Digital Markets, Competition and Consumers Bill (Thirteenth sitting)

Seema Malhotra Excerpts

Committee stage
Tuesday 4th July 2023 Public Bill Committees

[The Parliamentary Under-Secretary of State for Business and Trade (Kevin Hollinrake)]

It is a pleasure to serve with you in the Chair, Dame Maria. Clause 225 enables the Secretary of State to make new regulations for consumers to have a right to unwind, a right to discount and a right to damages. The regulations may cover, among other things, how such rights are to be exercised and when damages are to be payable. Before these regulations are made, the existing private redress provisions set out in the Consumer Protection from Unfair Trading Regulations 2008 will continue to apply. The first use of the power will be subject to the affirmative procedure, ensuring appropriate parliamentary scrutiny.

Clause 226 sets out how consumers can exercise their right to redress and allows consumers to undertake civil court action. Any legal claim must be brought within the time limit for simple contracts that applies under the Limitation Act 1980. If successful, a consumer will then have the right to unwind, the right to a discount, or the right to damages.

Clause 227 outlines the relationship between consumers’ private redress rights and other claims that are related to the prohibited practices of misleading actions and aggressive practices. It states that a consumer is not prevented from pursuing a claim under a rule of law, equity, or other legislation, but they cannot recover compensation twice for the same conduct.

[Seema Malhotra (Feltham and Heston) (Lab/Co-op)]

It is a pleasure to serve under your chairship today, Dame Maria. I thank the Minister for his opening remarks. He covered how clause 225 confers a power on the Secretary of State to make regulations providing rights of redress to consumers, including the right to unwind relevant contracts, receive a discount, receive damages and so on.

The Opposition support the clause and recognise the need for further provisions for rights of redress, but why is that being left to secondary legislation? Does the Minister know when the Secretary of State may exercise this power? There is a danger of further delay. Why is this a power, rather than a duty? Perhaps the Minister can come back on why it was decided that the legislation be set out in this way. I can understand that there may be some reason to allow for further provision, but one would have thought that some measures would be brought in earlier.

Clause 226 sets out how a consumer can enforce their rights to redress, and I thank the Minister for his comments on it. Specifically, it sets out how a consumer with the right to redress by virtue of the regulations would be able to enforce their rights through making a claim in the civil courts. In Scotland, proceedings could be brought before the sheriff or the Court of Session. We welcome this clause in ensuring consumers have swift access to means of redress.

We also support clause 227, which would have the effect of avoiding double compensation, which is a common-sense and welcome provision.

[The Chair]

For the avoidance of doubt, if anybody wants to remove their jacket, please feel free to do so. It is a little muggy in here.

[Kevin Hollinrake]

Clause 228 protects consumers against inertia selling, which occurs when traders send unsolicited products to consumers and then demand payment for the products or that the products be returned or safely stored. The clause provides clarity for consumers and traders, leaving no room for doubt. Consumers are exempt from any obligation to pay for the unrequested products, return them or store them safely. The lack of a response by a consumer to a trader does not mean that the consumer has agreed to pay for, return or store the product.

[Seema Malhotra]

The Minister has laid out the reasons for this clause, which we very much support. It is important to support consumers against inertia selling, and it is a real worry when we hear of cases where traders demand an immediate or deferred payment for the return or even the safekeeping of products that have been supplied but not solicited by the consumer. It is important that we clarify that consumers are not required to pay for products supplied unsolicited by the trader, so we support the clause.

Question put and agreed to.

Clause 228 accordingly ordered to stand part of the Bill.

Clause 229

Offences

Question proposed, That the clause stand part of the Bill.

[The Chair]

With this it will be convenient to discuss the following:

Government amendments 72 and 73.

Clause 230 stand part.

Government amendments 74 to 77.

Clauses 231 to 233 stand part.

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[Seema Malhotra]

Clause 229 introduces provisions setting out the conditions under which it would be a criminal offence for a trader to engage in an unfair commercial practice of a kind prohibited by clause 217. The Minister outlined what those practices would be: a misleading action, a misleading omission, omission of material information from an invitation to purchase, and so on. The clause also makes every practice listed in schedule 18 a criminal offence, apart from using editorial content in the media to promote a product where it is not made clear that it is a paid-for promotion, or including in an advert a direct appeal to children to buy advertised products.

The Opposition recognise the importance of making unfair practices criminal offences and support this clause. However, why does the legislation specifically make two practices in schedule 18 not subject to a criminal offence?

Clause 230 provides a range of potential defences for an offence charged under clause 229. We recognise the need for a defence of due diligence and therefore support this clause. However, we would welcome further explanation from the Minister regarding subsection (1), which specifically outlines that it is a defence for the trader if the offence was “a mistake or accident”. I just wonder whether there is any more guidance regarding what the bar or threshold is here, and about how individuals and businesses will be required to prove that an offence occurred as a result of a mistake or accident.

Amendment 72 ensures that the defence provided for under clause 230(1), the defence of due diligence, does not apply in relation to an offence under clause 229(4). This replicates the current position under the Consumer Protection from Unfair Trading Regulations 2008. We welcome this common-sense amendment, and we similarly welcome amendment 73.

Clause 231 sets out that where a body corporate commits an offence with the consent of an officer of that body, both the officer and the body corporate can be prosecuted and punished. This also applies if the offence is attributable to neglect on the part of the officer. We welcome this clause because it ensures that all those responsible for an offence that has a detrimental impact on consumers are subject to being held accountable and to action as a result of that offence.

Amendments 74 to 77 ensure that the imposition of liability on another person does not apply to an offence under clause 229(4). This replicates the current position under the Consumer Protection from Unfair Trading Regulations 2008. Assuming that this is consistent with the current legislation, the Opposition of course support this amendment.

Clause 232 sets out the penalty for offences under this chapter, and how a person guilty of an offence is liable to a fine or imprisonment for a term not exceeding two years. We support this clause.

