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The regulations also ban 31 specific practices in all circumstances, irrespective of whether they may affect consumers’ economic behaviour. These include prize-draw scams, bogus closing-down sales, and preying on elderly people’s fears about their personal security to sell them burglar alarms. The prohibition on the use of unfair commercial practices will be enforceable through the procedure for the enforcement of Community infringements in Part 8 of the Enterprise Act 2002.
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In addition, with limited exceptions, a breach of the prohibition on unfair commercial practices will be a criminal offence. Most of the offences follow the general approach of strict liability, which requires proof only that a commercial practice is prohibited. However, there will be no offence merely because a commercial practice falls within the broad category of those falling below honest market practice or good faith, unless the trader knowingly or recklessly engages in this conduct. This is because of the wide-ranging nature of this category.
The Office of Fair Trading and Trading Standards will have a duty to enforce the regulations. However, where there are effective systems of self-regulation, such as those administered by the Advertising Standards Authority and PhonepayPlus, we would usually expect complaints to be referred to them in the first place for action, as established means under both these regulations and the business protection regulations. A supplementary objective in transposing the directive was to achieve some regulatory simplification, where that was possible without reducing consumer protection. The consumer protection regulations repeal provisions in a number of laws, including most of the Trade Descriptions Act 1968 and the provisions on misleading price indications in Part III of the Consumer Protection Act 1987.
The consumer protection regulations represent the biggest change to the UK consumer protection framework for almost 40 years. They will put in place a more comprehensive framework for tackling sharp practices and rogue traders who exploit loopholes in the existing prescriptive legislation. They will also deliver a big part of BERR’s simplification plan. This is a good law for both consumers and honest businesses. Consumers will obtain better protection from unfair practices. Honest businesses will no longer have to face unfair competition from traders who use underhand tactics. The changes will also simplify consumer protection, making it clear which commercial practices are, and are not, allowed.
I turn to the second instrument under discussion today. The business protection regulations implement the 2006 misleading and comparative advertising directive. That directive consolidated the previous 1984 directive on the subject with amendments made to it by other directives, including the UCPD. The previous 1984 directive is currently implemented by the Control of Misleading Advertising Regulations 1988, which will be repealed by the consumer protection regulations.
The business protection regulations prohibit advertising that misleads traders and set out the conditions under which comparative advertising is permitted. Comparative advertising is advertising that identifies a competitor or a competitor’s product. A trader who engages in advertising which misleads traders will be guilty of a criminal offence. The OFT and Trading Standards have a duty to enforce the
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There has been extensive consultation on the transposition of the unfair commercial practices directive into UK law and on these two sets of regulations. I therefore commend the regulations to the House and beg to move.
Moved, That the draft regulations laid before the House on 3 March be approved. 13th Report from the Joint Committee on Statutory Instruments.—(Lord Tunnicliffe.)
Baroness Wilcox: My Lords, it is my pleasant duty to welcome the noble Lord, Lord Tunnicliffe, to his new responsibilities on the government Front Bench. There will be battles ahead, I assure him of that, but not this evening—just a little gentle questioning for clarification.
We took an overview of these statutory instruments. The consumer and business protection SIs, as the Minister has said, come as a result of the implementation of the European unfair commercial practices directive. I have consulted Malcolm Harbour MEP and the office of my honourable friend in another place, Mark Prisk, and for once we do not view these measures as gold-plating and regard them as relatively uncontroversial.
The Consumers, Estate Agents and Redress Act order brings into force the section of the Act that requires the National Consumer Council to produce a forward work programme before each financial year. That is my overview. At this point I will admit that I was chair of the National Consumer Council, and I am nervous about the idea of turning something that has been so good and productive under so many Governments for so many years into a great big organisation that is swallowing up other organisations. My worry is that it will get slower and slower.
7.45 pm
With regard to the consumer protection from unfair trading regulations and the business protection from misleading marketing regulations, I can repeat, as the Minister has done, all the things it is hoped that they will achieve—but rather than wasting your Lordships’ time, as we do not aim to be difficult in either of those areas, I shall just make a couple of points. Perhaps the Minister, on behalf of the Government, could give me some clarification on them.
Some of the key concepts in the directive might be interpreted differently by different member states. For example, what is perceived as likely to distort the economic behaviour of an average consumer can differ significantly across Europe. What assurances can the Minister give that the directive will be interpreted uniformly? Have the relevant enforcement
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The Consumers, Estate Agents and Redress Act 2007 brings into force Section 5—
Lord Tunnicliffe: My Lords, I apologise for leading the noble Baroness astray. When I said I was proposing one statutory instrument and speaking to the second, I meant both the consumer protection and business protection regulations. I shall be doing the Consumers, Estate Agents and Redress Act order separately.
Lord Razzall: My Lords, I have two points to make on this. One point is procedural—which is unusual, coming from me—and the other is substantive.
