The Parliamentary Under-Secretary of State for Business, Enterprise and Regulatory Reform (Mr. Gareth Thomas): I beg to move,

The Chairman: With this it will convenient to consider the draft Consumer Protection from Unfair Trading Regulations 2008.

Mr. Thomas: It is a pleasure to serve once again under your chairmanship, Mr. Hood. The consumer protection regulations implement the unfair commercial practices directive. Both sets of regulations implement EC directives. The consumer protection regulations prohibit traders in all sectors from engaging in unfair commercial practices with consumers. A commercial practice is unfair if it amounts to conduct below a level which might be expected towards consumers, in accordance with honest market practice or good faith.

That broad category of unfair commercial practices is supplemented with more specific categories concerning misleading actions and omissions and aggressive practices. The vast majority of practices that would be considered unfair will fall under these provisions. Indeed, for a practice to be unfair under these rules, it must be likely to change consumers’ economic behaviour. The normal benchmark for determining the likely effect of a practice is the average consumer. However, where a practice is targeted at particular groups of consumers or is likely to adversely affect the economic behaviour only of a clearly identifiable group of vulnerable consumers in a way that the trader can reasonably foresee, the average consumer of the group becomes the benchmark against which the effect of the practice would be assessed.

The regulations also ban 31 specific practices in all circumstances, irrespective of whether they affect consumers’ economic behaviour. The prohibitions will be enforceable through part 8 of the Enterprise Act 2002. In addition, and with limited exceptions, a breach of the prohibition on unfair commercial practices will be a criminal offence. The Office of Fair Trading and trading standards will have a duty to enforce the regulations.

Another benefit of the regulations is that some further regulatory simplification is achieved. The regulations, for example, will repeal provisions in a number of laws, including most of the Trade Descriptions Act 1968. They represent the biggest change to consumer protection law in the UK for almost 40 years and will put in place a more comprehensive framework for tackling sharp practices and rogue traders who exploit loopholes in the existing prescriptive legislation. I believe that that is good law for both consumers and honest businesses.

The business protection regulations will implement the misleading and comparative advertising directive 2006. Those regulations prohibit advertising that misleads traders and sets out the conditions under which comparative advertising is permitted. Comparative advertising is advertising that identifies a competitor or a competitor’s product. Again, the OFT and trading standards are given the power to apply to the courts for injunctions to supply compliance with the regulations. In addition, advertising that misleads traders is a criminal offence. The regulations will ensure that there is no reduction in business protection following the repeal of certain laws that protect businesses as well as consumers. I commend the regulations to the Committee.

Mr. Mark Prisk (Hertford and Stortford) (Con): I welcome you to the Chair to guide our proceedings this afternoon, Mr. Hood. I also thank the Minister for his opening remarks. What a talented individual he is. This morning, I was in my shower—not with the Minister, I hasten to add. We are a caring and compassionate party, but not quite that caring. There he was, talking on the radio in dulcet tones about international development, and this afternoon here he is, talking about consumer protection. It is encouraging to see that he is able to cover both briefs with such great attention. I should perhaps move along from opening remarks in which the words “shower” and “briefs” come together.

The Minister is right that the two statutory instruments before us are distinct, albeit related. They are embedded in, or drawn from, a single European directive: the unfair commercial practices directive. As he said, that directive establishes a general principle, a duty not to trade unfairly. That is an important and welcome improvement to the law, both for consumers and for business, and representations that I—and I suspect other members of the Committee—have received both from the CBI and the Consumers Association have reflected that. The general principle is welcome, and I am pleased that on this occasion it is not my intention to divide the Committee on the principle. The Minister will not be surprised, however, that I wish to raise some practical issues.

First, can the Minister discuss the timing? While common commencement dates clearly do not apply to EU regulations, it would be helpful to know whether the Minister’s Department sought to get this important set of regulations, which would apply to the high street, on to one of the two common commencement dates, not least to help business. If the Ministers made that application, why did it fail?

Secondly, what preparation time has the Minister’s Department given businesses, particularly small businesses? We can all envisage that the kind of practices that are being dealt with here will impinge on markets where small businesses are key players. The regulations change 23 laws and establish 31 unfair sales practices, so implementing them and ensuring that businesses are compliant will be a major piece of work. What guidance did the Department issue to businesses about the regulations, and when was it sent to them? The commencement date of the instruments is 26 May. It would be useful to know how much time businesses have been given to put them into practice.

Thirdly, given that the regulations affect 23 UK laws, it is important that business is able to understand the difference between its current position and the proposed position, and that business can feel comfortable and be assured by the Minister that no gold-plating has occurred. Can the Minister give us that assurance? In the European Parliament my Conservative colleague, Malcolm Harbour, has played an invaluable role with his colleagues in the European deliberations on the directive. He tells me that there is a potential danger that some of the key concepts in the directive are being implemented in a different way. In France, Belgium and Denmark they have so far failed to implement the directive appropriately. Given that that could present serious problems for UK companies in those markets, what representations have the Government made to ensure that the directive is enforced right across the European Union?

