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House of Lords

Friday, 31st January 1997.

The House met at eleven of the clock: The LORD CHANCELLOR on the Woolsack.

Prayers--Read by the Lord Bishop of Oxford.

Vehicles (Price Indication) Bill [H.L.]

The Earl of Bradford: My Lords, I beg to move that this Bill be now read a second time.

The aim of the Bill is extremely simple: that new motor car prices will be quoted fully inclusive of delivery charges and number plates.

The anachronistic, confusing practice of not including delivery charges started in the days of purchase tax and was designed to avoid payment of a portion of that tax. It remained in place through the time of the car tax, but now that this has been removed there is no financial reason for it to continue any longer. Not to include number plates in the price of a car seems plain daft.

At least we have got rid of the strange practice of charging separately for seat belts. However, one still finds a plethora of different pricing scenarios from full on-the-road pricing, sometimes even including road tax and extended guarantees, to other cases where it seems that everything is an extra.

Gradually there has been a move within the industry towards all-inclusive pricing. However, this is still proceeding slowly and the Bill would put the final nail in the coffin. It would also ensure that there would be no backsliding in the future, as it is so easy for people and companies to revert to bad old habits if they see financial advantage in doing so.

Only this week, I received a press release from a major importer of Far Eastern manufactured cars in which it is stated that the on-the-road package price has increased from £590 to £610, effectively demonstrating that people have not changed their policy yet.

The Bill is being supported by the Consumers Association, which sees it creating a more transparent and simpler situation for car buyers, ending the confusion between on-the-road prices, often in rather smaller print, against prices exclusive of delivery and number plates. It is also supported by the Retail Motor Industry Federation and privately by many others in the retail motor trade.

The Society of Motor Manufacturers and Traders is sitting on the fence. It produced a rather strange letter opposing the Bill, addressed to me, which was never signed or dispatched. However, a copy was sent to the DTI. This has now been withdrawn by the society as it did not agree with the contents itself. I believe that it wishes to see an effective voluntary scheme put in place which it would attempt to police. That does, though, aptly demonstrate how confusing the present situation is.

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Considering the clear consensus that action is required, I hope that your Lordships' House will be content with my Bill. It is simple; it is progressive; there are no disadvantages. I hope that the Government and Opposition parties will give it their support. I commend the Bill to the House.

Moved, That the Bill be now read a second time.--(The Earl of Bradford.)

11.10 a.m.

Lord Lucas of Chilworth: My Lords, in taking part in this short debate this morning, I should perhaps remind your Lordships of my interest. I have been involved for many years in the retail motor industry and to some, albeit small, extent I still am involved. I am grateful to my noble friend for his explanation of the Bill, which is, indeed, simplicity itself. I am slightly ambivalent about the progress of the Bill, however, as I do not believe that it is necessary. I have a number of reasons for so saying.

The background to the sale of new motor cars is merely numerical. For example, in 1995 about 1.94 million cars were sold and in 1996 just over 2 million were sold. Of those numbers, over half (in 1995, 53 per cent. and, in 1996, 54 per cent.) were sold to what one might call the professional buyer, people such as the rental companies and some of the banks--the big buyers. So the point made by my noble friend is irrelevant in that respect. It leaves about half the number being sold to what one might call the general public.

Two-thirds of all new motor cars sold have a part-exchange element in the transaction. So there has to be some negotiation as to that value. It follows fairly logically, therefore, that the indicated price is no more nor less than an indicated price. It is not a fixed price because that is only part of the transaction.

Lord Marlesford: My Lords, I apologise for interrupting my noble friend, but I did not follow the logic. He said that a large proportion of cars are sold to big buyers--the banks and so on. It did not seem to me obvious--perhaps he would explain--why that made my noble friend's Bill irrelevant.

Lord Lucas of Chilworth: My Lords, I was simply trying to suggest that over half the number of new motor cars sold are sold to those big buyers, who negotiate the price. Therefore, there is an irrelevancy in relation to half the sales.

Lord Marlesford: My Lords, so are they not charged delivery charges or for number plates? It does not seem to me obvious why everybody else should be so charged.

