Examination of Witnesses (Questions 280-290)|
6 JUNE 2007
Q280 Chairman: I do have a suspicion
though. It is launched on 1 June this year and, forgive me, the
suspicion is that all this has started because we have started
to look at this and everything is happening this week. That is
Mr Williams: No, that is not the
case. We have been trying to launch this very quickly, for the
very reason that the Committee is concerned about, that obviously
there are people already planning their savings for this Christmas.
Chairman: John, you see if you can make
Q281 John Thurso: Can I turn to a
different issue actually and go back to the question of regulation?
Last December you concluded that there was no clear case for specific
regulation of the hamper products industry; is that still your
Mr Williams: Yes, that is our
view and indeed, following up from the earlier conversation, we
are very pleased to have the protections in place that we heard
about an hour ago. We are still arguing that it would not be proportionate
to try to regulate prepayments in this way.
Q282 John Thurso: We have heard evidence,
which you may well have heard this afternoon, from the Park Group
that they are perfectly content to come under the auspices of
the FSA and their regulation. They have announced the trust scheme
and there are other variants of escrow schemes that are available.
In your executive summary you said the best options appeared to
relate to reform of company law, improving consumers' rights to
take representative actions and consideration to banning the hamper
scheme business model. In light of the evidence we have heard,
do you think banning the model, making directors personally liable
and changing company law are actually a better option than decent
regulation through the FSA? Is that a serious and credible statement?
Mr Williams: We have to recognise
that there are a very, very wide variety of prepayment schemes
and indeed there are many prepayment practices which would also
be caught if one were seeking to regulate them. If one is seeking
regulation of prepayment arrangements in the economy we think
that would be very complicated and disproportionate to the issues
that were raised.
Q283 John Thurso: Clearly, specific
industries have a greater impact on the consumer, that has fairly
long been recognised. For example, money that is held by professionals
is held in an escrow account, the travel industry which I used
to belong to is either bonded or has particular schemes in place,
the hamper industry which has very particular details because
it is holding clients' money over a longish period of time and
is a financial instrument now seems to have come up with quite
a good scheme and is open to further. Would it not have been better
for you to have actually gone into, in a little more detail, those
things that should actually be regulated rather than those things
like simply putting down a deposit for a fridge you are going
to buy, or something, which quite properly may not need to be
or would be better not regulated?
Mr Williams: As I say, our approach
has been to encourage self-regulatory practice through our code
approvals and to make sure that the codes that get approved in
industries that are coming forward for approval include proper
protection for prepayments. Our overall practice therefore is
to encourage self-regulation rather than to come in with a new
regulatory regime for all pre-payment practices.
Q284 John Thurso: Do you seriously
consider banning the hamper scheme business model?
Mr Williams: No, I would say that
these schemes are attractive to certain groups of people who find
them readily accessible and readily understandable. There are
risks entailed in them, and unless we can mitigate those risks
then one should consider whether to ban them. We have heard this
morning that it has been possible to mitigate those risks through
negotiated protections and trust arrangements.
Q285 John Thurso: I am sorry to press
you on this, but it interests me that you, a body I have the greatest
respect for and look to for advice and help, suggest that consideration
is given to banning the hamper scheme business modelthat
comes in paragraph 3 of your executive summarywhen it seems
from all the evidence we have got that that actually should not
even be on the table.
Mr Williams: As it has turned
out it has been possible to put in place what we understand from
this afternoon's conversation are robust protections for prepayers'
money. In those circumstances I do not think it would be appropriate
to consider that. If it had been impossible to mitigate risk,
then it might have been appropriate to consider banning such schemes.
Q286 John Thurso: You are now investigating
the merger between Park Group and Home Farm Hampers. In doing
so, how far are you examining the wider savings product market
in which those firms can be?
Mr Williams: We have to consider
exactly what the right market definition is to consider this market
in, so we have to consider whether it is just Christmas hamper
savings in the most narrow sense or whether there is a wider market
for prepayment arrangements or a wider market for savings arrangements.
We are still in the process of considering that.
Q287 John Thurso: Do you expect that
to be out by the end of June?
Mr Williams: Our timetable runs
within the next month.
Mr Brown: It will be during July.
Q288 John Thurso: We can look forward
to that during July. Lastly, could I just ask what range of remedies
is available to you to prevent the abuse of a dominant market
Mr Williams: In relation to a
merger or in relation to a market question?
Q289 John Thurso: Really in relation
to a market question with a dominant position.
Mr Williams: If there was a dominant
firm abusing its position then our main instrument is the Competition
Act and Chapter II investigation under the Competition Act.
Q290 Chairman: Mr Fingleton has written
to me giving his apologies, but I wonder if you could pass on
to him our concerns and perhaps we could have a chat on that.
Mr Williams: Of course.
Chairman: Thank you for your attendance.