Turning to the two statutory instruments before us, while the principles of the draft Consumer Protection from Unfair Trading Regulations are sound, there are a couple of practical points on which I hope the Minister will be able to help me, not least with regard to misleading or copycat packaging of consumer goods. The leading trade body in that area, the British Brands Group, has pointed out that the Government decided not to give civil enforcement powers to companies, despite the huge threat that copycat packaging can represent, to both individual products and brands. Instead, only the OFT and trading standards will have civil powers to tackle copycat and misleading packaging. I have just been at a conference where innovation internationally was at the top of the agenda, and in a commercial world that absence of powers could leave UK businesses vulnerable.

Can the Minister tell us why the Government have decided to exclude private civil enforcement when a number of our fellow, competing nations within the European Union, including Ireland, have adopted it? Why have the UK Government chosen not to? What assurances can he give that the UK enforcement regime will be prompt, effective and firm? Businesses will be concerned about that, as will consumers because they will be the end victims in any deceit. Will the OFT and trading standards have the resources needed to police this area in terms of manpower and money? Will the Minister confirm that he is prepared to review the effectiveness of the regulations on misleading packaging earlier than in three years if the Government are able to provide evidence that the new regime is not working? That is an important principle and I know that everyone in industry would like some clarification about it.

The other side of the coin is the consumers’ point of view and I have received a number of representations on that. I think that it would be helpful for us and for those who will be affected by the regulations to understand the Government’s position. Given the breadth of the statutory instrument, with 31 practices being outlawed, it is clear that there will be many circumstances where unfair trading practices have been employed that contravene the regulations, but which do not contravene existing law. That may well be the case with aggressive selling tactics.

The Consumers Association and others are concerned that a number of consumers will find themselves bound by what we might call unfair contracts. Why have the Government decided that consumers do not need protection in the form of a right to terminate such a contract? I can see the dangers, but it would be helpful to understand the thinking of the Government on what is an important part of consumer law.

Turning to the draft Business Protection from Misleading Marketing Regulations 2008, I will focus on part 4 on enforcement and in particular the powers under regulation 23. During the consultation, the question arose as to whether powers to enter a premises, with or without a warrant, should be exercisable and, if so, in what circumstances. As I understand it, a majority of businesses in the Government consultation thought that there was a danger that the powers could be misused for what we might loosely describe as fishing expeditions. What assurance can the Minister give that the authorities will not engage in such activity?

It is right to go after the rogue trader, but we must ensure that legitimate businesses are also dealt with in a fair and balanced way. Given that and the conduct of the OFT with regard to Morrisons, where a fine ensued, it is important that legitimate businesses understand the circumstances in which these quite substantial regulations will be enforced and how they should prepare for them.

As I have said, it is not my intention to seek to divide the Committee on the general principle because the principle of not trading unfairly is good and it needs to be put carefully into law. However, there are practical issues from the point of view of businesses and consumers. I would welcome the Minister’s response to the small number of points that I have chosen to raise.

Lorely Burt (Solihull) (LD): May I add my welcome to you, Mr. Hood? This legislation must be extremely welcome from the perspective of the consumer and from that of all traders who wish to trade fairly.

From the draft Consumer Protection from Unfair Trading Regulations 2008, I have learnt about practices that I have never heard of, such as buzz marketing where the trader pretends to be something other than the trader in order to get the word out. An important principle that advertisers and traders should bear in mind when selling to consumers is that the overall presentation should not deceive, even if it is factually correct in context. I am also glad to see the inclusion of advertorials, where it is not clear that the trader has paid for the copy. Of late, I have seen in my local newspaper a number of obviously paid-for articles that have not included any indication that they were advertorials. That could have ramifications for all forms of attempts to reach people, including in political situations.

The use of unbelievable prices is another important issue. I recently introduced a Westminster Hall debate on will writing and described people who offered to visit people’s homes to write a will for £19.50, which bore no relation to the eventual price. Therefore, the measure is very welcome in that regard.

On advertising to children, the directive says that there should be no direct exhortation to children to buy or to persuade their parents to buy. As a parent, I am intrigued to know how that will work in practice, given the increasing subtlety of marketing methods to children used on TV and many other media.

I am particularly pleased to see a tightening-up on pressure selling. This is a scourge, particularly for some of the more elderly and vulnerable people in our society. I would be delighted to see the pressure to buy—from salesmen who will not leave until people sign, or who say that it must be done today or that time is limited—outlawed further. However, I would endorse the comment of the hon. Member for Hertford and Stortford—I think we have been reading the same briefs—about the lack of a right to terminate a contract that has been entered into as a result of unfair trading practices. According to the EU directive, there was a facility for that to have been incorporated as part of the legislation. We would both be interested to know why the Government did not take the step of allowing people who have been tricked into an unfair contract to regard that contract as terminated.

