Examination of Witnesses (Question Numbers
380-399)
Ms Maggie Craig, Mr Harold Gay and Ms Linda Jackson
21 MAY 2009
Q380 Baroness Morgan of Huyton: Do you
think that means that we would be better in some ways not proceeding
with this as it is at the moment but doing a much more thorough
and fundamental job?
Mr Gay: As regards services, yes. The rest of
the Directive is certainly worth pursuing, but for services it
needs a more thorough job.
Q381 Baroness Morgan of Huyton: On the
digital point?
Mr Gay: The difficulty with digital services
is that they are not goods a lot of the time. They are licensing
arrangements. They are not just a subset of services. They are
licensed for people to use; they are not sold to them as a good.
The principle is that if you get a faulty piece of licensed software,
a faulty music download, there should be no problem with getting
it resolved. They are a complex area. The remedy is not necessarily
a replacement, given, particularly, that these sorts of goods
are very easily copied and the creators are likely to lose out
in the widest sense. Against a background of digital Britain,
we have been very good in the UK at creating these sorts of market-places
and delivering content into these market-places. If we end up
with a regime which does not allow a remedy that works for both
business and the consumer, we end up damaging the creative arts
in terms of these sorts of things.
Q382 Baroness Morgan of Huyton: Are we
not also in danger of creating a consumer law that is not serving
the younger generation, in a sense? It is a consumer law that
is about old-fashioned goods but not about new goods or not about
new services.
Mr Gay: Yes. I think that is quite possible.
In the way this is currently constructed, it does not fit with
digital services. Again, digital services are not a subset of
services, but digital services need some work on their own to
address all the practical issues about solving what we do when
things go wrong.
Q383 Baroness Morgan of Huyton: You are
not saying that, in principle, you are always going to be against
that being included?—which you kind of do say in your evidence.
Mr Gay: I do not know. I suppose we are not.
If you have the right remedies, if we can get some practical solutions
to that, then, yes, it could be included, but at the moment those
remedies are not in there. Again, it needs more time. It is a
complex, fast-moving area, in which there is a lot of debate,
both inside Europe and elsewhere, about what the solutions are.
The simple solution is not to keep sending somebody a new software
disc every time they say the software is faulty—which is
what you do with goods—because you are just giving the opportunity
to distribute software free.
Q384 Lord Lea of Crondall: Just as an
aside, if I may, My Lord Chairman, we did ask the Minister last
week whether he would agree to provide us with some statistics,
in so far as they are available, about the relative orders of
magnitude of all these things we are talking about, services cross-border
or non-services—digital and so on. It does seem to me that
we are in a fact-free zone. People say, "That's gone up.
Young people are doing this." I am sure it is all true, but,
as a statistician, it would be helpful—I certainly feel
uneasy if there are no facts on the table and I trust you would
support that—if BERR or somebody else could get a better
statistical base for what we are talking about.
Mr Gay: I would certainly support that. One
of the difficulties we have from the CBI perspective is, of course,
that our members are very careful about sharing with us market
data. But I do not see why we should not perhaps have another
go at our members to see if they are happy to provide that market
data.
Q385 Chairman: Perhaps I can pursue for
a moment the business-to-business issue. Is there a problem about
the lack of redress which Lady Morgan was pursuing. If you have
a phone, how does the retailer of the phone get redress against
the service provider—which might be Vodafone—in order
that the consumer gets the benefit? There is this complex issue
where services and goods are provided together. We have heard
from other witnesses that this should be given time; and that
in a way means that the whole Directive should be given more time.
Mr Gay: It is a complex area. The issue around
business to consumer/business to business has always been a challenge.
The difficulty is that the business-to-business arrangements are
really dependent upon the contract between the trading parties.
You are right, there are some very difficult issues between small
businesses and large businesses about who has the balance of power
and what the rights to return goods are. I have to say that even
with very, very large businesses there is usually somebody even
larger who will insist that you pick up the tab for faulty goods
beyond, say, 90 days, which, given the Directive gives us six
months in which to do a refund initially, means that, again, even
some very large businesses pick up the cost of returns of goods
from consumers.
Chairman: I will turn to Lord Inglewood,
who is now going to pursue full harmonisation.
Q386 Lord Inglewood: From your opening
remarks, I think it is clear that both organisations think that
some sort of Directive of this kind should aim to harmonise pretty
high rather than low. What is the right level? At what point do
you think the thing really ceases to have much advantage and why?
You mentioned gold-plating earlier on, which clearly must have
the effect of fragmenting the way the market works. Do you have
any thoughts?
Mr Gay: For me, you are right, it is full harmonisation
at the right level—and the CBI has said that throughout
the entire debate. There are a number of reasons for that. We
realised that if it went to the highest level—of the sort
that is used in some States—then there would be significant
add-on costs to business and it would be difficult for us to keep
up with it. The other extreme would be that if you downgrade it,
then of course there is this argument, certainly from consumer
organisations, that we as businesses might seek to lower our standards.
