15 Oct 2014 : Column GC99

15 Oct 2014 : Column GC99

Grand Committee

Wednesday, 15 October 2014.

Consumer Rights Bill

Committee (2nd Day)

3.45 pm

Relevant documents: 3rd and 8th Reports from the Delegated Powers Committee

The Deputy Chairman of Committees (Baroness Harris of Richmond) (LD): My Lords, if there is a Division in the Chamber while we are sitting, the Committee will adjourn as soon as the Division Bells are rung and resume after 10 minutes.

Clause 20: Right to reject

Amendment 14

Moved by Baroness Jolly

14: Clause 20, page 11, line 11, at end insert “, subject to subsections (19) and (20)”

Baroness Jolly (LD): My Lords, I appreciate that the government amendments are technical in nature, so I would like to take some time to explain what they do.

The Bill sets out key statutory remedies, such as the right to reject substandard goods, which entitle the consumer to reject goods, treat the contract as terminated and get a refund, but there is also court-developed common law regarding contracts for goods, and the Bill is intended to work alongside much of that. Amendments 14, 17 and 18 are to explain how the rights to reject goods under the Bill work, where contracts are severable under contract law. By severable, I mean contracts where parts are intended to be independent of each other, so different parts of the payment can be assigned to different parts of the trader’s performance. For example, it could be a contract for numerous goods where payment is due per item or for building work where payment is due pro rata for work done, regardless of whether all of the work has been done. That is distinct from obligations which are entire, when the consumer has to pay only when all the trader’s obligations have been fulfilled—for example, a building contract under which the trader must carry out all the work before the consumer has to pay a lump sum. It is that existing common-law distinction and principle to which the amendments refer.

Let me state from the outset what the amendments are not about. They are absolutely not about preventing consumers from rejecting faulty goods. Where goods are faulty, the consumer has the right to reject them under the amendments. The amendments clarify that where the contract is severable, the consumer has the right to reject the faulty goods and may also have the right to terminate the whole of the contract. Above all, the amendments provide clarity that the Bill would not override the distinction between severable and entire contract, which currently exists in common law.

15 Oct 2014 : Column GC100

The Bill, like the Sale of Goods Act, explains the position for contracts where the parties agree to deliver and pay for goods in instalments. A contract, including a mixed contract, such as one where goods are supplied alongside services, may be considered to be severable in other situations. For example, goods may be delivered in instalments but paid for monthly rather than per instalment. I gave some other examples earlier.

Under the Sale of Goods Act, much of the detail of how the right to reject operates is dealt with by common law, whereas in the Bill we have greater clarity about the right to reject. To provide that greater clarity without cutting across the existing concept of severability, we consider that it would be helpful to include some clarification about how the right to reject operates for severable contracts, other than those for delivery and payment in instalments.

Under current law, if a consumer and a trader make a contract which is severable and an item supplied under the contract is faulty, the consumer may be entitled to compensation in relation to the faulty item, or may be able to terminate the whole contract—it will depend on the nature of the goods, the fault, and the detail of the contract. The amendments are intended to set out the position in the Bill.

If the contract is not severable—for example, if the consumer is required to pay only once and the trader has carried out all of the work—the amendments do not bite. The consumer could terminate the whole of the contract if there is a fault in one of the goods.

I turn to the amendments. First, Amendments 14 and 17 are to clarify that the rights to reject goods take account of this common-law distinction between severable and entire contracts. The Bill provides that a consumer should be able to reject goods, including those supplied as part of a mixed contract, where the goods breach one of the statutory rights in the Bill. However, where the contract is severable, in some cases the faulty goods supplied might represent only a small part of the whole contract. These goods or the fault with them may have little impact on other things which the trader must do or supply under the contract. Of course, in other cases the faulty goods may represent most of what the consumer is paying for under the contract, or the fault in the goods may be representative of an inherent fault in other goods which are to be supplied. That is why the amendments provide that the consumer’s right to reject may apply to a severable part of the contract or that the consumer may also have a right to terminate the wider contract.

Whether the consumer can treat the whole contract “as at an end” may depend on the circumstances and the contract. Under common law, the main tests for deciding whether a consumer may treat the whole contract as being at an end in such cases are the extent of the breach compared to the whole contract and the likelihood of the breach being repeated in the other things that the trader is to supply. Imagine, for instance, that a trader has renovated a bathroom and billed the consumer separately for the different items. There is no issue with the trader’s work or most of the items but there is a fault with the sink. Amendment 17 is to make clear that the consumer’s right to reject would apply to the severable part of the contract and not to

15 Oct 2014 : Column GC101

the whole contract, unless the circumstances justified this. In my example, therefore, a consumer could reject the part of the trader’s performance which did not meet the consumer’s rights—here, it is the sink—but not necessarily the whole bathroom.

Amendment 18 ensures that the distinction between entire and severable contracts is also reflected in Clause 21, which enables a consumer who has the right to reject goods under a contract to choose to reject only some of the faulty goods. Where a contract is severable, the consumer might have the right to reject goods supplied under part of the contract but not all the goods under it. The amendment therefore makes it clear that in this situation, too, the consumer may choose to reject only some of the faulty goods which they are entitled to reject.

As I said at the start, I appreciate that these are technical amendments and if the noble Baroness, Lady Hayter, would like additional time to consider them more fully, the Government are willing to withdraw and not move them at this time and reintroduce them on Report.

Lord Hodgson of Astley Abbotts (Con): My Lords, I do not want to run before my horse by talking about an amendment which I shall bring up later but I was listening carefully to what my noble friend was saying about the ability to reject part of a contract. In the case that I shall come to in a minute, which will be about custom-made double-glazed units, will that mean that one window only could be rejected?

Baroness Jolly: My noble friend makes a very good point. I have extensive speaking notes on that part and we will come to it later in the afternoon.

Baroness Hayter of Kentish Town (Lab): I thank the Minister for that. Perhaps it would be helpful if I put on the record what our questions are. I take very much the offer that she has made to withdraw and not move these amendments so that we can come back to them; with them being tabled at this stage, we obviously have not had all the time that we need. Neither have they been scrutinised by the BIS Select Committee or in the Public Bill Committee in the other place. That would give us a little more time and we are grateful for that.

The real question, which the Minister helpfully set out, is whether it is reasonable for a consumer to reject every part of what they think was bought under a single sales contract or only the faulty parts. With the example given, it may be that an entire bathroom suite has been ordered—all in the same pale blue or whatever one wants for a bathroom suite—but if the sink is faulty, that may have implications on the bundle and on whether the quality of the whole is affected by one part.

Though hearing and understanding the intention, we are worried that this proposal could have consequences for big, very expensive items, particularly whether the amendments would create an incentive for traders to supply related goods under separate orders or contracts to try to make the contract more severable. That could apply to a whole furniture suite, a music centre, a matching table, chairs and cupboards, and so on where

15 Oct 2014 : Column GC102

the householder thinks that they are buying a complete look. Rather like the Minister, I have focused on kitchen equipment and those sorts of things. However, telecoms and media bundles, which can include phone, broadband and television, are increasingly purchased by consumers. Such purchases raise the same issues as to whether they are a single contract or severable.

I should like to lay two further issues on the table because we will, with the Minister’s generous offer, come back to this. Thinking of the whole area, it will at least be possible for the installer or the retailer to take out insurance against the whole or the parts, whereas an individual consumer cannot at the point of installation. The Minister has kindly offered further discussions on the point at which one pays and whether one simply pays at the end of a contract. If it is for something fairly small, that may be simple, but when I have had building work done, money quite rightly has been wanted up front to buy components. We have tended to pay in bits, which makes it sound as if each bit is separate, although it was really just to help a small trader. Again, we would like the time to look at that. If this amendment really is to clarify current law, we would have fewer worries. For the moment, we are grateful for the time and hope that we will be able to sort this out.

Baroness Jolly: I thank the noble Baroness for her comments and appreciate that she needs more time to consider the amendments more fully in the light of remarks on this issue. I am happy therefore to withdraw the amendment with a view to revisiting it on Report.

Amendment 14 withdrawn.

Amendment 15

Moved by Lord Stevenson of Balmacara

15: Clause 20, page 11, line 24, at end insert—

“( ) A consumer shall not be obliged to incur any costs when returning rejected goods except those incurred in returning the goods to the place where they acquired physical possession of those goods.”

Lord Stevenson of Balmacara (Lab): My Lords, Amendment 15 would ensure that a consumer would not have pay to return faulty goods other than any costs incurred in returning them to the place where they originally acquired physical possession of them. It is intended to stop traders charging additional costs, such as large postage costs or costs for delivery of large items. I understand the Government’s view and I expect the response to be along the lines of that raised in the other place when this issue was raised; namely, that the present arrangements under the Sales of Goods Act 1979 should be continued. Basically, what is being said here is that when a consumer exercises a right to reject faulty goods, they are not obliged to return the goods unless they have agreed to. All the consumer needs to do is to make the goods available to the trader. The consumer and trader can arrange for the consumer to return the goods but it would be the consumer’s choice.

Of course, it does not exactly make it the trader’s responsibility in that circumstance to do that. The whole of this appears to be on an edifice of good will and

15 Oct 2014 : Column GC103

sound trading, which often does occur but, in reality, sometimes does not. Good traders are not the ones we have to worry about: it is the unhelpful, nitpicking, take-it-or-leave-it traders who we have all come across and who may say, “Oh yes, we will give you a refund on your sofa but you have to bring it back to the depot”. You then work out how on earth you are going to do that and probably give up in despair.

It has already come up in our Committee that there is clearly an invisible but rather firm line on the part of the Government regarding where they want to go on some of these issues where they feel that the evidence that comes from the earlier legislation is sufficient. However, times are changing, and the sharp practices and issues that have been raised with us as we have approached the Bill need to be addressed. This very simple amendment would put into the Bill something that we think would be good practice. It would help consumers, particularly vulnerable ones, to deal with poor traders, and would level the playing field between the good and the bad retailers. I beg to move.

4 pm

Baroness Jolly: The noble Lord has eloquently described how unfair it would be for a consumer to have to pay the cost of returning substandard goods. I have a lot of sympathy for the sentiments that he conveys; to receive substandard goods is disappointing and frustrating in itself, but to have to pay the cost of returning them really would heap insult upon injury. Where I think we differ is that I am not convinced that further protection is required. This is because of the protections already in the Bill and in common law. Moreover, there seems to be little evidence of bad practice from traders insisting that consumers fund the return of shoddy goods. Some large online retailers already cover the cost of returning goods, either by arranging for a courier or by providing a freepost sticky label.

The Bill already provides protection by stating in Clause 27 that there is no need for the consumer to return the goods unless they have specifically agreed to do so. The consumer need only make the goods available to the trader—for example, to facilitate their collection. Furthermore, if the consumer rejects the goods and terminates the contract, he or she can also pursue a damages claim against the trader in order to recover further costs that they have incurred, and these damages could include the cost of returning the goods to the trader if they had been required so to do. So although I am with the noble Lord opposite on the spirit and intention behind the amendment, I question the need for it. I therefore ask him to withdraw the amendment.

Lord Stevenson of Balmacara: My Lords, that was not unexpected, although I noticed, as the Minister was framed by the TV behind her, that Christmas bells were ringing, and I thought my time had come and this was going to be the first crack in the edifice that has been erected between us in this debate, but sadly not.

We are so close on this that I do not understand why the Minister cannot accept the argument. I find it very strange that the Government would be happy to rest on a situation where a poor, vulnerable consumer, with a sofa that is bulky, difficult and unfit for purpose,

15 Oct 2014 : Column GC104

has to rely on the good will of the trader to send a courier van, as she has described it, or even to send a sticky label—though I do not think that that would be much use—in order to send the sofa back to the warehouse. What happens if the trader does not do that? Are we really saying that everyone in the country has to become expert in raising small claims charges in small claims courts to try to persuade recalcitrant traders to do what is obviously the expected thing? I do not think so. I hear what the Minister says and I understand where she is coming from, but we might wish to return to this. I beg leave to withdraw the amendment.

Amendment 15 withdrawn.

Amendment 16

Moved by Lord Hodgson of Astley Abbotts

16: Clause 20, page 11, line 37, at end insert—

“( ) The entitlement to reject shall not apply, notwithstanding the right to repair set out in section 23 and the right to a price reduction under section 24, if the contract is for goods that---—

(a) are made to the consumer’s specifications or are clearly personalised, or

(b) have been installed following significant alterations to the existing fabric of a building so as to render return of the product impractical.”

Lord Hodgson of Astley Abbotts: My Lords, this amendment appears to be sticking one’s head in the lion’s mouth, in that it appears at first sight to be an amendment in favour of double-glazing salesmen. Like many Members of the Committee, I have seen examples on various consumer protection programmes where the behaviour has been completely unacceptable. Before Members switch off completely, though, I wonder whether they will bear with me while I drill down a bit into the issue. There have been egregious examples of fly-by-night double-glazing operators but equally there are many reputable firms, some of which offer guarantees as long as 10 years for the performance of their products. It is of course also worth being aware that double-glazing plays an important part in improving the insulation of people’s homes and in the fight against global warming. Therefore this industry has an important commercial role to play in our society. However, the nature of its bespoke—I use the word carefully—way of working can make it the victim of the unscrupulous customer. I will explain briefly what I mean.

New double-glazed windows have to be custom-made. They have to be measured individually, and the new window is thereafter made appropriately. Under present regulations—the consumer contracts regulations; I am sure that the Minister will correct me if I have this wrong—if the windows are wrongly installed, the customer has, quite appropriately, the right to repair. If the repairs are unsatisfactory, the customer is entitled in the end to a discount on the price. Those remedies are of course reinforced in Clause 23: the “Right to repair or replacement”, or in Clause 24: the “Right to price reduction or final right to reject”. I think the industry, and others, would say that in so far as the new provisions do not repeal the existing consumer contracts regulations, we need to make sure that they mesh up and match precisely. The industry supports the provisions of Clauses 23 and 24, as my amendment makes clear.

15 Oct 2014 : Column GC105

The challenge to the industry comes from the provisions of Clause 20 and the apparent lack—I hope that the Minister will be able to reassure me on this—of any test of proportionality. If I may take an example, a customer might order a dozen windows to double-glaze his or her house. The windows are measured, manufactured, and fitted. At that point, the provisions of Clause 20 appear to give the customer almost any grounds for rejecting the goods and treating the contract as being at an end. There is no requirement, as I read it, to seek any remedial work before ending the contract. At this point, the supplier is of course in a very weak position. The fitted windows have no alternative use, as they have been specifically measured and made. Moreover, they now form part of the structure of the building, which makes their removal even more legally complex. Amendment 16 merely seeks to achieve some equality of arms, that this absolute unproportional right of rejection as in Clause 20 is limited where goods are personalised and have been installed in a building.

