Select Committee on European Union Minutes of Evidence

Examination of Witness (Questions 1020 - 1034)




  1020. What about China and places like that?

  A. I am afraid we have not yet—

  1021. The States have started raising their horizons, looking at possibilities there.

  A. In the area that is under David Byrne's responsibilities, in terms of A officials, officials who do policy work, we have got 30 covering the whole area of consumer protection.

  1022. Enough?

  A. At this time it is very much prioritisation in terms of what they are going to do. The area of e-commerce was our priority when we came in and that is what we have put more effort into but there is a huge range of other areas that we are not really touching in this whole area of e-commerce basically because there are so few people we can devote to that task.

  Chairman: Shall we go to Lord Paul with his last question on the Global Business Dialogue?

Lord Paul

  1023. I understand that you are planning to provide an expert group looking at the political dialogue with global business. Is there any agreement on reflecting consumer interests there?

  A. Absolutely. In this stakeholder group that we have built up there are a couple of people who are from the GBD involved in this and we have the main consumer organisations involved in this group. So far as our area is concerned, there is not any problem there about consumer participation. Where there tends to be more difficulty is about the selection of that consumer participation. We have the European Bureau here in Brussels and there are other national agencies like the Consumer Association of the United Kingdom that is big and the Dutch agency that is big. You start getting into more problems with some of the other Member States like Italy, Spain and France. In France it is very much divided along old trade union lines because that is where the consumer protection background comes from. You do not have strong national organisations. It is a problem in that sense because you cannot invite everybody around the table at that stage. To ensure that is representative in some way there is always a certain amount of cut-off. There are problems at the edges. For us though, in terms of getting an input from the consumer side, that is not a problem. As I said earlier, how the consumers feel that their voice is heard, if they are in another forum in dealing with other DG, they may feel "they are not paying enough attention", but when it comes to the political discussion, as I said, between Byrne and Liikanen things have been surprisingly smooth in this Commission.

  Chairman: Can we just keep on this for a minute because somebody has to accept responsibility somewhere if consumer groups and representatives in different places do not feel that they are being heard. Lord Faulkner has a question.

Lord Faulkner of Worcester

  1024. We have had witnesses telling us that the Commission does not have proper consumer representation in a number of very important areas like e-commerce, telecoms, broadcasting and financial services. Are you looking at that and do you think that there is room for improvement?

  A. Sure. If I can say that consumers are our "clients", so I would be very concerned if consumers felt that in our area they were not receiving a hearing, that would be of concern, that there would be something missing in that sense. We have various fora for dialogue with consumers some of which, I have to say, frankly are not very effective. We have this Consumer Consultative Committee and part of the problem with this is there are so many competing interests among consumers that it is very hard to use this as a vehicle for ensuring effective consumer participation. In our limited time being responsible for this area, what we have found is that if you are subject orientated it is much more effective, like on e-commerce or on the area of financial services. You can say "here is an issue we want to address, let us get you who are interested to come in, let us sit down and talk about it", rather than using a formal consultative process. If we use a formal consultative process it just does not move forward with the speed that you want. In the area of financial services, if you ask consumers to list their worries or concerns financial services are always very high. The difficulty about the financial services area up to now is that it has been quite diverse and with the arrival of the euro you can see the national approach is breaking down and now you are getting services offered across frontiers. The Anglo system has always been a bit different but in the rest of Europe, between Germany and France, you have suddenly got this opening up and you now have enormous competition building up. Why? Because banks want to be able to offer mortgages across the place, banks want to be able to sell insurance policies, they want to do things on a pan-European level. This is raising important issues now, let us say, in the mortgage area where for two years there has been a dialogue going on between consumer associations and the banks trying to work out a code in terms of conditions to be made available to consumers who buy mortgage policies. This thing has been fraught with enormous difficulties. It is fraught with difficulty on the side of the banks because of rivalries between the banks. From talking to various financial institutions in the United Kingdom I know that at this stage they are saying "to hell with it, there is a market out there, we can go and do it, we are going to do our own thing. For the larger institutions, their approach is that we are trading on our name, we are going to go out there and we are going to give the consumer this. We will set up our own networks in the individual Member States because we are big enough to be able to do it". That is fine so far as the individual companies are concerned but from a consumer's point of view you want to say, "fine, a consumer is going out to buy a product in the market, is he being told about what the terms and conditions are, is he being told about the real rates of interest?" You have had enormous problems in the United Kingdom on this form of selling financial services, so you know well the kind of problem. At the end of the day what we have to do, and where we are less well equipped in terms of being able to do it, is to identify value added at Community level of this type of thing, but it will come very much in the financial services area because the sheer force of the market is going to be there and there will be calls to have certain common guidelines in place. David Byrne has said this to the people concerned, "unless you come up with something on mortgage credit by the end of the year, I am coming in with hard legislation". So the gun is against their head, if you like.


