Examination of Witnesses (Questions 125-139)
MR SHAUN
WOODWARD MP, MARGARET
HODGE MBE MP AND
MR JOHN
FINGLETON
26 JUNE 2007
Q125 Chairman: Can I finally welcome
to the last part of this morning's hearings the Minister of State
for Industry and the Regions, Margaret Hodge; the Permanent Under-Secretary
of State, Department of Trade and Industry, Shaun Woodward; and
John Fingleton, the Chief Executive of the Office of Fair Trading.
Can I first ask Shaun, you have held a number of summits at the
DCMS to look at this question of ticket touting and I understand
that you have reached a conclusion that there needs to be a statutory
approach of some kind. Can you just tell us what the present thinking
in the DCMS is as to what needs to be done.
Mr Woodward: First of all, good
morning and thank you for asking us to be here this morning. We
have held four summits at the DCMS over the last 12-18 months
to look at this issue, specifically with a recognition that at
the DCMS, unlike the DTI, our remit is to promote the health of
the sport and the creative industries sectors. The DTI obviously
has responsibility for consumer protection with the OFT in relation
to this. We held the summits originally so that we could learn
more from those putting on events—music or sporting events
for example—but also from those who are involved in selling
tickets for these events so that we could try and get some sense
of the scale of the problem. I think it is important to put that
on record first of all that for 90% of people trying to get tickets
to a sporting or music event there is not a problem, and the market
works very well. That does not mean to say that we take a view
that there is not a problem, but it is extremely important at
the start, I think, to make sure everybody understands that we
have not got some epidemic in relation to the sale of tickets
to these events. But for a small minority there is a significant
problem, and therefore in trying to get a grip on the problem
through the summits, what we were anxious to do was to find a
proportionate way through, which at the end of the day, might
alleviate the problem for the minority (which is a considerable
problem) but would not damage 90% of the market where it works
effectively. We reached a view that we needed to improve the terms
and conditions and try and produce clarity for the consumer in
relation, for example, to the sale price of a ticket, the position
of a ticket, and we needed to deal with the problem of the Internet,
for example, in relation to futures selling. What we wanted to
do most of all was achieve this through self-regulation because
we continue to believe that self-regulation within the industry
and of these events remains the best way forward. Where we are
now is a position where we believe the market has got better but
it is certainly not cured of some extreme excesses that continue
to take place. So the current stage Chairman, is wrestling with
the small proportion where there is still a problem. It is a serious
problem for those who are actually adversely affected by it. It
is a slightly different problem for sporting events than it is
for creative industry events and therefore a range of options
continue to sit before us. We continue to want to work with industry
to improve self-regulation. We certainly believe that better information
for the consumer is a desirable goal that we should all work towards
and we would still like to see where the excesses take place a
resolution by the industry, both those who put on the events and
the primary and secondary markets. We still maintain that as a
very, very last resort (and we are not at that point yet) we might
have to consider regulation, but again we should be very cautious
in thinking that regulation is a simple solution; it is not, and
there is plenty of evidence around the world. Look for example
at New York this year where they are bringing legislation in to
revoke previous legislation which prevented a secondary market
from operating. It is an easy solution to jump to if you think
you are in an in extremis position but in practice it may
not actually do that much to help the minority that is affected
at the moment, and it does run the risk of damaging the 90% of
the market which at the moment works well.
Q126 Chairman: I entirely share your
desire to achieve self-regulation if it can be achieved. I think
our experience of the last two hours is that we are some way away
from a meeting of minds of the various players in this particular
business and I would not be optimistic that self-regulation can
be achieved. If that is the case and you have no alternative,
what kind of regulation would it be? Would you go so far as accepting
the argument being made by the entertainment industry and the
sports bodies that we should ban the secondary market?
Mr Woodward: I do not believe
that a ban of the secondary market is either in the interests
of the industries that will be affected or indeed the consumer.
Indeed, I have not yet seen any evidence from the consumer, who
after all is the group that we particularly want to protect and
it is the group that particularly brought us the problem, that
it would help them because, by and large, I think we have to make
a distinction in the secondary market between one consumer who
wishes to sell—for perfectly legitimate reasons, maybe they
are ill, maybe they cannot go—his or her ticket to somebody
else maybe at the face value, maybe at less than the face value,
maybe at a little bit more, from unauthorised exploitation by,
effectively, an industry that is growing up particularly through
the Internet which may be producing excessive profits. Having
said that again, the consumer is very clear about this; the consumer
wants a secondary market, the secondary market being one whereby
they can resell their ticket. What the consumer is also, by and
large, very clear about is that it does not want to see ticket
touting on the Internet or anywhere else taking place whereby
unauthorised selling takes place solely for the purpose of exploiting
considerable demand for an event which outgrows supply and people
making huge amounts of profits which prevents people having fair
access to sporting events, an extremely important Government goal,
but also for example to major concerts that take place, those
sorts of things, and one step that we are in the process of looking
at there, which I think still is an interim measure here, is the
concept of "Crown Jewels" protection which may be one
way forward that we certainly would want to consider, flesh out
and probably bring forward before again we consider the legislative
option.
