Consumer Rights Bill

Baroness King of Bow Excerpts

Monday 3rd November 2014 Grand Committee

Moved by

[Baroness King of Bow]

63C: Clause 80, page 43, line 4, at end insert—
“(2) A year after the commencement of this section, the Secretary of State shall review the powers set out in Schedule 8 and report to Parliament on—
(a) the number of private actions commenced under this power,(b) the redress provided to consumers under these private actions, and(c) the scope and potential effect of expanding these private action powers to all areas of consumer protection law.”

[Baroness King of Bow (Lab)]

My Lords, Amendment 63C calls on the Government to review how the new powers for collective legal redress are functioning and whether these powers should be expanded to other consumer protection law. It asks the Secretary of State to set out how many private actions have taken place, what redress consumers received and the scope and potential effect of expanding private action powers to cover other areas of consumer protection law.

We welcome the Government’s move to provide new powers for collective legal redress. We do not agree with the scaremongering we have heard on this issue but we are concerned that we get things right. I should stress that the amendment does not call for collective legal redress to be expanded beyond competition law; it simply asks for this issue to be reviewed in the light of the evidence and the efficacy or otherwise of the new powers. This modest request will help identify whether the legislation works as intended. The intention is to make it easier for groups of consumers who have been subject to unfair and anti-competitive practices to put forward a collective claim. The review would also consider the level of redress achieved through joint action, which is often too low to motivate consumers to challenge unfair practices.

Amendment 74A is a probing amendment which seeks to improve scrutiny. At the moment we are being asked to pass into law CMA-approved voluntary redress schemes. These are no doubt a good idea in theory but, in practice, we have no detail in the Bill about how these schemes will work. However, we know that BIS has written a scoping paper which states that a specially constituted board will work out how the CMA alternative dispute resolution procedure will work and how complaints will be handled.

The Minister will no doubt be aware of the concerns raised by Which?, which is looking for answers, as are we all, to some key questions. For example: how will the board be resourced; who will pay for the board; and how will the board assess evidence? Is the board a gatekeeper or an adviser? What will happen if board members disagree? Will the board’s recommendations be determined by a majority vote or unanimity? Will the infringer get to vote on its own proposals? The answers to these questions will determine whether CMA-approved voluntary redress schemes are a success or a failure.

It is entirely reasonable for Parliament to review the SI that will answer these questions and many others. I beg to move.

[The Parliamentary Under-Secretary of State, Department for Business, Innovation and Skills (Baroness Neville-Rolfe) (Con)]

My Lords, with this amendment we turn our attention to Schedule 8 to the Bill and focus on competition law. Schedule 8 provides easier access to redress to businesses and to consumers for breaches of competition law. We believe that effective competition is good for the consumer and this part of the Bill reforms the regime for private actions to give businesses and consumers redress where they have been harmed by anti-competitive practices. I am sure that we will discuss this further when we reach the amendments tabled by the noble Lord, Lord Hodgson.

This amendment would require the Government to report to Parliament on the number of private action cases taken, the level of redress paid to consumers and the impact of expanding these provisions to all areas of consumer protection law after a year. The Competition Appeal Tribunal already publishes as a public record an annual review containing details of cases taken forward in the previous 12 months and a summary of the judgments made with the case names. These judgments contain details of any redress awarded. The last annual report, for the year ending 31 March 2014, was published in June 2014. The report revealed that there were no collective actions on behalf of consumers, and this is one of the reasons we are legislating.

The last part of the amendment—which the noble Baroness, Lady King, spoke about in some detail—seeks, by gathering information, to encourage redress for consumers for breaches of consumer law in the future. However, the substantive underlying issue here is whether to provide consumers with the right to come together and fund their own collective actions for breaches of consumer law as opposed to competition law. Ed Mayo’s report for the Opposition highlights the obvious downsides that can be experienced with this proposal: consumers sometimes receive little or no benefit; consumers are sometimes then bound to a low settlement; and legal fees mean that lawyers can benefit as much as consumers. This would be a significant expansion in consumer law, might not benefit consumers and could be a significant burden on business. I am sure that they would think so, and, as Ed Mayo has said, the lawyers could be the main beneficiaries.

