CBI RESPONSE TO THE GOVERNMENTS CONSUMER WHITE PAPER MODERN by asafwewe

VIEWS: 15 PAGES: 24

									 Confederation of British Industry
 Centre Point                           Business Environment
 103 New Oxford Street
 London WC1A 1DU
 Telephone: 0171 395 8043
 Facsimile: 0171 836 1114
 Email: linda.jackson@cbi.org.uk        Company and Commercial Law




        CBI RESPONSE TO THE GOVERNMENT’S CONSUMER WHITE PAPER

                               MODERN MARKETS: CONFIDENT CONSUMERS



Introduction and key issues

The CBI welcomes the fact that the government has set out in the White Paper a clear
framework where best value for consumers is seen as part of the wider picture of improving
competitiveness. We are pleased that the government sees little need for extension of
consumer legislation and intends to work with business and consumer representatives to
review and simplify existing regulations wherever possible.

The White Paper covers a number of areas on which further consultation will be required,
notably, codes of conduct and review of the Fair Trading Act 1973 Parts II and III.

Our detailed comments are set out in the remainder of this paper but the following highlights
our key responses to specific areas of the White Paper:

•    Competition: we welcome the emphasis on competition rather than additional regulation.

•    Regulatory burdens : the UK already has a mature framework of consumer legislation.
     Simplification and effective consolidation of legislation, against the background of EU
     consumer activity, are essential. New regulation must be targeted, proportionate, provide
     certainty for business and consumers and be workable and enforceable in practice.

•    Resources: the government must make available appropriate resources, and funding
     should be ring-fenced in order to ensure both the Office of Fair Trading and trading
     standards departments are able to exercise effectively their increased powers and
     responsibilities. Adequate levels of staffing and training should be provided.

•    Information and education: much of the success of the White Paper’s proposals are
     dependent upon improved information both for consumers and business. Information
     targeted at consumers must clearly set out their rights, redress processes and also their
     responsibilities so that their expectations are in line with reality.

•    Codes of conduct: these must be voluntary and flexible, involving a key role for trade
     associations and the OFT must have the will and resources to administer the scheme.




 President: Sir Clive Thompson          Switchboard: 0171 379 7400
 Director-General: J. Adair Turner      Website: http://www.cbi.org.uk
•   Tackling rogues: we support the targeting of rogue traders but new powers should not
    inhibit reputable commercial activities of business.

•   Enforcement: effective enforcement depends upon improved consistency and co-
    operation, as well as appropriate resources. Prime focus should be on “partnership not
    policing”.

•   E-commerce: legislation must not inhibit the development of e-commerce, business and
    government should work together to develop consumer confidence through, for example,
    codes of conduct.

•   Business to business trading: business and government should work together to consider
    whether there is a requirement for a change in the legal treatment of such trading.




                                                                                             2
CHAPTER 1 : Promoting performance, providing protection

Aims, Opportunity and Challenge

(paras 1.1 – 1.5)

The CBI welcomes the publication of the White Paper and the emphasis of the government on
areas of consumer policy which will enhance competitiveness. We support the principles
underpinning the White Paper that interests are best served by open and competitive markets,
by access to good information and by encouraging business to adopt best practice in relation
to customer service.

In the UK we already have a mature framework of consumer protection legislation which has
developed over the past century. We accept the need for this framework to be modernised. In
this way business and consumers will be equipped better to take up the challenges and
opportunities provided by the opening up of global markets and by technological
developments, including the spread of e-commerce.

Much emphasis is laid in the White Paper on the virtuous circle of strong consumers and
strong businesses. The CBI strongly believes that the satisfied customer is what all business
is striving for. Demanding, knowledgeable consumers are good for business. Customer
feedback and response is vital. Business is not purely reactive to consumers: there is much
innovation and development of new technology, products and services, which is not simply a
response to consumer pressure, still less to consumer complaint.

In taking forward the detail of modernisation, the CBI urges that there is a balance to be
struck between the interests of business and those of consumers. There needs to be
appropriate recognition not only of consumers’ rights but also of their responsibilities to
exercise choice prudently, against the background of the interplay of the responsibilities of all
stakeholders in the economy. The need for extending consumer protection should be
examined in the light of properly and objectively identified problems. The response should be
targeted to deal with the specific issue and proportionate to ensure that legitimate problems
are addressed without adding unnecessarily to the regulatory burden for business. This is
particularly important for SMEs.

The European dimension

(para 1.7)

The CBI welcomes indications that the UK consumer affairs strategy is to be seen in the
context of the European Commission’s Consumer Policy Action Plan. Business has faced,
over the past five years, an avalanche of additional regulation resulting from measures
emanating from the Commission. We support the government view that the need for further
legislation to increase consumer protection in Europe is limited. Indeed, we are encouraged
by the initiative of the previous Commission for “less but better” and hope that this objective
will continue to be taken forward.