  1025. We were just having a little side chat here about financial services supervision and regulation and how things operate in the United Kingdom. You say things are now changing here with the euro and there is a break down?

  A. Yes. For example, if you look now at the traditional domestic market, if you look at the big German and French markets, all these complaints have been you can never get access to the markets, that has gone. Big public banks in France have all been privatised. Now you can buy your way into the market much more easily. In Germany, Deutsche bank is starting to be very aggressive. This whole breaking down of the role of the landers bank is starting to take place. All of this is now increasing competitiveness. As a consumer, as an informed consumer today, I have no currency risk in the Euro-zone any more. I can go to France, I can go to a bank in France, I can go to a bank in Italy and I can shop around and say "Who is providing me? What is the rate of interest?" That is there now, it is a new possibility. That is what is going to happen. Once it is all clearly in euros the customer will buy wherever he wants to. What you are going to have is you are going to basically have presences on the high street which will sell a range of products.

  1026. If you are Dutch and have problems with a product you buy from somewhere in Germany, how will you resolve it?

  A. This is where you come back to your various dispute resolution mechanisms. For the big banks, I have heard this more from the United Kingdom than from others, they are saying "We are setting up our own business in the various countries".

  1027. They have the FSA regulating it as well in the United Kingdom.

  A. Yes, but that is controlled already under the internal market legislation in terms of the provision of services, how it is controlled. The responsibility goes back to the home country financial supervisor. At the end of the day if you are doing business, if I want to buy a product, for example, from Barclays or from wherever, normally I will want to see for a big transaction a presence, the market has not yet totally evolved in that way that they are prepared to do it over a screen. Therefore, you are probably going to have to have a presence in the market. Whether that is a local agent or whether it is their own national or individual presence you will have to judge that, but for big companies that is not a problem. They know how to do it, they are doing it already. That is where I think the smaller companies are going to find themselves in difficulties unless they can get part of some kind of a grouping because the big players are there and they will be able to get the high ground much more quickly.

  1028. Within the new structure that you now have, do you have dealings always with the regulators for businesses such as financial services? We had Howard Davies in to see us and one of the views he expressed was that he could see a case for better co-operation between regulators across Europe and that in turn then means there is implied a role for you.

  A. Sure.

  1029. But it does not happen now?

  A. It does not happen now, but—

  1030. Should it?

  A. If you look at the Commission as a whole it does happen through the Directorate-General for the Internal Market who are the ones responsible for the regulation of financial services within the EU. They have regular contacts with the various financial supervisors. I do not know any more if there has been a separation but there used to be groups where the controllers of the stock exchanges used to meet, there used to be groups which would bring together the bankers and things like that so that network exists. That is in so far as the regulation of the market for financial services. All we can do from a consumer side is to try to have some input into that debate with our colleagues.

  1031. What would you like to see happen? We are here this morning speaking on behalf of the millions of consumers in this particular meeting and saying that the arrangements are not adequate in this area.