Finally, clause 233 outlines the time limits for prosecution under clause 229, with a prosecution needing to begin within three years of an offence, or within one year of the offence being discovered by the prosecutor. We support this clause, although is the Minister confident that within a year of discovery will be long enough, particularly considering the current resourcing pressures on our prosecution and justice systems? He may have confidence, and of course we do not want to lengthen the timescales, but how will he know how many prosecutions are missed due to running out of time?

[Kevin Hollinrake]

The banned practices to which the shadow Minister and I have referred are not currently subject to criminal liability, and we did not consider it appropriate to introduce new criminal offences.

On the “mistake or accident” defence, the defendant has an obligation to prove it was a mistake or an accident, which I think is a reasonable provision.

The timescales are replicated from the current timescales in the 2008 regulations, so there is nothing new here. We are pretty confident the timescales will be appropriate but, of course, we will continue to engage with the relevant enforcement bodies to make sure they are appropriate.

[Seema Malhotra]

How will the Minister know how many prosecutions are missed due to running out of time?

[Kevin Hollinrake]

We have continuing engagement with the various enforcement bodies, such as trading standards and the Competition and Markets Authority, through either officials or Ministers. If there were a problem, we are confident we would receive that feedback and be able to make a decision on how to act accordingly.

[Seema Malhotra]

rose—

[The Chair]

Is this an intervention or a further speech?

[Seema Malhotra]

It was meant to be an intervention, but the Minister sat down.

[Kevin Hollinrake]

I have concluded my remarks.

Question put and agreed to.

Clause 229 accordingly ordered to stand part of the Bill.

Clause 230

Defence of due diligence and innocent publication

Amendments made: 72, clause 230, page 154, line 32, at end insert “subsection (1), (2), (3), (6) or (7) of”.

This amendment ensures that the defence provided for in clause 230(1) (defence of due diligence) does not apply in relation to an offence under clause 229(4) (offence of engaging in an unfair commercial practice which involves a contravention of the requirements of professional diligence). This replicates the current position under the Consumer Protection from Unfair Trading Regulations 2008.

Amendment 73, clause 230, page 155, line 5, after “under” insert “subsection (1), (2), (3), (6) or (7) of”.—(Kevin Hollinrake.)

This amendment ensures that the defence provided for in clause 230(3) (defence of innocent publication) does not apply in relation to an offence under clause 229(4) (offence of engaging in an unfair commercial practice which involves a contravention of the requirements of professional diligence). This replicates the current position under the Consumer Protection from Unfair Trading Regulations 2008.

Clause 230, as amended, ordered to stand part of the Bill.

Clause 231

Offences: criminal liability of others

Amendments made: 74, clause 231, page 155, line 30, after “under” insert “subsection (1), (2), (3), (6) or (7) of”.

This amendment ensures that the imposition of liability on another person does not apply in relation to an offence under clause 229(4) (offence of engaging in an unfair commercial practice which involves a contravention of the requirements of professional diligence). This replicates the current position under the Consumer Protection from Unfair Trading Regulations 2008.

Amendment 75, clause 231, page 155, line 31, leave out “section” and insert “subsection”.

This amendment is consequential on Amendment 74.

Amendment 76, clause 231, page 155, line 40, after “under” insert “subsection (1), (2), (3), (6) or (7) of”.

This amendment is consequential on Amendment 74.

Amendment 77, clause 231, page 155, line 41, leave out “section” and insert “subsection”.—(Kevin Hollinrake.)

This amendment is consequential on Amendment 74.

Clause 231, as amended, ordered to stand part of the Bill.

Clauses 232 and 233 ordered to stand part of the Bill.

Clause 234

Powers to amend this Chapter

[Seema Malhotra]

I beg to move amendment 129, in clause 234, page 157, line 30, leave out subsection (2).

This amendment would ensure that future “banned practices” are both criminal and civil breaches, reflecting their potential seriousness and putting them in line with all but two of the current banned practices.

This amendment would ensure that future banned practices are both criminal and civil breaches, reflecting their potential seriousness and putting them in line with almost all other current banned practices. As we understand it, under the legislation as drafted, any practice added later by the Secretary of State will not be subject to criminal enforcement. Perhaps the Minister can clarify that, because it is slightly unclear. Given that clause 234 is the means by which the Government are planning to take action on fake reviews, will the Minister confirm his intentions on penalties for breaches?

This is a straightforward amendment that seeks to ensure that future action against fake reviews, or any other unfair commercial practice, is just as robust as the action taken on the face of the Bill. I do not intend to press the amendment to a vote, but I would be grateful for a clarification from the Minister because, during the course of the Bill, we will want to understand the penalties and be clear about those for different practices.

[Kevin Hollinrake]

I thank the hon. Lady for her amendment and her remarks. She will be aware that, ordinarily, when criminal offences are created, it is important and beneficial for Parliament to have ample opportunity to scrutinise them. That is usually via primary legislation, rather than powers given to Government. There is, of course, nothing to prevent Members of Parliament from introducing primary legislation to criminalise specific practices in future, should the House consider it desirable to do so. In the meantime, any new practices added to schedule 18 will continue to benefit from the relevant civil penalties, as well as the greater deterrent effect that we expect from the considerable reforms that we are introducing.

On the penalties themselves, we will go much further than any UK Government have ever done before; we are empowering the courts and the CMA to impose fines of up to the higher of £300,000 or 10% of worldwide turnover for infringements of consumer-protection law.

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[Seema Malhotra]

I thank the Minister for his comments. I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Question proposed, That the clause stand part of the Bill.

[The Chair]

With this it will be convenient to discuss the following:

Clauses 235 to 242 stand part.

Government amendment 78.

Clauses 243 and 244 stand part.

[Kevin Hollinrake]

Clause 234 gives powers to the Secretary of State to amend this chapter. New regulations using the powers may not be made before consultation and will be subject to the affirmative procedure. For example, the power to amend the list of banned commercial practices in schedule 18 will allow the Government to respond more quickly to emerging consumer harms and ensure that appropriate levels of consumer protection are maintained.

The power to amend the list of information deemed to be material in an invitation to purchase means that we can ensure that consumers get the information that they need when they prepare to make a purchase. The power to amend the list of prohibited practices in clause 224(7) will enable the Government to extend private rights of redress to further commercial practices, such as misleading omissions. I hope that hon. Members will agree that it is critical to future-proof the Bill through these provisions, given the constantly evolving environment in which traders operate.

