Consumer Rights Bill

Robert Flello Excerpts

Tuesday 28th January 2014 Commons Chamber

[The Secretary of State for Business, Innovation and Skills (Vince Cable)]

I beg to move, That the Bill be now read a Second time.

I am delighted to introduce this important Bill. It has been widely consulted on outside and inside the House and our understanding is that it is welcomed by both business and consumer groups. There has been some constructive criticism from inside the House during domestic scrutiny and we have taken on board the large majority of the suggestions. As the Bill proceeds, we will further debate much of the detail.

The context of the Bill is our determination to build and enhance a climate of trust in which UK business operates, restoring trust, which is often needed, in markets and market transactions. The consumer law reforms that we are discussing lie at the heart of a crusade towards trusted business and trusted capitalism. We see them as part of the overarching overhaul of UK competition and consumer legislation that we have been undertaking over the past four years.

Essentially, the coin has two sides: competition policy and consumer protection. Let me start with the competition reforms. A competition regime is essential to encourage efficient and innovative businesses, allowing the best to grow and enter new markets, driving investment in new and better products, and pushing prices down and quality up. That is good for growth and good for consumers. That is why earlier in the Session we introduced reforms of competition policy and the new Competition and Markets Authority, which will come into effect in April with strong new powers to take robust decisions more quickly. Changes we have made to the criminal cartel offence will enable the CMA to address the pernicious influence of cartels.

What we are doing in the UK is mirrored in what is happening in the European Union. There are people who think that the European Commission is entirely about regulation, but it does important work in opening up markets, deregulating and increasing competition. It is worth citing several examples. Last year, fines of almost €1.5 billion were imposed on companies engaged in fixing the price of TV and computer monitor tubes and fines of €1.7 billion were imposed on companies that had established a cartel to fix interest rate derivatives. The European Commission is conducting a competition investigation into Google’s business practices. Among other things, the Commission is considering how Google uses third-party content without consent and how it structures its search results. Our domestic Consumer Rights Bill will enable us to strengthen that framework by making it easier for individuals and businesses to seek redress through private actions where they have been harmed by anti-competitive behaviour. That is covered in one of the clauses.

Competition also relies on consumer law and the framework of protection for individuals who suffer from unfair business behaviour. That is why we are reforming the landscape of consumer bodies funded by Government to improve consumer protection and give greater clarity about where consumers need to turn for help and advice. I hope that will deliver a better deal overall for consumers through clearer responsibilities and better co-ordination.

We cannot expect consumers to be confident when they do not understand their rights or when they find it hard to know what they are entitled to if something goes wrong. Unclear rights and remedies mean that businesses can also find it costly to understand their responsibilities. We seek to address those concerns. We have set out in one place key consumer rights and what consumers are entitled to. The measure covers goods, services and, for the first time, digital content such as e-books and software. We estimate in the impact assessment a value in the order of £4 billion over a 10-year period.

Of course, this involves strengthening statute and regulation, but overall this is a deregulatory measure, with a positive impact on business. It makes it easier for business to understand what should happen when a problem arises. It will stop problems escalating, with all the associated costs and the development of disputes, and it will help to create a level playing field for business. It is pro-consumer, but it is also pro-business.

[Robert Flello (Stoke-on-Trent South) (Lab)]

Will the Secretary of State elaborate on the reason why the downloaded digital regime is different from the physical regime? If I go and buy some software on a physical DVD or CD, under the Bill, that is different from a downloaded version.

[Vince Cable]

I will elaborate on that when I discuss digital measures. The hon. Gentleman is quite right: there are different consumer protection arrangements for the DVD—the physical equipment—and for content. The measures in the Bill specifically relate to how we strengthen protection on content.

The Bill was published in draft last summer and, as I have acknowledged, we are grateful for the feedback we received as a result of scrutiny, particularly by the Select Committee on Business, Innovation and Skills. Many of its recommendations are reflected in the Bill before the House, and I believe that it has been improved as a consequence of that scrutiny.

The first main measure in the Bill deals with goods, which are a critical part of the economy. There are roughly 350,000 retail businesses, but much of the law pertaining to this area is 30 to 40 years old. We have tackled the complexity that makes compliance burdensome for companies and confusing for consumers by setting out in one place the standards that have to be met. For example, we have defined a 30-day period within which goods have to be inspected. We have made it clear that, where consumers have a faulty item repaired or replaced, that repair or replacement must remedy the problem the first time round, or they can insist on some money back. Survey data show that all but 6% of faulty goods can be remedied the first time round, but we have embedded that in a clear set of rules.

We often hear, for example, about consumers trapped in a cycle of repairs that fail to fix a fault. Which? recently reported a case of a car owner who had fault after fault after fault, but he was consistently fobbed off with further repairs that failed each time to fix the fault. Under the Bill, that will not arise, as we will narrow down the obligations.