Lord Lucas of Chilworth: My Lords, if I were privy to every contract that a major buyer entered into with a manufacturer, I should be able to answer the question. All I know is that a price, probably different from that which may be displayed, would be negotiated by a big fleet buyer. I went on to say that two-thirds of purchases have a part exchange element. Therefore there is another element in the contract; namely, the value of the used motor car. There is no fixed price on that.

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I come to the remainder of the buyers. Certainly to my knowledge nobody pays straight cash. They take advantage of the multitude of purchase schemes that are available. Some are called personal contract plans. They could include leasing, hire purchase and so on. So there is another element of negotiation. In a sense, the displayed price, the so-called "recommended retail price" is rather meaningless as part of the entire transaction.

Lastly, I want to refer to that leading authority Chitty on Contracts. I quote from the 27th edition, volume I, published in 1994. Chapter 2, Section 2-007 deals with display of goods for sale. It says:

    "As a general rule, a display of goods at a fixed price in a shop window or on a shelf ... is an invitation to treat and not an offer".
The concluding lines of that paragraph state:

    "The distinction between an offer and an invitation to treat depends, in the last resort, on the intention of the maker of the statement".
The maker of the statement in this case is the motor dealer; and the intention of all motor dealers in the retail trade is to offer a product for sale--an invitation for a buyer to come in and discuss a transaction. I have described quite briefly one or two of the elements that go into that transaction.

Further in Chapter 2, Section 2-008, headed "Other displays", says:

    "The principles stated in  2-007 above also apply to other displays ... There is no perfectly general answer to the question whether such displays are offers or invitations to treat; the answer depends in each case on the intention with which the display was made".
It seems to me that any price indicator on the windscreen or a board sitting on the roof of the motor car is an invitation to treat--an invitation to negotiate. So the pricing is irrelevant. That is the irrelevancy that I see in the Bill.

I accept what my noble friend said about the manufacturing and retail industries moving towards an all-inclusive price. I understand that that is the subject of discussion between the industry and the Office of Fair Trading. It seems therefore that we have an invitation to enter into a transaction which involves buying a new motor car. It is negotiable and therefore any price indication in that regard is something of an irrelevance, which I see reflected in the Bill.

I would not force my view upon the House by opposing my noble friend's request that the Bill be read a second time, if he goes so far. But I do not believe that there would be any great benefit to the consumer.

11.17 a.m.

The Viscount of Falkland: My Lords, the noble Earl very clearly explained his Bill, which he described rather ominously, I thought, as "a simple Bill". That is rather like someone who prefaces his story or remarks by saying, "To cut a long story short". Those stories inevitably go on for a long time.

This matter has become rather complicated. It is not the fault of the noble Lord, Lord Lucas of Chilworth, who is an expert on this subject. But I have some

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sympathy with the noble Lord, Lord Marlesford, who intervened, in order to have further explanation of some of the noble Lord's remarks. Like other noble Lords, I suppose, over the years I have bought a number of vehicles, both cars and motor cycles, and have always been irritated by the retention of the additional charge for delivery and number plates. I am not so much concerned about number plates as about delivery charges.

With motor cycles, delivery charges represent quite a cost to the distributor. When a motor cycle arrives from the distributor or the manufacturer at the point of sale it sometimes arrives in boxes and has to be put together. That exercise takes many hours and then the vehicle has to be road tested to make it a vehicle ready to go on the road and perform according to the manufacturer's warranty. Most motor cycle dealers and indeed car dealers do that extremely well, but it is a cost.

I agree with the noble Earl that there is no reason nowadays to separate the delivery charges and the cost of the number plate from the total cost. As he so rightly said, it was originally arranged in that way in order to separate the charges from those which were subject to purchase tax.

It is an irritation. But if I understand the noble Lord, Lord Lucas, correctly, he is saying that if people are buying a car or motor cycle under a finance agreement, partly because of the mood they are in at that time--they are excited and not in a normal state of mind, particularly when it is a second-hand vehicle, though we are not talking about second-hand vehicles--they accept all the charges and will not be relieved of the charges when they enter into the agreement. If one wants to pay cash or pay immediately without going into a finance agreement, the first thing one does is say, "I do not want anything to do with the delivery charges and the cost of the number plate. You can knock that off for a start and whatever further discount you will give me". Usually one can obtain a generous discount, except for vehicles which are in demand at the time.