In developing future policy, however, co-ordination of national strategy with EU objectives is
essential to ensure that several bites at the regulatory cherry causing duplication and
confusion are avoided and that effective operation of the single market is not undermined.




                                                                                                  3
Devolution

(para 1.9)

We recognise that while many of the issues covered in the White Paper are reserved matters,
there are others which are devolved. It is in the interests of business and consumers that the
UK should operate as a seamless market and that therefore in the implementation of the White
Paper efforts should be made to minimise regional differences in terms of policy as well as
enforcement.

Resources

The provision of adequate resources for the implementation of proposals in the White Paper is
fundamental. This relates to the development of policy as well as to its enforcement. We
believe that it is essential that resources should be allocated specifically to the Office of Fair
Trading (OFT) centrally to enable them to respond to the challenge of new powers and to
local authorities, where it is proposed that they share the exercise of enforcement powers.
These resources should be specifically ring-fenced to avoid them being dispersed in the face
of competing budgetary pressures. There is a whole range of proposals in the White Paper
which require further government action, for instance, on the provision of information,
advice, price comparisons, increased awareness on counterfeit goods. Appropriate resources
must be made available for all these areas of increased government activity.

Next steps

(para 1.10)

The CBI looks forward to working closely with the government, consumers, enforcement
authorities, as well as with other business partners, to ensure that policies which follow from
the White Paper are balanced and workable in practice.




                                                                                                  4
CHAPTER 2 : Open and Competitive Markets

A strong legal framework for competition:

(paras 2.1 - 2.6)

The CBI welcomes the introduction of the Competition Act 1998, and indeed had long
supported reform of the archaic and complex competition laws which previously existed in
the UK. In particular, we welcome alignment with the European provisions of competition
law, to avoid companies having to comply with two different systems. The CBI was fully
involved in discussions as the Competition Bill passed through Parliament, and we are
currently commenting on the remaining consultation papers and guidelines.

(para 2.3)

However, although we strongly support firm enforcement of the new Act and competition
rules in general, we are very concerned about the proposed maximum level of penalties under
the new Act (up to 10 per cent of a company’s turnover for each year of infringement of the
Act, for a maximum of three years, i.e. 30 per cent).

We believe this proposed maximum penalty to be excessive. It could lead to extremely large
fines, and affect the viability of businesses, potentially leading to insolvencies and consequent
job losses. Also, we are of the view that any fining regime should take into account the fact
that the application of competition law is not a straightforward matter: there are often
reasonable differences of opinion as to whether conduct is in fact anti-competitive, and to
what degree. The new regime should be sufficiently flexible to reflect this.

In addition, the proposed level of maximum fine may be contrary to the principle of section
60 of the Act (which seeks to ensure consistency between EU and UK competition law): the
equivalent time period at EU level is only one year. Likewise, the proposed level runs
contrary to the general EU law principle of proportionality.

The CBI is also concerned at the change of direction by the government on the maximum
level of fines. Throughout the passage of the Competition Bill in Parliament and thereafter,
indications were given by Ministers that fines would be limited to 10 per cent of turnover,
with no reference being made to this being applied for three years.

Price comparisons

(paras 2.7 and 2.8)

We support the focus on the need for consumers to be knowledgeable and to have access to
relevant information to enable them to make sound purchasing decisions. We believe that
information collected should relate to a range of factors, of which price is one, in order to
ensure that consumers get good value.

We support access to information and business looks forward to working with government to
ensure that comparative information is available. We are keen to ensure that the following
issues are taken into account, some of which are acknowledged in the White Paper:

•   it is extremely difficult to make comparisons on a like for like basis


                                                                                                5
•   a wide range of complicated factors have to be taken into account in making the
    comparisons, including tax, exchange rate, size of market, technical specifications, fuel
    prices and labour costs

•   the risk is that the resulting price comparisons will be either simplistic or so complex that
    they could mislead consumers

•   in certain areas government action directly results in higher unit costs in the UK,
    particularly structural/land costs and planning restrictions

•   the methodology used must be transparent.

We also believe that similar resources should be devoted to the education of consumers to
enable them to make appropriate use of this comparative information.

Mergers

(para 2.9):

The CBI is of the view that the proposal to limit the role of the Secretary of State in merger
decision-making raises important questions as to what should replace that framework. Such a
proposal must be given careful consideration, and cannot be divorced from other aspects of
the merger review.

Overall, there is no great demand among business for wholesale reforms in this area, but any
review should be carried out with care, involve proper consultation with business, and should
create a system based on a clear understanding of how modern, competitive markets really
work. The timely resolution and predictability of merger decisions are key concerns for
business.