To conclude, this Bill is entitled “Consumer Rights Bill”, and I support its principles. However, not all consumers are angels; therefore there is a concern that without some protection of proportionality these firms may find themselves taken advantage of by the unscrupulous. In addition, of course, the better the firm, the greater the risk, because the fly-by-night operators who should be the focus of our regulatory efforts will by then be over the hills and far away. I beg to move.

Lord Clement-Jones (LD): My Lords, I will briefly support the amendment in the name of the noble Lord, Lord Hodgson. He has made an even better case than the one that was presented to him in the first case. It struck me that in principle, if we set our minds to it, we could probably find quite a number of other areas apart from double-glazing, which was the example that the noble Lord gave, where goods are manufactured, bespoke, to a customer’s requirements. This particular case is very strong because of the construction work that is required to be done, which you cannot undo without serious damage to a property. I therefore hope that the Minister can give either clarification or assurance that something in the Bill deals with these kinds of made-to-measure products. A very valid point has been raised, and the noble Lord, Lord Hodgson, has put the case extremely well.

Baroness Hayter of Kentish Town: My Lords, the amendment as it is written, not necessarily as it is intended, is what concerns us. As written, it would undermine the right to reject. We do not see why a consumer should have any less of a remedy when something has been made to their specification than anything else. In fact, very often if it is made to their specification it may be particularly valuable, desired and even expensive. They certainly should not lose their rights just because of that. To some extent their rights should be stronger. because they have negotiated and explained exactly what it is that they want. As I was saying to the Minister earlier, I am wearing a made-to-measure garment.

Noble Lords: Very nice.

15 Oct 2014 : Column GC106

Baroness Hayter of Kentish Town: For readers of Hansard, you would love my crimson chiffon, off-the-shoulder, diamante-encrusted gown. However, at that level, yes, I have made-to-measure clothes, but my grandchildren, called Poppy and Isaac, have “Poppy” and “Isaac” embroidered all over their swimming towels and things like that. I had a very nice hand-painted plate made for my godchild’s wedding. What I would not like to see is that, as a consumer of those made-to-measure or personalised goods, I would lose my rights to reject if they were faulty. If they are for a wedding I am afraid that a replacement probably would not arrive in time. I am not convinced that personalised, made-to-measure things should lose their rights. If it is bespoke it is probably something that has been made fairly specifically.

I understand that the wording used has probably been carried across from the distance contracts rules, where if one orders a personalised product then one obviously cannot reject it simply because one has changed one’s mind, because there is nothing else the supplier can do. We understand that completely, but that is obviously not the same as where a personalised product is faulty. Our worry is that the amendment from the noble Lord, Lord Hodgson, as worded would undermine the rights that a personalised order should have.

If we have read this correctly, the amendment would be not a clarification, but a change in the current law. Our understanding is that the current law has not produced any problems in the past. We have certainly heard no catalogue of complaints, although the Minister might know more than we do about that. Our worry therefore is, whether it is simply my dress or a tailor-made kitchen, that we would want consumers to retain their rights if such a kitchen was full of faults or badly installed. It is a bit like what my noble friend Lord Stevenson said on the previous amendment: I do not think good traders have anything to worry about, but it is the others that we are worried about, who would be the ones most likely to misuse something such as this. Many personalised goods are expensive and very much thought about. If they are in one’s own house it is not that easy to keep having them changed: one has to take more days off work to have that done. This is one’s home we are talking about.

We hope that the Government are not going to accept this amendment, which I am sure is well intentioned but perhaps unnecessary.

Baroness Jolly: I thank my noble friend Lord Hodgson of Astley Abbotts for the reasoning behind his amendment. I also welcome his general support for the principle of the Bill. My noble friend Lord Clement-Jones is absolutely correct in pointing out that the amendment’s application would be wider than double-glazing: spectacles are another really good example of something that is personalised. I am grateful to have the support of the noble Baroness opposite.

The Government disagree with the approach that the amendment takes. The rights to reject in the Bill—both the short-term and final right to reject—represent fundamental protections for consumers where goods do not meet the consumer’s rights under the Bill.

15 Oct 2014 : Column GC107

4.15 pm

The removal of these rights to reject for particular types of goods would risk leaving the consumer in the position of either having to live with the faults, albeit with some compensation, or being trapped in a cycle of repairs or replacements. They would have more limited protection than if they had purchased something mass-produced, for example. These are not acceptable as a consumer’s only options.

A key tenet of the Bill is that there should be consistency and simplicity in how the remedies apply. A consumer should not generally face reduced protection simply because of the type of goods or the way in which they were provided. For example, a consumer who buys a washing machine as part of a fitted kitchen should have the same rights as another consumer who bought the same washing machine as a free-standing unit.

Whether the goods were bespoke or have become part of the fabric of a building, the consumer paid for goods meeting the key rights under the Bill, such as being of satisfactory quality and as described. The trader has failed to provide them. The consumer has done nothing wrong and should not be penalised by being trapped in the contract.

It is particularly unclear why the consumer should lose the protection of the right to reject if they have bought bespoke goods. If anything, the consumer is even more reliant on the skill and judgment of the trader for the production of the goods to the consumer’s specification. If the trader failed to produce the desired goods to the required quality, why should the consumer lose out?

I appreciate that, for the types of goods that this amendment covers, rejection could be problematic to the trader. This could be either in practical terms—for example, in removing a window that has become part of the property—or in cost terms. I understand that it may be costly for a trader to remove rejected goods which may have little or no residual value. At the same time, I understand that traders may be concerned that if consumers do not believe that rejected goods will be collected by the trader, the consumer will be able to continue using them without cost.

On the surface, these may seem like legitimate concerns, but I should make two points. First, the short-term right to reject already exists under the current law for sales of goods, but there is little or no evidence of it being abused by consumers and there is no reason to suspect that consumers will start abusing the right under the Bill. Secondly, the Bill explicitly states that the consumer must make the goods available to the trader or return them if they have agreed to do so, so it is clear to both parties that goods are not at the consumer’s disposal once rejected.

In order to reject, the goods must fail to meet the requirements of the Bill; for example, falling below the standards that a reasonable person—“reasonable” is a concept that we will come to throughout the Bill—would consider satisfactory.

I restate that the removal of the right to reject is too broad a measure. There is little or no evidence for the problem that the amendment seeks to address, and the

15 Oct 2014 : Column GC108

Bill already includes protections that are more proportionate. I therefore ask the noble Lord to withdraw the amendment.

Lord Hodgson of Astley Abbotts: I am grateful to the Minister and particularly to my noble friend Lord Clement-Jones for his support. This is a probing amendment and, quite rightly, some of its defects have been pointed out. However, my noble friend did not answer on whether partial rejection could take place. If I may use the example given by the noble Baroness, Lady Hayter, let us suppose that she bought not just an aquamarine off-the-peg but a crushed raspberry and a shocking pink as well, and let us say it turned out that the garment in crushed raspberry was poorly manufactured. Was she entitled to return them all? Is that part of the same contract? The issue for my noble friend is this: if in the example that I have given there are 12 windows and one is faulty, does the right to reject extend to all 12 windows, or is it limited to the specific article about which problems have been found? In the example given by the noble Baroness, of course she can return the one dress, but can she return all the dresses that formed part of a single order? That is what I am not clear about. I do not know whether my noble friend can illuminate me any further now.

Baroness Jolly: Indeed, my Lords. I will try to keep out of people’s wardrobes. Of course we are keen to ensure that rejection is a proportionate remedy. Amendments 14, 17 and 18 on severable contracts, which we have already discussed, were intended to give clarity here. As was explained in that debate, if the contract is severable, the consumer would have the right to reject the affected part, and the circumstances of the case would determine if they could reject the other parts of the contract.

Lord Hodgson of Astley Abbotts: My Lords, we seem to be getting some good clarity there. I will read carefully, take some further advice, thank my noble friend and all noble Lords who have taken part, and beg leave to withdraw the amendment.

Amendment 16 withdrawn.

Amendment 17 not moved.

Clause 20 agreed.

Clause 21: Partial rejection of goods

Amendment 18 not moved.

Clause 21 agreed.

Clause 22: Time limit for short-term right to reject

Amendment 19

Moved by Baroness King of Bow

19: Clause 22, page 13, line 12, at end insert—

“( ) Where, given the nature of the goods and all the circumstances existing at the time the contract was entered into, it is reasonably foreseeable to the parties that the consumer will not be able to ascertain whether the goods are in conformity with the contract within the time period set down in subsection (3), the time limit for exercising the short-term right to reject in relation to those

15 Oct 2014 : Column GC109

goods shall end once the consumer has had a reasonable period in which to ascertain whether the goods are in conformity with the contract.”

Baroness King of Bow (Lab): My Lords, Amendment 19 allows the period within which a consumer can exercise the short-term right to reject to be extended beyond 30 days when necessary to give the consumer sufficient time to assess the goods. In other words, the amendment is about limited flexibility and maintaining rights available to consumers under current law.

When the Law Commission recommended a 30-day period for a consumer to exercise the initial right to reject, it was on the basis that 30 days would be the “normal period” but that there would be flexibility in appropriate circumstances. The Bill recognises that some goods will typically perish within 30 days, and in those cases a 30-day right-to-reject period clearly is not appropriate. However, the Bill does not recognise that a longer period may be needed in some circumstances. Under current law, a consumer has a “reasonable” period within which to exercise the initial right to reject. The Law Commission recognised that for many purchases a court may consider a reasonable time to be longer than 30 days. We have some of the current case law, including the court finding it reasonable for a consumer to reject a new car after seven months. Presumably without this amendment a consumer would not have that protection from the courts. A more obvious example is a pregnant woman buying a pram before her baby’s birth or goods bought out of season—skis during the summer, lawnmowers in the winter, or the obvious Christmas present scenario.

Without the ability to extend the right to reject in such circumstances, consumers might be worse off under the Bill than under the current law, which allows that reasonable period. That is obviously our concern—and not just ours: apart from the Law Commission, the BIS Select Committee recommended that,

“the Government reconsider an exception to the time limit for the early right to reject where it is reasonably foreseeable that the consumer would need a longer period to inspect the goods and to try them out in practice”.

Amendment 19 would implement that recommendation. I beg to move.

Lord Clement-Jones: My Lords, I am intervening rather unfairly on this amendment to say that I do not support it and that, as the Bill’s passage carries on, a number of sectors will have their voices represented. I want to raise issues that have been raised with me by the motor sector, particularly the Finance and Leasing Association, which represents a wide range of those who finance the purchase of motor cars by consumers.

As we heard, Clause 22 introduces this 30-day right to reject goods if they are of unsatisfactory quality, however minor the defect. Sellers are unable to deduct the costs incurred—for example, depreciations—while the goods have been used by the consumer. As a result, the right to reject could have a particular cost implication in the world of motor finance, where 75% of private new car sales are bought on finance. New cars, as my noble friend may know, typically lose 15% to 20% of their value in the first 30 days, and in the event of a defect the car dealer will have to offer to repair the car, although the customer is not obliged to accept that

15 Oct 2014 : Column GC110

and can simply opt to hand back the vehicle. In a worst-case scenario, as the FLA says, the customer might have had the car for a month and driven it extensively, clocking up thousands of miles, only to hand it back because of a very minor defect—for example, the windscreen wipers failing to work properly. That is the case that the FLA makes.

I am very happy for my noble friend to write, since this is a rather unexpected intervention. There is clearly a balance to be struck between ensuring that customers are able to return faulty goods and preventing potential abuse. I therefore ask my noble friend whether the department will clarify, in the accompanying guidance to the Bill and in any associated publicity, that this new short-term right to reject should be invoked only if the quality of the goods is genuinely unsatisfactory—that is, the defects are not simply minor mechanical or cosmetic ones—and ideally it should be done as soon as possible within the 30-day period.

Secondly, could my noble friend confirm how this new short-term right to reject fits with Section 75 of the Consumer Credit Act, which already allows the customer to make a claim against a supplier or lender for breach of contract? This Consumer Rights Bill gives the consumer a right to challenge the supplier, whereas Section 75 of the CCA establishes an additional right to pursue the creditor for breach by the supplier. Will the Government be making clear in the guidance that the customer must obtain recourse from the supplier first, and that the supplier must not renounce responsibility on the grounds of Section 75?

Baroness Jolly: My Lords, this amendment reflects a recommendation by the Law Commission in its 2009 report, Consumer Remedies for Faulty Goods. Many of the recommendations in that report are implemented in the goods chapter of the Bill. Indeed, a normal period of 30 days was recommended by the Law Commission as giving a reasonable opportunity for a consumer to inspect goods, as well as meeting the expectation of consumers. However, I am concerned that the amendment would undermine the benefits of certainty provided by the 30-day time limit for the short-term right to reject.

Here I am staying with the example of the pregnant lady buying a pram. Let us look at the example of a pregnant woman who buys baby equipment in preparation for the birth of her child. The amendment would allow her to exercise the short-term right to reject potentially months after purchasing the goods, should it transpire that they were faulty. On the face of it, that may seem fair, but I see many issues that could arise to make this impractical. If a friend who was not pregnant bought the same goods for the same unborn baby, it is not clear whether it would be reasonably foreseeable that there might be a delay before they were used. Should all baby-related goods be subject to a longer period for rejection because it is not unreasonable to think that they may be for a baby who has not yet been born? Or would this only be reasonably foreseeable if the consumer said something to indicate it, or had a sign, such as being pregnant?

If it was reasonably foreseeable that there may be a delay before the consumer would use the goods fully, it seems difficult to know what the reasonable period

15 Oct 2014 : Column GC111

would be. Take the example of a consumer buying skis in the summer. What is the reasonable period for the consumer to be able to test them? A week into the European ski season, or a month? Not until the end of the season? How would the trader know when the consumer came to return the goods whether a delay was reasonably foreseeable when the consumer bought them? Would the trader have to keep a record of who bought what and any relevant circumstances, such as when they said they would start to use it? This would be extremely burdensome on businesses.

4.30 pm

This amendment has the potential to leave traders in the position where they ignore the 30-day limit and provide refunds for faulty goods long after it, to avoid falling foul of the proposed rule. This would totally undermine the protection that the Bill seeks to provide. It would bring potential for dispute, as the parties may have different views of what was reasonably foreseeable from the circumstances, and lead to a large degree of uncertainty. This is the exact opposite of what this measure is trying to achieve. A fixed time period provides clarity and gives the most certainty for consumers and business alike.

