Crown Dependencies - Justice Committee Contents

Memorandum submitted by the National Association of Health Stores (NAHS)


  1.1  The NAHS submission is primarily aimed at answering point two of the call for evidence for the Select Committee's inquiry, which asked for views on the role of the Ministry of Justice in managing the United Kingdom's relationship with the Crown Dependencies including inter-departmental liaison and coordination.

  1.2  Our members have been experiencing problems with unfair and illegal competition from the health food industry based in the Channel Islands. Due the fact that the Channel Islands are not part of the EU, and have not implemented the relevant European legislation which regulates food supplements and the health claims that can be made about food, such companies are able to sell products containing ingredients that would be illegal if placed directly on the UK market. In addition, some Channel Islands operators make claims about these products which would also be illegal if the products were placed directly on the UK market. They can also benefit from Low Value Consignment Relief (LVCR), meaning that their products can be sold more cheaply.

  1.3  The fact that companies based in the Channel Islands are able to sell a wider range of products than UK companies, make exaggerated claims about their products, and under-cut the prices of UK companies, means that law-abiding and responsible UK companies are severely disadvantaged. This situation also has the potential to put consumers at risk.

  1.4  As it is the role of the Ministry of Justice to manage the UK's relationship with the Crown Dependencies, we would like to see them coordinate effective action to support UK businesses and protect UK consumers. In particular, we would like them to ensure the implementation of the Nutrition and Health Claims Regulation, the Food Supplements Directive and the Medicines Directive in both Jersey and Guernsey.


  2.1  The NAHS (National Association of Health Stores) is a non-profit organisation founded in 1931 which represents independent health stores in the UK. We have 160 of the most progressive independent retailers as members.

  The independent retail sector is the most important channel in the UK for the sale of the very specialist nutritional and herbal supplement market in the UK. Being UK based we are fully compliant with all medicines and food law and perceive an injustice when other competitors are not.

  2.2  We are responding to this inquiry into the Ministry of Justice in relation to the Crown Dependencies, due to a specific problem influenced by that particular relationship. The Ministry of Justice has a role to play in dealing with this problem of unfair and illegal competition from the Channel Islands. Therefore, this submission primarily addresses point two of the call for evidence, which asks specifically about the role of the Ministry of Justice in managing the United Kingdom's relationship with the Crown Dependencies including inter-departmental liaison and coordination.


  3.1  The UK specialist health food industry is being undermined by illegal and unfair competition from businesses based in the Channel Islands. Personal imports of specialist supplements, currently worth over £70 million per annum, are seriously undermining the profitability of responsible UK suppliers and retailers, at times jeopardising consumer safety, and diverting substantial revenues from the Treasury.

  3.2  This is possible because the Channel Islands' (CI) unusual status of crown dependencies means that they are not fully in the UK, nor are they in the EU. Therefore, they are not subject to either the UK or EU regulatory regimes covering medicinal claims, product quality and safety. These include the Food Supplements Directive (FSD), Nutrition and Health Claims Regulation (NHCR) and the Medicines Directive. In recent years, a number of operators have located in CI jurisdictions to take advantage of the more relaxed regulatory situation whilst targeting the UK market. The Ministry of Justice and the Channel Islands have now agreed that the relevant legislation should be implemented, but to date this has not happened.

  3.3  Virtually all CI operators make medicinal claims for (unlicensed) food supplements and herbal products and some make wildly exaggerated claims for 'miracle cures' for serious conditions. In the UK, such claims are banned by the Advertising Standards Agency (ASA) code. While it is possible to obtain ASA adjudications against such advertising, in practice they pose little threat to companies based in the Channel Islands. Some CI operators offer substances ostensibly as food supplements that are classified as medicinal in the UK. One potential effect is that those who are ill risk deciding not to seek appropriate medical advice. Furthermore, CI operators escape the need for compliance with UK food safety (or pharmaceutical) legislation.

  3.3  There is already debate about the inequities of LVCR for Channel Island companies to avoid paying VAT on deliveries valued less than £18. This is sometimes compounded by operators splitting parcels for orders in excess of £18. Also, technically, most if not all CI businesses operate in contravention of the 'contract for purchase' requirements for purchases from an off-shore vendor. The rapid growth and predicted future growth of trade from the CI in relevant sectors will exacerbate the loss of VAT revenue to the Treasury (official estimates predict a rise in lost revenue resulting from LVCR across all product categories to £200m pa). The fact that unscrupulous operators making illegal and exaggerated health claims from the CI also enjoy the LVCR benefit gives them a double advantage over responsible EU and UK businesses.