The CBI is consulting with members on the DTI’s consultation paper, and will respond in
detail to that consultation by the closing date of 1 December 1999.

The regulated utilities

(para 2.10)

The CBI responded in detail to the government’s Utilities Review1 .

We believe that the current system of introducing and stimulating real competition rightly
focuses on economic regulation which has benefited both consumers and utilities and should
remain the primary focus of each regulator.

With regard to the new primary duty for regulators in our response to the utilities review, we

•   supported focus on consumers

•   stressed that regulators should not have the duty to keep inefficient utilities in business

•   suggested a number of amendments to the proposals including that the regulator’s primary
    duty should have explicit regard to the financial viability of the regulated organisation as a
    whole, and ensure investment and innovation meet the needs of customers.

1   Utilities Review: A new deal for consumers

                                                                                                  6
(para 2.11)

In response to the government’s Utilities Review, the CBI welcomed the proposal for the
establishment of independent statutory consumer bodies. We look forward to publication of
the legislation to introduce these.

We believe that such consumer councils should:

•   represent all consumers – including business users, large and small

•   recognise that the interests of business and domestic consumers are often different and
    these should be recognised and addressed by the consumer council when it makes its
    decisions and recommendations

•   have their responsibilities and relationship with regulators clearly defined to ensure
    regulators are fully aware of the work of the councils

•   co-ordinate with the regulators’ requests for information.

Competitive international markets:

In Europe:

(para 2.14)

The CBI is deeply concerned by the European Commission’s proposals for modernising EU
competition law procedures. Whilst we are firmly of the view that reform of enforcement of
the EU’s competition rules must take place, we believe the Commission’s White Paper’s
plans if implemented could damage the single market and cause great uncertainty to business.

Since the early 1960s, notification and authorisation have been of considerable assistance in
providing certainty to business, and their removal will destroy such certainty. We believe that
placing the power to apply Article 81(3) of the EU Treaty in the hands of national courts and
national authorities will lead to conflicts of jurisdiction and interpretation of the rules, which
could potentially have damaging effects on the single market. Further, we believe that
national courts are not a suitable forum to apply Article 81(3): they do not have the
experience to deal with the kind of complex economic arguments which application of that
provision requires, and in an adversarial system (e.g. the UK), judges simply are not trained to
perform the quasi-administrative role that the White Paper requires for them.

We believe that introducing such radical, untested reforms is even less justifiable without a
sustained effort to improve the current enforcement system, and our Paper outlines numerous
substantive and procedural steps which the Commission could take to improve the functioning
of the present system. Likewise, a thorough updating of DGIV’s internal working practices
could improve the system’s effectiveness and efficiency, and our Paper makes suggestions in
this regard as well.

We are concerned that the solutions put forward in the White Paper may in fact worsen the
problems it seeks to remedy: the potential complexities and uncertainties which are likely to
arise from the White Paper’s implementation could put business in the EU at a disadvantage
compared with competitors in other jurisdictions.2


                                                                                                7
(para 2.15)

The CBI notes the government’s statement on the Motor Vehicles Block Exemption. As for
the current European Commission consultation on vertical restraints generally, the CBI has
long advocated reform in this area, but we are of the view that the European Commission’s
proposals contained in the draft Block Exemption are too complicated and not as business
friendly as the Commission believes. We would like also to see the market share threshold set
at a level that will leave the least number of companies having to deal with the uncertainty of
being outside the Block Exemption (i.e. through a 40 per cent threshold). The Commission
currently proposes the figure of 30%. In addition, we are strongly critical of giving the power
to Member States to withdraw the Block Exemption. The CBI has prepared its response to
the draft Block Exemption3 and is currently preparing its position paper on the draft
Guidelines (closing date 24 November).




2    CBI position paper, 29 September 1999
3   CBI response to the EU Commission, dated 22 October 1999




                                                                                             8
CHAPTER 3 : Knowledgeable and demanding consumers

Information gaps

(paras 3.1 - 3.3)

The CBI supports the government’s view that knowledgeable, well informed consumers are
good for business and assist the effective operation of competitive markets. Demanding
consumers will need the background of relevant information and knowledge, and this will
enable them to exercise their rights in the context of their responsibilities.

Information should be well targeted, accessible and accurate, taking into account the needs
and skills of consumers in making use of that information. In this context we support the
provisions of Part III of the Disability Discrimination Act 1995 for information to be available
in alternative formats.4 Quality, not quantity should be the watchword.

The CBI looks forward to involvement in a future government programme to improve
provision of information.

Product labelling

(paras 3.4 – 3.6)

We agree that information provided to consumers on products should be accurate, relevant
and comprehensible.

We support the government’s approach to improve product information through discussion
and work with manufacturers and retailers. Businesses, for their part, will wish to work with
government to ensure information is, where necessary, even more closely aligned on
consumer needs.

