Business, Innovation and SkillsWritten evidence submitted by the British Chambers of Commerce

Summary of the British Chambers of Commerce’s (BCC) Position

The BCC—representing 53 accredited Chambers of Commerce across the UK—supports measures to simplify consumer law for both businesses and consumers. Measures such as the proposal to introduce the definition of a voluntary redress scheme will be welcomed by business.

However, we are concerned that the proposal for an “opt out” collective action regime has been included in this Bill. Although the proposal is limited to cases in competition law, it could establish a dangerous and unwelcome precedent. The introduction of “opt out” collective action in the UK could eventually result in expensive and damaging US-style class action lawsuits. Such an outcome would be negative for businesses and consumers, who would ultimately bear the costs of increased litigation. It is vital that this Bill balances the interests of business and consumers and we urge ministers to drop the collective action proposal on this basis.

The BCC considers the proposal to make verbal contracts legally binding unacceptable, as it undermines the value of contracts and the clarity of the legal system. We are concerned by the suggestion that conversations with businesses could be recorded in order to enact this measure.

Many of the proposals in the Bill represent significant changes in the law and it is important that businesses, especially smaller companies, are given adequate time to comply with these changes once they are implemented. Many smaller firms do not have dedicated legal departments, and will need appropriate time to comply with these changes. It is vital that these changes are communicated appropriately by the government to businesses and clear advice is given on how firms will need to comply. Accredited Chambers of Commerce across the UK are happy to help disseminate information on the changes to the law.

Alternative Dispute Resolution (ADR)

ADR is cheaper, quicker, less confrontational and less harmful to business relationships than litigation. The BCC welcomes the introduction of ADR in appropriate cases as a means of ensuring that litigation is the last resort. Whilst it is important that those engaged in anti-competitive behaviour can be taken to court, it is also right that businesses and consumers are encouraged to resolve their differences outside court in order to reduce the costs and time spent on a dispute.

Whilst recognising the importance of ADR the proposals do not prioritise it, and have no effective means of making voluntary ADR the preferred avenue of redress. The BCC strongly recommends that ADR procedures are given preference in proposals. If ADR does become part of the regime for private competition law actions, Chambers could play a role in such an ADR scheme. Some Chambers of Commerce across the country already offer ADR, for example Business West which manages the Chambers of Commerce operations across Bristol, Bath and Gloucestershire is a joint partner in the Mediation in Business service for businesses across the South West.

Opt-out Collective Actions Regime

The proposals go further than the recommendations from the European Commission in this area, with the Commission favouring opt-in collective redress. In opt-out collective actions, all underlying claimants are bound by the outcome of a case unless they actively opted out of the action within a specified period.

The BCC is concerned at the proposal to introduce an opt-out collective actions regime for competition law to allow consumers and businesses to collectively bring a case to obtain redress for their losses. The BCC is also concerned at suggestion that multiple cases could technically be brought against businesses by parties or regulators for a single breach.

The BCC opposes the introduction of measures that could create a US-style litigation culture in the UK. Opt-out collective actions could increase the number of speculative claims and fuel litigation, whilst not substantively benefiting SMEs. A US-style system of class action could damage entrepreneurship, and the BCC does not believe that the safeguards set out in this proposal will prevent this. If a severe loss is felt by a consumer or business they can already choose to opt in to collective action, for example PPI claims.

The BCC has not received specific feedback from members requesting a change from the current system, suggesting that most SMEs consider that redress mechanisms are already sufficiently robust. There is no evidence that SMEs require the ability to bring opt-out collective actions. The burden of taking actions is higher for SMEs and therefore businesses need a strong regulator and access to information from the government to enforce competition cases. The BCC believes that the focus should not be on compensation for losses but on how SMEs can stop anti-competitive behaviour in the first place, in order for them to continue trading and competing in an effective and functioning market.

Digital Content

Further clarity is needed on how digital content will be subjected to the same consumer law as goods. In compensation claims, there may be difficulties in deciding who is at fault, with many variables involved in the supply of digital content, such as broadband speed and quality of hardware. It is therefore very hard to know what a fair exclusion and limit of liability are.

These requirements could lead to the very costly exercise of companies reviewing, publishing and reprinting their standard terms of business to comply. This is something that small and medium-sized businesses in particularly may find highly burdensome. In addition, the practicality of this change must be questioned, particularly with the increasing use of Smartphones and similar devices by consumers when contracting, due to the limited screen space available to display the required information.

Refunds and Reductions in Pricing

It is important that the law is clear to businesses and consumers, and that consumers are able to receive fair refunds or replacements on faulty goods. The proposal that verbal undertakings will be legally binding is unacceptable as it undermines the value of contracts and the clarity of the legal system. At present it is not clear how this would work in practice and the BCC is concerned about the suggestion that conversations with businesses should be recorded by the consumer in order for this aspect of the Bill to work. We therefore seek the removal of references to verbal undertakings, and far greater clarity on how these proposals would affect both B2C and B2B services, before we can support the proposals being made by the government in this area.

Changes to the Powers of Investigatory Authorities

The BCC welcomes the measures introduced by the draft Bill to safeguard against misuse of investigatory powers, such as the requirement by investigatory authorities to issue a written notice in advance of entering premises and to provide evidence of their authorisation before seizing documents. If public enforcers are given the power to seek redress from businesses where there has been a breach of consumer law, it is crucial that any remedy is just and proportionate to the breach.

Extending the “Grey List” of Unfair Contract Terms

The BCC welcomes proposals to ensure clarity in written contract terms for both businesses and consumers, but is concerned that the proposed legislation contains terms which may be open to interpretation. The inclusion of such terms adversely affects smaller businesses, many of whom do not have legal departments to advise on compliance with complex legislation, and undermines the aim of the proposals which is to ensure clarity in this area. However, if a term of a contract is deemed to be more onerous and unusual than other terms, the party seeking to rely on it must take steps to bring the other party’s attention prior to the contract. The BCC is concerned that this introduces further burdens on business, as they become fully responsible for ensuring that the other party fully understands every word of a contract. The value of a contract is undermined by the subjection to a “fairness test” in court of additional contract terms as this further reduces the consumer liability to adhere to a contract agreed with a business. Businesses could be required to review and republish their terms and conditions, and in the short-term the familiarisation costs would be a costly burden on businesses, particularly those required to seek external legal advice to comply with the proposals.

25 July 2013

Prepared 20th December 2013