  A. Right. Well, I would probably have to agree with you that they could be improved. One of the things again, and I do not want to be saying things have changed, is this Commission as such is working in a different type of way. The people who are responsible now in the various areas, if you look at Fritz Bolkestein who is responsible for the internal market area and Liikanen in the enterprise area and Byrne in the consumer product area, the three of them get on quite well.

  1032. But we are talking about other areas of activity beyond there.

  A. That is very important because what has been happening up to now, there have been very entrenched positions. There has been a basic feeling that industry and consumers cannot mix. What we have been trying to do is to show there is a mutual interest in all this. There was a difficult discussion in the Commission last week on the liberalisation of postal services which has certain interest in a lot of Member States. Yet the three Commissioners concerned—Bolkestein for the internal market, Likanen for enterprise and Byrne for the consumer—entered into an agreement beforehand in terms of how this should go forward. You have areas, like in the financial services, which I have to admit from a consumer point of view within our DG were not as actively involved but we have to bring some kind of value added for ourselves. We cannot just be saying "look, things are not great for the consumers", we have to say "look, what is it that we can now address to bring about some change? What are the issues where consumers at a European level ..."—and do not forget we are more concerned than anybody else not to get into this subsidiarity debate and there is a fine line here about where you can justify things—"...where are the areas at a European level which we need to address for consumers in the financial services?" It is now because of this whole increased cross-border provision of services that you see there has to be more particularly adequate clear common information made available to consumers, that is understandable, that is clear. The second aspect then is you have control of things like the regulation of the market, how effective is it for preventing fraud, misleading advertising, misleading representation? All these kinds of factors then start coming into play on this. You have a very well defined set of laws in the United Kingdom. You have seen the problems over misselling of all kinds of financial services. There is not an easy solution, if you like, to that kind of thing. You are into an area, for example, of contract law. There is absolutely no harmonisation of contract law at a European level. We have started a ball which will slowly roll down the hill on this whole aspect of contract law. This will take three or four years to bring to any fruition but we are starting to bring together a group of universities working with some Member States who have expertise in the area, trying to see is there any basis for some type of commonality in terms of contract law. Look at it from a company's point of view, have you ever followed the debate on a single European company, Susetec, this seemed a great idea in the 1970s. Gosh, if we are setting up an EU why do we not have possibilities for companies to set themselves up with a common European Statute. Terrific idea. 25 years down the line we still do not have that. Why? Because Member States have stayed entrenched about the supremacy of their own law and particularly for taxation reasons.

  1033. I am going to conclude now. We have come to the end of the meeting, but just one last question. You have on one side the internal market and business, as it were, focused on the home country principle. On the other side you have consumers and financial services regulators focused on country of reception. How do you think this antithesis will be resolved?

  A. It is an antithesis. I go back to the basic premise again, consumers must always have access to the courts in their own Member States. They cannot be denied that, okay, that is your bottom line. We are prepared to go with home country control if it is shown to be sufficient and that is what is important, the web of other measures which are in place to be able to solve the consumer problems.

  1034. Martin, that has been excellent. We are very grateful indeed to you. I am sure it is going to be very helpful for us in this area in writing our report. I hope we might be able to say some things which might be of assistance to you. We will endeavour to do that. We would like to wish you the best of luck with the energy and enthusiasm you bring to the topic.

  A. Thank you very much. If I could just say to you as well I am very struck by what you have picked up in the States and things like that on this credit card issue. I hope this will be something which will figure largely in your report. Secondly, since you are also picking up a lot of things about what consumers feel, if there is anything that you feel it would be useful to let us have, say "Look, the consumers feel in this particular area they are not getting something" and particularly if there is anything we are involved in, I would feel more than anxious we are aware of that as well. Thank you all for your attention. I am sure Olli, in terms of the great co-ordination that exists between us, will repeat everything that I have said.

  Chairman: Thank you very much indeed for your time.

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