Examination of Witnesses (Question Numbers
320-339)
Mr Gareth Thomas, Mr Guy Horsington and and Mr Paul
Baker
14 MAY 2009
Q320 Lord Inglewood: But, given this
problem, which I think is a real problem, would it perhaps be
a more effective solution to the apparent impasse to
go down the so-called "blue button" approach and have
a single harmonised option that would be available for consumers
to opt into if they so wished, because no doubt small businesses
might then decide they did not want to trade under those terms,
and in this way you would deal with a lot of the material that
is blocking the progress of the Directive that we are currently
discussing?
Mr Thomas: It is a remarkably attractive scenario
but I just think the practical problems of getting such a "blue
button" approach are considerable.
Q321 Lord Inglewood: But are they more
than the other options?
Mr Thomas: I think they are. I do not think
you can get away from the confusion for consumer or the confusion
for business point. Businesses would still have to know what their
requirements were under consumer protection law in particular
Member States where they wanted to operate and would have to know
the difference between that and the blue button approach. Consumers
will have to understand the difference between where they are
trying to buy goods under existing consumer protection law in
their own Member State or in the other Member State they want
to buy the goods from and the difference between that and the
blue button approach. I understand the apparent attractions of
it. I just think in practical terms it does not solve the problems
that we all recognise with different levels of harmonisation.
Q322 Lord Inglewood: If I may follow
with a slightly tangential point, in practice, in the real world,
the negotiating power is the crucial issue between the parties
in terms of the principle, whether or not it is a consumer purchase
or any other kind of purchase, but where you have a business-to-business
transaction where one party is, say, an enormous multinational
and the other is a small micro business, a one-man band, does
the same inequality of bargaining position not apply and would
it not perhaps be better, rather than to see this in terms of
consumers versus business, to differentiate all this in terms
of, say, the size of the contract in question?
Mr Thomas: I think it is most stark in terms
of the consumer and the very big business, but I think it is still
on occasions stark between the consumer and the small business.
Again, I understand the attraction for wanting to segment the
transactions, if you like, but I just think that would again add
a layer of complexity which would not necessarily be helpful.
Our sense is that, even though it will be difficult to get complete
agreement in terms of maximum harmonisation, that is still what
we should be pushing for in the negotiations because that will
help to get a more simple set of laws, even if it is not a perfect
simple set of laws, across the 27 States.
Lord Inglewood: That is very fair. Thank
you.
Chairman: Minister, I think Lord Lea
wants to pursue this issue about business-to-business.
Q323 Lord Lea of Crondall: Provisionally,
is it therefore a fair reflection of the Minister's view (coincidentally
very similar to the CBI's view) that to get greater legal certainty
for business and consumer confidence to shop cross-border the
essential focus must be on what the CBI call dealing with a myriad
currently of consumer laws in each Member State, and that is perhaps
going against the blue button approach, that it would still look
too much like a myriad and that it could be a mirage to think
that you could reduce the myriad by the blue button approach?
Mr Thomas: I do share that sense that the blue
button solution is not the magic bullet that some have thought
it might be, attractive as it initially appears. We want to use
the appetite that there is across the Union for the current Consumer
Rights Directive to push for as much simplification as we can,
as I say, not only to help the business community but, frankly,
also to help consumers. Our own work on our consumer law review,
just looking at the UK situation, revealed that our own rules
are hugely complex in terms of the current consumer law set-up.
If our laws are hugely complex and it is difficult for British
consumers to understand exactly their rights in every situation
in the UK you can understand their difficulties in wanting to
go abroad in terms of other Member States, so our desire is to
use this current Directive to push for as much simplicity as we
can, recognising, as Lord Inglewood referred to, that we have
to live in the real world and that we are not going to get perfection
in every area because of 27 States coming together to protect
their own specific totemic issues.
Lord Lea of Crondall: Thanks very much.
Chairman: Minister, moving on in relation
to this simplification, one of the areas where we have had some
concern is the general consumer information provision, and Lady
Gale is going to pursue this.