That is something we totally refute, because most businesses deliver
customer satisfaction and survive on satisfying customers. If
we do not do that, we do not survive very long. What is a suitable
alternative? I think the alternative is not an easy one. I think
harmonisation is the key and it is getting people to understand
that this does not necessarily mean that the consumers in their
particular State are not going to be protected. There has to be
a balance somewhere across the piece. For us, full harmonisation
is the prize, because it lowers the operating costs. It allows
us to look at operating in the same way across all 27 States.
That is a particular benefit for cross-border trade in terms of
internet operation. One website would be wonderful, rather than
having to have one that reflects the needs of each country.
Q387 Lord Inglewood: Is there anything
you would like to add to that?
Ms Craig: I do not think so. I think that was
very eloquent.
Q388 Lord Inglewood: Everybody agrees,
in principle, that if you can find a set arrangement with which
everybody is happy, then the Directive is a good thing. The problem
seems to be that almost everyone we meet says, "Ah, but,
this is a particular sacred cow and whatever else happens we must
not lose that." One particular sacred cow we have come across
a lot is the UK's right to reject. A lot of consumer organisations
have suggested to us that if the right to reject was rejected,
then we should not go on with the Directive. How do you view that?
Is the right to reject important? You have touched on this, and
some other evidence we have been given in this week's mailing
has suggested it, that however important the law is, the commercial
imperative to satisfy the customer appears to be at least as important.
Is there a dichotomy between consumer rights and consumer interest?
Mr Gay: I think there is. Consumers want their
problems solving very quickly at the point of contact they have
with the business they are dealing with, and so there is a dichotomy.
Most problems are solved in most retail businesses at that point,
and dealt with very quickly. According to the Law Commission's
recent reports, the number of cases that end up being in the small
claims court arguing over the short-term right to reject is quite
small. I do not think it stops us proceeding with the Directive
but, equally, it would not be a problem if the short-term right
to reject was in the Directive. The key to me is that this is
a harmonised proposal across the piece. I do not think the short-term
right to reject is understood by consumers anyway. They know they
have a natural right to a refund if something has gone wrong with
it. It just feels right: it is not fair to sell somebody something
if it does not work the minute they turn it on or if it falls
apart the minute they take it out of the box, but I do not think
anybody ever comes back into our store saying, "I've got
a short-term right to reject these goods." It is an area,
again, where there is some strange interpretation. I heard yesterday
of a case on a fridge-freezer that was supplied in 2006 where
a court ruled that it was still okay for the consumer to reject
the goods under their short-term right. Three years on, that seemed
a bit of a strange conclusion to get to. It does not help us from
a business point of view either, in terms of giving us any clarity
about where we draw the lines in our operating processes.
Q389 Lord Inglewood: When you are operating
from the internet sites to which you referred—and I know
you sell into Europe—do you approach these consumer issues
on the basis of what the law in any particular Member State is,
or do you have a company policy which you implement regardless
of where the purchaser might be?
Mr Gay: The latter. The company policy gives
a lot longer time period than the 14 days, for what it is worth.
If you look at our website, I think it is 28 days.
Q390 Lord Inglewood: Do you think that
is a general state of affairs?
Mr Gay: I think it is a general state of affairs
with businesses that are expanding and growing rapidly. I think
there are some internet businesses which do not even provide a
seven-day return, but, again, that is a very small number.
Q391 Baroness Gale: It seems to me that
you are saying you are happy with full harmonisation of the Directive.
Many of the consumer groups we have met are not happy with it.
If the consumer rights of people in the UK are lowered, the customers
are not going to be happy with that, are they? Yet you seem to
say that is okay. Consumer rights in this country have built up
gradually. Most people think we have good consumer protection
now and some of it could be lost. How would traders or business
people feel if you may not be offering as much as you used to
in the past?
Mr Gay: It could be lost. However, I think it
would be a really brave business that would turn to its consumers
and say, "We're not giving you a refund because the law has
changed in Europe and we do not have to give a refund any more."
As you say, in the UK we have built up a really good package of
consumer rights, a really good balance of customer service, in
terms of delivering satisfaction to the benefit of keeping our
customers, so that, for us, was not and never has been an issue.
Even if we ended up with something slightly lower, I am not sure
the provisions, when considered as a package, are lower for the
UK consumer; they are just rebalanced and they have a different
approach to doing it. That is why we keep saying that this is
okay as a package. There is much inside this Directive that we
do not like. If you take the detail out of it and take this bit
of it away and put this piece of it in, there are things around
it that we could object to it, but as a package we think it was
a fair outcome from the approach they took on reviewing the directives.