The review may also require the simplification of existing legislation relating to product
information.

Better information on prices

(paras 3.9 – 3.13)

We support extension of unit pricing of pre-packaged quantity-marked goods to increase
transparency of price comparisons for consumers. We welcome exemption for smaller
retailers.

Advertising and claims

(paras 3.14 – 3.18)

The CBI shares the government’s view of the importance of advertising in the effective
operation of competitive markets. It supports the self regulatory controls on advertising in the
UK, operated through the Advertising Standards Authority, and backed by the Misleading
Advertisements Regulations 1988. We believe that the effectiveness of the work of the


4   CBI response to the draft Code and Regulations on access provisions, November 1998

                                                                                                9
Advertising Standards Authority would be increased if it were to liaise closely with, for
example, LACOTS and trading standards departments. An area of concern is in respect of
credit advertising where the ASA does not currently liaise with home authorities. The CBI
was involved in discussions surrounding the negotiation of the Comparative Advertising
Directive, 1997 and notes that draft Regulations for UK implementation have been issued.

(para 3.17)

The CBI endorsed the Code of Practice on Green Claims. Concepts such as “environmentally
friendly” are subjective ; labelling should be based on fact and “measurables”. Even then it is
difficult to prove that claims were or were not misleading. The CBI would support a
voluntary code, and does not believe that regulation would be any more successful in
achieving the objectives in this area. It is not in the interests of business to attempt to mislead
consumers with environmental claims.

We are concerned that imported goods should not be able to make claims which imply they
are ‘greener’ than in fact they are.

UK action must also be seen in the context of EU activity where attempts are being made to
develop an effective pan-European initiative in the face of many other established schemes.

Consistency of treatment: description of goods and services

(para 3.19)

The CBI looks forward to contributing to the consultation exercise on whether the provisions
of the Trade Descriptions Act relating to services should be aligned with those relating to
goods.

Counterfeit goods

(paras 3.20 – 3.21)

While we support the government in improving education for consumers in this area, we
would urge specific targeting of rogue traders who deal in counterfeit goods. Additional
resources should be made available to local trading standards departments to enable them
effectively to deal with counterfeiting.

Consumer Education

(paras 3.31 – 3.34)

The importance of education, both at adult and school level, to provide consumers with the
skills to make appropriate use of information, should not be underestimated.

The White Paper rightly identifies the importance of basic skills, if adults are to be effective,
confident consumers. Sir Claus Moser’s Report, A Fresh Start, found that 20 per cent of
adults have problems with literacy, and 40 per cent have problems with numeracy. The CBI
believes that this major problem should be a priority for the new Learning and Skills
Councils.




                                                                                                 10
As regards school education, the CBI’s policy Brief, Greater Expectations - Priorities for the
Future Curriculum, called for economic citizenship to be an integral part of the curriculum.
We welcomed the recent proposals for citizenship to become a statutory foundation subject
and expect economic citizenship to feature in its implementation.

Consumer Gateway

(paras 3.35 – 3.36)

We support the establishment of the consumer gateway as one of the sources of further
information. We believe it is essential that there be clear objectives on targeting, e.g. is it
information for consumers as individuals or aimed at intermediary providers such as CABx?
Additionally, it would be useful to make information and advice available to SMEs. The
Internet is an important medium for transferring information and seeking views; importance
will increase as access widens. However, it is a passive medium and we do not believe it
should be relied upon solely. It will not be a suitable channel and should not be used as a
substitute for other information in reaching, for instance, the elderly and groups which may be
“information poor”. Other media should also be used.




                                                                                            11
CHAPTER 4 : Promoting customer service in business

The challenge to business

(para 4.11 – 4.12)

The vast majority of businesses are committed to improving customer service continually and
to finding ways of meeting the demands of increasingly competitive markets. Codes of
practice have a role to play in raising standards. Self-regulated codes constitute excellent peer
pressure to raise standards.

The CBI believes that in principle good, well run codes of practice can give consumers
confidence when purchasing goods and services, provided that they are relevant and
appropriate to the businesses that sign up. Trade associations must have a key role in
developing codes; they provide the focal point for a sector and will be responsive to the
different needs and interests of the industry and its customers. And codes must be voluntary
to ensure appropriate flexibility to respond to changing circumstances.

But there is very little information about what happens already and we recognise that much
more needs to be done to identify what good practice already exists and how that can be used
to inform the current debate.

With support on funding, the CBI has proposed a short-term but wide-ranging research
project into the range, scope and operation of current codes to underpin standards of service
for the customer.