We must also remember that the Bill does not prevent the trader and consumer agreeing to exercise the short-term right to reject later than the 30-day limit, should the trader wish to offer a more flexible arrangement for the benefit of customers. A pram buyer might say “I would like to extend this beyond 30 days”; indeed, many retailers already choose to offer refunds for extended periods. The right to reject applies if goods fall below the standards that a reasonable person would consider satisfactory. This may include minor defects and is not a change to the current law.

Before I conclude, I would like to answer the point made by my noble friend Lord Clement-Jones. Section 75 of the Consumer Credit Act already applies alongside the consumers’ rights under current law. The consumer can seek redress from the seller or the credit provider, for example the credit card company. The Bill does not alter this interaction, nor would that be appropriate.

In regard to Amendment 19, I confirm that the specified time limit of 30 days is a minimum that does not prevent competitive positioning by retailers to offer more flexible arrangements. Of course, the Bill also offers further remedies once the time limit for the short-term right to reject has passed. For example, the options of repair or replacement and, afterwards, the final right to reject or a reduction in price are available. I therefore hope that the noble Lords are prepared to withdraw the amendment.

Baroness King of Bow: My Lords, I thank the Minister for her response but the key point here is that consumers, in some circumstances, will see a reduction in their rights under the current law. That is what would worry me, if I were one of the Ministers taking the Bill through. It is the Consumer Rights Bill, not a consumer rights reduction Bill. Notwithstanding the examples of pregnant women all over Britain, we want to see those rights upheld. The Minister spoke about the undue burdens on business. In theory, I could have

15 Oct 2014 : Column GC112

some sympathy with what she was saying but in fact, as things stand, we do not see Britain awash with businesses in disarray as a result of the current law. Given that, it seems strange that we would reduce the rights that consumers currently have.

I thank the noble Lord, Lord Clement-Jones, for raising the issue of balance because that is the key issue here: the balance of rights for both businesses and consumers. So, lastly, we think that this is an important issue. Both sides seem to come back to the pregnant women conversation. On hearing of this debate, should any pregnant women with backache in the middle of the night be reading the Hansard of this Committee, they will no doubt hope that they do not have overdue babies but women who have premature babies may rejoice at the current passage of the Bill. I beg leave to withdraw the amendment but we may well return to it at a future date.

Amendment 19 withdrawn.

Clause 22 agreed.

Clause 23: Right to repair or replacement

Amendment 20

Moved by Baroness Hayter of Kentish Town

20: Clause 23, page 14, line 6, leave out paragraph (a) and insert—

“(a) do so as soon as reasonably practicable and in any event within 14 days, unless the consumer expressly agrees otherwise;

(aa) do so without significant inconvenience to the consumer; and”

Baroness Hayter of Kentish Town: Amendment 20, which stands in my name and that of my noble friend Lord Stevenson, aims to provide greater clarity on how long a repair should take and, therefore, how long a consumer must wait before they may be entitled to a refund or a price reduction. At Second Reading, the whole House was very supportive of the aim of the Bill to increase clarity. Under current law, and under the Bill, where a consumer asks for a faulty good to be repaired, the trader has to do so within a “reasonable time”. However, “reasonable” is not specified, which causes uncertainty for the consumer but probably for businesses as well.

We are very keen that the Government’s new remedies should work but they will do so only if customers feel confident about their rights, particularly about when they can exercise those rights. As we have just been discussing, elsewhere in the Bill there is a significant change that we welcome, where the 30 days replaces the reasonable period to reject. The Minister has just emphasised the clarity of that. Our concern is that in this area the word “reasonable” remains as regards how long it takes to complete a repair. Clearly, the range of goods covered goes from yo-yos to the double glazing referred to by the noble Lord, Lord Hodgson. It would apply to an enormous range of goods and therefore it is difficult to have a precise time for all repairs.

15 Oct 2014 : Column GC113

Amendment 20 therefore proposes a longstop, coupled with an obligation for traders to effect the repair sooner if possible. For most repairs, 14 days would be absolutely adequate, even if spare parts had to be sourced from overseas. But the amendment also would provide flexibility where the consumer could agree to a longer period where they are happy to do so. This may be in cases such as those raised by the Glass and Glazing Federation where on-site visits will have to take place before any repair could be ordered, let alone fitted. That flexibility obviously would be possible. For other goods, there is no reason why they should not be repaired in less than 14 days. In a Which? survey, more than half of the respondents said that traders should not have more than 14 days to effect a repair. After all, that would leave a customer without the goods for quite a long time.

The clarity that this amendment seeks is to empower consumers to exercise their rights. In other words, they will know that they can ask for a repair to be done in that time. We think that it will reduce unnecessary disputes as to what is reasonable because both sides will know what to expect. It will also deter poor practice. The problem that the consumer has is that, while they are awaiting a repair, they are caught: they do not have the good; they do not have the money, so they cannot replace it at another shop; and they cannot have it repaired by another trader because they would have to pay for it. At that time, they would be very vulnerable. We hope that this amendment will facilitate the clarity that the Government seek in this Bill. I beg to move.

Baroness Jolly: My Lords, first, I acknowledge that a minority of consumers may be frustrated by lengthy waiting times when they have asked for a repair or a replacement. We have found little evidence that the time taken for repairs is a common problem. The Consumer Engagement And Detriment Survey2014 found that of those consumers who had experienced a problem with goods and services, only 5% had a problem with a failed or delayed repair and, of this group, delayed repair is likely to be a smaller problem.

BIS has considered a time limit with regard to repairs and replacements. There was a consultation in 2012 and we discussed the issue further with stakeholders, consumer organisations and traders. On the basis of that consultation and those discussions, we concluded that the best approach is a simple limit of one repair or replacement of goods that must be provided within a reasonable time and without significant inconvenience to the consumer. I am concerned that setting a longstop date for repairs or replacements lacks the necessary flexibility to deal with all types of goods in all circumstances. Attempting to apply such a broad rule would at the least be burdensome to some businesses, but may also lead to unwanted consequences.

The Bill provides flexibility because the time needed to carry out a repair will depend on the goods and the circumstances. In most cases of repairs there are a number of factors beyond the control of the trader, so a backstop period may impose a burden. If goods are faulty and the consumer wishes to reject them under the short-term right to reject, this is a simple process.

15 Oct 2014 : Column GC114

The consumer need only notify the trader that they wish to do so. On the other hand, repair or replacement of goods is a more involved process which will vary according to the goods in question and the type of fault. The application of a specific time period for repair work cannot effectively take account of all the relevant factors that affect the trader’s ability to provide a repair or replacement.

Repairs are often not carried out by the trader themselves, so the goods may need to be transported to and from the repairer. Further time is added if parts need to be ordered. For complex goods, time-consuming processes of diagnosing the fault and testing the repair may also be needed. The amount of control that the trader has over those factors is proportionate to the size of the trader. Small businesses have relatively little or no control over their suppliers and so would bear a larger burden. The British Retail Consortium gave the following evidence when this issue was discussed in the other place. It said that for small and medium businesses, setting a deadline for repairs is,

“more difficult … because they cannot have control over third parties that are perhaps coming in to do the repair … If that was regulated, clearly that would be one-size-fits-all, and would, I fear, penalise small, medium-sized and micro-businesses”.—[

Official Report

, Commons, Consumer Rights Bill Committee, 11/2/14; col. 33.]

The amendment would enable the consumer to agree to an alternative timescale. While this goes some way to providing flexibility we do not believe that it does enough, for two reasons. First, it opens up the possibility of the consumer simply refusing to agree an alternative timescale where it is impossible for the trader to provide a repair or replacement within 14 days. This creates an opportunity for the consumer to circumvent the first-tier remedies altogether, to the cost of the trader. Secondly, the amendment suggests that the alternative timescale should be agreed in advance. In many cases it will only become clear in the course of carrying out the repair that a longer period is necessary. If a repair takes a long time, of course, the consumer may well suffer inconvenience from being without the goods. The Bill already allows the consumer to move to the second-tier remedy if that happens. That protects the consumer, while still allowing the flexibility needed for the rules to work for different goods and circumstances.

The second main concern we have about this amendment is the risk of unwanted consequences. I underline the fact that we believe that repair is a vital remedy; it provides the trader with the opportunity to put right what has gone wrong, while enabling the consumer to have the goods they wanted. If done properly, it meets the needs of the consumer while reducing the burden on the trader and is more environmentally friendly as it is less wasteful than rejection. We are therefore concerned about any amendment, such as this one, that could shift the balance and lead to more rejections over repairs.

Imposing a backstop date may lead to a reduction in the quality of repairs. The trader may feel pressured to do a “rush job” to get it back in time rather than having the time needed to get it right. If consumers begin to lose faith in repairs, this could lead to an increase in rejected goods, which would be wasteful and costly. This is not just limited to repairs. Flexibility

15 Oct 2014 : Column GC115

is also needed where a trader is to provide a replacement, as the necessary time will depend on factors such as stock, their source, and whether the goods were bespoke. Bespoke goods are a good example of where the amendment could be problematic. Many bespoke goods will take longer than 14 days to make, in the case of a replacement, or to repair.

Creating a backstop 14-day period, and requiring the consumer’s agreement for a longer period, means that the consumer would always have an automatic right to veto the repair or replacement and move directly to rejection or money off for these types of goods. This would be hugely detrimental to the whole industry, which is especially concerning when you consider that many of the businesses offering bespoke goods are small, specialist traders that would be hit hard by these costs. I therefore ask the noble Baroness to withdraw the amendment.

4.45 pm

Baroness Hayter of Kentish Town: I thank the Minister for that thoughtful reply. Maybe we should revert to day one of Committee, though: if the Minister is going to help micro-businesses, we should make them consumers under the Bill. However, we decided that on an earlier day. I want to put on record that we welcome the main point about having one repair before rejection; we do not in any way question that.

I have only one comment. Which?, representing consumers, is very much in favour of this, and although I said its research showed that half its respondents said that 14 days was the right limit, one in five of them actually said that it ought to be seven days. I did not use that figure before. It is interesting that that group of consumers want quick repairs whereas the Minister quoted the British Retail Consortium, which clearly represents a different interest, and to some extent this is a balance between the two. I thank her for her comments and beg leave to withdraw the amendment.

Amendment 20 withdrawn.

Amendment 20A

Moved by Lord Clement-Jones

20A: Clause 23, page 14, line 34, after “Chapter” insert “—

(a) ”

Lord Clement-Jones: My Lords, I shall speak also to Amendment 20B. I am afraid that I am going to do exactly what the noble Baroness, Lady Hayter, did not want to do, which is to question the “one repair” point. I return to some of the concerns of the motor industry. The Society of Motor Manufacturers and Traders and the National Franchised Dealers Association have raised significant concerns over the wording of Clause 24 regarding “one repair” and the right to reject the product and demand a refund. These concerns are centred not on the principle of the right to repair or replacement itself but rather specifically on what “one repair” entails. This issue is of course particularly pertinent to the final right to reject in Clause 24.

At present the Bill does not specify what “one repair” would entail but the draft guidance states that one repair means a single attempt at repair and that

15 Oct 2014 : Column GC116

the trader can offer further repairs and replacements, but only if the consumer agrees. Members of the motor industry and the trade seek clarity over the definition of “one repair”, and do not accept that the current status of the draft guidance provides a fair interpretation of what is really needed to give clarity. They point out that the notion of a single attempt at repair, as set out in the draft guidance, is problematic for highly complex consumer goods such as motor vehicles. They say that these complex products may show a fault that requires more than one repair, involving a series of visits to the garage so that the fault can be diagnosed and tested, and have causes ruled out. In addition, a repair may appear complete but the fault may reappear, as can be the case with electrical faults, and a second or subsequent repair may fix the problem. These issues are likely to become increasingly apparent as motor vehicles become even more technologically complex, as they have done over the past few years.

The amendment seeks to include a definition of “one repair” to permit a process of repair and provide traders and dealers with a fair opportunity to fix these complex goods. It is worth noting that the consumer will still be fully protected by the right to repair or replacement under the amendment, as the process of repair would still need to be completed within a reasonable time and without significant inconvenience to the consumer. I hope that at least meets the interest of my noble friend, as this is a matter of considerable concern. On the previous amendment to which I spoke while seeking further clarification on the guidance, I note that my noble friend answered the second point about the CCA but not the first: what clarification the guidance would give for minor defects. Perhaps my noble friend can write to me on that matter. In the mean time, I beg to move.

Baroness Hayter of Kentish Town: We think that the noble Lord has brought an interesting issue to the Committee; I do not know whether the Government find it such. However, we are unconvinced that this needs to be detailed in the Bill as suggested. The Bill simply states that repair means making the goods conform to the contract, which means making them deliver what was promised. I do not think that it says “at one go”. Obviously, we look forward to hearing what the Minister will say on that.

However, the Committee will not be surprised that our worry is that the danger of the new wording is to allow a trader to make more than one repair and then claim that it was simply different stages of the same job, whereas actually they may have tried this, that and then something else—and want another go if they did not do it at first. I recognise that that is not what the noble Lord, Lord Clement-Jones, is aiming at, but the wording might allow for that. It is exactly to avoid such situations where consumers are fobbed off by a number of unsuccessful repairs before they can move to the next stage that we like the clarity of the Bill and would not want it jeopardised by these amendments, no matter how well-intentioned they might be.

As we are into personal stories, such as my clothes, let us take my new car. Of course, it got a great big problem and I took it back to Nick but rather than opening the bonnet all he did was to put a computer

15 Oct 2014 : Column GC117

on top of the car, which seemed to tell him what was wrong. I do not know how that worked but 55 minutes later it was completely mended. Cars, which I no longer understand even if I once did, may be more complex but one does not want to have to keep going back to the trader. We worry that the amendment would lose the clarity that there is in the Bill.

Lord Borwick (Con): My Lords, Clauses 23 and 24 as they stand seem to state that a consumer can have their money back if one repair does not fix the problem. That is reasonable for a product such as a television but it may cause problems where the fault is less obvious. Some products are incredibly complex; just as complex as consumers.

While we are telling personal histories, from my time in the London taxi industry I know that the clause would cause huge problems for car repairs. We had a customer bring in a taxi for repairs to his rear axle. My mechanics could not find anything wrong with it, and they therefore stupidly said that they had mended any problem that existed. However, the customer brought the car back, insisting that he was hearing dreadful noises from the back of the car. It turned out that the customer had spanners stored in the boot of his taxi that were slipping around. He removed them to bring the car to the garage, which is why no fault could be found. He then put the items back into the boot and so began hearing strange noises again as things slipped around, so he brought the taxi back in. Would the clause as drafted mean that we would have had to refund him because we did not fix the problem the first time around? You can have two problems—one masking the other—and you may need a process, as suggested in the amendment, to resolve some problems.