We ought to register the concern that a year ago we had the Consumers, Estate Agents and Redress Act, under which these regulations are laid. They are serious regulations that impose criminal offences on people, leading to two years’ imprisonment for people who are in breach of both sets of regulations. From these Benches I have long argued, in relation to consumer legislation, that there ought to be a prohibition on unfair commercial practices, and I feel, although this is not a point I often make, that this ought to be dealt with by primary legislation rather than by regulation. After all, we are not in a position to amend these regulations; either we throw them out, which I do not propose to do this evening and I know the noble Baroness, Lady Wilcox, will not, or we approve them. The imposition of a prohibition on unfair commercial practices, which from these Benches we have long argued for, coupled with significant repeals of Trades Descriptions Act legislation, is an important point, and I fail to understand why the Government, knowing that the directive was going to come out, could not have postponed the legislation on the Consumers, Estate Agents and Redress Act until it had.
Lord Borrie: My Lords, a moment ago the Minister explained to the noble Baroness, Lady Wilcox, that he has so far talked only about the two sets of regulations dealing with consumer protection and business-to-business transactions. He has yet to talk about the third set of regulations before us.
Lord Razzall: My Lords, as always, I am grateful to the noble Lord, Lord Borrie, speaking from the Back Benches, defending his new Minister. As far as I was aware, I was speaking to the Consumer Protection
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My second substantive point is on the difficulty in which I find myself. Noble Lords will have received representations from Which?, which the noble Baroness, Lady Buscombe, refers to as, “Oh God”. I have never thought of it in any divine capacity. It has made a sensible point, which should be the subject of debate. If these regulations are passed, which I support, and if an individual or a business has been subjected to an unfair commercial practice, why do the regulations not permit that individual or business to get out of the contract which they have been induced to enter into as a result of that unfair commercial practice?
It is a perfectly sensible point, which should be subject to debate. We cannot amend the regulations, so those people who might be persuaded that that is a good point have only the option to object to the regulations—which we do not object to. It seems that all the Government can do, if this is a serious point, is monitor the effect of the regulations, see how many cases in practice are uncovered where people ought to be allowed relief from onerous contracts imposed as a result of unfair commercial practices, and then bring back new regulations. Going back to my first point, that seems to be an unsatisfactory way to deal with this issue.
Lord Smith of Finsbury: My Lords, first, I join the noble Baroness, Lady Wilcox, in welcoming my noble friend to his new responsibilities on the Front Bench and I congratulate him on his elevation. I join this debate primarily as the chairman of the Advertising Standards Authority and, in that role, I give a warm welcome to these two instruments. The Government have succeeded in implementing the European directive skilfully and in aligning business-to-business provisions alongside that. The directive of course primarily deals with business-to-consumer issues. They also have found the right sort of balance between protecting the interests of the consumer and the interests of legitimate business.
The Advertising Standards Authority is the UK’s self-regulatory body for regulating advertisements appearing in all forms of media. For the past 45 years it has been responsible for upholding standards in advertising and for ensuring that consumers are protected from misleading and unfair advertisements. On the whole, it has done a pretty good job, including under the distinguished tenure, as chairman, of my noble friend Lord Borrie, from whom I took over some nine or 10 months ago.
The ASA has been fully engaged with the Government, the Office of Fair Trading and consumer organisations in the discussions around the putting together of these two instruments. We have found the Government’s approach to be inclusive and constructive. We welcome the regulations. Under the existing consumer protection regime, the ASA is
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The ASA is very pleased to have had its status confirmed in both these sets of regulations as the “established means” for protecting consumers from misleading and unfair advertising. In doing that, the regulations acknowledge the important role that the self-regulatory ASA plays in protecting UK consumers and in maintaining a level playing field for business. The ASA responds to more than 24,000 complaints each year and conducts proactive monitoring and compliance work to ensure that advertisements are compliant with the advertising codes, regardless of whether or not a complaint is received. This generally leads to around 2,500 advertisements being changed or withdrawn each year as a result of ASA action.
The advertising self-regulatory system is an excellent example of better regulation at work. Our work on misleading advertising means that many cases do not have to be dealt with by the courts or by statutory regulators—indeed, trading standards officers currently refer quite a number of cases to us. This is an important point because our work saves the public purse a good deal of money: the advertising self-regulatory system is funded by industry via a levy on advertising space. The ASA is not only an example of better regulation but also a strong supporter of the Government’s better regulation agenda. We are encouraged that this agenda appears to have been followed in constructing these regulations.
However, I have to ask my noble friend one question. The better regulation agenda makes clear that enforcement action should be proportionate to the risk posed, but that is not entirely clear from the regulations, which touches on the point raised by the noble Lord, Lord Razzall. In the light of this, will the Government be able to confirm that it is their intention that enforcers of these regulations should follow Hampton principles when enforcing the regulations and so use the most appropriate mechanism to achieve compliance? Specifically, will the Government confirm that enforcers should normally seek to escalate their compliance action from low-level intervention and retain criminal enforcement for only the most serious of cases?