We expect this research to provide the basis for continuing dialogue with the DTI and OFT to
ensure that the framework proposals are fair and workable to both consumer and business, and
address genuine problems in the marketplace. A genuine working partnership between the
OFT and business will be necessary to develop codes. In particular, we strongly believe that a
badge of approval from the OFT is an important element in ensuring consistent high quality in
any scheme. The OFT needs the will and resources to make a new system work. We have yet
to be convinced, however, that an overarching regime could be set up and maintained
effectively without overriding bureaucracy.

Codes for e-commerce

(para 4.13 – 4.17)

We recognise that building up consumer confidence in e-commerce is vital. Global issues are
involved and the UK needs to ensure that new and existing regulation does not inhibit the
development of new technology. Cross-border enforcement of regulatory measures is
important to ensure a level playing field and act against barriers to trade. (See also our
comments in relation to para 7.11.)

The Direct Marketing Association has been leading the work on developing core principles
for e-commerce codes (which are outlined in the White Paper) and the proposals for an e-
hallmark. The CBI is involved in this debate with the other members of the Alliance for
Electronic Business, which are the Federation of the Electronics Industry, the Direct
Marketing Association and the Computer Software and Services Association .




                                                                                                12
We look for joined up thinking and action within the DTI and the OFT and, in particular,
co-ordination between those officials considering e-commerce and those considering other
elements of codes in the context of the consumer strategy.

Developing consumer safety standards

(para 4.18)

Consumer safety is a key concern to business and its promotion through the standards
developed in partnership with consumers and government is a continuing process. We are
fully involved in discussions on the review of the General Product Safety Directive and we
are keen to ensure that any proposals for reform are based on genuine problems with the law
rather than on failure by other Member States to enforce its provisions.

Product recall

When there is a problem involving the safety of a product, corrective action needs to be taken
to ensure that consumers are protected and that it is done in a way which maintains customer
loyalty. We have been pleased to be involved in the development of a guide to good practice
on product recall which the CBI will recommend to business.

We believe that it will be of particular use to SMEs, which may have little or no previous
experience of product recall.

Promoting good practice

(paras 4.20 – 4.22)

We note government support in the White Paper for benchmarking schemes. The CBI is in
the forefront of promoting and operating such schemes. CBI Service PROBE and Unisys
Service Excellence Benchmark, in particular, focus on the provision of Service Excellence
and concentrate on identifying customer needs and the ways in which companies satisfy those
needs. This is also reflected in the Fit for the Future Campaign, a business-led, government-
backed campaign which promotes the adoption of good practice. The network of partners
which is being built within the campaign has a number of customer-focused bodies actively
promoting the use of customer measures for business.

More help for business

(paras 4.23 – 4.24)

We have considered whether it would be appropriate for consumer protection legislation to be
extended to small businesses. This is a complex question which raises fundamental issues and
which would alter the current general position whereby businesses, whether large or small, are
treated in the same way under the law. There could be far-reaching consequences on a range
of issues such as tax and insurance. As a general principle, businesses, and particularly those
which accept the benefits of limited liability, undertake responsibilities which are different
from those of a private consumer and should not therefore be given equivalent protection.




                                                                                             13
Any attempt to alter that position will encounter difficulties in terms of defining what would
constitute a small business for this purpose. If this were taken to be an unincorporated
business, anomalies would arise because there are large partnerships which could hardly
justify the label of small business and very small incorporated companies which, it could be
argued, need some element of protection. If a threshold level were adopted, it could create
inequity in dealings between those falling just within the limit and those exceeding it by a
small margin.

This is such an important issue that it should be the subject of a full consultation to examine
the need for greater protection for small businesses and to look at all aspects of business to
business trading, including a definition of small business. Different issues are likely to arise
in relation to individual areas of consumer protection and it may be appropriate to look at the
issue on a sectoral or individual statute basis. We are aware, for instance, that in the financial
services sector, consultation is already under way to determine whether protection should be
extended to small businesses in certain circumstances.




                                                                                                14
CHAPTER 5 : Helping consumers to get redress

Sources of advice

(paras 5.1 – 5.4)

The CBI supports the government’s objective that consumers should have adequate relevant
information about their rights and simple, accessible redress mechanisms. Business would
wish to be involved fully in the development of proposals to achieve that objective.

Much good practice that exists already on complaints management could be built on, for
instance, the BSI standard on Complaints Management (BS 8600); there is, however, concern
that over-prescription could be counter-productive, reducing the practical effectiveness of
what are, in principle, valuable aims.

It is essential that there is a clear definition of what constitutes a complaint. Research is
needed to identify in percentage terms the level of consumer complaints that are genuinely
unresolved to get the real picture. The number of complaints per se is not meaningful. We
would expect the number to rise as consumer expenditure rises; and also as businesses offer
higher standards of customer service which raise expectations. The White Paper aims to
make consumers more demanding; this will automatically lead, at least initially, to a higher
level of “complaints”. Companies must always be the first port of call for dissatisfied
customers. Information should not inflate consumer expectations as to the performance of a
product or service purchased.