Q324 Baroness Gale: This leads nicely
on to this concern that has been expressed by a number of our
witnesses about "information overload" for the consumer,
that we can give them too much information and make it much more
difficult for them. What is your view on the new consumer information
requirements in the draft Directive and do you consider that there
is a danger of "information overload" for consumers?
Mr Thomas: There is a risk of information overload
for consumers, but let me begin by saying that I think the idea
that there should be contained within the Directive the requirement
that general information that is put out has got to form a part
of contract terms is a good thing. To give a very practical example
of both the benefits and the risks, you and I, Lady Gale, would
want to watch Wales beat England at the Millennium Stadium at
rugby.
Q325 Lord Kirkwood of Kirkhope: Ooh,
difficult territory!
Mr Thomas: I think I had some of the Committee
with me until that point! When we went to buy our ticket from
the Millennium Stadium ticket office it would be daft if there
were a requirement on that ticket office to give us information
saying when our ticket was going to be given to us and what were
the circumstances in which the ticket would arrive. If, however,
we buy our ticket to watch Wales beat England online then it is
more reasonable to think that the ticket office should say when
the ticket is arriving or how you can pick it up, et cetera. There
needs to be common sense about how information requirements are
deployed to the consumer. As I say, in general terms I think a
general information requirement should be part of contractual
arrangements and is a sensible additional provision so long as
it is sensibly deployed.
Q326 Baroness Gale: So what is the big
concern then about information overload? Can you give too much
information to the consumer, or is it that if you give them so
much they do not bother to look at it?
Mr Thomas: If you give lots of information you
deluge people with it and they end up being more confused. That
is certainly one of the concerns that was expressed to us as part
of our consumer law review. There is an awful lot of information
out there already about both consumers' rights and indeed information
consumers would want to know. The question is how you help consumers
understand the absolutely pivotal things and not overload them.
I used the example of the ticket office because why on earth would
someone who goes into the ticket office to pick up their ticket
need to be given a separate leaflet explaining what their rights
are at that particular point in terms of the delivery of the ticket
or what the ticket entitles them to? I think if you are buying
your ticket online it is right that you have some sense of when
your ticket is going to arrive or how you can pick the ticket
up if it is not going to be sent to you.
Q327 Lord Kirkwood of Kirkhope: Can you
get your money back if you lose?!
Mr Thomas: It has happened so rarely—!
Q328 Chairman: It has been put to us,
however, if I can follow up Lady Gale's question, that consumers
cannot be given too much information because, although they may
not need it at the point of sale, it is when things go wrong that
they need to go back to the documents and look at what their remedies
might be in relation to the particular purchase. What do you think
about that comment?
Mr Thomas: As I say, we support the suggestion
in the Directive that when there is basic information being provided
that should be included as part of the contractual terms. I think
there is a balance that one has to strike between the perfectly
reasonable desire, which we would be completely behind, of wanting
to give consumers the information they need to protect themselves
and the requirement that we place on businesses in terms of the
information they have to provide. The reality is that if there
is an overload of information requirements we will see that reflected
in many cases in terms of higher prices for consumers. Our sense
is that we have to strike a balance, and it has to be a careful
balance, in order to protect consumers and ensure that where there
is a genuine risk their rights might not be protected by the business
in question they can get redress and they know what to do as against
putting too many requirements on businesses.
Q329 Baroness Gale: My next question
again deals with the provision of information when selling financial
services off premises. How do you respond to the suggestion that
the proposal may reduce the level of mandatory information to
be provided to consumers when buying financial products off premises?
Mr Thomas: We share the concern of the Committee
about the possibility that the Directive would reduce the level
of mandatory information to consumers of financial services products.
We have more rigorous requirements than those in the Directive
and we would want to maintain those at the moment going forward.
I think, for example, of the FSA's Key Facts Illustrations document.
The risk would be, in the way the Directive has been drafted at
the moment, that that information would not be provided, so that
is one of the issues that we are talking to the Commission about.
We would specifically prefer that financial services were not
included in the scope of the off-premises provisions that are
in Chapter 3 of the Directive, so, to come back to Lord Inglewood's
question about the things that we are concerned about within the
Directive, as I indicated in my answer to Lord Inglewood, this
is one of the areas that we are talking to the Commission about.
