19 May, 2015
Background Of The Case
On 2 April 2015, three beauticians were sentenced after being convicted of engaging in "aggressive commercial practices" when selling a body treatment package, thereby contravening the Trade Descriptions Ordinance ("TDO"). The first defendant was sentenced to 200 hours of community service. The second and the third defendants were each sentenced to 3 months' imprisonment and were ordered to compensate the victim of HKD 70k, in total being the deposit paid for the package. The three beauticians were the first people convicted of this offence since it was introduced in an amendment to the TDO in July 2013.
Under the TDO, a commercial practice will be considered "aggressive" if the practice significantly impairs or is likely to significantly impair the average consumer’s freedom of choice in relation to the goods or services concerned through the use of harassment, coercion or undue influence, thereby causing the consumer to make a transactional decision that he or she would not have made otherwise.
According to the investigation by the Hong Kong Customs and Excise Department, the three beauticians, on the pretext of examining the consumer's chest, told her that she had lumps which could mutate into cancer and suggested that she should purchase the body treatment package offered by the beauticians' employer company. Despite that the consumer had expressed her reluctance towards purchasing any treatment package, they continued badgering her for over one-and-a half hours. The consumer found their constant persuasion annoying but was scared and worried that she might have cancer, and finally purchased the body treatment package unwillingly. The Court also found that the purported signed terms and conditions for purchasing the package were unclear and did not help the victim in understanding what she was buying.
The magistrate said that the sentence imposed was to reflect the seriousness of this case and the jail sentence was a deterrent, to show the public that the TDO does not tolerate such "appalling behaviour".
Lessons To Learn
This case highlights the risks especially for those businesses which rely more heavily on verbal sales and the marketing of products through individual salespersons, who very often draw on their previous sales or personal experience when persuading customers to purchase.
Under the TDO, agents and employees acting on behalf of a trade can be individually prosecuted for an offence. In addition, principal officers such as directors, company secretaries and managers can be liable for the commission of the offence by a trader if the offence has been committed with their consent or connivance, or is attributable to their neglect. A potential defence for aggressive commercial practices lies in cases where the commission of the offence was due to the act or default of another person, and that the person charged has taken all reasonable precautions and exercised all diligence to avoid the commission of the offence.
For traders, from the perspectives of reducing their exposure under the TDO as well as that of their management and employees, we suggest that they should:
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Conduct a wholesale review of their marketing and sales practice with a view to identifying the potential risky areas, e.g. reliance on verbal representations.
- Review and beef up contracts and other terms and conditions, and make sure purchasers are sufficiently made aware of the relevant provisions and disclaimers.
- Develop sales policies and manuals for staff, and monitor compliance with those policies and manuals.
- Provide regular training for staff on requirements under the TDO.
The above suggestions are also in line with the usual terms of undertaking given by traders to the Hong Kong Customs and Excise Department under the civil compliance-based mechanism under the TDO.
For further information, please contact:
Alan Chiu, Partner, Hogan Lovells
alan.chiu@hoganlovells.com
Eugene Low, Partner, Hogan Lovells
eugene.low@hoganlovells.com
Henry Wheare, Partner, Hogan Lovells
henry.wheare@hoganlovells.com
Deanna Wong, Partner, Hogan Lovells
deanna.wong@hoganlovells.com