  3.4  The freedom to make health claims that are illegal in the UK with impunity (it is self-evident in this sector that claims sell products) and the price advantage generated by the LVCR has led to CI operators capturing a substantial share of the UK food supplements market (audited value £362m in 2005) from a very low base 10 years ago. There are no significant barriers to further growth and without effective intervention it is inevitable that the CI share of market will continue to increase, with responsible EU and UK operators unable to compete on either cost or claims on a level playing field. Responsible operators have also had a raft of recent EU Directives and Regulations imposing further restrictions on the sector and the gap between what a CI operator will say in making health claims and what an EU operator can say will grow.


  4.1  The Medicines and Healthcare products Regulatory Agency (MHRA) and Trading Standards Officers have power to take steps against UK operators contravening the rules on 'promotional health claims' but they have no jurisdiction in the Channel Islands. They do where appropriate forward complaints to the relevant foreign regulating body. Informally they comment that where a complaint is forwarded to a member state, the practice complained of normally ceases but that this is not the case with the Channel Islands in the majority of complaints.

  4.2  We do not wish to suggest that the CI authorities are anything other than well-meaning and we do recognise that enforcement is always going to be a problem within such a small jurisdiction which, in some ways, has the responsibilities of a nation state. Nevertheless, the end result is an ever-increasing flow of inappropriately marketed and sometimes illegal items being sold to vulnerable UK consumers, who find the Channel Islands address reassuringly British.

  4.3  Jersey and Guernsey legislate separately. The Guernsey Medicines Law, which implements the Medicines Directive, received Royal Assent in December 2008, and should come into force in October 2009. The MHRA have stated that the Medicines Law is not fully consistent with the Medicines Directive; but it is hoped that some of the loopholes can be closed with secondary legislation.

  4.4  Guernsey has not implemented either the NHCR or the FSD. However, it was recently confirmed that work has begun on investigating the implementation of the FSD and NHCR, but a clear timetable for implementation has still not been provided.

  4.5  Jersey already has a medicines law already in place which makes it illegal to make medicinal claims on unauthorised products or distribute unauthorised medicines, but it is difficult to enforce in practice and only targets Jersey based suppliers and advertisers.

  4.6  Initially, Jersey had pledged to implement both the FSD and the NHCR on the back of a review of their Food Hygiene Law, with drafting due to begin in 2010. However, this target has since been delayed and the implementation work has not yet been included in their work programmes.

  4.7  Guernsey and Jersey also have the power to adopt UK law as their own. It will be necessary for them to take this step, or to model their new legislation very closely upon it, if they wish to avoid the accusation that they are actively encouraging unscrupulous operators in their jurisdiction to exploit potentially vulnerable UK consumers.


  5.1  It is essential that the Ministry of Justice, as the point of liaison between the UK and the Channel Islands, continues to put pressure on both Jersey and Guernsey to implement the necessary legislation, including the FSD, the NHCR and the Medicines Directive as soon as possible, as well as to offer help with the implementation where needed.

  5.2  Once this legislation does come into force, attention will shift to enforcement. Both Jersey and Guernsey are likely to require the assistance of several UK agencies to achieve effective enforcement, including the MHRA, the FSA and Trading Standards. The Ministry of Justice needs to actively coordinate this assistance, to ensure that the legislation is adhered to, and UK retailers and consumers are protected.

  5.3  Until the legislation has been implemented, the Ministry of Justice also needs to support efforts to deal with the problem through other channels, including through Royal Mail (who deliver the majority of the catalogues advertising products of concern) and supporting cooperation between Trading Standards officers based in the UK and the Channel Islands.

  5.4  It is important that the Ministry of Justice is fully behind any efforts to tackle this problem. As well as undermining responsible UK businesses, it misleads UK consumers and is a potential threat to their health and wellbeing. The Ministry needs to effectively manage the relationship between the UK and the Channel Islands, and as well as facilitating cooperation between other UK departments and agencies to ensure that the health food businesses based in the Channel Islands cause as little damage as possible in the short term, while working towards the long term solution to the problem: implementation and effective enforcement of the FSD, the NHCR and the Medicines Law in both Jersey and Guernsey. Only this long term solution ensures that any competition coming from the Channel Islands is fair and legal, and it ensures a long awaited level playing field for UK businesses.

October 2009

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