Clause 235 establishes that the Crown is not criminally liable for any infringement of the regulations. This does not affect the application of the regulations in relation to a person in public service of the Crown.

Clause 236 states that a contract or agreement is not void purely because of a breach of this chapter, except for cases where voiding of the contract arises as a result of a consumer exercising their right to redress.

Clause 237 defines “transactional decision”. This is an important and broad definition, which includes decisions before any purchase has taken place as well as decisions after a purchase has taken place.

Clause 238 defines an “average consumer”. It largely restates the equivalent provision from the Consumer Protection from Unfair Trading Regulations 2008.

Clause 239 defines “average consumer” in situations where a group of consumers are particularly vulnerable to a commercial practice. It recognises and makes explicit that consumers may be vulnerable for a range of reasons, including their age, health, credulity and circumstances.

Clause 240 defines “product” for the purposes of this chapter. A product can mean goods, services and digital content. That is important as it means consumers are protected from unfair trading practices when purchasing digital content from businesses online.

Clause 241 defines a range of other terms used in part 4, chapter 1 of the Bill. Clause 242 provides an index of defined terms in this chapter.

Clause 243 revokes the 2008 regulations and re-enacts their substance in part 4, chapter 1 of the Bill. It also makes a small number of consequential amendments to other UK legislation.

Government amendment 78 makes a minor consequential amendment to section 393 of the Communications Act 2003 to include part 4 of this Bill. That will enable Ofcom and the CMA to collaborate in relation to matters covered by part 4 in the same manner that they do for the consumer protection regulations.

Clause 244 sets out that the 2008 regulations will continue to apply to any unfair acts or omissions occurring before this Bill is enacted. The clause also provides that part 4A of the consumer protection regulations, which deals with private right of redress, will continue to apply until new regulations are made under this chapter. I hope hon. Members will accept amendment 78, and I commend the clauses to the Committee.

[Seema Malhotra]

Clause 234 introduces a provision allowing for the Secretary of State to amend the list of banned practices in schedule 18. The clause will be the route through which we may see later action on fake reviews. The Opposition welcome the flexibility this gives the regime and supports the clause, but I want to ask the Minister one question on changes that can be made.

We have talked about additions, but there is also the power to remove a practice from the schedule. We understand the principle and the importance of the flexibility to add practices, particularly considering the ever-increasing ways that rogue traders can mislead consumers in not only the digital economy, but in the real world. However, I would welcome clarity on the circumstances in which the Government would want to remove a practice from the list and, more importantly, the process it then uses to do so. Will it be subject to similar procedures? It would be helpful to understand that for the record.

Clause 235 exempts the Crown from criminal liability as a result of the provisions in this chapter but does not affect their application to persons in service of the Crown. Will the Minister clarity that Crown exemption?

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[Seema Malhotra]

I think the Minister was referring to my second question on the meaning of average consumers and vulnerable persons. Rather than wanting any changes, I wanted him to recognise that someone’s circumstances can lead to an over-assumption of their vulnerability, and an interpretation of that vulnerability can make it more difficult for those who really do know what they want, even though they are in those circumstances.

[Kevin Hollinrake]

The hon. Lady makes a very good point. Regulators play a part in this as well by ensuring that the average consumer is assessed correctly and that there is relevant assessment of any characteristics. Businesses can be challenged on the back of that to ensure that they do not exploit consumers, especially those who are vulnerable to a particular commercial practice.

Question put and agreed to.

Clause 234 accordingly ordered to stand part of the Bill.

Clauses 235 to 242 ordered to stand part of the Bill.

Clause 243

Consequential amendments etc relating to this Chapter

Amendment made: 78, in clause 243, page 161, line 21, at end insert—

“(3A) In section 393(5) of the Communications Act 2003 (exceptions to general restrictions on disclosure of information), after paragraph (r) insert—

‘(s) Chapter 1 of Part 4 of the Digital Markets, Competition and Consumers Act 2023.’”—(Kevin Hollinrake.)

This amendment enables OFCOM to disclose information to the CMA for the purpose of the CMA exercising its functions under Chapter 1 of Part 4 of the Bill in the same way that OFCOM may currently disclose information to the CMA for the purpose of the CMA exercising its functions under the Consumer Protection from Unfair Trading Regulations 2008.

Clause 243, as amended, ordered to stand part of the Bill.

Clause 244 ordered to stand part of the Bill.

Clause 245

Overview

Question proposed, That the clause stand part of the Bill.

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[Kevin Hollinrake]

There may be some regulations to deploy after that. I can find out for definite if the hon. Gentleman gives me a few minutes. It is in the Bill, of course, so it should be pretty quick.

Clause 246 provides a legal definition of a subscription contract, which is principally one that automatically renews or continues so that a consumer continues to be liable for payments unless they end the contract. That includes contracts that are of fixed duration but can be ended earlier by the consumer. Contracts that offer a free or reduced-cost trial for a defined period and then revert to a higher cost are also in the scope of the chapter. It is critical that such contracts are included as calculations show that each year, around a quarter of consumers get rolled over accidentally from free or reduced-price trials.

Clause 247 provides for specific sectors and subscription contract types to be excluded from the chapter and those sectors are detailed in schedule 19. The sectors have been excluded because they are already subject to regulation and may be supervised by a specialist regulator. To apply the chapter to them would overburden them with regulation and trespass on the remit of a specialist regulator. It could also potentially create conflict between the regulation and legislation, particularly if the sectors already provide consumers with similar protections.

Sectors may also have been excluded on public policy grounds, such as the exclusion for childcare. The childcare sector, like many of the other excluded sectors, provides an essential service and these are not the type of contracts that we consider raise the risks commonly associated with a subscription trap. The exclusions in schedule 19 may need to change over time as the regulatory and legislative regimes for the excluded sectors change. That is why clause 247 ensures that the Secretary of State has the power to adapt the provisions through secondary legislation.