Q392 Lord Inglewood: If you are going
to go down the road of trying to create a single market of the
type we are talking about, you have both said that you favour
a high rate of harmonisation, if not a completely fully harmonised
approach. If you did not go in that direction, do you think that
the consequence would be that the markets would be so fragmented
it would make it very, very difficult, if not impossible, for
people like you to work across it, or is there in some way another
approach that is a satisfactory commercial alternative from your
perspective?
Mr Gay: There are always alternative commercial
approaches. You do make pragmatic judgments based on, for instance,
delivery. There are some parts of Europe you just cannot get a
delivery service into, so you therefore just do not go there.
There are other balancing things. This piece of law is just one
part of the jigsaw puzzle, but it is an important part. Yes, we
could find other solutions. Some solutions that have been adopted
by other businesses are that they buy businesses in the country
that they want to go to. That just has a higher operating cost.
But if we are keen to develop Europe as a single market that can
compete with America, China and the rest of it, we need to build
a market-place that is consistent and can operate against a standard
set of values.
Q393 Lord Inglewood: Do you think that
one of the consequences of building such a market-place is to
improve the lot of consumers?
Mr Gay: Yes, because it will improve consumer
choice. At the very least it will deliver consumer choice. The
easier it is to operate consistently, the more likely it is there
will be competition, in my view. If you have more competition
in that market-place, that, again, is good for consumers because
it will keep the price competitive, it will keep choice in the
market-place.
Q394 Baroness Morgan of Huyton: A minute
ago you said that even if the law changed so that you did not
have the right for a refund, you did not think businesses would
move towards that. Where do you get your level of confidence?
I do not question you as Alliance Boots saying that, or other
large businesses, because I think the reputational damage would
be obviously strong, but I really do question that across the
piece businesses would not take advantage of the law changing.
Are you saying that, although the UK consumer would get increased
choice as a result of this, they will get reduced rights?
Mr Gay: If the law is changed, then they will
get reduced rights in terms of what is in the law. I just do not
think what will be delivered in the market-place will be that
significantly lower. I think the businesses that choose to lower
that will be right at the margins, the rogue end of the operation,
the people who do not intend to be trading for very long, who
are not seeking to build a business or who are in a position,
as I was just saying, of being the only business in town of that
type.
Q395 Baroness Morgan of Huyton: That
means that the UK consumer could suffer as a result of this.
Mr Gay: It could do, if there was no choice.
Q396 Chairman: Could I follow the logic
of what you are saying. If as a business in the UK you would not
lower your standards in relation to UK consumers or, indeed, as
you were saying, Lord Inglewood, to any consumer, if the Directive
was at that level of our consumer legislation, would that not
give you an edge in terms of cross-border sales? I cannot understand
why you are not battling for a better level for consumers, if
you are saying that you are going to give it to them anyway and
that it would benefit them across Europe. I think that is what
Lady Morgan is also trying to pursue.
Mr Gay: I can see the point. The reason you
would not ask as a business for the highest level to be delivered
in the law, is that if everybody has to deliver that high level
of compliance across the piece, to the point where the only thing
left to differentiate you from the business next door is price,
you make it more and more difficult to compete. Again, there is
a balance between the two. There is also the issue that if you
drive it right to the very top, it adds cost to compliance.
Q397 Chairman: I do not think people
are talking about the additionality, the things that say "These
do not take away from your statutory rights," but are talking
about the highest level of statutory rights rather than the additional.
Do you not think there is a way of getting the harmonisation at
the highest level of statutory rights which sits properly in the
UK, and in a number of other European countries which have taken
on the UK level?
Mr Gay: There may well be. I just do not think
that has ever been debated. The level that we ended up with in
the Directive, apart from the short-term right to reject, I do
not think is very far away from what we have already in the UK.
Q398 Lord Inglewood: The United Kingdom
is a single market, albeit obviously smaller than the European
market. Indeed, some of the debate has been about the kind of
fly-by-night, "Del Boy" characters who may be operating.
But the UK market is a microcosm of the single market. How much
trading goes on with people who disappear and do not do what they
say they are going to do within the UK market-place? What sort
of impact does UK consumer legislation have on people like that?
Again that would, one would assume, be a microcosm of the larger
market-place.
Mr Gay: They exist. Trading standards tell me
they exist. From the people we deal with in the UK, there are
complaints about people who are operating on street corners or
in market-places, or shops that just open for a short time, take
a short-term lease, sell goods and disappear. They have always
existed. The trouble is the law never really catches those people—in
terms of the trading standards people catching up with them—because
they just set up their business to disappear. For us, they are
an issue, but tighter law does not get over the problem. I would
like to see tighter enforcement.
Q399 Lord Inglewood: That is what I was
driving at, whether you thought tighter laws dealt with that problem.
Mr Gay: No.
Chairman: We are going to move on to
Lord Eames and distance and off-premises contracts.
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