To me it seems a nonsense. It is like many other things that have arisen over the years--for example, food rationing which went on for five or seven years longer than in most other countries which suffered terribly during the war--and ought to be removed. It is illogical and irritating. I would like to see, as would the noble Earl, vehicles offered for sale at an inclusive "on the road" price. The manufacturers and dealers can sort out what that "on the road" price should be.

Perhaps I might add at this stage that it is extremely expensive to buy a vehicle in this country, whether it is a car or a motor cycle. A very good British motor cycle which is now extremely popular will be on sale in this country, when it arrives at the dealers, for around £10,000. In the United States, for reasons which escape me, it will be on the market for around £7,000. I do not understand that. People who are prepared to go through complicated paperwork are able to go to Denmark and make arrangements to buy a car for several thousand pounds less than the retail price at which they can buy it here. Most people cannot be bothered to do that, even if they have the cash to do so.

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There is a whole area which needs to be explored way beyond the simple measure--it is a simple measure--suggested by the noble Earl. I do not know what the noble Earl intends to do with the Bill. It has been an interesting debate and I shall follow it further outside the Chamber with the noble Lord, Lord Lucas of Chilworth, who is always so interesting when he speaks on these subjects. I am sure that the points in his speech which confused me and his noble friend Lord Marlesford will be made clear. Having said that, I support the noble Earl in whatever he decides to do.

11.23 a.m.

Lord Haskel: My Lords, once again I congratulate the noble Earl, Lord Bradford, on showing his concern for the consumer. He showed great concern that diners should not be ripped off over service charges in restaurants; now he is showing his concern for those buying motor vehicles.

It seems to me that the noble Earl is absolutely right. Number plates are required by law and customers cannot drive a vehicle away from a dealer without them. They are not an optional extra. Equally, delivery is not an optional extra. I agree with the noble Viscount, Lord Falkland, that we buy the vehicle from the dealer's showroom, not from the factory gate. The vehicle is delivered to the dealer before the consumer has decided whether or not to buy it.

The practice of plates and delivery being charged separately has grown up from the days of purchase tax. It is extraordinary that customers are not always offered a price "on the road". It would be good customer relations to do so. It would make for clarity.

I would say to the noble Lord, Lord Lucas, that there is a cost to quoting the law to customers. A confused customer is a wary customer. After all, every dealer wants the customer to come back and buy another vehicle. If there is argument and confusion over the price, the customer may feel ripped off or confused because he has been charged extra for items which are not a matter of choice. The customer is then likely to go elsewhere when he next wants to buy a car.

However, on these Benches we are committed to eliminating unnecessary regulation. Because it seems to me to be good customer relations to offer an all-in price, including delivery and plates, I wonder whether regulation is required. Is it not a matter for the motor trade? The vehicle industry has an active and effective trade organisation, in spite of its inability to write a letter. Could not the noble Earl persuade that organisation to introduce an inclusive price as part of a code of practice? Normally a code of conduct incorporates best practice, and most companies are anxious to carry it out, otherwise they will not remain in business for long.

There will always be special deals, and the law will not prevent that. In relation to the retail consumer, it is clear that some firms do not adopt that misleading approach. I saw an advertisement for a Peugeot 306 this week quoting an all-inclusive price. It also avoided the other trick of proclaiming one price in large letters and then again, in the smallest print, stating a much larger

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price for the car illustrated. That leads me to make one further comment. It is strange that that trick is acceptable to the Advertising Standards Authority. It could make a contribution to consumer protection by disallowing that kind of advertising.

We are in entire agreement with the noble Earl's objective of greater clarity. But could it not be more easily and effectively achieved by a code of practice rather than by regulation? The noble Earl is persuasive; perhaps he could persuade the trade to put its house in order--the alternative will be something much more draconian--if not now, then in the future.

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