[Seema Malhotra]

Clause 245 provides an overview of this chapter, which centres around duties on traders in relation to subscription contracts and the rights of consumers if those duties are breached. The chapter also introduces further rights and protections for consumers in relation to subscription traps, specifically regarding the right to cancel contracts during cooling-off periods, and the information that must be made available to consumers.

We welcome the principles of the chapter and I note that before the Bill was bought before the House, the Labour party had already announced that we would legislate in government to tackle subscription traps and protect consumers, particularly in the light of the Conservative cost of living crisis, because we know that things have become worse for consumers. Any time the Government want to adopt a Labour proposal, we will welcome it. We have tabled some new clauses in this area, which I will come to later.

Let me start by welcoming the action on subscription traps taken by the Government so far in the Bill. As I said before, Citizens Advice estimates that £306 million a year is spent on unwanted subscriptions in the UK, so we need to act and, in that spirit, to work constructively with Ministers to ensure that the measures are as robust as possible.

Clause 246 defines the scope of subscription traps, which are defined as a business-to-consumer contract for the supply of goods, services and digital content that either auto-renews for an indefinite or fixed period or contains a free trial or specified reduced price for a specified period in the contract, after which time the contract renews and the consumer becomes automatically liable for payments. We welcome the definition and the important inclusion of subscriptions that start with a free trial, a technique that is commonly used. However, I want to press the Minister on subsection (1), which sets out that

“a subscription contract is a contract between a trader and a consumer”.

The Minister will probably have a straightforward answer on how business-to-business subscriptions are covered. There are plenty of instances where a business may pay for a subscription, so I would welcome assurances about how businesses are covered, particularly smaller businesses and those run by the self-employed.

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[Richard Thomson (Gordon) (SNP)]

I beg to move amendment 117, in schedule 19, page 349, line 39, at end insert—

“Non-commercial society lotteries

13 (1) A contract under which a lottery ticket or tickets are purchased for one or more non-commercial society lotteries.

(2) In sub-paragraph (1), “non-commercial society” has the meaning given by section 19 of the Gambling Act 2005, and “lottery ticket” has the meaning given by section 253 of that Act.”

This amendment seeks to exclude lottery tickets purchased for non-commercial society lotteries from the scope of the provisions on subscription contracts.

It is a pleasure to serve under your chairmanship, Dame Maria.

A few moments ago, I was encouraged to hear the Minister express a desire not to trespass on any of the specialist regulators, and I am delighted to say that that is exactly what the amendment is intended to achieve. I hope we can all agree that charity lotteries do an awful lot of good. They raise an awful lot of money, and they are fun. They are also already heavily regulated by the Gambling Commission. If the Gambling Commission does not fall under the category of specialist regulator, I am not entirely sure what does.

I raised this issue on Second Reading, but I was beaten to the punch by the right hon. Member for Calder Valley (Craig Whittaker), who said that subscription-based charity lotteries

“are already heavily regulated by the Gambling Commission”.—[Official Report, 17 May 2023; Vol. 732, c. 882.]

He wanted to see whether such lotteries could be removed from schedule 19, and the Minister committed to looking at the matter in detail. I do not know what the result of the Minister’s deliberations has been. I know that by the time the Under-Secretary of State for Science, Innovation and Technology was on his feet to sum up he was certain that it would fall outside the scope of the Bill. Despite his best efforts on that occasion, I have to say that some of the representatives of the charity lottery sector I have spoken to are not reassured.

There remains an uncertainty. For all the best intentions of Ministers, and whatever ends up in Hansard as a result of our discussions on Second Reading and today, the Bill contains significant ambiguity. In that regard, it is unclear in a way that it does not need to be. Amendment 117 would add charity lotteries to the list of excluded contracts in schedule 19, so it would remove any remaining doubt that they are excluded from the provision. They will therefore be able to continue under the legislative environment that the Government have already set for them, which seems to work quite successfully, and will be able to do so without having any additional inhibitors put in their way in collecting revenues from the public and their customers, and crucially in paying out to good causes, which I am sure that we have all seen the benefits of across our constituencies.

[Seema Malhotra]

I do not propose to say much on the amendment. The hon. Member has laid out his arguments, and it would be helpful to hear some clarity from the Minister on his position.

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[Kevin Hollinrake]

I am not sure whether it does or not. I refer the hon. Gentleman to one of my earlier points: it is a straightforward cancellation route. What he describes to me is not a straightforward cancellation route. That is the key definition. We can have a discussion after this sitting.

Clause 253 requires a trader to send a notice confirming when the contract was, or will be, ended once they have been notified of cancellation by the consumer. This also applies where a consumer exercises a cancellation right under this chapter. The trader must provide this notice promptly, and on a durable medium, and refund consumers any overpayment for which they are no longer liable.

I now turn to new clauses 5 and 6, which I will address together. They propose that traders must obtain a consumer’s express agreement to an auto-renewing contract by the consumer’s active opt-in. Through new clause 5, when consumers sign up to a subscription contract, they would have to be given the option to choose whether their subscription auto-renews after six months. If they do not choose this auto-renewal option, the contract would end after six months unless the consumer expressly asks for it to continue.

New clause 6 would apply equivalent requirements to contracts that auto-renew after a free or low-cost trial and may also auto-renew again subsequently. The Government share the view that consumers must be able to avoid being trapped in unwanted subscriptions and ensure their hard-earned cash is spent only on subscriptions they actually want. However, we know that the majority of consumers enjoy the auto-renewing features of their subscription contracts and the convenience they provide.

Through these new clauses, if a consumer had not opted-in to an auto-renewing contract, but they decide they want to keep their subscription, they would have to repeatedly respond to emails or similar to continue their subscription, or risk it unintentionally lapsing. That risk could be multiplied across each subscription they hold. For that reason, the Government decided not to pursue that approach, which was supported by our public consultation.

It is also important to consider the burdens the changes could place on businesses. The measures would add significant regulatory costs to businesses as they adapt their business models to meet the proposals. We are confident that the approach we have taken strikes the right balance of ensuring consumers are able to exit their contracts at various points during their contract, as well as maintaining consumer convenience.