The hon. Member for Stoke-on-Trent South (Robert Flello) asked about digital content. There is a good deal of legal uncertainty about consumer rights in relation to digital content, which is unacceptable in a rapidly growing segment of the economy with a turnover of around £200 billion. That is why we have introduced a new category of digital content with a set of quality rights. As I said, we need a distinction between the way in which we protect content, which is intangible, and the way in which we protect goods, such as DVDs, which are tangible and are dealt with under the goods provision.

For example, many people now download music albums, but if one of the tracks is corrupted and will not play, it is not clear what they are entitled to. Under the Bill, they are entitled to a repair or replacement of the digital content and, if that does not fix the problem, they will get their money back. This is a complex matter, and we recognise that, in relation to complex software, for example, there are flaws—that is the nature of the business—but we have tried as far as possible to narrow down the areas of fault and consumer obligation. Clear digital rights are good, not just for consumers but for responsive businesses, particularly new market entrants—a key part of the industry—which will find it easier to attract customers, even if they are not an established brand, because they can establish a track record in consumer service underpinned by the legislation.

Another part of the Bill deals with consumer protection in relation to services. We know from reviews by the Law Commission that the law governing the provision of services is difficult to understand and, when things go wrong, there is no statutory redress regime to put them right. However, we are talking about 75% of the British economy. That is why the Bill provides new statutory rights and introduces new statutory remedies when things go wrong. There is a great deal of debate about the specifics: the Business, Innovation and Skills Committee has suggested a statutory quality right, which we looked at, but we found it too complex. We considered the evidence from Australia, and we are certainly happy to engage in further debate on the matter.

As an example of how the new rights would apply, we can look at the case of cowboy builders. Almost all of us have dealt with such cases in our constituencies, and they cause particular anger. A cowboy builder is doing domestic work and altering someone’s bathroom. They start the work, but there are problems, with debris strewn around the house and disruptions to the water supply. Currently, it is unclear what the householder is entitled to, and a lot of frustration flows from that. Under the Bill, there will be a statutory right to ask for a poorly performed service to be redone if possible. If it cannot be redone within a reasonable time or without significant inconvenience there is a right to money back. I stress the example of cowboy builders, as I think that the hon. Member for Walthamstow (Stella Creasy), who may well want to discuss this, issued a press release this morning in which she singled out cowboy builders and said that there was no reference to them in the Bill. In fact, these measures will improve significantly consumer protection in that area.

Another area in which the Bill introduces reform is unfair contract terms—essentially the small-print problem. Legal ambiguity arises from recent landmark court cases—the so-called banks case in particular—and our reforms endeavour to protect consumers from the small print while making it easier for businesses to understand how they can prevent contract terms from being challenged in court. In a typical example, someone joins a gym in January with a lot of enthusiasm, but they have not read or fully understood the details of the small print. When they cancel the contract in March, as many people do—I seem to remember cancelling my gym contract rather earlier in the year—they have to pay for a full year’s membership. Currently, it is not clear whether a court would find that unfair. Under our proposals, it is clear: a court can find it unfair, and if it is unfair the consumer is not bound by it.

The reforms endeavour to make clear what the courts can and cannot consider in assessing fairness. In particular, we make it a key test that price and subject matter in a contract need to be transparent and prominent—the operative word is “prominent”—to ensure that it cannot be challenged for fairness in court.

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[Vince Cable]

The right hon. Gentleman asks a tricky and quite specific legal question, and I do not want to guess the answer. Of course, in general we always try to avoid retrospective legislation, but I can see that for contracts spanning a period of time we need to cover the whole contract period. I will check the details of the proposal and get back to him.

[Robert Flello]

I appreciate the Secretary of State’s generosity in giving way to me a second time. I want to touch on something my hon. Friend the Member for Bridgend (Mrs Moon) raised: the issue of companies based overseas. The Secretary of State has generously met me and other colleagues from north Staffordshire on a couple of occasions to discuss the ceramics industry. People can sometimes be misled into buying something that they think was made in Stoke-on-Trent, but when they get it home they discover it was made not in Fenton, but in Indonesia or China. How does the consumer get redress in those circumstances? If that is not dealt with in the Bill, is it something he will look at?

[Vince Cable]

As the hon. Gentleman says, I have discussed that with him before. Indeed, there was a discussion in the European Union last week about rules of origin legislation. I am very sympathetic. The potteries are reviving somewhat and the ceramics industry is returning, and we want to ensure that that is sustained. I think that the issues raised are somewhat different from the content of the Bill. We might be talking about fraud, trading standards or enforcement, and there is an issue about mandatory origin reporting, which is currently being debated in the European Union. I fear that the Bill’s provisions will probably not help to solve the problem, but those are important issues.