In addition, information should be targeted in such a way as to ensure that consumer
expectations of compensation levels in the redress process are in line with reality.

Joined up consumer advice

(paras 5.5. – 5.9)

We welcome the proposals to develop a new network of advice agencies.

Telephone helpline

(paras 5.10 – 5.12)

We welcome the initiative to provide a telephone helpline, provided that its objectives and
targets are clear and that it is resourced at the appropriate level.

Enforcing rights through the courts

(paras 5.17 – 5.22)

Small claims courts are a helpful element in the range of routes available to consumers
seeking a remedy for a genuine claim.

We support the increase in the financial limit in the Arbitration Act 1996, below which
arbitration only clauses are not binding.




                                                                                              15
Alternative dispute resolution (ADR)

(paras 5.23 – 5.24)

The CBI supports the use of ADR where it is a less formal, cheaper and more accessible form
of redress mechanism than the courts or formal arbitration schemes.

Cross-border disputes

(paras 5.26 – 5.28)

The CBI has concerns as to the amendments to the Brussels Convention which appear to have
been made in isolation to the ongoing work on e-commerce generally.

The amendments to the Brussels Convention greatly extend the application of the courts at the
place of domicile of the consumer. Currently the competence of such courts depends upon an
activity being directed at the consumer, but the amendments, as they apply to electronic
commerce, would bring websites which consumers can access, within the scope of the new
rules.

The implications for business are

•   Businesses may be sued in any Member State where their site can be accessed;

•   Business will be required to know and comply with the laws in 15 Member States. The
    cost will be prohibitive to many businesses particularly SMEs;

•   Web sites are likely to include disclaimers and limit the applicability of offers to particular
    Member States. These, if valid, would limit consumer choice and fragment the single
    market.

•   The regulation would apply irrespective of the fact that on the Internet a business cannot
    know in all cases if the other party is a consumer or where his domicile is;

•   It would apply even if the contract itself has not been concluded by electronic means and
    where the consumer travels to the country of the business to conclude a contract having
    seen the website in his country of domicile.

There is an attempt to present the argument as business versus consumers. However, we
would submit that the Brussels Convention, in both its original and amended forms, offers
little benefit to consumers. This is for a number of reasons:

•   Many consumer transactions are of low value; the cost of court proceedings often exceeds
    the value of the transaction;

•   Court processes, even where specific small claims procedures exist, are complex, time
    consuming and costly;

•   Enforcement is expensive and will have to take place in the business’s country of
    establishment.



                                                                                                16
The amendments proposed would not change this position.

We believe that the correct focus should be on developing low cost cross-border redress
mechanisms.

Rights when buying goods

(para 5.29)

We hope that the close and constructive dialogue which we have maintained with the DTI
during the negotiation of the Directive on certain aspects of the sale of consumer goods and
associated guarantees will continue during discussions leading to UK implementation of the
directive. We look forward to participating in the debate to ensure that implications for
business are fully explored. We urge that as much notice as possible is given of the new
requirements in implementing legislation to ensure that business has adequate opportunity to
prepare; and also that other Member States are urged to implement quickly to avoid
competitive disadvantages arising for UK companies.




                                                                                           17
CHAPTER 6 - Keeping consumer law up to date

Targeted and proportionate rules

The CBI supports the government view that the UK has a mature framework of consumer
legislation. It already provides a sophisticated level of protection for consumers.

We recognise, however, that as markets develop and circumstances change, the framework
must be dynamic. New regulation may be necessary, while some existing laws may become
obsolete.

In terms of new regulation, we welcome the Government’s emphasis on the underpinning of
new proposals with regulatory impact assessments so that risks, benefits and costs to all
economic parties can be assessed. It is important that proposed measures address genuinely
and objectively identified problems and do not add unnecessarily to the regulatory burden.

The CBI agrees that measures should be proportionate and targeted. Indeed, we should like to
see all proposed legislation measured against the five better regulation principles promulgated
by the Better Regulation Task Force.

On the specific issue of any review of sale of goods law to take into account implementation
of the recently adopted EU directive, we hope that the Government would resist any pressure
to “gold plate” its provisions. Thanks in large measure to the efforts of DTI officials during
negotiations, the directive reflects to a significant extent current UK law in that area. It would
be unfortunate if the opportunity were taken to undermine the consensus achieved in the
directive.

Reducing burdens

(paras 6.10 – 6.20)

The CBI welcomes proposals to simplify and reduce regulatory burdens in certain areas. In
the UK laws are discredited if they are so complex and confusing that they are not understood
and not effectively enforced. This benefits neither consumers nor business.

