Byrne backs tough US-style justice for company cheats

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Series Details Vol 7, No.10, 8.3.01, p4
Publication Date 08/03/2001
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Date: 08/03/01

By Peter Chapman

COMPANY directors could face fines or prison sentences if they fail to live up to their promises to trade fairly under plans being considered by EU consumer affairs chief David Byrne.

The Commissioner says he envisages a European version of the US system, which gives the Federal Trade Commission (FTC) the power to impose sanctions on firms that renege on industry-led consumer-protection codes.

Byrne's aides claim it is still just an idea - but critics see it as a bid to make his department more like that of competition watchdog Mario Monti, who vets cross border mergers and cartels.

Crucially, Byrne's words, echoed recently by his second in command, Robert Coleman, come as the Commissioner prepares to unveil a policy paper on fair trade. He wants a directive to ensure firms do not resort to "sharp practice" to evade the law and mislead the consumer.

But Byrne claims the US approach would make firms abide by the codes of conduct, self-regulation and 'co-regulation' schemes (in which firms escape legislation by agreeing to develop schemes that meet policy makers' targets) that are intended to complement this directive.

"I see advantages in the US approach on unfair practices, where essentially the legal framework defines any breach, even of a voluntary commitment, as equivalent to a legal infringement with all that implies," Byrne told a Brussels e-economy conference last week.

The FTC is an independent agency with the power to bring criminal and civil prosecutions in cases against companies.

"This would strengthen the workability of co-regulation and self-regulation by giving confidence to both business and consumers that commitments, once given, will be honoured," Byrne added.

Jim Murray, director of the European Consumer Association BEUC, predicts the 'FTC model' will be just one of several options the Commission will moot when it publishes the controversial fair trade paper later this Spring.

Murray, who will attend a Swedish presidency conference on the issue tomorrow (9 March), said there was already an array of models - such as the UK's Office of Fair Trading, which oversees the effectiveness of the industry-led Advertising Standards Agency, and Scandinavia's consumer ombudsmen who have the power to launch probes.

But industry critics are already voicing concerns about the plan. They warn that an EU-level, FTC-style agency may lack the legal mandate to force firms to abide by codes of conduct without adopting a special law such as the one granting competition watchdogs powers to vet mergers and cartels. This, they say, would be a huge political decision.

"That would be incredibly dangerous. It would be a major step to a federal state," said Mike Pullen, single market expert with UK law firm DLA.

Even if member states are left to apply the rules and agree to US-style sanctions, critics say there may be huge differences in interpretation of what fair trade is and what companies should be obliged to do. This could lead to legal nightmares for companies operating in different countries.

"At the stroke of a pen a whole section of the single market could be wiped out," said Philip Sheppard of the European Brands Association.

Company directors could face fines or prison sentences if they fail to live up to their promises to trade fairly under plans being considered by EU consumer affairs chief David Byrne.

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