On the Business Protection from Misleading Marketing Regulations 2008, the idea of criminalisation of misleading adverts or indications is extremely welcome, as is the definition of in any way, including in presentation, deceiving or being likely to deceive the trader. Deception includes fake reviews and hyping a business on online forums by posting endorsements, which has many implications for e-commerce. Copycat packaging exploits consumers and companies alike. Again, to bring up the points made by the British Brands Group, why cannot companies take civil action to protect their brands? Its concern is that the OFT might not treat the matter with the same urgency as a company whose livelihood is at stake because it is being bled financially by such unfair practices. Why do the Government not consider that it would be possible for civil action to be taken in that way?

Finally, although the regulations are very welcome, as with many parts of Government legislation, implementation will be the key. I share the concern of the hon. Member for Hertford and Stortford about communicating their contents and requirements to small businesses. If such businesses are already trading fairly, then 99 times out of 100 I am sure that they will not be in difficulty. However, as some of the terms were new to me, it should be made as easy as possible for small businesses to understand the workings, both as a trader and potentially as a victim.

Mr. Thomas: Let me try to reply to the questions put by the hon. Members for Hertford and Stortford and for Solihull. I welcome the collaboration with the CBI, the Consumers Association and a range of other organisations that we have consulted about the detail of the regulations and the process of helping businesses to understand their implications. If the hon. Gentleman will forgive me, I shall not follow him down the showers and briefs route, but I thank him for the compliments.

On timing, we wanted to introduce the regulations by 6 April, but I became aware that we were having difficulty in completing the preparations for implementation. We have had to review a considerable amount of existing legislation to see where the unfair commercial practices directive, for example, will have an impact. That took longer than we would have liked. After discussion with business representatives, to give them a full three months to prepare, I judged that on balance it was better to delay the implementation of the regulations slightly until 26 May, rather than attempt to rush for 6 April. I hope that that explains the slight delay.

Mr. Prisk: In that consideration, did the Minister reflect on the opportunity to look at October, to achieve the common commencement date principle, or did something prevent him from going that far out?

Mr. Thomas: Given that we had gone a substantial way towards doing all the necessary work to introduce the regulations, although the commencement dates are important we felt that rather than wait until 1 October and delay giving consumers those additional rights, only a short gap was required. After discussion with businesses, we felt that we should delay until 26 May rather than for a much longer period.

The hon. Gentleman asked me about the guidance and time scales. If he wants chapter and verse on exactly when interim guidance was published and consultation arrangements took place, I am happy to provide that level of detail. I can assure him that there has been considerable contact with a range of stakeholders within the business community and among consumer groups, to look at how to transpose the directive into UK law and to consider the consequences. We have also looked at how to make businesses aware of the consequences of the legislation. Indeed, there is currently interim guidance on the Department website about some of the newer concepts mentioned by the hon. Member for Solihull, and what those concepts might mean in practice for business.

Mr. Prisk: The Minister is quite right: I do not need chapter and verse. But when was the guidance for businesses on the final directive issued?

Mr. Thomas: I will have to come back to the hon. Gentleman on that date, but interim guidance has been on the website for some time. I am happy to give him the specific detail after the Committee.

The hon. Gentleman acknowledged the contribution of a Member of the European Parliament in advising him. I acknowledge the considerable work of Arlene McCarthy, who currently chairs the Committee on Internal Market and Consumer Protection in the European Parliament, and who has been extremely helpful. In that context, the hon. Gentleman raised the issue of different interpretations in different member states. I do not know whether his European colleague was able to update him, but the Commission has now established a working group of member states to ensure that there is consistent interpretation across Europe—exactly the hon. Gentleman’s point—so that we can give certainty not only to the business community but to UK consumers wanting to shop overseas. We will obviously engage at appropriate levels with that working group.

The OFT and trading standards have considerable resources to police such matters. We review the OFT’s resources directly through the Department for Business, Enterprise and Regulatory Reform. The funding for trading standards comes, in part, through funding streams from the Department for Communities and Local Government. The hon. Gentleman might be aware of the additional funds that we have given for Scambuster pilots and tackling illegal lending.

Mr. Prisk: Just so that the Committee can understand, what is the net addition? The Minister has mentioned the various elements to the addition. What is the total financial addition to the resources?

Mr. Thomas: My right hon. Friend the Secretary of State for Business, Enterprise and Regulatory Reform announced an additional £7.5 million for the roll-out of the Scambuster pilots across the whole UK, for example.

The hon. Gentleman also asked about the issue raised by the British Brands Group. It asked me in particular to bring forward the review date from three years to one year. I have decided to bring it forward, not to one year—because the regulations will still be bedding down after 12 months—but to two years, with a proper review at that point.

We did not take advantage of the provision on consumers withdrawing from contracts because of a concern about unintended consequences. That is a point that both hon. Members raised. We have asked the Law Commission to consider the potential impacts of that provision and whether other work would be needed. I reserve my right to bring forward measures that would implement such a provision once the Law Commission has done its work.

Lastly, on the worry of the hon. Member for Hertford and Stortford about fishing expeditions, the regulations contain a requirement that documents can only be seized if there is reasonable cause to suspect that a breach of the regulations has been committed. With that, I hope that I have given sufficient reassurance to hon. Members on the Opposition Benches and, indeed, on my own side.

Question put and agreed to.

Resolved,

Resolved ,

Committee rose at one minute to Five o’clock.