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OFT backs replacement of criminal penalties with civil ones

Competition law and consumer watchdog the Office of Fair Trading has welcomed a legal reform proposal that would reduce its reliance on criminal law but has said that proposal should be less rigid to allow it to protect consumers.25 Nov 2010

The Law Commission is consulting on a proposal (254 / 690KB PDF) to reduce and control the reliance of regulators on criminal law. It proposes putting guidelines in place to help Government departments decide when to propose a criminal law, and asking regulators to use civil penalties rather than criminal ones in many cases.

The OFT has welcomed the proposal in some contexts, such as in competition law cases, but said that it should not be forced to exhaust all civil law options in every case before using criminal sanctions.

"We note that the consultation document proposes, particularly in the field of consumer protection, that criminal sanctions in regulatory cases should be used as a follow on process where there has been a failure to comply with civil sanctions," said the OFT's reponse (15-page /316KB PDF) to the consultation. "It is OFT policy that prosecution is used where it is proportionate and appropriate, for example because of the seriousness of the detriment caused to consumers and where other types of intervention are unlikely to be effective."

"Making prosecution possible only as the final stage in a rigid procedural hierarchy to be in place under all circumstances is undesirable," it said. "Such a change would result in the loss of a deterrent which we consider has a very real effect on the level of detriment that may be experienced by consumers."

"Our concern is that all or most breaches of the law that we and partner authorities enforce can sometimes demand prompt use of criminal sanctions," it said. "The OFT would therefore consider the removal of the possibility of prosecution in relation to the consumer protection law that we deal with to be detrimental to the effectiveness of the regime and to pose risks for the consumer."

The OFT said that the logic of only using criminal sanctions when civil ones have failed may seem appealing but that in practice it would hamstring regulators' enforcement efforts.

"Enforcers would ... be less able to deal appropriately with the worst types of behaviour in a time sensitive manner," it said. "There are circumstances and cases where civil action is clearly unlikely to achieve the desired result, for example [if] the trader is itinerant and a civil sanctions first approach would fail to stop them moving to another area and working under a different name [or] the trader commits a string of similar, but different, offences such that each one is a 'first' offence. For many traders, especially at local level, only the threat of arrest and imprisonment is an effective deterrent."

The OFT said that it supported the existence of civil penalties alongside criminal ones.

It said, though, that the Law Commission's plans would be helpful in some circumstances.

"The OFT fully supports the introduction of civil sanctions as an alternative to criminal penalties, and notes there are areas where currently the only recourse is prosecution," it said. "For instance, no civil sanctions currently exist for failure to comply with the investigation of competition cases, although in certain circumstances it is a criminal offence not to comply with the OFT's information-gathering powers."

"The OFT believes that the ability to impose civil sanctions in these circumstances would allow the OFT to take action in cases where the seriousness of the conduct ought not to warrant criminal sanction, and encourage parties to provide information more fully and in a more timely fashion. Criminal sanctions might nevertheless be appropriate in the most serious cases, such as where a party physically prevents an investigation team from entering a building," it said.