Q330 Baroness Gale: So do you think you
are going to be successful, because I think we have got quite
a high standard of consumer protection in the UK and if we do
not get any changes in this we are going to have lower protection,
with the right to reject, for example. I think most people recognise,
"If it is faulty goods I can take it back", but with
this we could have a lower level of consumer protection than we
have now in the UK.
Mr Thomas: Absolutely. That is the worst case
scenario and that is one of the reasons why we are pushing very
hard on the right to reject, but this is one of the issues that
we are also talking to the Commission about. I think the Commissioner
recognises that what she does not want to see happen is in some
way the current level of consumer protections in Member States
being substantially reduced. The concern about financial services
products is intense, not only in the UK because of what has happened
but across the European Union in general as well, so I think there
is a will to try and find suitable solutions, but, obviously,
we are in the middle of negotiations and we have not yet got there
at this stage.
Q331 Chairman: I know Lord Inglewood
wants to come in, but, before he does, how receptive are the Commission,
do you think, to the suggestions about financial services and
the other issues we were putting to them?
Mr Thomas: As I say, I had a very sympathetic
hearing when I spoke to the Commissioner about our concerns about
the Directive. She knows that consumer groups and business in
the UK are in a fairly similar place in terms of some of the concerns
that are being expressed from the UK to the Commission. I cannot
give the Committee a cast-iron guarantee that we are going to
get everything we want, but thus far they have been helpful and
sympathetic to the concerns that we have put. What they have agreed
as a result of the meeting I had most recently with the Commissioner
is for further direct conversations between British officials
in my department and the Commission officials who are working
on the Directive. I welcome that level of collaboration and that
desire to engage with us.
Q332 Lord Inglewood: A small point occurred
to me as you were making the previous response. Are there any
Member States which are adamantly against the right to reject,
and, if so, what are their reasons, please?
Mr Horsington: Yes, there are some countries
which have indicated within the Council that they have a concern
about this. Germany is an example of a country which does not
have a right to reject and they look at our right to reject and
they have considerable concerns because they see it as being a
very generous protection for the consumer, especially to the extent
that it can extend to minor defects. When we did discuss it in
the Council there was general support from quite a number of Member
States for a right to reject. Some Member States already effectively
have a right to reject in the sense that they give their consumers
a free choice for remedies which are in the existing Sale of Goods
Directive, so we put forward our proposal to include a right to
reject for everybody. There was some discussion about that and
we have yet to come back to that discussion in the Council working
group. There was support but there are some Member States who
consider that that is perhaps a protection too far.
Q333 Lord Inglewood: Is there any evidence
within the UK that the right to reject is used semi-fraudulently
by consumers?
Mr Horsington: We have had representations from
business that people do take goods back and claim that they are
faulty and therefore there should be a right to reject. Sometimes
in those scenarios it is just that they have not managed to work
it properly. With a complex DVD player, for example, they say
it does not work and then on explanation they find it is just
that they did not read the instructions properly. Yes, there are
occasions of consumer abuse but we do not consider that they are
sufficiently high for us to have to move on the wide support that
there is for a right to reject.
Chairman: We are going to move on to
scope. Lady Perry is going to begin this but you may find yourself,
Minister, with other questions from other Members as this is an
area of concern.
Q334 Baroness Perry of Southwark: Minister,
you have talked a lot about your concerns about scope already
in some of your answers. In the letter that we have from your
department you did mention specifically the lack of coverage of
mixed goods and services and also the digital download issue.
There are some of these areas, of course, like digital download,
where our own legislation is still deficient; we do not have strong
enough protection for the consumer in these areas, as was indicated
earlier. Can you tell us any particular way you think the Directive
could be worded in such a way as to cover your concerns and, again,
what support would you have from other Member States for that
kind of move?
