Consumer Rights Bill

Lord Stoneham of Droxford Excerpts

Wednesday 29th October 2014 Grand Committee

[Lord Best (CB)]

My Lords, I have added my name to Amendment 56B. I was approached by the Internet Telephony Services Providers’ Association—ITSPA—because I chair your Lordships’ Select Committee on Communications. However, my committee has not had a chance to consider this particular issue so, having discussed it at length with ITSPA, which represents some 80 providers of telephony services via the internet, I speak in a personal capacity.

The amendment addresses a consumer rights issue relating to the penalties facing unwary customers of some of the companies that supply our mobile phone and internet connections. Unbeknown to those who sign up to get the internet from their iPhones and other mobile phones—unless they have studied all the small print and those terms and conditions that we all accept but have never read—some of the big players have built-in penalties for using the internet to make telephone calls—for example, through Skype. While providers such as BT, O2 and Sky, for example, have not adopted such practices and do not penalise their customers in this way, Vodaphone and EE have done so in recent years.

Presumably, the restrictive practices of these companies are a consequence of them providing mobile telephone services, which could be less popular and profitable if people use the internet to make telephone calls at a much lower cost. However, this practice is bad not just for the innocent consumer who can have their calls blocked or degraded, and/or could find some hefty charges on their mobile phone bills, it is also bad for this industry that finds it harder to attract investment to extend a really useful communication tool which, increasingly, could benefit more and more of us but has this cloud hanging over it. The practice is detrimental to consumer interests as well as anti-competitive and will gradually affect other services as we increasingly access the internet via mobile connections.

I note that amendments to this effect were tabled in the other place by both Conservative and Labour Members. We learnt there that the Government and Ofcom are keen to see an end to the current bad practice. We hear that in recent days Vodafone and EE have bowed to pressure from all sides and agreed to sign up to the industry’s code of practice which outlaws the technical blocking or restricting of telephone services through the internet. This is a step in the right direction. Nevertheless, as ITSPA points out, there are ways of interpreting this code of practice that could circumvent its intentions, for example simply by avoiding the term “internet access” and using a synonym such as “mobile data” or “mobile broadband”. There are also no sanctions for breaking the code, and those who voluntarily sign it one day can withdraw from it another. Only through legislation is the matter fully resolved.

As I know from the work of the Communications Committee, ensuring the law keeps pace with technological change—particularly in respect of the internet—is an important challenge for today’s legislators. This Bill takes steps in that direction and this amendment is very much a case in point. It seems that in the somewhat arcane world of telephony services, the consumer needs the protection of the law, not just of a voluntary code, to ensure fair play.

Finally, I gather that there is a school of thought that suggests we should await an EU directive on so-called internet neutrality—to which the noble Baroness, Lady Thornton, referred. That would cover this point, among other measures. However, I fear that we could wait a very long time for agreement on the content of this Europe-wide measure. Surely it is much better for UK citizens if the Government act now with a small, well-focused amendment to the Bill already before us. I am delighted to support this amendment.

[Lord Stoneham of Droxford (LD)]

Briefly, I lend my support to this amendment. Most of the points have already been made but wherever uncompetitive activity is trying to distort a market and deprive market entry to competitors it should be exposed and eliminated. Internet access should be open and consumers buying that service expect it to be so. Can the Government really achieve their objective of an open market without considering this amendment? Selective blocking is abhorrent to innovation and generally has uncompetitive motives. Consumers are not fully aware of the practices when ISPs and mobile providers undertake inhibiting their services. Ofcom has already indicated that it would welcome more clout against the blocking of or economic deterrents for internet services. It recognises that these practices should be unacceptable. The voluntary code of practice should be given statutory support.

[Baroness Jolly]

The noble Lord, Lord Deben, says that this is a tricky issue and he is clearly right. One of the tricky bits of this amendment is that many aspects of internet behaviour can be fitted under these amendments. The ones in my comments relate to those of the noble Lord, Lord Best, in which people using voice over internet protocol have been wrongly charged for it. Nobody wants to see that situation but I question whether there is a need to change the law to tackle such behaviour as we have good and robust protections in place for consumers.

I also understand that companies which block services such as Skype no longer offer packages that do so, except on legacy tariffs, so these terms and conditions should not apply. I also understand that the regulator Ofcom has been in dialogue with the providers, and that there is a commitment to review the wording in their terms and conditions to ensure that these are not misinterpreted in this way.

The noble Baroness, Lady Thornton, asked about the assessment of the two-tier internet. The Government’s intention is to ensure an open, secure and safe internet. Where some services are blocked, we want to see transparency. However, our experience is that competition is working. The proposals in the US are informed by the US market. The UK’s market is very different, so we watch with interest to see what the FCC will do.

More broadly, the Government and industry through the Broadband Stakeholder Group have done a great deal of work together to ensure that there is greater transparency. For example, two industry codes of practice have now been developed. This, coupled with the UK’s highly competitive telecoms market, has been very successful in ensuring that there is no consumer detriment caused by traffic management problems.

I hope that this gives some reassurance to noble Lords proposing the amendments. However, given their wide applicability, it makes an awful lot of sense to convene a meeting on this issue with interested parties before Report. Therefore, I ask the noble Baroness to withdraw the amendment.

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Moved by

[Lord Stoneham of Droxford]

57A: After Clause 76, insert the following new Clause—
“Copyright
In cases where there is a consumer contract under Part 1 or 2 of this Act, paragraph 1(c) of Schedule 1 to the Unfair Contract Terms Act 1977 (scope of sections 2 to 4 and 7) applies with the omissions of “copyright,”.”