(para 6.12)

We agree with criticism that the Consumer Credit Act 1974 is complex. We have already put
forward proposals to the Better Regulation Task Force that simplification could be achieved
through guidance provided to support general obligations in the Consumer Credit Act,
replacing detailed Regulations which, in some areas, are of labyrinthine complexity.

(para 6.13)

We have given an initial response to a limited enquiry by the DTI on the existing consumer
credit licensing system. The current regime represents a valuable tool in the regulation of
consumer credit provision, which the CBI would not wish to see removed. Possible reform
and tightening up of Part III of the Fair Trading Act 1973 would undoubtedly add to the
regulatory weapons that could be used in certain circumstances and could in future provide a
speedier route against rogue operators. Such reforms, however, would not justify removal of
the whole licensing system.



                                                                                               18
We would, however, fully support periodic review of the regime to ensure that its operation is
as effective and efficient as possible.

(para 6.15)

The CBI welcomes the proposal to consider consolidation of the requirements in the Unfair
Contracts Act 1977 and the Unfair Terms in Consumer Contracts Regulations 1999. The
scope of, and tests within, these two legislative measures overlap to a certain extent but are,
nevertheless, different. Effective consolidation would help to reduce confusion for consumers
as well as for business.

(para 6.20)

The CBI suggests that the same arguments for consolidation apply to Part II of the Consumer
Protection Act 1987 and the General Product Safety Regulations. It is confusing for business
to have reference to two separate pieces of legislation which overlap but may create different
requirements.

We would also like to see a common age limit for the sale of certain restricted products, such
as alcohol, solvents and fireworks. It is increasingly difficult for retailers to comply with
requirements which set the age limit at different levels for a range of different products.




                                                                                            19
CHAPTER 7 - Securing compliance

Effective enforcement and persuasion and education of traders

(para 7.1 – 7.3)

Business benefits from clear regulation effectively and evenly enforced by well resourced
central and local authorities. Clear legislative objectives set by the government should be
backed by a transparent and effective enforcement policy. We see it as important that
business, and consumers, have as much guidance as possible about how regulation will be
interpreted and enforced and we support partnership and discussion between business and
enforcers, both nationally and locally, to inform traders of the law and to encourage
compliance. It is desirable that an enforcement culture is promoted in which prosecution
is the last resort for authorities and is then only pursued on the basis of an agreed set of
principles which makes clear to consumers, business and enforcers exactly what behaviour is
prohibited. The Enforcement Concordat has a significant part to play to ensure that
enforcement is as consistent as possible as between different trading standards departments
and between national bodies and local authorities. We endorse the government call for those
enforcement authorities which have not already done so to sign up to the Concordat.

Dealing with the rogues

(paras 7.4 – 7.9)

In addition to the damage done to consumers, the CBI agrees that the action of rogue traders
can undermine the reputation of legitimate business and we support the government’s aim of
clearer targeting of rogue traders and specific unfair practices.

The CBI notes the proposals to provide for an injunctions power, a banning power and a
power for the Secretary of State to make orders by secondary legislation against specified
practices.

We believe that:

-      the new remedies must be proportionate

-      statutory objectives must be clear

-      these are far-reaching powers with potentially very damaging consequences for
       business and therefore must be accompanied in legislation by a series of checks and
       balances on those undertaking enforcement

-      definitions must be clear and confer certainty, particularly in relation to what is an
       unfair practice, and not inhibit reputable commercial activities

-      there needs to be increased dialogue between business and enforcers about the way in
       which statutory powers are to be exercised both at national and local level

-      there would need to be mechanisms to ensure appropriate co-operation and
       consistency of enforcement both between local authorities and between the OFT and
       trading standards departments

-      cases should be heard in the High Court and not in magistrates’ courts.
                                                                                                20
Broadening the enforcement base

(para 7.10)

We note that the Government is opening up the possibility of a wider range of bodies and, in
particular, consumer organisations, to take action in the courts to enforce consumer rights.

In relation to the Unfair Contract Terms Regulations, it will be important to ensure that the
current constructive approach to enforcement taken by the specialist OFT Unit, including the
provision of a significant amount of helpful information through its bulletins, is not diluted in
any way by extension of the enforcement powers to other bodies. There is scope for
uncertainty and costly duplication. Business will look for co-operation and consistency in
enforcement.

The Consumers’ Association is one of the named qualifying bodies which are empowered to
take enforcement action under the new Unfair Contract Terms Regulations. There is some
unease among members that increasingly the Consumers’ Association is becoming a quasi-
commercial operation, pursuing and developing a range of business activities. Conflicts of
interest may arise between the exercise of the new powers granted under the Regulations and
the commercial activities of the organisation.

On the work of the Lord Chancellor’s Department relating to representative actions, the CBI
will be pressing to ensure that the implications of any change of policy are fully explored.

