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OFT pursues first criminal action under Unfair Trading Regulations

New criminal investigation powers granted to the Office of Fair Trading (OFT) by consumer protection laws have been used for the first time. The OFT has conducted raids while investigating a suspected scam in Bristol.26 Feb 2009

The Consumer Protection from Unfair Trading Regulations came into effect last year and created civil and criminal offences where business people acted unfairly in relation to consumers. Civil actions have been taken under the laws, but the OFT's recent activity is the first criminal case to be pursued under the new laws.

"The OFT executed entry warrants at three premises, accompanied by police who arrested three women for alleged involvement in the operation and promotion of a suspected pyramid scheme. The OFT also visited two other premises in Bristol and seized evidence," said the OFT.

"The investigation is the OFT's first use of new criminal powers under the Consumer Protection from Unfair Trading Regulations 2008," it confirmed.

Pyramid schemes earn early participants money as long as people are found to pay to join the scheme. Later entrants will not make any money from such schemes, which are illegal.

"Consumer protection laws … prohibit the establishment, operation or promotion of any scheme where money is made primarily from recruiting other people rather than from the sale of goods and services," said the OFT. "Breach of the law is an offence punishable by up to two years' imprisonment and/or an unlimited fine."

The Consumer Protection from Unfair Trading Regulations imposed a raft of obligations on traders to deal fairly with customers or potential customers.

Guidance from the OFT and Government indicated that the law would control misleading closing down sales, creating products which deliberately confuse customers into thinking they are known brands, and controlling the use of the word 'free'.

A Salisbury County Court ruling last year against two Wiltshire traders used the Regulations to control their behaviour after customers complained that the father and son handyman team behaved aggressively and produced poor quality work.

Jimmy Stockwell and son Shane were ordered by the Court not to break terms in the Regulations.

Wiltshire Trading Standards stopped short of mounting a criminal case, though. It told OUT-LAW.COM at the time: "we could get it done quicker" by pursuing a civil case.

The Bristol raids took place on 22nd January, when OFT officers were accompanied by police. Three people were arrested.

"Scammers adapt to new circumstances and are tempting people feeling the pinch with false hopes of making easy money. Sadly responding to these pyramid schemes will only leave participants worse off," said Heather Clayton, OFT senior director of consumer protection.