Baroness Jolly: I thank my noble friend Lord Clement-Jones for his clear explanation of the purpose of these amendments, and other Peers who have added their thoughts. The amendments reflect concerns that the motor industry in particular has about a single repair or replacement. Officials have engaged with the industry on this throughout the Bill process—I do not think that spanners came into the conversation. If it will help to allay the noble Lord’s fears, my noble friend Lady Neville-Rolfe or I will be happy to meet with representatives of the motor industry to discuss their concerns.

I am concerned, however, that these amendments would undermine the clarity of the Bill and the consumer protection that it provides. When the Law Commission consulted in 2008 on clarifying when consumers can move to a second-tier remedy, it concluded that the best and simplest way to make the law on repairs and replacements an effective protection for consumers was to create a cut-off so that after one failed repair or replacement the consumer was entitled to a second-tier remedy. In 2012 BIS consulted again on this matter and reached the same conclusion.

In both consultations, evidence was given by Which? and Citizens Advice of consumers becoming trapped in a cycle of repairs or replacements that failed to fix the problem but where it was not clear whether the existing triggers for the second-tier remedies were met.

15 Oct 2014 : Column GC118

In fact, one of the examples given was that of a car. The limit of one mandatory repair or replacement before the consumer is entitled to money back mitigates this risk. The consumer should never find themselves without a clear route to a satisfactory outcome for them.

These amendments would entirely undermine that certainty. For complex goods, they would allow a single repair to be extended indefinitely over a number of attempts. The intention in the Bill is that after a single repair attempt, the consumer is entitled to a second-tier remedy if the goods are still faulty. Under the amendments, while the consumer would not be trapped in a series of failed repairs, they could easily become trapped in one ongoing repair without an end in sight. Just to be clear, the effect on the consumer would be the same, and I am sure that noble Lords can see that.

The noble Baroness, Lady Hayter, talked about one repair and there have been some comments about what “one repair” means. The Bill is clear that a repair is an attempt to bring the goods into compliance with the Bill’s requirements. One repair is complete once the trader returns the goods to the consumer in response to the consumer’s request for a repair.

Of course, it is also important to remember that the Bill does not prevent the consumer from agreeing to further repairs. If goods do not conform to the contract after a single repair attempt and the consumer would prefer the trader to carry out a further repair rather than rejecting the goods, they are entitled to choose that.

I know that the motor industry has an excellent track record in providing good service to consumers, and that rejection is rarely resorted to by consumers because of the warranties supplied for motor vehicles and the repairs that they provide. There is no reason to believe that consumers will change this behaviour under the Bill; they already have the right to reject under the current legislation but choose not to do so in many cases.

If noble Lords consider the consumer’s position when a fault occurs with a vehicle, they will see that a repair, rather than rejection, is often in the consumer’s interest. It makes sense that consumers take time to choose expensive items. It also makes sense that it is not very appealing to give up on something that one has spent a lot of time and money considering and selecting. Presumably, the consumer has the car for practical reasons such as going to work, the school run, or doing the shopping. If the consumer rejects the vehicle, they will have the inconvenience of getting another one to carry out these normal day-to-day activities. However, the industry says that repairs are generally completed quickly, and where there could be a delay a courtesy car is often provided to mitigate any inconvenience to the consumer.

I believe that repair will remain a crucial remedy that consumers want so long as business, such as the motor industry, continues to provide effective, convenient repair. Crucially, the consumer is protected in the Bill in the worst-case scenario of a series of repairs failing to bring the vehicle up to standard. These amendments would remove that protection.

15 Oct 2014 : Column GC119

Where the faith of the consumer in the trader is eroded following a repair, the consumer should have the right to exit the contract or get some money back. They should not be trapped without further recourse. On the basis that the amendments undermine a key consumer protection that the Bill establishes, I must ask my noble friend to withdraw the amendment.

5 pm

Lord Clement-Jones: My Lords, I thank my noble friend for her response, rather negative though it was. I suspect that to some degree we are victims of our own personal experiences in this respect. The noble Lord, Lord Borwick, whose support I am grateful for, has had some unfortunate experiences from a business point of view; on the other hand, the noble Baroness, Lady Hayter, looks at this through rose-tinted glasses, having had her car repaired in a trice. It therefore depends on where you stand on this. I do not accept the Minister’s point that the amendment would have the effect of extending the repair indefinitely or undermining, which was the word that she used, the whole edifice that has been established here—that is a rather an extreme view about this.

The Minister’s statement about what “one repair” constitutes may go further than the wording of the guidance, some of elements of which I found quite helpful. That may horrify her, but she may have gone further than guidance, in which case I would ask that the guidance is looked at in the light of what has been constructed as a response today. That would be helpful.

I suspect that the industry will continue to kick the tyres of these clauses, to coin a phrase. It is still concerned about them. It may be that some tweaking could be done without opening the door in the way that the Minister thinks we have done in these amendments. I think that there will be some further discussions and I welcome in particular her offer, and indeed on behalf of her noble friend Lady Neville-Rolfe as well, to continue those discussions with the industry, which after all is an extremely important sector for us. In the mean time, I beg leave to withdraw the amendment.

Amendment 20A withdrawn.

Amendment 20B not moved.

Clause 23 agreed.

Clause 24: Right to price reduction or final right to reject

Amendment 21

Moved by Baroness Hayter of Kentish Town

21: Clause 24, page 15, line 37, leave out from “unless” to end of line 39

Baroness Hayter of Kentish Town: My Lords, we now move to a tricky and, from our point of view, rather serious amendment. The other amendments have been serious, but this is a significant amendment that we wish now to move. Amendment 21 stands in my name and that of my noble friend. I shall speak also to Amendment 22.

15 Oct 2014 : Column GC120

Clause 24 deals with the right of the consumer to receive a refund for faulty goods. It allows the seller to make a deduction from that refund to reflect the use that the consumer has had of the goods if it has been over some time. For example, if a sofa falls apart after a year—and, no, I do not have such a sofa—the seller can deduct a proportion of the price which reflects the use that has been made of it at that time. However, if the refund is sought within six months, there should be a full refund with no deduction for use.

However, the Bill creates an exception to that full refund within six months for items that it describes as having an “active second-hand market”. Our fear is that this could undermine the otherwise clear and final right to reject. Our amendment would remove that exception and retain the principle of a full refund in the first six months for all goods.

Our understanding of the background to the introduction of the “active second-hand market” let-out is that it addresses the particular issues of new cars, which it is estimated lose 40% of their value in their first year, about 10% in their first couple of yards as they are driven off the forecourt and up to 20% in the first 30 days. The argument is that a car dealer should not be required to provide a full refund in the first six months when, simply because of the way the car market works, the car has lost a significant amount of its value.

However, it seems to us that if the consumer, wanting a new car, has bought a faulty one, they should get a full refund. Otherwise they cannot replace what they thought they were buying—a new car—with another new car, because there will have been this deduction in value. They will not be put back in the position where they can buy a car and be the first registered owner, which is what makes it especially expensive to be the first owner of a car. The sums involved are quite considerable. I have it on good advice—since I have not bought a new car but, rather, have a newly bought car—that a new car could cost £35,000 but, if it was faulty, the dealer could reduce what they got back by £5,000. That leaves the consumer without a new car but with only £30,000 instead of £35,000 in their bank, and perhaps only 500 miles on the clock.

The other issue about the drafting of this clause is that it does not restrict the exemption from the deduction for use only to cars but covers every other sale of goods where the trader can demonstrate that there is an active second-hand market. The Government have argued that they have carefully drafted to cover only second-hand markets for sale “by traders to consumers”, to exclude the general eBay type of second-hand markets of individuals selling to individuals. There are a lot of other second-hand markets of traders to consumers, both online and on the high street, of furniture, second-hand clothing, vintage jewellery and—as I know better—bicycles, and so on, but if you buy a new one and that turns out to be faulty, you want the money back to buy another new product.

We are therefore worried that consumers will be denied a full refund for new furniture that collapses, clothing that is so damaged that you cannot even wear it, or broken jewellery, simply because there is an “active second-hand market” for these and the trader

15 Oct 2014 : Column GC121

says, “I’ll deduct it for use because you had some use of it”, even if they could not wear it or carry it, or whatever the case may be. Another problem is that, as the clause currently stands, the seller determines how much should be deducted for use; it is not a negotiable price. That creates quite an escape clause for dodgy traders, who have the freedom to set that reduction-for-use amount without it being reviewable as an unfair term because it would count as priced.

The then Office of Fair Trading and the Law Commission have both opposed this exception. The OFT thought that the drafting on “trader to consumer” did not exclude eBay-type comparisons, as many traders operate on eBay. The Law Commission opposed the deduction for use for the first six months and has urged us in Parliament to consider removing it, citing how much ill-feeling was caused by such deductions. As it said:

“Consumers felt that where they had paid for new goods, they wanted new goods. If the first goods were faulty, they wanted to be able to start again, with enough money to buy other new goods, not second hand ones”.

Which? worries that the let-out,

“could leave consumers out of pocket”,


“does not give consumers the certainty and protection they need”.

I understand that the Government have been focused on this let-out being for these very high-value goods, which lose their value very rapidly. The Minister in the other House said that the drafting had followed the recommendations of the BIS Select Committee. However, the Select Committee was critical of the drafting, pointing out that the lack of a definition of an “active second hand market” had been criticised in many submissions that it received. It also said that it would apply to most goods, which rather contradicts what the Government said about there “normally” being no deduction for use. The committee felt that the drafting would cover a lot of goods, and pointed again to the advice of the Law Commission that the deduction for use was “inflammatory” for consumers. According to the Select Committee, the Law Commission also said that it was rarely employed, so it may be an unnecessary complication.

The Select Committee concluded that,

“neither the policy … nor the drafting … on deduction for use is clear”.

It did not believe that the exemption from the six-month refund rule was workable, and recommended the deduction-for-use clause. It said that, should the provision be retained, the reference to a second-hand market comparison should be removed, with any deduction for use being based on the lifespan of the goods. In the case of the car I assume that this means that, if you had it for five months, the deduction would be based on five months’ use rather than on whether you could actually buy a five month-old car.

The clause may again be well intentioned and aimed at a particular problem with a particular product, but the catch-all is so wide now that it is probably misguided.

15 Oct 2014 : Column GC122

It certainly seems unworkable, could be unfair and could undermine consumers’ rights on a much wider range of goods.

The British Vehicle Rental and Leasing Association supports our amendment. It pointed out that in certain industries, particularly electric cars, there has not yet been enough time to develop a second-hand market, which might make it less likely that people would buy a new type of car. They would know that if anything went wrong with it they might lose their rights and be less likely to get their money back, the second-hand market not being a deep one.

I urge the Government to rethink the clause. If it really is simply cars that they have in mind, it might be better to deal with them in a different way rather than risk a much wider range of goods being caught by this provision. I beg to move.

Baroness Jolly: I thank the noble Baroness for outlining the reasoning behind her amendments, and will look first at Amendment 21. The principle of deduction for use is fair. Where the consumer has enjoyed uninterrupted use of the goods, the consumer should be accountable for that use. For example, if a consumer has been driving a car around for three years of normal use and then a fault manifests, the trader should be able to reduce the refund to take account of those three years of unaffected use. Of course it is right that consumers should be able to exit the contract at that point, but it is unfair to require the trader to bear the costs of that use.

When the Government consulted on the issue, only a very small minority of respondents to BIS’s consultation favoured scrapping the deduction for use, and two-thirds of online respondents agreed that it was right to allow a deduction to be applied in some instances. However, it is frustrating for consumers to get a partial refund even though they have had little use of the goods. The irritation of having to deal with a fault often eclipses what little enjoyment the consumer may have had from the goods, so the Bill includes a new protection that prevents, in most cases, a deduction from being applied within the first six months. There is a limited exception to this rule and it is this exception that Amendment 21 would remove.

5.15 pm

The Government are concerned that there are some goods types—in particular, complex, high-value goods—for which the removal of the right to make a deduction in the first six months could be hugely detrimental to traders. Cars are the obvious example, but we do not consider it appropriate to limit the exception to them in any way: other types of complex goods will benefit from the exception. The noble Baroness gave some examples. There will be technologies and industries that do not yet exist for which this exception would be appropriate. This is therefore as much about future-proofing the law as it is about protecting existing traders.

We have included an exception aimed at these types of goods because they may sometimes be subject to a series of minor faults. A car might, for example, have two small faults: the windscreen wipers might need

15 Oct 2014 : Column GC123

fixing and then an indicator bulb fails. These can both be quickly and easily addressed. I do not think it would usually be reasonable for a consumer to reject the whole car on this basis and expect a full refund, especially after driving it around for a few months. Traders will therefore be able to reduce the refund during this six-month period if they can demonstrate an active business-to-consumer second-hand market in goods of the same make and model. We want this exception to apply where it is most needed: to high-value or complex manufactured goods. Those types of goods tend to be those which traders have an interest in selling second-hand.

I stress the point that the market must be between business and consumers, so that the exception does not apply to goods that are commonly traded only between consumers, so the trader cannot point at sales on online auction sites as justification to apply a deduction. Furthermore, the example market that the trader uses as evidence must be in the same goods—taking into consideration any factors that a reasonable consumer would be expected to consider—so the trader cannot simply direct the consumer to a market in similar goods. For example, if a consumer would be expected to consider things such as the size or capacity of the goods when buying them new, the trader would need to demonstrate an active business-to-consumer market in the same goods of the same size or capacity. In any case, any deduction that a trader applies must reflect the use that the consumer has had of the goods and not simply the second-hand value of those goods. This is above all a deduction for use, not a deduction for value. What represents a fair deduction will be made on a case-by case basis.

To sum up, I believe that this is a proportionate exception that represents a fair and sensible protection for business and is targeted where it is needed. The criteria that we have set out mean that it is limited in scope, so the vast majority of consumers will get a full refund in the first six months. In any case where a deduction is applied, it will fairly reflect the use the consumer has had.

Turning to Amendment 22, the subsection that it would remove defines the concept of corresponding goods, which is used in the exception to the six-month rule on deduction for use. I have already explained the importance of requiring the example market used in the exception to be in goods of exactly the same type. The definition in this subsection is crucial to that criterion and therefore to limiting the scope of the exception. Without it, there is a real risk that the exception may be used more widely than is intended.

I therefore ask the noble Baroness to withdraw the amendment.