Furthermore, the existing clauses in this chapter already achieve much of the ambition of the amendments. As I set out earlier, clause 250 will ensure consumers are sent regular reminders about their subscription, including towards the end of a free or low-cost trial. These reminders will ensure that consumers have the right information at the right time to decide if they want to continue their contract, or cancel it.

In addition, through clause 252 we will ensure easy cancellation routes so that subscriptions are as easy to leave as they are to enter. Finally, the Bill enhances consumers’ existing cooling-off rights. Clause 256, which we will discuss shortly, introduces an extra 14-day cooling-off period after a free or low-cost trial, and at the 12-month mark when a longer-term contract auto-renews. That means that, if for any reason a consumer has not been able to take action to cancel before renewal, they have an extra chance to do so.

Together, those measures will ensure that consumers can make informed decisions about their subscription contract. They also make it easy to leave while avoiding creating additional steps for those who want to continue. I hope that reassures hon. Members that the Bill will enable consumers to manage their contracts effectively, and that they feel able to withdraw the amendments.

[Seema Malhotra]

Clause 248 introduces provisions requiring traders providing a subscription contract to give consumer information as set out in schedule 20, which I will say a few words on shortly.

We very much welcome this clause as necessary in ensuring consumers are as informed as they possibly can be before entering into a subscription contract. I just ask the Minister to expand on subsection (2) It sets out that the information must be provided

“as close in time to entering into the contract as is practicable”.

I would welcome clarification on that requirement. Under that provision, exactly when would the Minister expect a time as close to entering into the contract to be practicable?

Schedule 20 on pre-contract information and reminder notices sets out information that is required for traders to give to consumers before entering into a subscription contract. Among other things, it would require traders to provide information on how often payments will be taken, to provide consumers with a pro-rata cost per month, to state the minimum total amount for which a consumer would be liable under the contract, to outline how the consumer could exit the contract, and to provide a summary of the consumer’s right to cancel the contract and of the right to cancel the contract within a renewal cooling-off period. The schedule is necessary for giving consumers the chance to have that information before entering into a subscription contract. We welcome its inclusion in the Bill.

Clause 249 introduces provisions requiring traders to ensure that the final step consumers take when entering into an online contract involves the consumer expressly acknowledging that the contract imposes an obligation on them to make payments to the trader. This clause and clause 248 are vital in ensuring consumers are informed before choosing to enter into a subscription—a minimum requirement for ensuring effective consumer protection in this area.

The Opposition welcomes how, if the trader does not comply with that requirement, the consumer would not bound by the subscription contract. In addition, traders would be required to give consumers additional information on whether there are any restrictions on the delivery of the product to be supplied under the contract, and which means of payment would be accepted for the contract.

Clause 250 covers reminder notices. Alongside clause 251, it has the effect of requiring traders to issue written reminder notices to consumers explaining that a subscription contract is going to continue, and a renewal payment will fall due unless the consumer takes steps to end it. Those reminder notices would not need to be issued more frequently than once every six months, which we welcome as a timeframe allowing for informed consumers without causing undue annoyance. The first reminder notice must include the first renewal payment, for which the consumer will become liable under the contract, and each subsequent renewal payment. We welcome the clause, and I will further discuss ensuring that consumers are not locked into subscriptions in the provisions to come.

Clause 251 sets out the timing and content of the reminder notices. Under the clause, the reminder notice must be given to the consumer between three and five working days before the last cancellation date, meaning the last day on which the consumer can end the contract and avoid becoming liable for the next renewal payment. The Opposition welcome the timeframes, including that for a 12-month subscription contract, as giving the consumer sufficient time to decide whether they still want their subscription contract to continue and, if necessary, to cancel the contract before a renewal payment is due.

Clause 252 introduces provisions imposing on traders an obligation to put in place arrangements to enable consumers to end a subscription contract in a single communication and without having to take any unreasonable steps. The purpose of the clause is to prevent traders adopting practices that would deliberately hinder a consumer exercising their rights to exit a subscription contract. It is a welcome clause, which should tackle the practice of, as the explanatory notes set out, requiring consumers to phone a call centre, complete a long form, or complete a survey of their reasons for exiting—all those things are barriers to the consumer making the decision to exit the contract. Those are unnecessarily onerous cancelling terms, and could lead to consumers not cancelling a subscription when they need to. Sometimes that could also be because people are short of time or they may not be able to do everything in one moment.

It should be as easy to exit the contract as it is to enter it. Will the Minister expand on whether he is confident the provision will have the desired effect of stopping traders making it harder to leave a contract than to enter it? Does he think the provision goes far enough in ensuring there are not those undue hurdles?

Clause 253 relates to where the consumer has exercised a right to cancel and sets out a requirement on the trader. The trader is to give the consumer an end-of-contract notice acknowledging the request to cancel, which must be in writing and there must be a clear date when it is going to take place. The end of contract notice must be given within three working days after the day on which the consumer has given notice of cancellation, or, when the consumer notifies cancellation online, the trader must give the end of contract notice within 24 hours of cancellation. In addition, any overpayment received by the trader must be refunded to the consumer. We welcome the clause as providing greater transparency for the consumer throughout the cancellation process.

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[Kevin Hollinrake]

Clause 254 sets out that a trader’s compliance with their main duties under this chapter is an implied term in every subscription contract. The clause is necessary as it gives the consumer access to legal remedies or defences to a claim by the trader where the trader has failed to comply with duties set out in this chapter.

Clause 255 gives consumers a right to cancel their contract if a trader fails to give the required key pre-contract information or reminder notices, or if their failure to provide an easy way of ending the contract means that a consumer remains trapped in their contract. Consumers who cancel their contract as a result of such breaches will be able to do so without penalty, and in prescribed circumstances may be entitled to a refund.

[Seema Malhotra]

Clause 254 sets out that the trader must comply with certain terms in every subscription contract they enter into, and various information is given about what is expected. We welcome the inclusion of clauses 254 and 255 in the Bill.

Question put and agreed to.

Clause 254 accordingly ordered to stand part of the Bill.

Clause 255 ordered to stand part of the Bill.