As a result, the Government do not consider collective actions for breaches of consumer law to be appropriate and have instead adopted enhanced consumer measures. Perhaps I may pick up a point from the preceding debate. The enhanced consumer measures come into operation with the Bill on 1 October 2015.

Under the Bill’s enhanced consumer measures, not only will more consumers get more redress, but traders who have broken the law could also or instead have to put in place other innovative measures. They might have to advertise their breach and what they have done to put it right on their website or in the press, or they might have to change their internal processes to ensure that there is no repeat of the breach. These can be good remedies and a more appropriate approach for something like petrol stations where pumps are providing inaccurate readings. Indeed, once the measures have bedded in, we expect additional redress of £12 million per year for consumers.

On Amendment 74A, paragraph 12 of Schedule 8 introduces a new power for the Competition and Markets Authority to be able to approve a voluntary redress scheme offered by business, and proposes the affirmative rather than the negative resolution procedure for the reasons that the noble Baroness explained. Having looked at this we are happy that the key features of this power, including CMA enforcement and costs, are set out in the Bill. The remaining regulations that will govern the CMA power concern procedural and technical matters.

I should comment on the point that the noble Baroness raised about how the board will be set up, how cases will be assessed and so on. There are a range of views, as she hints, on how the CMA power will work. As Which? is aware, the Government are engaging with a range of stakeholders to answer these questions. As I have already said, the key parts of the power are in the Bill, including the CMA considering the level of redress on offer.

The approach taken here is similar to that which we have taken in other parts of Schedule 8, which is to create a framework that allows the relevant bodies to make assessments on a case-by-case basis. In the Government’s response to the private actions consultation, we highlighted what components might be included in the regulations. They included: the role of an independent panel, which can consider in detail the contents of the scheme and then make a recommendation to the CMA; how consumers would be notified of the existence of the scheme; and a complaints scheme to resolve disputes with possible claimants. The regulations will be procedural and technical in nature and the Government consider that the negative procedure is suitable. We will of course consult.

The noble Baroness, Lady King, also asked about the number of private actions. Between 2005 and 2008, there were 41 competition cases. Between 2000 and 2005, there were only 43 out-of-court settlements. I hope that that answer gives the noble Baroness the figures that she needs, but I am sure that she will tell me if she wants information on some other aspect. In the circumstances, I ask her to withdraw the amendment.

[Baroness King of Bow]

I thank the Minister for her reply. Obviously, we all agree that effective competition is good for the consumer. We would like the Government to report on this to Parliament, because, if the legislation works, there will be collective redress whereas, as the Minister pointed out, that has been lacking until now. Given that we hope that the legislation will work, we believe that the details of how it works are worthy of Parliament’s attention.

As I mentioned, Amendment 74A is a probing amendment. It is simply about Parliament being able to scrutinise the proposals in any detail. Will the Minister let us know when the key questions that she outlined regarding the board and the mechanism for the scheme will be answered? Perhaps she could write to us on that unless she has the timetable to hand. What will happen if the level of redress is too low? This seems to be an issue that could effectively undermine all the legislation. I would appreciate a response on those two aspects. In the mean time—

[Baroness Neville-Rolfe]

Before the noble Baroness withdraws the amendment, I think that my noble friend Lady Jolly has already offered to write and will make sure that the letter also covers the question of timing, if that would be helpful.

[Baroness King of Bow]

I thank the Minister for those remarks. I beg leave to withdraw the amendment.

Amendment 63C withdrawn.

--- Later in debate ---

The final amendment, Amendment 79, is very simple. As I said earlier, it would first allow, by the addition of paragraphs 38 to 40 of this part of the Bill, this type of tribunal to come within the provisions of the Legal Services Act 2007. Secondly, it would extend that Act—Section 194 in particular—to Scotland and Northern Ireland. It seems fairly obvious that there is no reason why England should have a different regime from Scotland and Northern Ireland in these matters. Equally, given the particular status of the Competition Appeal Tribunal, it should be in the Bill as proposed by this amendment. I beg to move.

