3 Background
8. The Department explains that trading stamp schemes
are a form of consumer incentive characterized by the issuing
of physical tokens to customers which can then be exchanged for
goods, either with retailers themselves or through special outlets
provided by the promoter of the trading stamp scheme concerned.[4]
Many schemes were operated by specific trading stamp promotion
companies (such as Green Shield) who traded stamps with retailers
and provided them with collection books for issue to customers
and catalogues of goods for which given numbers of stamps could
be redeemed. Some schemes also allowed consumers to exchange
stamps in payment or part payment for goods from retailers themselves.
9. The 1964 Act was introduced "to control and
regulate the activities of trading stamp practice".[5]
To that purpose, the Act specifies who may undertake the promotion
of a trading stamp scheme and provides rules as to the terms on
which trading stamps may be issued and redeemed for goods. It
implies a number of warranties into contracts for the exchange
of such stamps for goods so that consumers receive statutory protection
against being supplied with goods which are unsafe or (in various
ways) of unsatisfactory quality.
10. Provisions within the 1964 Act in respect of
protections for consumers are:
i. Section 1 of the Act provides that only a
company under the Companies Act 1985 or an industrial and provident
society under the Industrial and Provident Societies Act 1893
may be permitted to carry on a business as the promoter of a trading
stamp scheme. Given the requirements which the law makes of companies
concerning matters such as the declaration of the identity of
shareholders and directors and the preparation of professionally
audited accounts, this provision was intended to ensure that trading
stamp scheme promoters operate with a degree of transparency and
to make it less likely that schemes are run by disreputable persons.
ii. Section 2 of the Act requires that any trading
stamp must be printed with the scheme operators name and a statement
of the amount of cash for which that stamp may be exchanged (see
iii. below). It was felt that these requirements would also ensure
transparency and enable consumers to form a judgement as to the
respective benefits of rival trading stamp schemes.
iii. Section 3 of the Act requires that stamps
be redeemable for cash, provided that the aggregate value of stamps
to be encashed in any one exchange is at least 25p. The Department
notes that at the time of the passage of the 1964 Act, there was
concern that, in order for this protection to provide any benefit
for consumers, stamps would need to be assigned a meaningful cash
value.[6] As discussed
at paragraph 35 below, subsequent commercial practice has shown
that these concerns were well-founded.
iv. Section 4 of the Act implies a warranty into
every exchange of trading stamps for goods as to title, quiet
possession, freedom from encumbrance and satisfactory quality
in those goods. This means that a consumer who receives goods
falling short of these warranties has a right to pursue a claim
for damages under the 1964 Act.
v. Section 5 of the Act requires that the name
of the scheme promoter be printed in trading stamp catalogues
and stamp books.
vi. Section 6 of the Act prohibits the advertisement
of trading stamp schemes in terms which are misleading or deceptive
or, specifically, by means of any statement associating the worth
of trading stamps with the amount a consumer would need to spend
in order to obtain them. The effect of this section is to render
it illegal to advertise a trading stamp scheme by making a statement
such as "£1 worth of additional stamps free when spending
£1 or more". Such a statement means only that the allocation
of stamps for the amount spent would be increased by the number
of stamps normally earned for £1's expenditure; the unwary
person might however believe it to mean that they would obtain
£1 worth of discount in the form of extra stamps for every
£1 they spent.
vii. Section 7 of the Act requires that every
shop where a trading stamp scheme is in operation must display
a notice giving the cash value of trading stamps and indicating
the number of stamps which consumers will receive in relation
to any given transaction; it also requires that any current scheme
catalogue be available in the shop for customers to examine.
11. The Act specifies penalties which may be imposed
by the courts for breaches of these requirements and provides
that officers of any corporation which operates a trading stamp
scheme, as well as the corporation itself, are liable to prosecution
where such breaches occur with the officer's connivance or consent.
12. The Department considers that changes in the
technological and commercial context within which consumer promotions
take place mean that there is no requirement for specific legislation
to regulate the operation of trading stamp schemes. Most modern
consumer promotion schemes are electronic in nature and may well
fall outside the scope of the 1964 Act, which defines a trading
stamp as "any stamp coupon, voucher, token or similar device,
whether adhesive or not, other than lawful money of the realm".[7]
The Department considers that this definition excludes electronically
recorded credit 'points', on the basis that electronic credit
does not involve the giving of any physical device to consumers.[8]
13. The Department has been unable to provide a fully
comprehensive picture of the extent to which trading stamp schemes
are currently in operation. The evidence which the Department
has gathered in the course of its preparatory research and its
consultation on the proposal indicates widespread confusion among
scheme operators themselves over the extent to which a range of
modern promotional schemes (which may be primarily electronic
in nature but also involve the issuing and redemption of promotional
tokens) do fall within the compass of the Trading Stamps Act.[9]
14. The legislative regime governing retail purchase
incentive schemes therefore will vary depending on how that particular
scheme is designed and run. The Department considers that this
situation gives rise to unhelpful and unnecessary complexities,
as businesses are required either to comply with an Act which
is of decreasing relevance to modern conditions and which gives
no distinctive benefits to consumers or to spend time and money
ensuring that their promotional schemes are not subject to the
Act. The Department argues that the 1964 Act could be repealed
and the 1982 Act applied to trading stamp transactions so as to
reduce burdens on business and maintain an equal standard of protection
for consumers. It also considers that repeal of the 1964 Act
is unlikely to lead to a new series of trading stamp schemes as
such schemes are more costly and onerous to operate than electronic
schemes and do not have the important benefit of allowing valuable
data to be collected and processed with respect to the behaviour
of consumers and markets.[10]
The capacity to gather and make use of such data is vitally important
to retail businesses operating in highly competitive markets.
The intensity of competition is also seen as making it very unlikely
that any trader would wish to operate a promotional scheme, or
be associated with the promoter of any scheme, which did not provide
clear and consistent satisfaction for consumers, as to do so would
impact negatively on that business.
4 Explanatory Statement, paragraph 6 Back
5
HC Deb, 31 January 1964, col. 677 Back
6
Explanatory statement, paragraph 31 Back
7
Trading Stamps Act 1964, s. 10(1) Back
8
Explanatory statement, paragraph 7 Back
9
Explanatory statement, paragraph 82 Back
10
Appendix B, paragraph 42 Back
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