Clause 256

Right to cancel during cooling-off periods

[Giles Watling]

I beg to move amendment 113, in clause 256, page 170, line 22, leave out “any circumstances” and insert

“circumstances where the consumer has not yet made use of the goods or service provided under the contract”.

I had intended to withdraw this amendment, because I received assurances from the Minister that the Government will take this issue seriously. I tabled it because of concerns about the length of cooling-off periods. People can join a service, binge watch an entire series, resign, and then go back again and again. The Minister assured me about that, but I look forward to hearing his comments.

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[Seema Malhotra]

The clause gives the consumer the right to cancel a subscription contract without penalty during the initial cooling-off period and any renewal cooling-off period. That right, exercisable in any circumstances, cannot be subject to any restrictions or conditions imposed by the trader. The definition and timescales of cooling-off periods are defined in later clauses.

The clause is important to give consistency to the consumer about what rights they should expect in both initial and renewal cooling-off periods. We welcome the clause enabling the consumer to stop the renewal of a contract that may have renewed without them realising. I am also grateful to the Minister, for his response to amendment 113 and the questions posed by the hon. Member for Clacton.

Clause 257 sets out the meaning of initial and renewal cooling-off periods, as well as the timescales for such periods. We welcome the clause and the clear definitions. Under clause 258, the trader would be required to give a consumer notice of each renewal cooling-off period. Again, we welcome that, the clarification of consumer rights in those periods and the provision of transparency to consumers.

Clause 259 provides a delegated power for the Secretary of State to make further provision, by regulations, on the exercise of a consumer’s rights to cancel a subscription contract. It specifically empowers the Secretary of State to make provision on the exercise of the rights of a consumer to cancel a subscription contract, the consequences that follow a consumer exercising such rights, and extending a cooling-off cancellation period in such cases and to such an extent as the regulations may specify. We recognise the need for flexibility in this new subscription contract regulatory regime, and thus the flexibility to future-proof the regime, dealing with circumstances as they arise. We support this clause as well.

Question put and agreed to.

Clause 256 accordingly ordered to stand part of the Bill.

Clauses 257 to 259 ordered to stand part of the Bill.

Clause 260

Offence of failing to provide pre-contract information about initial cooling-off rights

Question proposed, That the clause stand part of the Bill.

[The Chair]

With this it will be convenient to discuss the following:

Clauses 261 and 262 stand part.

Amendment 128, in clause 263, page 175, line 40, leave out

“level 5 on the standard scale”

and insert—

“the statutory maximum;

(c) on conviction on indictment, to imprisonment for a term not exceeding two years or to a fine (or both).”

This amendment would make subscription traps offences “triable either way”, therefore bringing it in line with other similar offences in the Bill, for example for misleading actions.

Clause 263 stand part.

[Kevin Hollinrake]

The clause sets out that the trader commits an offence if they enter into an off-premises subscription contract and do not provide information about a consumer’s initial cooling-off cancellation right. Off-premises contracts mainly consist of contracts that are not concluded on the trader’s business premises and include situations such as doorstep selling.

In off-premises sales, the consumer is typically more vulnerable to poor trading practices. It is therefore necessary to make breach of this requirement an offence to act as an extra deterrent to rogue traders. That approach maintains consistency with the Consumer Contracts (Information, Cancellation and Additional Charges) Regulations 2013, which stipulate that failure to provide required pre-contract information about cooling-off cancellation rights in the case of off-premises contracts is an offence.

Clause 261 provides a defence for a person charged with the offence set out in clause 260. That is to ensure that if an offence was committed due to the act or omission of a third party and without fault on the part of the person charged, they are not held criminally liable. The trader must prove that they exercised due diligence to avoid the offence being committed by themselves or another person under their control. Clause 262 sets out that an officer can be held criminally liable if an offence was committed by a company or other corporate body with the consent or connivance of that officer or due to their neglect. That is necessary to strengthen the deterrent effect of the offence and hold other responsible people accountable. Clause 263 sets out that traders who commit an offence contrary to clause 260(1) are liable to a fine.

Amendment 128 would allow traders to be prosecuted in both magistrates court and Crown court and increase potential penalties, including imprisonment, where traders do not inform consumers about their cancellation rights before entering off-premises subscription contracts. I appreciate that hon. Members wish to ensure that penalties are consistent with those elsewhere in the Bill. However, the penalties are designed to be consistent with those for failure to provide information about cancellation rights for off-premises contracts in the 2013 regulations, which currently govern all consumer contracts and will continue to govern other off-premises contracts. Consistency is important to ensure that breaches of equivalent rules are treated fairly and consistently, regardless of the type of contract. I therefore urge that the amendment be withdrawn.

[Seema Malhotra]

Clause 260 creates an offence where a trader fails to provide the relevant information on a consumer’s initial cooling-off cancellation rights before entering into an off-premises subscription contract. That contract is defined in subsection (5) and could include contracts concluded by door-to-door sellers or traders using temporary high street stands. It is a welcome clause and an important way of increasing consumer protection, ensuring that all kinds of subscription contracts and not just those entered into online are regulated under the chapter.

Clause 261 introduces a provision providing traders with a defence of due diligence to the offence laid out in clause 260. That defence enables the trader to prove that another person was responsible for the offence and that the trader took all steps to avoid committing the offence. While we recognise that it is important that traders have a right to a defence, I welcome the Minister’s assurances that this has been worked through and there is confidence that rogue traders will not be able to abuse that defence and argue their way out of criminal enforcement by claiming due diligence.

Clause 262 would establish direct liability for company officers for offences committed by the body corporate in circumstances where it is proven to have been committed with the consent or connivance of a company officer or neglect on their part. We welcome the clause.

Finally, clause 263 sets out how a person who commits an offence under clause 260 is liable on summary conviction to a fine. The Minister has outlined his response to that and it is helpful for me to briefly speak to amendment 128, tabled by myself and my hon. Friend the Member for Pontypridd. As is clear in the explanatory note, the amendment

“would make subscription traps offences ‘triable either way’, therefore bringing it in line with other similar offences in the Bill, for example for misleading actions.”

