OPERATION ZEBEDY, EIFFEL & TREACLE
FOR RELEASE 30th October 2018– THIS CASE HAS NO REPORTING RESTRICTIONS
30th October 2018; In a shocking revelation earlier this month from York Crown Court in the UK, it appears that City Of York Trading Standards led by Senior Investigator Bethany Benger on behalf of National Trading Standards eCrime team have charged three London companies for acquiring goods from other traders ‘purporting to be consumers’ in a landmark case that could have severe detrimental effects on tens of thousands of businesses across the UK.
UK National Trading Standards commenced investigations into three companies in April 2017. By December, they had raided three premises, frozen millions of pounds of companies and Directors assets, despite not having a single complaint or civil action against any of the businesses by consumers or organisations.
In late 2016, The Government Department for Business instructed National Trading Standards to “test legislation” using the scalpers as a good news story. As we all know despite the ongoing public debate, parliament decided not to make it illegal to purchase or sell event tickets which brings in an estimated tax revenue of up to $70 million per annum to the treasury and has been widely accepted since the inception of free markets before the days of the Romans.
Despite the severe ramifications it could have on many business sectors across the UK, National Trading Standards have had other ideas. In June 2018, they decided to charge the three companies, their Directors and associates with breaches of the CPUTR2008;
- Being a trader engaged in a commercial practice, namely that for the purpose of acquire events tickets for sale or supply to consumers, you falsely created the impression that you were not acting for purposes relating to your trade or business or falsely representing yourself as a consumer, which was unfair. Contrary to regulations 12 and 13 of the Consumer Protection from Unfair Trading Regulations 2008.
- The said tickets were criminal property within the meaning of Section 340(3) of the Proceeds of Crime Act 2002, which was unfair. Contrary to regulations 12 and 13 of the Consumer Protection from Unfair Trading Regulations 2008.
These pieces of legislation were bought in under the consumer protection from unfair trading regulations 2008 and were not intended to be used for business to business practices. An example of its use according to the Office of Fair Trading: A second-hand car dealership puts a used car on a nearby road and displays a handwritten advertisement reading ‘One careful owner. Good family run-around. £2000 or nearest offer. Call Jack on 01234 56789’. The sign gives the impression that the seller is not selling as a trader, and hence this would breach the CPUTRs.
Through the wild and somewhat creative interpretation National Trading Standards are using, whereby the offences are committed through the acquisition of goods/services from another trader as opposed to the sale of goods/services to a consumer, this could result in regular practices by countless businesses being deemed a beach of the CPUTR2008 with potential money laundering charges. Even more daunting, in a hearing on the 1st October 2018 National Trading Standards expressed that they were also considering this business practice as potentially fraudulent.
The issue; thousands of UK businesses use an array of traders to acquire goods and services including a café owner that would purchase Bread to produce sandwiches for its customers, a cleaner purchasing detergents online from the store to clean houses. Unfortunately, if these prosecutions succeed, it would mean that these businesses could potentially be breaking various Consumer Protection offences resulting in potential arrest, confiscation of assets and up to two years in prison. Why? Deep within the terms and conditions of many websites or local stores, for example, tesco.com, it states; “Service is available for non-commercial and domestic use only.”
You might expect the above could be a potential civil contractual dispute between two traders and not the business of a local trading standards, let alone a national prosecutor. The worrying part to this is that it could open up the floodgates to tens of thousands of prosecutions. Under ARIS; local trading standards authorities would benefit from up to 100% of any fine and up to 33% of any confiscation that the business incurred, plugging the huge budget gap of bankrupt local councils.
In a state of instability with the potential forthcoming impact of Brexit, SME’s along with companies looking to invest in the UK need more reassurance and stability than ever from regulators.
Now nearly 2 years into this landmark prosecution with no trial date yet set, it is understood that it has not only cost the taxpayer millions of pounds in legal wrangling, closed 3 businesses including one that had a Primary Authority Partnership with its local Trading Standards with full approval. But countless jobs losses, many of which were individuals just at the start of their careers.
If this succeeds, this unfortunately could be the start of many!
John Szepietowski, a solicitor with Audley Chaucer Solicitors in London, who represented several of the defendants commented “it is extremely worrying that Trading Standards departments can invoke Proceeds of Crime legislation to try and seize the personal assets of directors of limited companies, using civil standards of proof, and at the same time, denying them access to funds to mount a defence, and denying them legal aid. It is an impossible situation and against the interests of natural justice”.
Notes to editor;
- GUIDANCE on the UK Regulations (May 2008) implementing the Unfair Commercial Practices Directive.
EU SME Federation