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Used Car Scandal ?

Recent articles in the Sun and other publications have suggested that that “millions” of customers are entitled to a refund on used cars.

This follows an Advertising Standards Agency ruling in October that “vehicles that were ex-fleet (having previously been used for business purposes), including whether the car had been driven by multiple users was material information likely to influence a consumer’s transactional decision” and therefore that because the adverts “had omitted material information regarding the cars having been previously used for business purposes whilst part of a fleet, we concluded that they were misleading.”

The ASA ruling itself doesn’t give rise to a claim for compensation. Its effect is limited to requiring the named advertisers to ensure that future adverts “did not mislead by omitting information that they had to show that their vehicles were previously used for business purposes whilst part of a fleet.”

It has however highlighted the importance of complying with the Consumer Protection Regulations 2008.

The regulations prohibit both Misleading actions and Misleading omissions, which are defined as matters which cause “or is likely to cause the average consumer to take a transactional decision he would not have taken otherwise.”

The argument being promoted is that an average consumer would be less inclined to purchase an ex-fleet car due to concerns about increased levels of wear and tear or previous maintenance, and therefore the information should be disclosed.

The OFT Guidance for second hand car dealers published in 2010 made it clear that  this would include “creating a misleading impression about the previous usage of a vehicle. For example, giving the impression that a vehicle has one previous user – through the use of statements such as ‘one previous owner’ – when in fact it is an ex-business use vehicle that has had multiple previous users (such as an ex-rental, driving school vehicle or taxi”). The guidance also makes it clear that it would also be misleading to omit the information. Whilst the guidance has formally lapsed with the closure of the OFT it seems unlikely that the courts will take a different view.

In our view the suggestion that buyers could receive 25-100% of the value of the car in damages is ill founded and misconceived.

27J of the Consumer Protection Regulations provides for a right to damages if the consumer has incurred a financial loss, alarm, distress, physical inconvenience or discomfort as a result of the prohibited practice. However it’s “a right to be paid only damages in respect of loss that was reasonably foreseeable at the time of the prohibited practice” and specifically not “damages in respect of the difference between the market price of a product and the amount payable for it under a contract”.

We’d be interested to see a coherent argument to support a claim that an ex-fleet car had no value whatsoever!

Graham Jones LL.B (Hons.) FIMI
Director of Legal Services
LAWDATA LIMITED

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