Mr Thomas: As we indicated in our letter, we
have expressed to the Commission disappointment that the remedies
for poor services and digital products are not covered within
the scope of the Directive thus far. I should say that Commissioner
Kuneva and Commissioner Reding, who is the Information, Society
and Media Commissioner, have together recently announced their
intention to extend consumer protection and rules to cover licensing
agreements of products like software and downloads. Thus far the
Commissioners want to keep that work stream separate from this
current Directive. Our own sense has been that if it were possible
to extend the scope of the Directive that would be helpful, again,
in terms of simplicity for business and consumers alike. I would
like to think that the fact that the Commissioners have just indicated
that they do want to extend consumer protection rules is an indication
that our message about the scope of the Directive is beginning
to get through, albeit not to the extent that the Commission thus
far have said they will take these discussions on this Directive
and expand them to include the software digital products services
concerns that we have had, but I think it is a sign that we have
made some progress in discussions with the Commission. We certainly
know a number of Member States share our concern and consumer
bodies have articulated the same message to the Commission. We
have made some progress but it is not there as much as we would
like it to be thus far.
Q335 Baroness Perry of Southwark: Are
there other Member States that have legislation like ours which
covers the mixed situation? If I buy a boiler, let us say, that
is covered by the Directive, but if I then buy a three-year contract
of service and the chap will not turn up or does not know how
to service it when he gets there, that is really vitiating the
value of the sale, is it not? How much do other Member States
have the same legislation which allows them to complain?
Mr Thomas: I do not know if Guy has studied
the other 26.
Mr Horsington: Not in great detail but we are
aware that there are some Member States which rely solely on the
European consumer Directives for their consumer protection framework,
whereas there are other Member States, such as ourselves and Ireland,
which have legislation which goes back over a significant period
of time, so there are clear differences. My feeling would be that
there are Member States which do cover the types of contracts
and concerns that you suggest, and indeed our own legislation
probably does in some areas, but the differences are great and
that is what leads to considerable problems for consumer and business
alike.
Mr Thomas: Lady Perry, you quite rightly said
that our own law needs reform. That came across extremely clearly
to us as a result of the consumer law review that we initiated
18 months ago or so. As I think the Committee is aware, the Prime
Minister has committed us to a consumer White Paper by the summer
and reform of consumer law is one element that we are looking
at including within that paper.
Q336 Chairman: Minister, before I bring
in Lord Lea can I pursue the points you have just made? When we
saw the Commissioner a week or two ago one did get a sense almost
that they were still thinking about the issues and you describe
them now bringing other areas into the thinking of the Directive.
There is a sense that a review of the scope and another look at
this might be helpful. How much do you think this is really pressed
by the political will to try and get this through rather than
the capacity to think through a directive that would really solve
the issues across Europe?
Mr Thomas: The immediate political imperative
is the European elections. Quite clearly we are not going to have
a new Consumer Rights Directive by the elections, so I do not
think in a sense the appetite of the Commission to make progress
in terms of a directive is governed by a political timetable as
such. They do want to make progress and our sense is that the
Swedish Presidency, which will take over on 1 July, are interested
in this dossier and will also want to see if they can make progress.
Council working group discussions in this area have been fruitful
to date. I think we have made some progress, as I have described,
in the discussions with the Commission, and they do want to try
and find solutions to some of the issues certainly that we are
raising in the UK and in other Member States, so I think there
are opportunities to continue to push for improvements in the
Directive. I am not sure I am a complete supporter of the idea
of "Let us go back and start all over again" because
I think it risks losing the political support and the momentum
that there has been within the Parliament, the Commission and
Member States for trying to make progress on the Directive. However,
we are certainly going to use the various discussions that have
come up to continue to push our arguments as hard as we can.
Chairman: That is really helpful to have
on the record where you feel your own negotiations are going.
Q337 Lord Lea of Crondall: Minister,
this question is about scope, and I suppose the scope of my question
might be a bit broad, but, arising from what you have just said,
and I suppose one matter of urgency, was that the Commissioner
was saying that she wanted to work until the final hour when she
leaves the office, and I guess it is more than likely that there
will be a new Commissioner, so I suppose that is relevant. In
this pause, if that is a fair word, and we are looking at scope,
do you think we could take this opportunity to do the best we
can to get a better statistical handle on what on earth we are
talking about? If we were discussing policy on the railways or
the problems in the hospitals we would have lots and lots of statistics,
but as a consumer of statistics I am amazed that this seems to
be so patchy and inadequate. The basic framework, as I understand
it, is this business-to-business across frontiers in Europe, there
is business-to-consumer and then there is a sort of consumer-to-consumer,
in other words, the natural persons are just selling each other
services for putting up a fence or whatever it may be, but even
that can become cross-border if you are improving someone's house
in Lot-et-Garonne or wherever. Is that the inherent difficulty
about knowing what we are talking about? It is easy to say that
we are clear what the scope of this is; it is business-to-consumer,
but there are all these grey areas or developments in scope by
conscious decision as well as the world moving on through electronic
communications and so on. Do you think we can up the priority
in talking to Commission officials to get a better statistical
framework in place?