Baroness Hayter of Kentish Town: I thank the Minister for that. Unfortunately what she said—that this is aimed at complex and high-value goods, which I absolutely understand—is not stated in the Bill, so it will not just cover those goods. It will cover things where there is a make and model, but that does not necessarily make them complex or high-value. We can perhaps come on to whether or not it affects cars, but we have a real concern that this will go far further than complex and high-value goods: it may cover yachts, helicopters, jets,

15 Oct 2014 : Column GC124

planes and cars, but it will include anything else where a make and model can be covered. We continue to have worries on that. This will therefore be something we will need to come back to, but for the moment I beg leave to withdraw the amendment.

Amendment 21 withdrawn.

Amendment 22 not moved.

Clause 24 agreed.

Amendment 23

Moved by Baroness Howe of Idlicote

23: After Clause 24, insert the following new Clause—

“Right to redress

(1) Where the consumer does not believe that remedies offered adequately resolve the original problem, the consumer has a right to seek redress from an alternative dispute resolution scheme, as provided for in statute or as approved by the competent authority.

(2) The Secretary of State must appoint a single competent authority.

(3) For areas not covered by an approved or statutory alternative dispute resolution scheme, the Secretary of State must appoint a residual body to provide this service.

(4) The Secretary of State must ensure that consumers have a single point of contact to identify the relevant alternative dispute resolution scheme.”

Baroness Howe of Idlicote (CB): My Lords, the Bill offers an excellent opportunity to simplify and improve the consumer rights and redress landscape across the UK. Much of the Bill is certainly to be welcomed, consolidating and simplifying the existing landscape surrounding consumer redress as it does. However, it is notable that reference to alternative dispute resolution —ADR—as provided by ombudsman schemes and strongly backed by Which?, is absent from the Bill.

ADR provides benefits to both customers and businesses. For consumers, it offers free, fast and effective redress when things go wrong. For businesses, it provides a cost-effective way of improving the trust in and performance of their organisation. However, the current landscape surrounding ADR is complex and confused. ADR is available in some sectors but not others. In some sectors, ADR schemes cover only part of the market; in others, multiple ombudsman schemes exist. This patchwork of provision means that consumers face a complicated and confusing landscape and are often unaware of what support is available to them. I believe that my amendment would help to improve the situation.

In keeping with the ethos of the Bill, the amendment would simplify the ADR landscape and, importantly, strengthen access to redress for consumers across all sectors. Importantly, too, the new clause would formally set out the existing rights to redress that consumers have and ensure that all ADR schemes are consistent in standards and quality of services, improving the support and protection available to consumers. It would also ensure that the Bill complements work currently being undertaken as part of the transposition of the EU directive on ADR. The directive, to be transposed by spring 2015, requires businesses across all sectors to offer redress via an ADR scheme, either as a specific scheme or as part of a wider residual scheme. Lastly,

15 Oct 2014 : Column GC125

and equally importantly, it would provide for a single point of contact for consumers, who could then be directed to the relevant ADR scheme depending on the nature of their problem.

The amendment would materially benefit consumers across all sectors by formally establishing the right to redress through ADR, paving the way for wider coverage of ADR schemes and achieving simplification in the system. I beg to move, and would welcome the views of the Government and others on the amendment.

Baroness Drake (Lab): I support the noble Baroness, Lady Howe, on Amendment 23. At the moment, in so many areas of retail, the primary route to a remedy if there is a dispute is to go to the courts, but going to a court is far too daunting and complicated for many people. The paperwork may well put them off. The court fees may act as a disincentive, especially if the goods purchased are modest in monetary value. Even if a consumer wishes to begin by going to the small claims court, if a case is considered complex by the judge, it may be transferred to the normal county court list, which would definitely deter and daunt most people.

I realise that mediation has been introduced in small claims cases, but the psychological impact of going to court—its legalistic aura, the language of the courts and dealing with the necessary paperwork—can all still be off-putting and a deterrent. The behavioural response of consumers to alternative dispute resolution and the courts is very different. The court system is not really fit for purpose for many ordinary consumers, certainly in respect of smaller consumer rights claims. As the noble Baroness put it so compellingly, alternative dispute resolution is essential, otherwise consumers will have their rights enshrined in a new Bill but many will be deterred from exercising them. Consumer inertia in pursuing rights and securing remedies will remain strong—an assumption, unfortunately, that some traders build into their responses and their market behaviour.

Consumer rights and access to an effective means of enforcing them need to be inseparable. You can give consumers all the rights in the world, but if they are deterred from exercising them because the process is off-putting, complicated, disparate or whatever, as was clearly set out by the noble Baroness, their rights will not be effective and the market will remain dysfunctional in part.

The Bill has several clauses that relate to redress, but it does not lock into an alternative dispute resolution scheme. It seems extraordinary that a Bill so focused on securing and improving the position of consumer rights does not seize the opportunity to lock into ADR. I know that the Government are consulting on the details of such a scheme in the light of the EU directive, but that in itself is not a reason for missing the opportunity to use the Bill to place a duty on the Secretary of State to implement such an alternative dispute resolution scheme. As the noble Baroness pointed out, a key purpose of the Bill is to consolidate, simplify and strengthen consumer law.

The Government agree—it was confirmed by the Minister, Jenny Willott—that if we are to have a consumer rights system that works, ombudsmen and

15 Oct 2014 : Column GC126

alternative dispute resolution will be critical parts of it. Having conceded that fundamental analysis and intellectual point, we have this big omission in the Bill. Although the Government are working on implementing the EU directive and looking at the different options, the amendment does not inhibit or undermine that detailed work. It does not prescribe exactly how the directive will be implemented; rather, it makes clear in the Bill that the right to redress for consumers must include access to an effective, independent alternative dispute resolution regime and that the duty is on the Secretary of State to ensure that that happens. The amendment would not prejudice the outcome of the consultation on the implementation of the ADR directive but would clearly place the duty on the Secretary of State. Having followed the debate on this in the Commons, it would appear that the only argument mobilised by the Government is that somehow it would prejudice the outcome of consultation. I do not think that it does, because it enshrines a fundamental principle which the Government concede is essential to an effective system of consumer rights. The detail of implementing that principle can be left to the outcome of consultation and subsequent regulation.

5.30 pm

The Government have known for a while that the EU directive had to be transposed into law. Given that all the parties recognise the importance of an alternative dispute resolution process to the exercise of consumer rights, not including the matter in the Bill is a lost opportunity. We do not know yet where in implementing the directive the Government will go on the continuum from the minimal option of a dispute resolution process of last resort to radical reform of the ombudsman landscape. That is still a matter for Parliament to consider. The amendment would put a duty on the Secretary of State to put an independent and effective alternative dispute resolution scheme in place.

The noble Baroness made the important point that her amendment goes with the grain of simplifying the consumer experience. That is not only the experience of the consumer when engaging with the trader but their experience when seeking redress. As the noble Baroness explained, we know that that can be off-putting; it can be complicated; and it can be variable, depending on what economic sector we are looking at. Her amendment is very clear and goes with the grain of the Bill, which is to simplify consumers’ experience in securing their rights and accessing redress. Particularly compelling was her argument about a single point of contact, because who knows where the detail of the Government’s proposals on ADR will settle in the light of the EU directive? Consumers need to have easy access to knowledge and easy comprehension of what the resolution alternatives are. They need a point of contact which will assist them in accessing redress when they need a resolution to their problem. I therefore strongly support the noble Baroness in her amendment.

Baroness Crawley (Lab): My Lords, I, too, support the amendment in the name of the noble Baroness, Lady Howe of Idlicote, and, in doing so, refer noble Lords to my consumer interests in the register.

15 Oct 2014 : Column GC127

As we know, the alternative dispute resolution directive requires the existence of simple, efficient, fast and low-cost ways of resolving domestic and cross-border consumer complaints—without the need to go to court, as my noble friend Lady Drake just said. It also assists business, as the noble Baroness said. ADR should have expertise; it should be independent; it should be impartial. The process should be transparent, effective, fair and legal. Member states are required, as the noble Baroness, Lady Howe, said, to identify competent authorities to ensure that ADR entities are competent to deliver the directive’s requirements. That process is ongoing.

The important point to keep in front of us today is the need to keep the environment as simple and as accessible as possible for the consumer. Although there is a need for sectoral expertise in transposing the directive, it is also important to have a low number of brands involved and a common front end or entry point, as both noble Baronesses have referred to, for the consumer to access a resolution to their complaint, be it a low-level complaint or a highly complex one.

The amendment in the name of the noble Baroness, Lady Howe, backed as it is by respected consumer bodies, will give consumers the confidence of legislative heft when it comes to this important new aspect of justice for consumers, which has attached to it a date of spring 2015.

Accepting the noble Baroness’s amendment is not gold-plating in any way; it is ensuring that the Government’s implementation of the ADR directive is a feasible process in the first place. I hope that he ramendment is given the serious consideration that it deserves.

Baroness Hayter of Kentish Town: My Lords, as has been clearly stated, the proposed new clause addresses what my noble friend Lady Drake says is the extraordinary absence from the Bill of any mention of the EU directive on ADR, the absence of any right to go to independent redress, and indeed the absence of any reference to what has just been mentioned—the competent authority to be set up to approve such schemes according to the EU directive.

The amendment would also add a very welcome missing element from the directive: the right for a consumer to have their complaint heard by such an alternative dispute scheme. Without such a scheme, we wonder what will happen to consumers when they cannot agree on the remedies set out in the Bill. Elsewhere, the Government have said, “They should go to Citizens Advice”, which I hope will be well funded to do all this. However, even if they do so, Citizens Advice cannot adjudicate; nor can it enforce any remedy. As has been said, the only alternative then is for the consumer to go to court for damages, and the reality is that that will not happen. At the moment, legal and financial clients, social housing tenants and patients can all go to an ombudsman; there are statutory ombudsmen for all those. The Government are in due course going to implement the directive, so they agree with us that consumers should have access to ombudsmen across the whole market.

The BIS Select Committee asked the Government why on earth the EU directive had not been included in the Bill. Which? regretted that it was omitted, and

15 Oct 2014 : Column GC128

the OFT, as it was at the time, asked for the incorporation of the directive into the Bill. Two really quite good things are happening. I know that I am not allowed to say that the Government are doing good things—but they are with the Bill. Some people would not like me to say that the EU was doing good things, but I am happy to say that it is with its directive. So we have two good initiatives coming along, but would you know it? They are being handled in different ways with different legislative processes and on different timing.

It is not as if this is a difficult issue. The British Retail Consortium and the Federation of Small Businesses welcome the alternative dispute approach to dealing with problems, rather than going to court. As Martin Lewis commented when he was giving oral evidence to the Public Bill Committee, unless the Bill and the directive are joined up,

“you are going to have a wonderful Bill that gives people many new rights”—

he went further than I would about the Bill—

“that they are never going to be able to use”,—[

Official Report

, Commons, Consumer Rights Bill Committee, 11/2/14; col. 55.]

because they will be without redress. The Government have assured us that the new directive will be implemented by spring. However, we still await their response to the submissions that BIS got to its consultation, which I think finished five months ago. The clock may be slow in this Room today, but it is ticking. We may have no chance to debate BIS’s response to the consultation because it may not be dealt with in primary legislation, which also seems a shame.

Most importantly, the two items are two sides of the same coin, so we hope very much that the noble Baroness the Minister will accept the amendment today. Whether or not the exact words please her we understand, but if she could accept that there should be reference to and embedding of the ADR in the Bill, that would be to the credit of the Government. We will then try to seek credit for it, but we will give it to the noble Baroness, Lady Howe, instead. It would be a wise Government who did this and took the full credit for it.

Baroness Oppenheim-Barnes (Con): Could I just highlight one of the main points? The noble Baroness mentioned the AER. One of the directives that she has mentioned as dealing with the way in which payday loan information is given by the providers is that it is still given in the old form, with the AER only, with no written amount. The noble Baroness might recall that we had an amendment to the Financial Services Act, during which we were told that the Government at that time—this is some time ago—were busily discussing that directive and would be wanting to implement it as soon as possible. It seems to me that the request from the EU about AER was a very small, perfectly justified and overdue one, and it is particularly disappointing if the Bill becomes law before that amendment has been made by the Government.

The Parliamentary Under-Secretary of State, Department for Business, Innovation and Skills (Baroness Neville-Rolfe) (Con): My Lords, I thank the noble Baroness, Lady Howe, for raising this very important issue. Her interest and expertise in consumer problems was demonstrated at Second Reading, which I missed, so it is very good

15 Oct 2014 : Column GC129

to have her engaged on this important subject. The noble Baroness, Lady Drake, also rightly underlined the value and importance of ADR and of ombudsmen and ombudswomen.

I want to make it clear that the Government are very supportive of alternative dispute resolution, which provides a more accessible route than the courts for consumers to obtain redress. Accessibility was a point well made and emphasised by the noble Baroness, Lady Crawley, and, as the noble Baroness, Lady Howe, said, it is also good for business. The noble Baroness, Lady Hayter, described the advantage of wider ADR and talked—rightly, I think—of the benefits of both this Bill and the ADR directive, so I thank her for that.

Before I address the specific amendment, I shall take a moment to reflect on what the Bill seeks to achieve. The Consumer Rights Bill sets out a simple and modern framework of consumer rights and, where appropriate, enhances measures to protect consumers. Clearer rights and remedies mean that both consumers and businesses will be better equipped to resolve any issues at an early stage. Having said that, we recognise that there will be occasions when problems arise that cannot be so easily resolved between the parties. In these instances, access to alternative dispute resolution can prove invaluable.

I am glad to say that the Government will be strengthening the framework for alternative dispute resolution when it implements the European directive on ADR in July 2015, to which I think all the noble Baronesses referred. Currently there are well established mandatory ADR schemes in sectors with a high risk of consumer detriment. It is worth remembering that. One example is financial services, and I was interested to read that the largest ADR provider in Europe is the UK’s financial ombudsman, and that last year it resolved 500,000 cases. Another example is energy, but in other sectors access to ADR is limited. The directive requires us to address these gaps and ensure that ADR is widely available.

We recently undertook a consultation exercise, which has been referred to, on the best way to implement the ADR directive. Stakeholders were asked for their views on the issues covered in this amendment, and we addressed several other issues in our consultation. We proposed that the compulsory use of ADR should continue to be targeted at sectors where consumers most need it. We said that our preferred option was not to gold-plate the directive by introducing a blanket compulsory requirement for all businesses to use ADR; that would come at significant cost to businesses, which pay for the provision of ADR through a mixture of annual fees and case fees. However, we expect the directive’s requirement for businesses to inform consumers with complaints about ADR and to encourage much greater participation in ADR schemes. We will very shortly be publishing our consultation response document, which will outline the Government’s proposals for implementing the ADR directive and improving and simplifying access to redress for consumers, a point raised by the noble Baroness, Lady Crawley.