[Lord Stoneham of Droxford]

My Lords, I speak on behalf of my noble friend Lord Clement-Jones, who has commitments in China this week. I reassure the Committee that this is not an option that has been proposed in order to make speedier progress on the Bill.

The purpose of Amendment 57A is to amend the Unfair Contract Terms Act 1977 so that it would apply to intellectual property rights contracts. Although this has been sought by the Society of Authors, we would argue that there is a wider significance that needs to be examined in the context of the Bill. There is no justifiable reason why creators should be denied the legal protections afforded to other businesses, and we would therefore press for the amendment to be accepted.

The Consumer Rights Bill should be extended to protect creators and others in an unfair negotiating environment where they often have little choice but to sign the contracts that are put in front of them. For example, writers always have to sign clauses indemnifying publishers against any claims brought by other parties even when they arise through no fault of the author, and even though the publisher is covered by insurance. Nor can writers easily enforce performance which turns out to be substantially different from what they could have reasonably expected under the contract.

The proposed new clause would impose a basic obligation of fairness. It is unclear why contracts involving intellectual property are currently excluded from the Unfair Contract Terms Act, but it is probably because they were not so significant in 1977. It will protect consumers and businesses from being bound by contractual terms that they may not have read as they would have simply clicked their agreement to them, as we all do, on the assumption that they contain nothing astonishing or that the law will offer protection. For intellectual property rights, which could include something as basic as buying an e-book, there is currently no legal protection against unfair terms. This is remarkable, given the growth of contracts involving intellectual property rights.

The Government may argue that this new clause would represent a major change that requires consultation, but we do not agree. It is not being suggested because creators have little bargaining power—although that is true—but because if as a society we agree that people should be protected from hidden and patently unfair terms in contracts, the protection should be apply to everyone. It is completely illogical to exclude contracts that relate to intellectual property. Without a government response, this unfairness will grow with the increase in contracts involving intellectual property, and it will deter innovation. I urge the Minister to accept the amendment, or at the very least tell the Committee how the Government intend to deal with this growing inequity.

I now turn to Amendment 63A, which is somewhat unrelated. I have spent my life in the publishing business, where passing off brands was a problem. Although we invested heavily in brands over a long period, it required us to be ever vigilant to protect them. Parasitic copying—the practice of packaging consumer products to mimic familiar brands—misleads consumers and distorts competition. Indeed, this has been recognised by the Government, who launched a consultation in February on enforcing consumer protection regulations in relation to misleading, similar packaging. It is therefore a legitimate subject to be covered by the Bill. Copying the packaging of branded goods hijacks the reputation of a brand built up over many years of consumer experience. The current legislation appears inadequate to deal with the problem.

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[Baroness Jolly]

I am grateful to my noble friend Lord Clement-Jones for tabling these amendments and to my other noble friend for speaking to them on his behalf.

I realise that these amendments are closely related but I will take each in turn, starting with Amendment 57A. Noble Lords asked why we are not changing the scope of the Unfair Contract Terms Act in the Bill to apply to business-to-business intellectual property contracts. This is because this Bill is about consumers. We want to have a one-stop shop where consumers can go to find their rights. Adding business-to-business contracts would dilute this for consumers, making the law more complex and reducing its accessibility. Having rights for businesses in the Unfair Terms part of the Consumer Rights Bill may also be confusing for businesses.

We sympathise with the situation in which some small businesses find themselves. However, we have not yet seen evidence that amending the Unfair Contract Terms Act in this way would address the issue. We would need substantial, quantitative evidence of a problem to make this change. We would also need to be sure that amending the Unfair Contract Terms Act in this way would solve the problem my noble friend raises without unintended negative consequences.

My noble friend Lord Stoneham raised the issue of consultation, effectively saying that we do not need consultation, we need action. We need to be sure that we get this right, so we need to consider all interests. The creative industries are too important to rush this. They are really critical to the UK economy. The department is aware that this is a live issue, but the Bill is not the place to solve it.

[Lord Stoneham of Droxford]

Is my noble friend saying that in recognising the issue, the department is prepared to initiate some form of consultation to put this inequity right?

[Baroness Jolly]

Yes, there was a meeting and the outcome was agreement from the creative industries to provide evidence of the problem and to propose a solution. My noble friend has just said that she is seeing the British Brands Group tomorrow at an IP round table to discuss these issues.

[Lord Stoneham of Droxford]

I am sorry, that is a separate issue. That is on parasitic brands. I am sorry to confuse my noble friend. Perhaps she could write to me.

[Baroness Jolly]

I will drop my noble friend a line. I am sorry, that has thrown me. I was given this and told exactly where to slot it in.

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I am sure that his amendment has been prompted in part by the opportunity provided by the Bill. However, I hope I can offer some reassurance that, were we to go down this route, we believe that we could do so via secondary legislation under Section 2(2) of the European Communities Act 1972. My noble friend should be reassured that I have passed his amendment to the officials conducting the review and that Ministers have met today once again with representatives from the British Brands Group to discuss these matters, as the noble Viscount, Lord Younger of Leckie, did in the past. I would ask my noble friend, on behalf of the noble Lord, Lord Clement-Jones, to withdraw the amendment.

[Lord Stoneham of Droxford]

I thank my noble friend for her comments. I apologise for interrupting, but I am grateful for the assurance that she will come back to us on Amendment 57A and its implications. Although I am disappointed that the review on parasitic products is not going to be published until early 2015 and I have certain doubts as to how this Government could deal with the European Act, we have had some assurances that the Government are on a path towards progress on this matter. I will have to leave it to my noble friend Lord Clement-Jones to decide how he pursues this matter. I beg leave to withdraw the amendment.

Amendment 57A withdrawn.