Certainly, in the case of advertising, this would lead to more frequent use of the ASA. Loath as I am to increase our workload, none the less, we would welcome the role that this would place on us. The reliance on a single regulator will lead to more consistent regulation, thus achieving another Hampton principle. It would also have the added benefit of leaving trading standards officers with more time and resources to pursue serious cases of infringement. The Advertising Standards Authority is very pleased to be recognised in these regulations, welcomes them and would be grateful for the assurance that we have sought from my noble friend.
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8 pm
Lord Borrie: My Lords, I, too, congratulate my noble friend Lord Tunnicliffe on the clarity of his first performance from the Front Bench; no doubt we shall hear much more from him in future. I should declare an interest as a vice-president of the Institute of Trading Standards because I want to say something about that body of noble men and women up and down the country employed by local authorities to enforce a great many consumer protection measures.
I welcome the comprehensiveness of the regulations before us in prohibiting unfair commercial practices. They are much more all-embracing in terms of dealing with rogue trader activities than was the case in the past. But perhaps I may express some sadness at the passing of older consumer protection measures, especially the Trade Descriptions Act 1968, which has its 40th birthday this year. In the 40 years of its life, trading standards officers throughout the country have been able to prosecute traders for misleading descriptions of goods, services and prices, and during this period it has been a most useful measure. I do not think there should be any condemnation of it just because its time has passed. It is now being absorbed into something larger, and although the noble Baroness, Lady Wilcox, does not like things to be absorbed into things that are larger, in this case, whatever she says about the National Consumer Council, she has not disagreed with the broad nature of the new regulations.
As the Explanatory Notes state, the unfair consumer practices directive, which underlines these regulations, will strengthen consumer protection considerably and improve cross-border trade by making it a good deal easier for consumers from all parts of the Community to shop all over the Community with the greater confidence that is so desirable. The duty of enforcement on the Office of Fair Trading and trading standards officers and their continuing ability to prosecute in the criminal courts is invaluable. But as the noble Baroness and the noble Lord on the Liberal Democrat Front Bench know very well because they have been taking an active part in the debates on the Regulatory Enforcement and Sanctions Bill, these powers of prosecution under the criminal law are to be combined with civil sanctions. That is useful because criminal proceedings and the stigma of criminal conviction are often not warranted, so the greater flexibility of the new Bill is highly desirable. I am sure that they, as I do, look forward to the Third Reading of the Bill in this House on Monday next.
OFT research shows that the losses suffered by consumers as a result of defective goods, inadequate redress and poor information run to some £8 billion a year, not taking account of the emotional costs and stress that may be suffered. Needless to say, low income consumers are particularly vulnerable. The only question I have for my noble friend the Minister is this: can he ensure that the enforcement offices I have referred to, the Office of Fair Trading and trading standards officers of the local authorities, will be adequately resourced to carry out their more wide-ranging and useful consumer protection and business protection duties in the future?
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Baroness Buscombe: My Lords, I begin by joining all noble Lords who have already spoken in congratulating the noble Lord, Lord Tunnicliffe, on his new responsibilities. I should say, though, that in another part of your Lordships’ House, we have just been discussing the speed with which Ministers seem to age on the Government Front Bench. I throw that one across just as a warning to the noble Lord.
Lord Smith of Finsbury: My Lords, I hate to interrupt the noble Baroness, but some of us get younger after the event.
Baroness Buscombe: My Lords, we did agree on that as well. I agree with the noble Lord, Lord Smith, that it is incredible how people lose those years when they leave the Front Bench.
I declare an interest as chief executive of the Advertising Association, and as such the chief executive of an association which represents all parts of the advertising industry: the advertising agencies; media owners, broadcast and non-broadcast; as well as the advertisers. In fact, it is our members who fund the self-regulatory system, the Advertising Standards Authority, albeit very much at arm’s length.
The Advertising Association has engaged fully over the past couple of years in the process undertaken by the Government of transposing and implementing into UK law the unfair commercial practices directive and reimplementing the misleading and comparative advertising directive in the form of the Consumer Protection from Unfair Trading Regulations and the Business Protection from Misleading Marketing Regulations respectively. They have broad implications for business to consumer and business to business advertising in the UK. Indeed, the Advertising Association, as an interested party, has engaged at various times in the past at the European level in the development of both the directives from which the regulations being debated this evening derive. I thank the Minister for reaffirming in his opening remarks the status of the ASA and PayPhone Plus as “established means” for the purposes of both the Consumer Protection from Unfair Trading Regulations and the Business Protection from Misleading Marketing Regulations. The ASA has enjoyed “established means” status for many years, and so I am pleased that the noble Lord has stated for the record that the authority will retain this status with the coming into force of these new regulations. The Minister’s statement serves to provide certainty and continuity.
I am also grateful for the Minister’s comments about the pursuit of best regulatory practice generally and in the context of these new regulations specifically. It is important that between now and 26 May, businesses both large and small continue to familiarise themselves with the implications for them of the new regulations in both business to consumer and business to business contexts. To assist the process of familiarisation, it is essential that the Department for Business, Enterprise and Regulatory Reform and bodies such as the Office of Fair Trading continue their own ongoing programmes of educating
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