Q127 Chairman: And is the DTI at
one with the DCMS on this?
Margaret Hodge: Our interest comes
from trying to ensure proper competition and protection of the
consumers and transparency. Whilst Shaun has been deeply involved
with the summits and with representations he has received in a
much more detailed way than I have on this issue, I think we would
take an enormous amount of convincing to think that at this point
we would want to contemplate legislation which would put a ban
on secondary ticketing. I think there is quite a lot of work that
we still need to do to get those minds to meet a little better,
which I think will improve the transparency and enhance competition
in a proper way and, for example, arising out of the OFT report
they did in 2005, there are negotiations around terms and conditions
which have, as I understand it, yet to be completed, and let us
see whether that does not improve transparency because that is
what actually the consumers want. Then we are transposing the
European Directive on these issues into UK legislation and that
again will strengthen the regulatory framework to get that transparency
and enhanced competition. I am pretty sceptical of the need for
further legislation.
Q128 Paul Farrelly: I wanted to address
some questions to Mr Fingleton but just before I do there has
been some controversy about whether or not the Secondary Ticket
Association was expelled from the second of your four summits,
Shaun. The English Cricket Board has told us that they were, because
of disagreement about the basic practices, but from the previous
session there was a shrug of the shoulders which said, "What
us, gov?" Can you clear that up for us?
Mr Woodward: They were not expelled,
they just did not come to the next summit. First of all, I am
trying to answer on behalf of my predecessor but I will actually
be able to do quite fairly. The purpose of the summit originally
was to bring those who thought there was a problem together. In
fact, what we felt, I believe, after the first summit, and as
I say I only came in for the third and four summits 14 months
ago, was that the problems we were trying to address were not
being assisted by their continued presence at those summits. That
being said, let us be clear about this because it is possible
to create an atmosphere of mischief where there is not one, it
was not the intention at the end of the day to achieve a resolution
that one party could not sign up to. The purpose of this was to
understand the problem and try and grapple with the problem and
it is perfectly clear, as you have suggested, from this morning
that there is a huge divergence of views about how to go forward
on all of this. What we were trying to do at the summit was to
actually glean what the real problem was for the consumer, bearing
in mind that our job at DCMS is to preserve the health of our
sectors, the access to sporting events, the access to major creative
industry events, and in order to understand that problem that
is what we believe should be done. I think there are two more
things worth saying here. I think this is a bigger problem now
in terms of its perception than it was when the OFT did their
report in 2005. I do not think that those members of the fourth
estate here this morning were writing about it in the same kind
of repetitive front page way (and that is not a criticism, it
is a just an observation) that they now are. I think it is a bigger
problem, although not necessarily in terms of the scale being
one that is greater but the perception of it is greater, and the
resolution of this remains as important as it did when we started.
However, I emphasise to you this, Paul, I do not think there is
a simple resolution to this. If you look at what is happening
in America where they are repealing the legislation, if you look
at what is happening in Australia where one part of Australia
is repealing it and another part of Australia, Queensland, is
bringing forward legislation, there is clearly no clear consensus
on how to act. The one thing that remains in our minds throughout
all of this is that whatever we do must a) be proportionate and
b) it must not damage the 90% of this that currently works very
well.
Q129 Paul Farrelly: So with respect
to our friends in the secondary market, is the accurate position
that they were not being helpful at the first summit, presumably
because they did not think there was a problem, so therefore they
were not invited to the second and possibly subsequent summits?
Mr Woodward: You will probably
find there were other organisations that would like to have taken
a larger part in the second, third and fourth summit. That has
not meant to say that we are not prepared to meet them or that
we do not take seriously what they have to contribute because
the solution to this will be, particularly if it is by self-regulation,
by everybody playing a role.
Q130 Paul Farrelly: Okay, so we have
sort of cleared it up.
Mr Woodward: I have tried.
Q131 Paul Farrelly: Mr Fingleton,
I have followed the affairs of the OFT for about 20 years now
and when I read your evidence, or whoever drafted it, I found
it very thin and not terribly satisfactory, which was not a surprise
to me. One of the holes in your evidence is that you do not make
any comment on the legislation with respect to football tickets
or the Olympic legislation, in particular whether you think those
bits of legislation will contravene the terms of the Unfair Consumer
Contracts Regulations. You do not address that issue at all.
Mr Fingleton: I think with the
Olympics obviously that legislation is intended legislation. I
think that there may be an issue there for the Department to look
at whether it contravenes European competition law, which is a
different matter, and I do not know if any assessment has been
done on that. If primary legislation restricts secondary sales
by individual consumers and European or UK consumer law gives
people that right, ultimately it is going to be a matter for the
courts to determine, and until there has been a case that determines
that I do not think we would be trying to set out a definitive
view on a question like that.