The Minister has outlined another way in which he sees that as being consistent with how penalties are applied.

We will not push the amendment to a vote. The most important thing is that there is consistency, and we will look again at what the Minister has said today.

[Kevin Hollinrake]

The hon. Lady asks me to address her point about the defence of due diligence. The defences listed in the clause are consistent with defences in other areas of the law, so we are comfortable that they strike the right balance.

Question put and agreed to.

Clause 260 accordingly ordered to stand part of the Bill.

Clauses 261 and 262 ordered to stand part of the Bill.

Clause 263 ordered to stand part of the Bill.

Clause 264

Information and notices: timing and burden of proof

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Finally, clause 273 provides an index of expressions used throughout this chapter, to make the chapter easier to navigate. I therefore invite Members to support Government amendments 79 to 82 and clauses 264 to 272.

[Seema Malhotra]

I welcome the speed with which we are moving through these clauses. Clause 264 specifies the timing and burden of proof for information and notices that are given under this chapter. For the electronic communication of notices or information, the clause makes it clear that delivery would be deemed instantaneous, even if the consumer does not receive the notice due to a reason beyond the trader’s control.

Subsection (6) specifies that in a dispute as to whether any information or notice has been given to the consumer, the burden of proof would be on the trader. We welcome that provision. However, under subsection (7), the burden of proof would be on the consumer in any dispute regarding whether a notice to end a contract or cancel it was sent to the trader, or with regard to the timing of that notice.

While the Opposition recognise the need for a balanced burden of proof, I draw the Minister’s attention to the written evidence submitted by consumer group Which?, which states in relation to subsection (7):

“We think this is unfair as it would create a disproportionate burden on consumers in situations where consumers cancel via means under the control of the trader. An example of this would be completing an online form, from the traders website, where no explicit confirmation has been given that the subscription has been cancelled.”

Can the Minister outline, for the benefit of the Committee, what will happen in such cases, where the consumer must cancel through a means that cannot be easily used or saved as evidence of cancellation? Does he not accept that in such circumstances, placing the burden of proof on the consumer is impractical, so there may need to be additional protections?

Amendment 79 corrects a drafting error, so we support it. Clause 265 introduces provisions such that any term in a contract contravening the regulations in this chapter has no legal effect. We welcome the clause ensuring that traders are unable to work their way around these regulations and therefore support its inclusion in the Bill.

Clause 266 clarifies that any rights the consumer may have under common law for breach of any term of a subscription contract are not limited by rights specified in this chapter. We welcome the clause ensuring that consumers are able to exercise both kinds of right in combination, providing ease for consumers.

Clause 267 introduces provisions regarding the application of this chapter. It sets out that if a trader were to choose the law of another country to govern a subscription contract but the contract has a close connection to the UK, chapter 2 would still apply. We welcome this common-sense clause, which enables the regime to be effectively enforced.

Under clause 268, the Crown would be bound by the provisions in chapter 2 but would not be criminally liable as a result. It would be helpful for the Minister to clarify what those circumstances might be, so that we can understand the provision more clearly.

Clause 269 grants the Secretary of State a delegated power to make regulations in relation to how and when information or a notice required to be given by traders to consumers under chapter 2 may or must be given, what information notices given under chapter 2 must contain, what arrangements a trader must make under clause 252 to enable consumers to end contracts, and when a consumer may exercise such a right, specifying the period in which a trader must refund an overpayment. While the Opposition recognise the need for this delegated power, it is not clear to us why these regulations are being left to secondary legislation and are not on the face of the Bill. I would be grateful if the Minister could clarify that and the reason for the regulations being subject to the negative procedure.

Clause 270 makes consequential amendments to the specified sections of the Consumer Rights Act 2015 and will ensure that information given to consumers as part of the pre-contract information required under chapter 2 is treated as a term of the contract. In effect, traders would not be able to make changes to the matters covered by this pre-contract information without the agreement of the consumer. We welcome that provision.

Clause 271 makes further consequential amendments to other legislation, and we support it. Clause 272 sets out general interpretations for this chapter, including definitions of “business”, “consumer”, “goods”, “trader” and “working day”. We support the clause and welcome its inclusion. Amendments 80 to 82 have the effect of expanding the definition of “durable medium” for the purposes of this chapter. We support these amendments. Clause 273 provides an index of defined expressions in the clause. It is self-explanatory, and we support it.

[Kevin Hollinrake]

The shadow Minister makes some fair points. In terms of the requirement for the consumer to prove cancellation, as she no doubt recognises, clause 6 contains obligations on the trader as well, to ensure that there is a burden of proof on them as to whether the information notice had been given by the trader to the consumer.

Clause 253 requires the trader to send an acknowledgment to the consumer that they received the notice to end the contract. We also address this in business and consumer guidance. This approach to burden of proof and the trader’s duty to confirm receipt of cancellation via their website is in line with the Consumer Contracts (Information, Cancellation and Additional Charges) Regulations 2013. Businesses and consumer advice bodies are familiar with those regulations, and traders should be used to complying with them.

There is no policy justification for emanations and servants of the Crown not to be bound by this chapter if they are entering a contract with consumers of the kind regulated by this chapter.

We will certainly work with businesses, regulators and consumer groups in developing the regulations under these chapters to ensure they are fair and proportionate, and to make sure that the arrangements for things like how traders issue reminder notices work for both parties.

Amendment 79 agreed to.

Clause 264, as amended, ordered to stand part of the Bill.

Clauses 265 to 271 ordered to stand part of the Bill.

Clause 272

Interpretation

Amendments made: 80, in clause 272, page 180, line 35, leave out “pre-contract”.

This is a drafting amendment to expand the definition of “durable medium”.

Amendment 81, in clause 272, page 181, line 1, leave out “pre-contract”.

This is a drafting amendment to expand the definition of “durable medium”.

Amendment 82, in clause 272, page 181, line 4, leave out “pre-contract”.—(Kevin Hollinrake.)

This is a drafting amendment to expand the definition of “durable medium”.

Clause 272, as amended, ordered to stand part of the Bill.

Clause 273 ordered to stand part of the Bill.

