolvency Service and Criminal Law investigations. We set out the background surrounding Trading Standards investigations and what to look out for if you are the Director of a company as well as detailing the potentially serious consequences for companies and Directors alike, which can include: Winding-Up Petitions, Director Disqualification and even Criminal Proceedings.

The purpose of this article

  1. To explore the nature, powers and extent of an investigation brought by Trading Standards into a company;
  2. The potential implications of a complaint to or an investigation by Trading Standards, including how an investigation can lead to a Section 447 Investigation being commenced by Companies Act Inspectors; and
  3. What value we at NDP can add to a client faced with such investigations.

What is Trading Standards?

Trading Standards comprises a set of laws designed to protect consumers under the Consumer Protection Laws from unfair trading. As the name suggests, the primary purpose is to protect consumers. The UK Government has been faced with a number of issues in this area in recent times, resulting in the need for changes and reforms to Consumer Protection Law, including new measures to tackle hidden fees, drip pricing and fake reviews, all of which are particularly prevalent nowadays given the large number of businesses operating online. This has widened the scope of what is considered to be ‘unfair practice’.

Consumers can contact Trading Standards directly if they believe they have been, for example, misled in any way or pressured into a sale. Each Council has its own set of Trading Standards – as of a survey in June 2016 there were a total of 1029 qualified Trading Standards staff spanning 116 local authorities in England, Scotland and Wales, with that number having no doubt increased since.

Once a complaint has been received by Trading Standards, it is then in their discretion to decide whether they investigate a business if they believe that laws have been breached. However, not all complaints to Trading Standards will result in an investigation, as they will first consider a range of criteria, including the number of people affected, their vulnerability or overall risk of the business to the public, before deciding whether to investigate. Trading Standards can, and will, only investigate a business when a complaint is received.

As a result of the ‘widening of the goal posts’ this will undoubtedly result in more complaints being made to Trading Standards and therefore more investigations by it into businesses.

The powers of Trading Standards

The powers conferred to a Trading Standards Officer are far reaching and are set out under Schedule 5 of the Consumer Rights Act 2015. Trading Standards can enforce the law across a range of industries and categories including*.

  1. Age restricted products;
  2. Agriculture;
  3. Animal health and welfare;
  4. Fair trading, which includes:

4.1 Pricing;

4 .2 Description of goods, digital content and services; and

4.3 Terms and conditions.

5. Food standards and safety;

6. Petrol and fireworks storage;

7. Intellectual Property;

8. Product safety; and

9. Weights and measures.

[*These are yet to include the additional grounds, as mentioned above, in the potential UK Government reform]

It is important to note that a Trading Standards investigation can be brought in both Civil and Criminal Proceedings. A successful criminal investigation may lead to a criminal record, a fine, with the amount being unlimited in most cases, or even for the more serious cases imprisonment with a maximum of 2 years and up to 14 years for fraud related offences. It is therefore imperative that any requests made by Trading Standards in an investigation are appropriately responded to.

Other consequences of a Trading Standards investigation

It is important to understand that whilst Trading Standards investigations carry their own powers and punishments, they will often work in combination with other investigations, including those of the Insolvency Service, pursuant to section 447 of the Companies Act 2006, or even the Police. It will be a matter for Trading Standards to determine whether to raise a complaint with the Police or the Insolvency Service. However, the Secretary of State for Business and Trade may decide to commence a Section 447 Investigation upon having received complaints from the public, in a similar vein to Trading Standards.

The powers then available to the Secretary of State for Business and Trade when pursuing a Section 447 Investigation include Director Disqualification and Criminal Proceedings. Should you wish to read further into Section 447 Investigations including the likely consequences and how the team at NDP can assist you, please refer to our previous article:

It is by no means unusual that once one investigation is commenced against a business that another shortly follows, as there is a large amount of overlap between the different Government bodies and if a complaint is made by Trading Standards the others typically listen.

Trading Standards’ main aim would ultimately be for the investigated business to cease trading (or mend its trading ways) to prevent the public from being misled any further. Alternatively, if there are, for example, issues with a certain aspect of your business, they may provide suggestions/advice to the business so that it can address the issues and no longer mislead consumers in the future.

What value can NDP add to help businesses and Directors undergoing a Trading Standards investigation?

Once either a letter or email is received from Trading Standards, it will have already conducted initial investigations against the business. However, this does not mean that the investigation is already over, or that Trading Standards will not discontinue the investigation.

There is always the opportunity for the investigated entity to make representations and put material before Trading Standards before they are to reach a final decision.

For this reason, it is vital that the company and its Directors are represented from the moment they are contacted by Trading Standards, not least to prevent anything being said at this early stage which might harm the position in the long-term.

Whilst it will be our aim to persuade Trading Standards that the business is not misleading or in any way abusing consumers, it is imperative that full compliance is afforded to Trading Standards including the provision of all requested information and documents. The potential repercussions of non-compliance are serious and should be avoided.

In complying with requests from Trading Standards, we can help the company to paint a positive picture about the Directors and the business, and reduce the chances of a Director Disqualification investigation.

Whilst we will provide the necessary information to Trading Standards as requested, it is important that this is done whilst ensuring that the Directors’ and the business’s interests are best protected.

Contact us if facing a Trading Standards investigation

We at NDP are very familiar with these types of cases, having dealt with them on numerous occasions. However, there has been a recent influx of such cases, and we anticipate that this will only continue to increase with the impending Government reforms.

If you are facing a Trading Standards investigation, and are concerned about possible director disqualification or criminal action, contact us or call is on 0121 200 7040 for an initial free of charge discussion.

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