Electronic commerce

(para 7.11)

We support the enforcement of consumer protection laws across borders, which is even more
important in the context of e-commerce, to ensure a level playing field for business and the
effective operation of the single market. This is confirmed elsewhere in our response (see
comments in relation to paras 4.13 – 4.17).

A modern trading standards service

(para 7.12 – 7.16)

We welcome the work carried out by LACOTS and local authorities themselves to improve
consistency and co-operation in enforcement. The Enforcement Concordat is a significant
step forward in establishing more formally the principles underpinning enforcement action.
We hope that those enforcement authorities which have not already done so, will feel able to
sign up to the Concordat and that this will help to foster greater discussion and dialogue with
business at the local level. The Concordat itself will need to be reviewed and possibly
strengthened in the light of new powers resulting from the White Paper. The Home Authority
principle is also a valuable procedure to reduce problems over enforcement and we
recommend further steps to ensure that all local authorities follow the practice.

Greater dialogue and communication, both through central bodies and locally, either directly
or through LACOTS, will be vital in increasing understanding between business and
enforcement authorities, particularly as the latter take on the challenge of the exercise of new
powers. We support recent initiatives taken by LACOTS and look forward to further
involvement in the development of this dialogue.

                                                                                               21
(para. 7.15)

Resources are vital. New regulatory functions will put further strains on already stretched
trading standards departments. They will require resourcing which is proportionate to the
new range of powers and the challenges presented by the exercise of those powers. There are
many other pressures on local authority budgets and we urge that resources for implementing
the White Paper proposals should be specifically ring-fenced to avoid their being diverted to
other competing areas of activity.

Performance measurement

(para 7.17)

We recognise that performance measurement, although difficult in practice, is a very
worthwhile objective. The CBI hopes that business can contribute to the debate with local
enforcement authorities to develop this area and to avoid some of the undesirable “skewing”
of activity which the White Paper itself acknowledges could result. In particular, we would
wish to ensure that the level of prosecutions taken by departments is not seen as a key factor
in performance measurement; indeed, the key performance measurement should be linked to
achieving compliance by encouragement and consensus.

Training, recruitment and development of trading standards staff

(para 7.19)

Given the wide range of regulatory functions that they must carry out, and the increase in
enforcement powers that will result from the White Paper, it will be important that trading
standards officers are consistently professional, well-trained and well motivated. Funding
must be made available for continuing professional development.

Closer co-operation

(para 7.21)

The CBI welcomes all steps to increase co-operation between and among national and local
enforcement authorities. We are pleased currently to participate in a working group drawn
together by the OFT to look at enforcement and liaison issues and hope that a permanent
mechanism can be formed to continue that process.




                                                                                              22
CHAPTER 8 : Consumers at the heart of government

Listening to consumers

(paras 8.1 – 8.5)

The CBI recognises that consumers’ views need to be taken fully into account in developing
fair and balanced government policy. There are a number of organisations and routes through
which the views of consumers are made known, many of which are set out in the White Paper.
There is some concern that the increasingly commercial role of the Consumers’ Association
may reduce its ability to represent the views of the majority of consumers.

National Consumer Council

(paras 8.6 – 8.7)

The National Consumer Council is able to play, without commercial distractions, a key role in
ensuring that consumers’ interests are represented and taken into account in government
policy. We hope that the review of its activities will result in an enhanced role which is as
transparent as possible.

Representing the consumer interest

(paras 8.8 – 8.9)

We accept that consumers should be represented by those who can reflect the real concerns of
consumers. There is a need to ensure that there is independent and careful research into
consumers’ needs so that a balanced view can be formulated before action is taken.

Involvement in the development of policy

(paras 8.10 - 8.11)

The CBI looks forward to participation in the work of the Minister’s Advisory Committee
which it welcomes as a forum for constructive discussion which will broaden understanding
of the issues affecting all stakeholders in the economy.

A stronger Office of Fair Trading

(paras 8.12 – 8.13)

We welcome the fundamental review taking place within the OFT against the background of
proposals in the White Paper to change and, in certain areas, to strengthen its role. The CBI
looks forward to participating in that review. As we have stated elsewhere in our response,
we are particularly concerned that the OFT should be appropriately resourced to carry out
effectively its new role.




                                                                                            23
CHAPTER 9 - Joining it all up

A strategy underpinning consumer issues across government

(paras 9.1 – 9.7)

A strategic approach to consumer policy depends crucially on a co-ordinated approach across
government departments. If the principles set out in the White Paper are applied across
departments and underpinned through the new Ministerial Group, it should help to ensure that
co-ordinated policy is developed and that different messages are not being sent out through
different departments. This has been an area of major concern to business in the past.




October 1999




                                                                                         24

								
To top