[Baroness King of Bow]

My Lords, I support this group of amendments. I am pleased to follow the noble Lord, Lord Phillips of Sudbury, who I once spent a night with in a metal freight container in the jungle in the Congo. That, however, is most definitely another story.

I return to consumer rights in the UK. As we have seen, Amendment 70 allows money not claimed in opt-out collective proceedings to be paid to charity, and permits any money remaining after that to go to pro bono lawyers. That is also the substance of several of the amendments tabled by the noble Lords, Lord Pannick and Lord Phillips, which, as we have heard, would allow lawyers who have worked for free in successful cases on behalf of consumers to get paid.

I realise that politicians like to put lawyers into that select group of social pariahs that includes politicians, second-hand car dealers, bankers and estate agents. However, when lawyers are ready to shoulder all the risk on behalf of consumers facing anti-competitive practices and they succeed and increase consumer protection for all of us, the least they should expect is payment—where that is supported by some of the damages raised.

Therefore, we support these amendments, which will, we hope, increase the resources available for legal charities distributed by the Access to Justice Foundation. This in turn will enhance access to justice across the piece, and we support the principle of tribunals being able to direct payments towards lawyers providing pro bono services on behalf of consumers.

[Baroness Neville-Rolfe]

My Lords, I am grateful to my noble friend Lord Phillips for his support for this part of the Bill and for taking us so carefully through his various amendments. This is an unusual grouping in that it includes government amendments which meet some of the views expressed by noble Lords during the passage of the Bill.

In addressing my noble friend’s amendments, I emphasise that the Government recognise the important work undertaken by the Access to Justice Foundation. We are not against the Access to Justice Foundation receiving unclaimed damages for its good work. Indeed, pro bono costs are already awarded to the foundation in the Court of Appeal and the Supreme Court. Accordingly, the Bill makes provision for the CAT to award unclaimed damages to the Access to Justice Foundation.

However, we are trying to ensure that unclaimed funds are allocated in the most appropriate way and that certain contingencies are provided for. The Government want consumers to obtain redress for breaches of competition law, which, as my noble friend explained, is all that is at issue here. These cases may be costly. Accordingly, the Government consider that representative bodies which successfully represent consumers should have the opportunity of having some or all of their costs paid out of unclaimed damages so as to ensure that they bring actions on behalf of consumers. Therefore, the Bill grants the CAT discretion to award some or all of the unclaimed damages to the representative so that it may recoup some of its costs—on a case-by-case basis, obviously—and, at the same time, the CAT may also award unclaimed damages to the Access to Justice Foundation.

Similarly, with regard to Amendments 76 and 79, the Government wish to encourage consumers to seek redress for breaches of competition law. Consumers will require someone to represent them. Accordingly, the Government wish to encourage representatives—including, of course, those who act on a pro bono basis—and therefore the Bill provides that the CAT may sometimes award costs to a representative who acted on such a basis. The Government believe that if the opportunity for unclaimed damages to go to representatives who act on a pro bono basis is restricted, there could be negative consequences for the consumer. However, given this debate, I will look in Hansard at the detail that has been fully set out, and reflect on our discussions. I hope that my noble friend and the noble Baroness opposite will do the same.

I am moving five government amendments. Briefly, Amendment 71 commits that the body to receive unclaimed damages is a charity. We have accepted the Delegated Powers and Regulatory Reform Committee’s recommendation and so the exercising power will be amended to be affirmative. Our third amendment allows underlying claimants to incur costs if they make an application to have the representative removed and lose the application. This has two benefits: first, it aligns the costs with the wider “loser pays” principle that exists in domestic law; and, secondly, it should deter vexatious applications. The final amendment is minor and technical and follows an earlier government amendment.

I ask the noble Lord to withdraw Amendments 70, 76 and 79 and beg to move government Amendments 71, 73, 75, 77 and 78.