15 Oct 2014 : Column GC130

5.45 pm

Baroness Hayter of Kentish Town: Can the noble Baroness tell us when the consultation will be published?

Baroness Neville-Rolfe: All I can say is that the consultation will be published shortly. I confirmed that the implementation date for the directive is 2015. The noble Baroness anticipates what I was going to say at the end, which I will say now. I assure your Lordships that our implementation plans for the Bill, which we discussed on Monday, will also advise businesses of their forthcoming responsibilities under the ADR regulations. Similarly, information to consumers will be available in one place—to meet the point that we will be joined up.

If I may elaborate, our response will explain how we intend to make ADR widely available and accessible for consumer disputes and our plans for competent authorities to monitor the provision of ADR. I hope that noble Lords will understand that I cannot set out the full detail of the Government’s response before publication. We consulted on whether a consumer complaint helpdesk would be useful to help consumers and business to access ADR, which was a point made by the noble Baroness, Lady Drake.

We will publish our intentions in our consultation response document. Once we have published our response, we will work with partner bodies to prepare for implementation. We will then publish draft regulations to transpose the ADR directive by spring 2015.

I would not want to affect the ongoing work to implement the ADR directive in regulations by amending the Bill. The noble Baroness, Lady Howe, said that her amendments would achieve consistency and simplification. However, the ADR directive contains many provisions, several of which are linked. That is why we feel that it is far better and more straightforward for businesses to implement the ADR directive in one package. Our consultation response document will set out our plans for doing so. We certainly want to avoid any unhelpful confusion that could be caused by implementing the directive partly through the Bill and partly through regulation.

The noble Baroness, Lady Drake, raised an important point about the need for the implementation of the ADR directive to complement consumer rights. I am glad to say that the changes that we will make to implement the ADR directive will complement the reforms in the Bill and improve access to and awareness of the ADR. We want to take the same comprehensive approach to ensure that we deliver the best possible ADR framework. Our plans for implementation allow us to do so. I therefore ask the noble Baroness to withdraw her amendment.

Baroness Oppenheim-Barnes: Before my noble friend sits down, can she tell the Committee what AER stands for?

Baroness Neville-Rolfe:ADR stands for alternative dispute resolution. I thank the noble Baroness for her intervention, which I did not think called for comment but I am happy to discuss it with her on another occasion.

15 Oct 2014 : Column GC131

Baroness Howe of Idlicote: My Lords, first, I thank the Minister for putting so explicitly the Government’s position of where they intend to be going with ADR—now we all know what the initials stand for. She has raised a lot of expectations and some hope. We are all concerned to ensure that it is kept on the agenda. We would not want it to be as slow as she has in mind. It is clear that those of us who feel similarly will need to table another amendment, which may be rather different, at Report to see how things are progressing.

Once again, I thank all my colleagues for so kindly joining in to support the amendment from their professional background, and I beg leave to withdraw the amendment.

Amendment 23 withdrawn.

Clauses 25 to 27 agreed.

Amendment 24

Moved by Baroness Hayter of Kentish Town

24: After Clause 27, insert the following new Clause—

“Product safety and recall

(1) The General Product Safety Regulations 2005 (SI 2005/1803) are amended as specified in the following subsections.

(2) In regulation 9 (obligations of producers and distributors), after paragraph (3)(d) insert—

“(e) a summary of what the producer or distributor suspects, or has reasonable grounds to suspect, is the number of consumers affected and the type of personal injuries and property damage which the risk associated to the product has caused”.

(3) In regulation 32 (reports), after paragraph (5), insert—

“(6) Before completing any report under this regulation, the Secretary of State shall consult the enforcement authorities, such bodies representative of producers and distributors, such bodies representative of consumers and such other persons as he thinks fit.”

(4) In regulation 33(3) (duty to notify Secretary of State and Commission)—

(a) after “specifying the reason for taking it” insert “, and shall publish such measure, and the reasons for taking it, on his department’s website”,

(b) after “of any modification or lifting of such a measure” insert “and shall publish any such modification or lifting immediately on his department’s website”.

(5) In regulation 33(5)—

(a) after “the Secretary of State shall immediately” insert “publish such measure or action on his department’s website and”,

(b) after “of any modification or withdrawal of any such measure or action” insert “and shall publish any such modification or withdrawal immediately on his department’s website”.

(6) In regulation 39 (information)—

(a) in paragraph (1), for “shall in general make available to the public such information as is available to it on the following matters relating to the risks to consumer health and safety posed by a product” substitute “which has received a notification under regulation 9(1) shall immediately publish on its website in respect of the product”.

(b) after paragraph (1)(b), insert—

“(c) a summary of the number of people reasonably suspected of being affected, and the type of personal injuries and property damage reasonably suspected of being caused by the risk”.

15 Oct 2014 : Column GC132

(c) in paragraph (1), for “and the measures taken” substitute “and the measures or action taken, whether on a compulsory or voluntary basis,”.”

Baroness Hayter of Kentish Town: My Lords, Amendment 24, which stands in my name and that of my noble friend Lord Stevenson, addresses a very serious and sometimes fatal weakness in consumer protection for electricity safety: when there is a generic and dangerous fault in a particular model of electrical goods. There is no adequate mechanism whereby other owners of the same make and model are notified of the need to stop using it and exchange it.

The amendment therefore requires manufacturers to inform enforcement agencies of the number of consumers affected, and of the extent and type of damage and injuries that have been caused. It also requires the Secretary of State to publish information on dangerous products and to consult consumer groups when publishing their five-yearly report on consumer protection regulations.

This is an issue of great sadness, because it is very much about deaths and injuries. There are probably 40 or 45 deaths a year in domestic fires that have been caused by faulty appliances. Although there is a system for manufacturers to recall faulty products, it is very flawed because of the difficulties of alerting customers who have unwittingly bought such faulty products. It has also been undermined by unjustifiable delays on the part of some manufacturers in recalling products, even once they know them to be unsafe. Such cases relate to potentially fatal faults, such as risks of fire, electrocution or carbon monoxide poisoning.

It has been estimated that there are up to 2 million unsafe products in people’s homes. Manufacturers currently have no obligation to declare how many of those dangerous appliances are in circulation. Once manufacturers become aware of faults in their goods there is no specific timeframe in which they have to take action. In several instances, manufacturers have taken years to take action after a fatal accident caused by one of their appliances. Current BIS guidelines say that a recall is expected,

“as soon as the manufacturer becomes aware of a problem”.

That is not specific—more than that, it is not mandatory.

The Government do not feel that this should be mandatory; they want to continue with the voluntary approach. In the Commons, the Minister said that most—I emphasise, most—businesses take their customers’ safety seriously. I do not think that is good enough: “most industries” is not “all industries”. We have to safeguard consumers not from the good businesses but from those which do not take safety seriously.

Electrical Safety First detailed a particularly sad case of a preventable death that happened because of failures in the recall system—I am sure other noble Lords have received the same information. Mr Santosh Benjamin-Muthiah, a 36 year-old father of two, died in 2010 because of a fire in his home caused by a recalled fridge-freezer. The manufacturer had been aware of a fault with the defrost timer on that defective fridge-freezer three years before 2010, but did not issue a safety notice until 2011, by which time as many as half a million had been sold. In 2013—two years

15 Oct 2014 : Column GC133

after the recall had started—the manufacturer estimated that, although 190,000 had been repaired and 186,000 were scrapped, about 114,000 were still unidentified and still in someone’s home. The coroner at the quite recent inquest on Mr Benjamin will, I think, have written to the Chief Coroner rather than to the Government. However, he has written through his official channels calling for the creation of a simple, easy-to-use and government-funded all-national website where all products can be registered and accessed by consumers and retailers. He also called for increasing fines for manufacturers who fail to notify and for the creation of a code of practice on product recalls. The Chief Fire Officers Association has also called for manufacturers to take legal responsibility for eradicating risks caused by faulty appliances. Peter Dartford of the Chief Fire Officers Association has said:

“The reality is that it is the manufacturers who have created these risks and it is their moral and legal responsibility to ensure that these risks are eradicated from homes”.

Our amendment would strengthen consumer protection in line with the coroner’s recommendation and the fire officers’ views. Perhaps even more importantly, our amendment is in line with the views of the families, who have been quite needlessly bereaved of their loved ones. I beg to move.

Baroness Bakewell of Hardington Mandeville (LD): My Lords, I support this amendment and I thank the noble Baroness, Lady Hayter, for her example of Mr Benjamin, as it saves me the trouble of giving that same very tragic example. It seems not unreasonable for the trader to record the consumer’s details at the point of sale and return the guarantee card to the manufacturer. This would seem a more efficient way of dealing with it than the present, somewhat haphazard system of leaving it to the consumer to fill in and return the guarantee—a document which is often at the bottom of the packaging and sometimes overlooked. If such a system were in existence, it would be much simpler to compile a register of consumers and contact them individually when and if a product recall is necessary. This would ensure that all those affected by product recalls were aware, rather than some being left in the dark about the risks they run by continuing to use the product.

Consumers, once they are aware of a product recall, are generally assiduous in returning their products to the relevant trader for repair or replacement. This is particularly important, as we have heard, where the product has an electrical fault which could lead to damaging and life-threatening domestic fires. The fire service, as we also heard, is able to produce quite frightening statistics on domestic fires caused by electrical faults, some of which tragically involve death. It is really important that we do all we can to protect consumers from this fate and I am pleased to support this amendment.

Baroness Neville-Rolfe: My Lords, there is already robust legislation on product safety that is based in large part on an EU-wide regime. I have listened to the debate and I would like to address the general, because I think the amendment is a general one, and then look at the electrical issues that have been raised.

15 Oct 2014 : Column GC134

The General Product Safety Regulations 2005 place strict duties on producers and distributors to ensure that only safe products are supplied. Importantly, these duties are backed by criminal penalties. However, there will unfortunately be occasions when things go wrong and a product needs to be recalled. I very much share the concerns of the noble Baroness, Lady Hayter, about accidents, especially fatal accidents. We need to learn all the time from such experiences. When a recall is necessary, producers and distributors are legally obliged to notify and collaborate with trading standards to ensure that all reasonable measures are taken so that unsafe products are swiftly removed from the market and the risks to consumers are addressed.

6 pm

The Government acknowledge that there is scope to improve the overall effectiveness of product recalls. However, I do not believe that introducing the new reporting requirement suggested by noble Lords is the right approach. Trading standards already work closely with manufacturers and distributors when corrective action, such as a product recall, is required. Under the 2005 regulations, if a producer or distributor discovers that it has supplied an unsafe product, it must notify trading standards, providing details of the risk and the actions taken to address the risk. Where the risk is serious, further information must be provided, including all available information relevant for tracing the product. Failing to notify trading standards is also a criminal offence. It is a criminal offence if the producer or distributor fails in its duties in respect of product recalls, including any failure to co-operate with trading standards in acting to address the risk. If the co-operation proves insufficient, trading standards can issue a formal notice requiring certain action, such as a recall, to be taken. Failing to comply with such a notice results in more substantial criminal penalties.

The noble Baroness, Lady Hayter, talked about delays in recalling products when manufacturers know that they are unsafe. She suggested that there were no specific timescales. I know from personal experience in business that manufacturers want to deal quickly with cases. Where a recall is required, the problems are often practical rather than legal, such as tracing the unsafe products. Best practice is promoted most effectively through guidance and very strong collaboration developed in partnership with producers and distributors, based on experience rather than yet more legislation, so that the system is effective. It is worth emphasising that it is very much in the interests of business to ensure that recalls are successful in order to avoid the criminal liability that I have outlined, to avoid product liability claims from injured parties and to protect their reputations.

It is right that information on the risks posed and the action taken is transparent where this is beneficial to consumers. However, what will work for consumers will depend on the circumstances and the specific action that is being taken. The Government consider that the proposal by noble Lords to compile and publish such general data will be of little value to consumers. Moreover, the administrative burden of providing the information cannot be justified. However, we have made good progress in the electrical sector. We are working with representatives from industry, consumer

15 Oct 2014 : Column GC135

groups, enforcement agencies and other interested parties to ensure that effective corrective measures are taken. As I have said, we are learning from experience.

The noble Baroness, Lady Hayter, suggested a simple, easy-to-use government-funded website for consumers to register their products. A new initiative to improve the ability of businesses to contact consumers is to be launched on 4 November with support from my colleague, Jo Swinson, Parliamentary Under-Secretary of State for Employment Relations and Consumer Affairs. In particular, for product recalls, we need to ensure that publicity to consumers is as effective as it possibly can be and consider all available means of communication to identify those most appropriate for each individual circumstance in a recall. That is in the best interests of consumers and of business.

Good work is being done in this area and a strong legislative base already exists. This will not be enhanced through additional legislation at this time. I thank noble Lords for their comments and ask that the amendment is withdrawn.

Baroness Crawley: The Minister has reiterated a number of times the role of trading standards in crucial product recalls. However, does she agree that the serious cuts to the trading standards departments across the country and throughout local government over the last number of years have impaired the effectiveness that she talks about?

Baroness Neville-Rolfe: My Lords, I am grateful to the noble Baroness for giving me the opportunity to say what a good job I think trading standards do in many of those very difficult cases, having worked with them for many years. It is true that many government services have suffered from cuts as a result of the need to get the economy back on track and deal with the deficit problems that we inherited.

As noble Lords know, spending and resourcing decisions about local trading standards are made by the individual local authorities. They, rather than central government, are best placed to make decisions about the enforcement needs of their local communities. However, I have talked to them about how you can focus and get local authorities to focus on the real areas of importance, and they are trying to do that in often deeply difficult circumstances. BIS greatly values their work protecting consumers from everything from rogue traders to scammers and so on. That is one of the reasons why we have set up the National Trading Standards Board and work with the Local Government Association on trying to improve enforcement in local authority areas in important areas. Of course, product safety and risk of death always come very high on their agenda.

Baroness Hayter of Kentish Town: My Lords, I thank the noble Baroness, Lady Bakewell of Hardington Mandeville, for her support for this amendment.

The Minister’s response will be deeply disappointing to the fire officers and Electrical Safety First, who worked on this and who have earned this amendment. They are the stakeholders who are referred to, and they do not feel that what the Government are doing is

15 Oct 2014 : Column GC136

enough, which is why they have called for this amendment. The Minister said that the legislation is robust, but it is not working. We are having a death a week because of faulty appliances, so that is not working. I do not ask for the information now, but it would be helpful if she could write and say how many prosecutions there were in the last five years of companies for not having reported and taken necessary action.

