16 August 2012
Hong Kong legislators passed amendments to the Trade Descriptions Ordinance which create new offences and strengthen enforcement against unfair trade practices. The new law is expected to come into effect next year.
The Trade Descriptions Ordinance prohibits false trade descriptions in relation to goods. The Ordinance tackles mischief like the use of false or misleading descriptions of the characteristics of goods and the use of forged trade marks on goods. Consumers and trade mark owners may request Customs to investigate a breach of the Ordinance.
The Government sees the need to stamp out unfair trade practices. The key amendments to the Ordinance include:
i. Wider definition of "trade description"
Following the amendment, the term "trade description" is expanded to cover matters like indications of availability and price (including calculation of discount). It also includes indications that a particular person has acquired or has agreed to acquire the goods or services in question; this probably covers certain kinds of celebrity endorsements.
ii. False trade descriptions of a service
The amended Ordinance is expanded to cover false or misleading trade descriptions of a service. The indication of any after-sale service assistance is part of the trade description of a service.
However, the offences relating to the use of forged trade marks remain confined to goods; they do not apply to services.
iii. Misleading omissions, aggressive commercial practices, bait advertising, bait-and-switch, accepting payment without intention to supply
The amended Ordinance creates new, strict liability offences against these unfair trade practices. The Ordinance sets out detailed criteria of these offences and the potential defences. For instance, for the offence of misleading omissions, a trader dealing with a consumer commits the offence if it omits or hides material information, or provides such information in an unclear or untimely manner. Examples of material information are additional delivery charges and the consumer's right of withdrawal.
For the offence of aggressive commercial practices, relevant factors include the timing and persistence of the practice, the use of language and any exploitation of the consumer's misfortune or circumstance. This targets the use of harassment, coercion or undue influence in pressuring a consumer to sign up for goods or services, e.g. lengthy sales pitches or preventing consumers from leaving the business premises.
With the intention of catching cross-jurisdictional transactions, especially online transactions, the offences under the amended Ordinance are applicable to a trading practice targeting consumers outside Hong Kong if the trader is physically in Hong Kong or has Hong Kong as its usual place of business.
The amendment strengthens the enforcement powers of Customs. Under the amendment, Customs has the additional power to inspect books or documents kept by a trader for ascertaining whether any offence under the Ordinance has been or is being committed.
The amended Ordinance also introduces a "compliance-based" mechanism. Under this mechanism, Customs may seek written undertakings from traders to stop an offending act. Customs may apply to the court for an injunction for a breach of the undertaking.
For certain offences under the Ordinance (with the notable exception of forged trade mark offences), the amendment empowers the court to order a convicted person to compensate the aggrieved person. The amendment also allows an aggrieved person to bring a civil suit to recover loss or damage. These provisions will most likely benefit aggrieved consumers.
The amendments are aimed at enhancing consumer rights and enforcement powers. However, the amended Ordinance could potentially have a significant impact on trading practices. While no one would dispute the need to discourage unfair trade practices, the net has been cast wide and may catch honest traders. Traders must therefore familiarise themselves with the legislative change and review their current practices. The Government has announced that it will conduct publicity campaigns before bringing the amended Ordinance into operation.
For inquiries related to this Legal Update, please contact Kenny Wong, Eugene Low or your usual contacts with our firm.