Q132 Paul Farrelly: We are getting
into another realm where I find the evidence unsatisfactory because
you do make plain that only courts can decide, but if we were
to take the issue of banks and credit card companies you have
made that point there as well (and you have reviewed one and you
are doing the banks at the moment) and the industry is crying
out for a test case, while county courts are groaning under the
weight of people reclaiming what they see as unfair penalty charges,
but you are not helping to sponsor a case to resolve the conflict.
Mr Fingleton: And that is consistent
with our legal powers to take cases because we are not able to
take individual cases on behalf of consumers, that is not in our
statutory mandate.
Q133 Paul Farrelly: Do you not think
you should be more proactive in this arena as well as other arenas?
Mr Fingleton: I think our role
is very much in this area. We have been proactive in looking at
this issue. We reported on it two years ago including the effect
of the Internet in looking at that and trying to deal with what
we saw as a widespread public concern. So I think the OFT has
been very proactive in looking at this issue well ahead of time.
As a result of that there is a good deal of evidence available
to this Committee and to others on the basis of what we have done
and I think our view on that evidence is that we do not think
a ban on the secondary sale of tickets would be in the consumers'
interests as a whole. I think that is our position. We have tried
to set that out very simply and I am sorry if it appears thin
but it is a very simple proposition.
Q134 Paul Farrelly: Some people in
the audience or in the Committee reading your evidence might actually
conclude that if this is the OFT's position then why is the DTI
and DCMS bothering holding these sessions at all? How are you
now actively trying to promote a middle way if not through legislation
then through a code of conduct? What is now holding up an agreement
with the Society of Ticket Agents and Retailers?
Mr Fingleton: We look before we
intervene in the market at ensuring that the changes in the market
do not harm consumers overall and, as with any change like this,
the effects are complex and we try to trace them through before
we intervene, I think voluntary agreement around this would be
much faster than litigation so we have been working with the Society
of Ticket Agents and Retailers on model terms. Some of those changes
have already been agreed and we expect to have agreed final terms
with them in August of this year. We have worked separately with
the Committee on Advertising Practice to get guidance out on the
face value of tickets and this is something that we have already
indicated in a different context, that of airline pricing, that
we are prepared to litigate on in order to establish the principle
that consumers should be shown the upfront price/final price that
they are going to pay. I think our selection of the airline sector
as a case in which to bring that forward is to establish that
principle in law in court and to find the right market and the
right case to do it, and bringing a case in one sector would have
application across a range sectors, so I think we are doing a
number of different things in terms of consumer protection in
this area. We are also working with the Trading Standards Service.
The most complaints that we get about secondary tickets are not
actually about prices. We do not see much evidence of consumer
complaints about prices. It is mostly about things that are already
covered by consumer protection law. Those include things like
being told this is a good seat and it turns out it is at the back,
or it has an unrestricted view and it has a restricted view, and
this is already covered by consumer protection legislation. We
are working with Trading Standards to try and ensure that the
law in this area is enforced. Trading Standards, as you may know,
have over 60 priorities. The Rogers Report looked at trying to
whittle them down and certainly secondary ticket agency is not
even one of the things that was in the original 60 priorities,
so they face a lot of competing claims. We as an organisation
face the challenge of trying to adjudicate how much more effort
we put on ticketing services as opposed to things like payment
protection insurance, complaints about house-building, about areas
like for example second-hand car dealers, and a whole lot of other
issues, which in terms of the consumer complaints we get—televisions,
mobile phone service contracts and so on—are things that
are scoring tens of thousands of complaints.
Q135 Paul Farrelly: If we can come
back to this, you are going to have an agreement in August?
Mr Fingleton: Yes.
Q136 Paul Farrelly: What are the
main headline terms of that?
Mr Fingleton: I am not going to
say what the details of that are until we announce it. I think
that the primary gist of that is to ensure that the arrangements
the industry are coming up with are a) compliant with competition
laws, there is no sense of them restricting competition and b)
at the same time increasing consumer protection.
Q137 Paul Farrelly: Under the agreement
that you are going to announce in August, if I go on to a ticket
site and pay my money over for a ticket, am I going to at least
know they have the ticket, where I am going to be sitting, and
other things that are of interest to me as a buyer? Is that going
to be part of the agreement?
Mr Fingleton: I cannot say that
at this stage. What I can say is that the primary focus there
will be around what restrictions they can put on the resale by
consumers of tickets and linking that to whether refunds are available.
Q138 Paul Farrelly: Was that a yes
or a no, just the basic terms of why I buy a ticket to give consumer
protection?
Mr Fingleton: Yes I think at that
level of specificity I cannot say yes to every individual item
but that is what we are working towards.
Q139 Paul Farrelly: It is not very
specific, it is actually what people are concerned about. Can
you give us some comfort on that?
Mr Fingleton: I think we will
give comfort in August on that when we have concluded those arrangements.
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