However, my noble friend Lady Crawley raised an extraordinarily important point. It is also a surprise to find that this Government are saying that on this issue they want the public sector—that is, trading standards—to deal with it, rather than the people who done wrong—the manufacturers—who acted unwittingly to begin with, but who made a faulty product that is leading to carbon monoxide poisoning, electrocution, or death by fire. It is interesting that the Minister wants not to absolve them of that but to say that the major responsibility is to tell trading standards—that is, the public sector—which will do something about it. Other things that come from the Government are all about the public sector doing less and all of us, whether it is the big society or manufacturers, doing more. Therefore I am surprised but also disappointed that the Minister does not want to put more of an obligation on to the manufacturers who have made these fire traps. However, she will understand from what I am saying that we feel very strongly about this, and we will come back to it. It certainly does not seem to be good consumer protection when once a week somebody dies when they do not have to. However, for the moment I beg leave to withdraw the amendment.

Amendment 24 withdrawn.

Clauses 28 and 29 agreed.

Clause 30: Goods under guarantee

Amendment 25 not moved.

Clause 30 agreed.

Clauses 31 and 32 agreed.

Amendment 26

Moved by Lord Stevenson of Balmacara

26: After Clause 32, insert the following new Clause—

“Secondary ticketing platforms: ticket information

(1) Where a ticket is sold through a secondary ticketing platform—

(a) the seller must provide all relevant information about the ticket, and

(b) the secondary ticketing platform must publish all the information about a ticket provided by the seller in a prominent and clear way.

(2) Information to be requested by the secondary ticketing platform and provided by the seller for the purposes of subsection (1) should include, but is not limited to—

(a) the name of the seller of the ticket;

(b) the face value of the ticket;

(c) any age or other restrictions on the user of the ticket; and

(d) the designated block and row and the seat or ticket number, where applicable.

15 Oct 2014 : Column GC137

(3) Where tickets are being resold in contravention of the terms and conditions agreed to by the original purchaser, this must be stated prominently by the secondary ticketing platform at every stage of the purchasing process.

(4) Information provided by virtue of this section must be—

(a) accurate; and

(b) prominently displayed before a buyer is able to complete their purchase.”

Lord Stevenson of Balmacara: I shall speak also to Amendments 26 to 31, which I am glad have been grouped, because they deal variously with one or two aspects relating to ticketing, and I think that there is a great deal to be taken from the fact that an all-party alliance is putting forward the various points. I hope that the Government are in listening mode, at least on these matters.

What is a ticket? That is definitely not a rhetorical question. We have a real problem about what we understand by the word “ticket”. What does purchasing a ticket confer on the purchaser in terms of rights and responsibilities? I would be very grateful if the Minister, when she replies, would spend some time explaining what the Government think a ticket is, because I would be illuminated by that.

There are two strands of thought. The promoters of many of our larger sporting and entertainment events feel that a ticket is an intangible right to attend an event or performance, a personal licence for the person who bought the ticket—and, presumably, those for whom he or she has bought the ticket—to attend a specific event, occupying a designated seat. That is not what is believed by the secondary ticket companies, who take the view that a ticket is real property and, once bought, is available to the original purchaser to sell and resell to any third party willing to pay a market price for it.

The problem is that there is no real accommodation between those two approaches. On the one hand, the promoters of events feel that tickets which have not been released are being advertised and sold, which means that the seller cannot guarantee that they will ever be able to honour that transaction. Tickets are being sold at prices well above their face value and the purchasers have no idea that that has taken place. Fans can end up buying tickets which do not guarantee them entry even to the event to which they think that they have bought a ticket, because there may be terms and conditions for the sale that have not been disclosed to them, which prevent them being transferred. I was at an event last weekend where I had a ticket issued by a reputable national theatre company which said clearly on its face that it was not valid if sold at a premium price. Of course, I knew that, because I could read it; but others may not have spotted that. In general, the view taken by many promoters is that consumers are being priced out, mis-sold or even defrauded when tickets are resold on the secondary market.

Two principles underlie that. The first is that promoters should make tickets available to people at affordable prices and that that should be protected; but also that consumers should be provided with more information about what they are buying when purchasing tickets through secondary outlets.

15 Oct 2014 : Column GC138

The secondary ticket market takes the view that people should have the right to buy surplus or unwanted tickets, and argues that by providing a platform for buyers and sellers, it offers an excellent service. In many cases, that is true. It also thinks that the traditional model means that only a very small number of tickets are made available, with the balance being sold at premium prices to sponsors and corporate hospitality organisations.

It is fair to say that this issue has a long history, with both this Government and the previous one trying to respond to public pressure, which is clearly pulling in two directions. On the one hand, people want access to tickets when they go on sale, but they are also against thousands of tickets being bought by people seeking to make a profit rather than attending the event. Equally—people will say this within a few seconds—they feel that they ought to be able to buy tickets if they decide, perhaps late in the day, that they would like to see the event after all and get very annoyed if they find that there are no tickets available or the price is extraordinary.

Recent technological changes have had an effect on this. We often find computerised botnets—as I think they are called—hoovering up tickets on sale online. What chance have ordinary punters to get tickets in the first place? Most people will either have been or will know of people who were trying desperately to buy tickets for the Olympic Games when they first went on sale, and spent many hours on the phone waiting for someone to respond or online waiting for something to respond. Sometimes you won; sometimes you did not. Obviously, with very popular events there will be a problem however you do it, but computerisation is both an advantage and a disadvantage.

We are beginning to worry about money-laundering and criminal gangs active in this area. If that is the case, where should the public interest now lie?

There is already a huge amount of legislation. I will not go through it in detail but there is the Civic Government (Scotland) Act, the Criminal Justice and Public Order Act and the London Olympic Games and Paralympic Games Act, and in addition to specific legislation on touting there are legal remedies under existing criminal law relating to theft, deception, obstruction or threatening behaviour. In addition to primary legislation, there is a substantial amount of secondary legislation coming through from the Consumer Protection from Unfair Trading Regulations 2008 and the Price Indications (Resale of Tickets) Regulations 1994, some of which have a direct impact on the way in which people are going to be treated if they are caught transacting secondary sales.

6.15 pm

However, there is a flaw in some of these regulations in that they do not apply to consumer-to-consumer transactions; they apply only when agents are involved. Accordingly, they do not apply to some of the issues that have caused the most concern recently. Secondary legislation in this area is constantly being updated—indeed, it may have been done as recently as June 2014—and I hope that the Minister will be able to shed some light on where the law currently stands on these matters.

15 Oct 2014 : Column GC139

The Committee will be aware that the London Olympic and Paralympic Games Acts were probably the most recent times when we discussed these issues, and I am sure that they will come up again as others speak to this debate. It is interesting that when the ticket touting laws were strengthened in the 2006 Act, it caused a bit of reaction among many of the major sports governing bodies. In April 2007 the Guardian published a report on a letter sent by five sports governing bodies to the Secretary of State demanding that they be given the same legal protection against ticket touts that was to be enjoyed by the London Olympics and Paralympics. The governing bodies asked the Culture Secretary to reform a “two-tier” system that was now apparently surrounding ticket sales in British sport. They said:

“The sports community is frustrated that the government has made it an offence for tickets to be touted for the London 2012 Olympics … It is surely an anomaly that the Wimbledon tennis tournament to be staged in late June 2012 will have no ticket-touting protection, while the tennis tournament at the same venue just eight weeks later in the 2012 Olympics will … We would urge you to address this anomaly so that there is no two-tier status between the Olympics and other major sporting events held in the UK”.

I draw attention to the DCMS Select Committee that carried out an extremely thorough investigation in 2007 following an OFT report in 2005 which found that the secondary ticket market was not operating satisfactorily. Its report was the subject of a Westminster Hall debate in April 2008. In his contribution, Don Foster MP for the Liberal Democrats postulated that the approach should be based on the principle that,

“there is an important role for a well-organised secondary market that has proper consumer protection built into it”.—[

Official Report

, Commons, 24/4/08; col. 531WH.]

However, the debate highlighted the lack of enforcement at that time, and figures were produced later in the debate showing that there were only some 20 convictions a year for ticket touting. Could the Minister update us on the present situation? It would be interesting to know whether it has been possible to mount more prosecutions and whether they have been successful.

When the then Minister, Gerry Sutcliffe MP, wound up, he suggested that what was needed was a voluntary code based on,

“a new code of principles that the market can sign up to”.—[

Official Report

, Commons, 24/4/08; col. 542WH.]

And what was to be in this code of principles? Improving the systems needed to prevent the exploitation of the ticket-buying public; countering bad practices such as misleading information and erroneous and future selling; provisions on exchanges, returns and refunds; and controls on tickets, such as identity requirements. In fact, he suggested that photos should go on tickets. That seems to be a very good agenda that we might well consider as we go forward in this debate. The problem, however, lies in the fact that it would be on a voluntary, not a statutory, basis.

There was a debate in the Commons in March 2012 in which Michael Weatherley MP said:

“I am not advocating that every ticketed event be subject to additional legislative support. Many artists and events will be happy for the secondary market to buy and sell their tickets, but those that wish to have protection should be able to apply for support under law, in the same way the Olympics did”.—[Official Report, Commons, 13/3/12; col. 62WH.]

15 Oct 2014 : Column GC140

In response the former Minister, Hugh Robertson MP, said that the trigger for a change of government policy would be evidence of,

“large-scale criminality … taking place as a result of secondary ticketing”.—[

Official Report

, Commons, 13/3/12; col. 64WH.]

I think we now have that evidence. Established in June 2010, Operation Podium is a dedicated Metropolitan Police unit created to combat organised crime around the London Games. A report on that operation, made public in February 2013, looked at three types of ticket crime—fraud, counterfeit and unauthorised ticket selling—and set out a number of recommendations, which included consideration to be given to introducing legislation to govern the unauthorised sale of event tickets. It said:

“The lack of legislation in this area enables fraud and places the public at risk of economic crime”,

and that:

“The primary and secondary ticket market requires regulation to ensure transparency, allowing consumers to understand who they are buying from and affording them better protection from ticket crime”.

Will the Minister update us on progress on implementing those recommendations? Will there be legislation, or do the Government perhaps have better information on this matter than the Metropolitan Police?

I turn to our amendments. The RFU, which we thank for its lobbying and provision of material in this area, has told us that the prices set by it are at a level which it thinks is affordable for rugby fans of all backgrounds. It has ambitions to grow the sport further as part of the Rugby World Cup legacy. It states that it is important that rugby is, and is seen to be, a game for all, which means that tickets to watch England must remain affordable—for my part, being Scots, I have a slightly different view: they should be priced out of the world, so that nobody can go and watch them and they lose, but I move on. The RFU tells us that, in its view, ticket touts price many of the people that it would like to see at its games out of the possibility of going. It has many examples from each season of cases of mis-selling and fraud. As a not-for-profit organisation, the RFU argues that every penny made or saved by the RFU is reinvested into rugby. It believes that it is unfair that highly organised touts are buying up large numbers of tickets to resell at huge profits while contributing nothing back to the game.

Our amendments would ensure that all transactions which involve the resale of a ticket should include detailed information about the ticket, the seller and the terms and conditions relating to resale. Websites facilitating secondary selling should be able to operate, but they would then become accountable for checking that this information is provided to consumers. We do not think that there should be a requirement for websites to check that the information is correct, but they should be obliged to remove advertisements for tickets if they are informed that the ticket information is incorrect or it is confirmed that the tickets may not be transferred. There is a legal case on this matter which some of us may wish to refer to.

We believe that providing more information to consumers would mean that the primary seller—for example, the RFU for matches at Twickenham—could

15 Oct 2014 : Column GC141

check that the ticket was genuine and being legitimately sold. Providing consumers with exact details would ensure they knew what they were purchasing and that were not buying something which offered no proper view or was at the wrong price. It seems logical that we should go down this route and make sure that the arrangements are as outlined by the RFU.

As I indicated previously, the legislative change that we are looking for is in line with existing government policy. The Department for BIS published updated arrangements for ticket resales in the Consumer Contracts (Information, Cancellation and Additional Charges) Regulations 2013—which may again be updated in 2014 —which have the good intention of making more information available to the consumer, but they do not seem to be sufficiently applied and there is evidence that abuses are still occurring. Since they apply only to “traders”, we do not think that they will attach to “consumers” selling tickets within peer-to-peer sites. The existing regulations are not explicit enough about the information that must be provided. Our amendments address that concern by placing the key information requirements in the Bill rather than leaving it to secondary legislation.

The RFU assures us that the amendment will not place any extra burden or additional costs on the industry, as there are already requirements to list ticket information details. As a result, the ticket sales process would become more transparent for the benefit of all. I beg to move.

Lord Clement-Jones: My Lords, I shall speak to Amendments 29 to 31. Although I think that I am singing very much from the same hymn sheet as the noble Lord, Lord Stevenson—I apologise if I go over some of the same ground because, as was the case in the Commons, these amendments are in parallel to those of the Labour Front Bench—these amendments follow directly from the conclusions and recommendations of the recent excellent report by the All-Party Group on Ticket Abuse. I happen to be a member of that group but, since I was not able to take part in the inquiry, I cannot claim any credit for it.

The amendments are not an attempt to shackle an important and growing service for consumers or to ban the resale of tickets. While accepting that there is a role for a legitimate secondary ticket market, the all-party group found considerable problems with how this market, which is estimated to be worth about £1 billion a year, works at present.

In particular, it does not adhere to the same principles of transparency and consumer protection to which other markets are held. With internet ticket selling becoming more streamlined, touts are able to use sophisticated computer systems to buy large volumes of tickets automatically, mere seconds or minutes after they are available online. That can often mean that it is practically impossible for genuine fans to access the event, forcing them to rely on an artificially created secondary market and depriving content creators of revenue for their event.

As the noble Lord, Lord Stevenson, mentioned, the Met Police published a comprehensive report on fraudulent ticketing and the dangers it posed to the Olympics. It specifically cited ticket fraud, touting and

15 Oct 2014 : Column GC142

ticket reselling websites as areas of concern. The report stressed the need for an open and transparent system for ticket reselling, with clear and appropriate regulations. The new clauses address those shortcomings and would increase consumer confidence in the secondary market.