Mr Thomas: On the statistical framework, this
is one of the reasons why we have supported the European Parliament's
calls in terms of improvements to the impact assessment, trying
to see greater clarity on the costs and benefits of the Directive
as it currently stands. I think we do recognise the Commission's
fundamental argument as to why reform is necessary of the existing
four Directives and that is the complexity that results from just
having minimum harmonised directives and all the additional consumer
protections that are added on in one Member State compared to
a different Member State. The point they make, quite rightly,
which we would be extremely sympathetic to, is that that complexity
makes it difficult for the business community, particularly those
who want to set up overseas, and it makes it difficult for the
consumer to know what their rights are overseas, and therefore
we need to crack on and try to find solutions to the problems.
The difficulty, once you get into the detail, as we have just
described, of how you future-proof what we come up with in terms
of this Directive is a real challenge because the consumer markets
are changing so fast as a result of the digital era. I do not
think we are ever going to have a perfect statistical framework
is the truth but your point and the Committee's broad point about
the need to get that impact assessment and that statistical framework
as rigorous as we can we would support, and we have, as I say,
been doing work ourselves to look at what the impact would be
on the UK of the Directive and that is why the areas that I have
described where we have concerns we have been pushing on as hard
as we can.
Q338 Lord Lea of Crondall: Just to narrow
it down to one point to take away possibly on the statistical
search, many areas covered by BERR are, of course, differentiated
to some degree, from small firms to medium sized firms to big
firms, and in terms of trading it is about recognition of where
it is—five, ten, 20, 50 and all this business, and we obviously
have statistics reflecting that. When we look at small firms we
know that some of them are really below the radar but they are
adding up to quite a lot. Could it be that instead of setting
up a huge statistical programme which might take a long time there
could be more sample surveys because I am very worried that we
do not often seem to know what we are talking about? We know what
we are talking about in principle but in terms of numerical results
and effects we do not actually know what we are talking about.
I have put it in slightly—
Mr Thomas: Provocative terms.
Q339 Lord Lea of Crondall: Yes. I did
not mean it in any other terms.
Mr Thomas: I think we do have a reasonable view
of what we are talking about; let me just put that on the record.
We have done a substantial amount of work to inform our thinking
and the comments that we have put back to the Commission. Part
of the reason why we are pushing as hard as we are in terms of
the scope of the Directive in terms of services is that we know
that the huge use of services as opposed to goods and the balance
between consumption of services as opposed to consumption of goods
by UK consumers have changed over the last ten to 20 years and
that is why we want to see change if it can be secured within
the Directive. There are some ways in which the Directive does
currently help in terms of services, cooling off periods being
just one example. The problem is that the remedies are not there
in terms of services and that is why we continue to make the argument
that we do. You can always have better statistics and I think
you are right to challenge us and the Commission to continue to
work in that area, and, as I say, we are encouraging them to do
that in terms of the impact assessment, but we are clear that
on the issues that I have explained to the Committee that we are
pushing on hard with the Commission we have got strong support
for our position from consumer groups in the UK and from the business
community, and I hope that gives further confidence to you, Lord
Lea, about the negotiating stance we are taking.
Chairman: Certainly, Minister, when we
looked at consumer credit there were a number of other issues
that impeded the development of businesses elsewhere, not the
least being things like language and the legal framework, and
we really want to talk a little bit about legal frameworks because
we do have the common framework which is alongside the Directive,
and Lord Kirkwood wants to pursue some of the issues around unfair
contract terms.
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