The first two new clauses address the lack of transparency, which the noble Lord, Lord Stevenson, emphasised. Amendment 28 is about who is selling the ticket. It would place a duty on secondary ticketing platforms to provide basic identifying information about the individual or business offering a particular ticket or set of tickets for sale. It would allow consumers to say how prolific and reliable a particular seller was; that would make the secondary ticketing platforms much more transparent. Importantly, it would also require secondary ticketing platforms to be transparent in cases where the seller was also the event holder. The practice of events organisers secretly allocating whole blocks of tickets directly to the secondary market has been on the rise. It was the subject of the Channel 4 “Dispatches” programme broadcast in 2012, entitled “The Great Ticket Scandal”. There is also a dishonest practice whereby a secondary ticketing platform, or rather its employees or shareholders, buy and sell tickets themselves, as the “Dispatches” programme also exposed.

Amendment 29 relates to the transparency of the ticket itself. I was very interested in the introduction of the noble Lord, Lord Stevenson, when he talked about the ticket itself; in many cases, knowing the characteristics of a ticket would make a material difference to a buying decision, particularly in the case of seated events, in which a person’s position in the venue can make a significant difference to their enjoyment of the performance or experience. Providing that information would also give consumers the confidence that the individual or company selling the ticket actually had tickets in hand and was not just speculating that it would be able to provide them at a later date. Making sure that consumers are made aware of the original price of the ticket that they are buying at the earliest opportunity gives them another piece of the information that they need to make an informed choice about whether to enter into such a purchase. Any genuine fans who need to sell on their tickets should not have a problem providing the basic information about the product that they are selling; nor should any professional reseller. The secondary ticketing platforms which claim to have higher standards should therefore have no problem adapting to the new provisions.

Amendment 30 concerns the recourse available to consumers. There have been numerous reports of event-goers being turned away with counterfeit or invalid tickets that they have bought via the big four secondary ticketing websites, all of which heavily promote their reliability and guarantee that their tickets are genuine. Of course those websites offer refunds, but people who come to venues with unusable tickets have all incurred at least some travel cost getting there. In some cases, they have come from abroad for the express purpose of using the ticket. For such people, a full refund on the ticket, while welcome, will still leave them out of pocket. The new clause would therefore allow those consumers to claim back the extra cost associated with attending an event, up to a reasonable level.

15 Oct 2014 : Column GC143

In practice, some resellers already offer reimbursement of travel costs. The new clause would place primary responsibility for that initial payback on the secondary ticketing platforms because they offer guarantees which, they say, consumers pay for in their significant service charges. However, having paid out that money, the new clause makes clear that the secondary ticketing platform may recover it from the seller of the ticket. The only individuals or businesses that the new clause would hurt, therefore, are those who have sold fake or invalid tickets and consequently caused financial loss to the consumer. The new clause would have the positive benefit of giving consumers the confidence that they would not be left out of pocket when they purchased tickets through the secondary market.

6.30 pm

In the Commons, my honourable friend Jenny Willott said:

“The Government agree that consumers should be protected from fraudulent, counterfeit and misleading ticket sales”.

She added that the new, updated Consumer Contracts (Information, Cancellation and Additional Charges) Regulations, “will come into force” in June this year,

“to empower and inform consumers”,

and that they would,

“ensure that consumers have all the information they need before they buy”.—[

Official Report

, Commons, 13/5/14; col. 691.]

That would include ticket sales.

I have had a careful look at these consumer contracts regulations and, although she was not specific, I think that she was referring to sub-paragraph (a) of Schedule 2, “Information relating to distance and off-premises contracts”, under which there is a duty on the seller to outline,

“the main characteristics of the goods or services, to the extent appropriate to the medium of communication and to the goods or services”.

That is a very general statement that requires considerable unpacking.

The guidance issued to the consumer contract regulations, as amended in June, poses a scenario headed, “I am a trader selling tickets online, what do I need to do?”. Paragraph 17 states:

“Schedule 2 of the Regulations lists the information you must provide to the consumer. Information on the main characteristics of the tickets and their total price (including delivery costs and other charges) must be given to the consumer in a clear and comprehensible way before the consumer purchases the ticket. Main characteristics include (if known to you) the date and time of the event and the content of the event”.

That is the trouble. It does not specify the information that must be provided in the same way as the clauses that we are setting out today. Effectively, it is at the discretion of the trader because the trader can plead ignorance in these circumstances. That may be a fallible interpretation of the guidance and may not be the intention of the regulations, but I do not believe that the regulations go nearly far enough in providing that kind of consumer security.

My honourable friend went on to say:

“In addition, from October of this year we are making it easier for consumers who have been misled by a trader to take their own action to get their money back and, if appropriate, to get damages as well”.

15 Oct 2014 : Column GC144

I was very interested in that reference, which almost harks back to our earlier debate about ADR. I would be very grateful for chapter and verse on exactly what my honourable friend was referring to in that Commons debate. She said:

“Armed with that information and access to redress, consumers will be empowered to make use of the market for their benefit and hopefully not fall victim to fraudulent, counterfeit or misleading ticket sales”.

That is the second limb of my question to my noble friend.

On compensation, my honourable friend said that,

“the first port of call should be for the industry to source a solution. Some of the larger event organisers … already have refund procedures in place”.

However, she admitted that some,

“smaller players … have chosen not to”.—[

Official Report

, 13/5/14; col. 691.]

That is the flaw in the whole argument. The big four sellers are powerful players. It is part of their unique selling proposition that they guarantee and make refunds that are more generous than simply refunding tickets; they sometimes compensate for travel costs and so on. But that is not true of many other players, and it is certainly not true of the ordinary ticket tout. I do not believe that voluntary action in these circumstances is adequate. I would like to think that in the best of all possible worlds traders will get together and have a common standard of service and so on, but I do not believe that that will happen unprompted by legislation. I am not moving an amendment but I beg to lay my wares before the Minister.

Baroness Heyhoe Flint (Con): My Lords, I wish to speak specifically to Amendment 28, which, as my noble friend Lord Clement-Jones has so eloquently put, is inextricably linked to Amendments 26, 27, 29 and 31. I am pleased to have the opportunity to return to the subject I raised at Second Reading. I am delighted that, in doing so, I am joined by colleagues from all sides, made up of many distinguished people—all finely tuned athletes, of course—who have been campaigning for many years to promote the interests of British sport.

The support for Amendment 28 demonstrates the need for specific action to protect the interests of sports fans when they purchase tickets to sporting events. I apologise if I am repeating what has also been stated so clearly by the noble Lord, Lord Stevenson, but just because we call them fans does not mean we should forget that they are consumers. I identify to the House that I am on the Board of the England and Wales Cricket Board, which is one of many sporting organisations that have expressed support for these amendments, such as the RFU, Wimbledon and the Ryder Cup, to name but three global event presentation organisations.

I thank the Minister for taking the time recently to meet with sports delegations on this issue. I shall reflect on that meeting in my comments and touch on the examples she requested. She asked for more feedback and we too would like more feedback.

First, I will address whether, as was suggested to us, the amendment would place too many restrictions into the market place and act as a burden on the buyer and the seller. I cannot see how the amendment can

15 Oct 2014 : Column GC145

place any unnecessary burdens on the ticket buyer. It is in their interests to be told the face-value price of the ticket they are buying; its location in terms of block, row and seat number, so that they understand where they will be sitting; and, most crucially of all, whether that ticket is rendered invalid if it is transferred. These facts are material to making an informed decision about whether to purchase the ticket.

As for the seller, I do not see that having to provide this information is a restrictive burden. All the major sites that sell tickets already have online forms that people have to fill in with their ticket details. It will take just a few seconds more to add this additional information. Indeed, I tested it myself. I think it takes about 20 seconds to provide this information, which is nothing in the context of having to log in and enter other information. Alternatively, in this modern age people have the option of taking a picture of the ticket with their phone and uploading it, but I have not currently conquered that art of IT communication.

The Government already require information to be provided through the Consumer Contracts (Information, Cancellation and Additional Charges) Regulations 2013 —I almost ran out of breath there. That is a very minor step, due to the lack of information and transparency to the buyer. My first question to the Minister is whether she accepts that the amendment places very little burden on the seller and that it is merely an extension to the existing regulations her department introduced this summer. I am sure that the Minister will respond to this short debate by referring to those regulations. They are of course welcome and a step in the right direction. Indeed, they show me that the amendment is in line with the Government’s existing policy approach. However, these regulations, as has already been pointed out, have certain flaws. The main one is that they apply only to sellers who are defined as “traders” and do not apply to consumers selling to other consumers, as happens so often and is the business model for secondary ticket sites.

Let me give an example. Last year one of our major venues, Durham County Cricket Club, managed to uncover the activities of Nicholas Hubscher—this in the public domain—a British Airways pilot who was found to be,

“touting on an industrial scale”,

as a sideline from his main occupation. I have a six-page selection of the cuttings and e-mail reports officially identifying the 800 tickets that Hubscher touted, with a face value of between £50 and £100, during the tests at the Oval, Old Trafford and Durham. These tickets were partially sold for hugely inflated prices on third-party ticketing websites such as Viagogo and Seatwave. The tickets were obtained not though sophisticated software but through using multiple credit cards and names. The England and Wales Cricket Board, in conjunction with the venues, successfully brought a civil action against him in the High Court but it was a stroke of luck that they found him. It had nothing to do with the regulatory regime that the Government have in place. Yet in this case, despite selling hundreds of tickets, Hubscherwould not be caught under the existing regulations as he would not come under the definition of a trader.

15 Oct 2014 : Column GC146

Even when the sales are placed on secondary sites deliberately to make a profit—which is surely acting as a trader in any other sense—it circumvents the regulations that the Minister says will assist us. Can she therefore confirm that, at present, the application of the regulations only to traders allows for organised touts and others to evade the new regulations?

I am sad to tell the Committee that so many people are doing this. Just yesterday, I went online again to research the issue. On the Viagogo sites, I found scores of tickets for the opening Ashes match at the SWALEC stadium in Cardiff next July—tickets, incidentally, which were only recently put on sale. Those tickets have not even been sent to purchasers yet. Perhaps I may cite an e-mail sent to the England and Wales Cricket Board from a frustrated and angry consumer:

“Dear Sir/Madam, I have tried and been unsuccessful in obtaining three tickets for day three of next year’s test match at Edgbaston in the Ashes. Just by looking online for tickets, I have come across this advert”—

this relates to an eBay advert. The consumer went on:

“Can you please explain to me how these companies get all these tickets and sell them at extortionate prices when genuine fans cannot get them?”

In one instance, four tickets are listed at hugely inflated prices but nowhere does the post tell me the face value of the tickets. Nor does it tell me the exact seating location or whether Glamorgan County Cricket Club, which is the host of the event, is permitting that ticket to be transferred. This advert—there are many more like it on this and other sites—demonstrates the flaws in the existing regulations. Will the Minister look at these ads on sites such as Seatwave, Get Me In! and Viagogo? Perhaps she has already, because I know that my noble friend the Minister is a keen cricket fan. Can she confirm that they are currently in breach of existing regulations and that consumers are not getting the protection we would all wish to see?

I have also seen example after example from Wimbledon of consumers from around the world purchasing tickets at inflated prices and not receiving what was advertised. There are examples referring to debenture tickets which were bought in good faith yet were not debenture tickets, which classify which rather exclusive zone you sit in at Wimbledon. There are complaints from members of the ticket fraternity or the supporters and fans of Wimbledon from the USA about tickets which they did not receive or with which they were refused entry. There were tickets that were not even for the original place that they had booked and paid for. There were also tickets that had previously been stolen from another source. There are these fears in the background, which have alarmed all the people who have spoken so far.

This amendment will make it a specific requirement that the fan buying the ticket must be told what the terms and conditions of the transfer of that seat to them are. Many sporting events do not allow seats to be transferred above face value or without prior approval. As the noble Lord, Lord Clement-Jones, pointed out, we are talking about a £1 billion worldwide “business”. I hope that the Minister will review carefully the case for this amendment, work with those Peers and sporting organisations who have called for change and consider

15 Oct 2014 : Column GC147

whether this amendment or a revised version of it is the right approach, ahead of Report and Third Reading in this House.

6.45 pm

Without lack of information and transparency by the seller there will be a risk of reputational damage to the image of the United Kingdom in staging national and global sports and entertainment events. We can just read in the Daily Telegraph recently—and is it not bound to be true, because it was in the Daily Telegraph?—that after the Rugby World Cup tickets went on sale for next year’s wonderful event, some tickets were being sold on the secondary market for nearly 50 times their face value. Category A tickets for the final were also offered on Viagogo for up to £4,000 each following the Government’s refusal to outlaw secondary ticket sales. That is what alarms me and makes me wish to speak so passionately about these amendments.

We pride ourselves in the world of sport in this country on being fair and honourable. That is a rather Corinthian approach, but the acceptance of these amendments, which have cross-party support, will ensure protection of sporting pride and integrity. It would be more a kitemark of confidence to anybody as a consumer, but even more importantly, it would be protection for those consumers whose anger and frustration is so apparent when they cannot quite legitimately acquire genuine tickets at genuine prices. For all the reasons stated, I strongly support the other noble Lords who have tabled these amendments.

Lord Pendry (Lab): My Lords, I will talk to this clutch of amendments, but specifically to Amendments 26 and 27.

Protecting sports fans from ticket touts and being ripped off when buying tickets for leading sporting events is an issue that I and others have been working on for over 20 years. At that time the focus was of course mainly on disorder issues in football, which were highlighted by Lord Justice Taylor and his report after the tragic events at Hillsborough stadium in 1989. Way back in 1994 I led from the Labour Benches in the other place a campaign to have the then Government extend the provisions they were introducing to ban ticket touting at football events to other sports, in the Criminal Justice and Public Order Act 1994. We were partly successful in that we obtained reserve powers to be added to that Bill to allow a Home Secretary to designate other sporting events. The amendment to that Bill was added in this place—just to show that we often have greater wisdom here than in the other place—but sadly, the measure has not yet been used, by successive Governments.

Back then I was working with the noble Lord, Lord Moynihan, on this issue, and here we are today still battling away to protect sport and its fans. I hope that today we will be successful, as the amendments before us have the support of the Opposition Front Benches and eminent Peers with a long-standing interest in sport, including the noble Baronesses, Lady Heyhoe Flint—as we have just heard—Lady Grey-Thompson, and others. They know well the issues that arise from certain individuals and companies who try to rip off genuine sports fans.

15 Oct 2014 : Column GC148

Of course, the Government acted to ban ticket touting at the London Olympics—at the behest of the IOC—and clearly the noble Lord, Lord Moynihan, must have had a major say in that decision. It is a great shame that we did not learn from that experience. Everyone agrees that one of the joys of the Olympics was the ambiance and general good will of the Games. That was aided by the fact that the approach to sporting venues was not inundated with shady touts doing their business and adding the air of menace they often bring. Instead, we had smiling volunteers and a general ambiance as real fans entered the various venues.