Clause 274

Meaning of “consumer savings scheme contract”

Question proposed, That the clause stand part of the Bill.

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[Neil Coyle]

I have a couple of points; I will try to keep them brief. The clause fundamentally rejects where the Government suggest the responsibility for oversight of a savings scheme should sit. I was just listening to the Minister, and it is probably worth flagging up the message from the Chartered Trading Standards Institute on this. The Government say that they have assessed where this should sit; they say that they have worked with partners and consulted, but that does not seem to be the feeling of the chartered institute covering the sector, whose language is interesting:

“These brand new provisions have been inappropriately dumped on local authority trading standards to deal with, but it would be much better placed to give the Financial Conduct Authority the responsibility to regulate new provisions on savings schemes which are similar in nature to banking and other financial matters already regulated by the FCA. Saving schemes are often national schemes”—

such as Farepak, which Members will be familiar with. No individual local authority could have prevented what happened with Farepak; I think that is the point it is making. I will come back to its direct comments—

“and therefore should be in the remit of a national regulator with the experience and resources to deal with financial matters. CTSI would like to see all references to local authorities removed in these provisions and to pass on responsibility.”

The Minister says that the FCA is not the right vehicle or body. Perhaps there is space and time to examine what that body should be. The point made by trading standards is that they do not have the skillset to oversee financial services in the way that the Government are demanding. They do not have the resources—that is the point made in our evidence sessions. This follows 13 years of cuts to weights and measures—to trading standards—which we have seen across the country; there has been a 50% cut in their capacity to do the job. Again, this is the Government trying to insist that local government take on greater responsibility after cuts to their own resources.

Southwark is a case in point. We have seen similar cuts to trading standards, but also to the overall council’s budget. The Government reduce the responsibilities of central Government Departments, such as the Home Office, and pass on additional costs running into the millions for things such as emergency children’s services with no recourse to public funds, without giving additional resources to councils to do so. This is another case in point where the Government are trying to push a new power and demand on to an already overstretched and under-resourced arena.

New clause 7 would have made the FCA the relevant body, rather than local authorities, but the point of the new clause is that trading standards should not be made responsible for something when they do not have the expertise or resource to be effective. If the Government do not think it should be the FCA, it is up to the Government to come back and find the right body. It is the Government’s legislation; they want it to be effective, and for these saving schemes to not collapse and leave people without, so it is incumbent on the Government to come up with either the resources and skills—training, whatever it might take—for trading standards to do this, or an alternative body to oversee these specific saving schemes. It is important at this stage to flag that concern, because there is a deep resentment, almost, from the sector over the Government’s suggestion that trading standards take this on, yet the Government still insist that it is the appropriate vehicle.

I hope there is still time to review which alternative body might be able to take on this task. This feels like something that a national body should deal with, and it should not sit with local authorities as operators and rogue traders may cover whole regions of the country, not one single local authority. I did listen to the Minister, and take onboard his suggestion that the FCA is not necessarily the right vehicle, therefore I am prepared to withdraw this amendment, as drafted, but I would like to see a commitment to reconsider where this responsibility sits.

[Seema Malhotra]

Clause 274 introduces the definition of a “consumer savings scheme contact” for the purposes of this chapter. Specifically, the clause defines it as a contract under which the consumer makes payments to a trader,

“the trader credits those payments to an account that is held by the trader for the consumer…and the payments credited to the consumer’s account provide a fund for the consumer to redeem as goods, services or digital content”.

The definition forms part of new provisions introduced by this chapter which are important for protecting consumers who use consumer savings schemes, and we welcome this. Clause 275 defines other terms used in this chapter—and in clause 274—and we welcome the further clarity this brings.

Clause 276 introduces schedule 21, which sets out arrangements that are excluded from the scope of a consumer savings scheme contract. It includes regulated financial services activities, arrangements for the supply of utilities, a contract between a consumer and a trader where the trader’s turnover is less than £1 million per year, childcare voucher schemes, and package holidays .

We welcome that exclusions might be necessary in cases where it is impractical for these regulations to apply. However, I would welcome some further clarification on paragraph 3 of the schedule to set out how contracts offered by small businesses are exempt. Is that in relation to wanting to have the right balance between smaller businesses and consumers? We obviously want to ensure that the consumer is as protected as possible in these contracts, so I would be grateful for a response from the Minister on that.

Clause 277—“insolvency protection requirement”—introduces provisions regarding the event of a trader’s insolvency and covering the costs of returning to the consumer any protected payments at the time of the insolvency. We do welcome that, and it is important in the context of record levels of insolvencies. It is a particularly unstable period, and it is important for consumers to have protections.

Clause 278 sets out what is understood to be an “appropriate policy” in the instance of a trader complying with the provisions in clause 277 by taking out an insurance policy. Under the Bill, an appropriate policy is one in which consumers are insured with cover for the refunding of prepayments held in the consumer’s account that have not been redeemed at the time of insolvency. The insurer must also be authorised by UK authorities. We welcome this clause, though I ask the Minister to expand on subsection (3), which requires the trader to

“meet the costs of arranging and maintaining an appropriate policy”

and explicitly inhibits traders passing that cost on to consumers.

I would be grateful for two things. First, will the Minister explain how we can be confident that the trader will not find a way to pass on this additional cost to the consumer? Secondly, will the Minister confirm how quickly, in the event of insolvency, consumers can expect to have their prepayment refunded? It would be helpful if he could clarify that. Does he feel that provision is tight enough in the Bill?

Clause 279 applies in circumstances where a trader complies with the insolvency protection requirements in clause 277 by using a trust arrangement. It sets out how it must ensure consumer prepayments are held in a trust located in the UK. The consumer’s prepayments must also be held in a trust until either the funds have been redeemed or the payments have been returned to the consumer. Similarly to clause 278, the Opposition welcome this clause as providing greater protections under consumer savings schemes in circumstances where the trader becomes insolvent.

I refer the Minister to subsection (7), which requires the cost of administering the trust to be paid for by the trader. Again, how will the Minister be able to safeguard against the trader passing this additional cost on to the consumer?

Clause 280 sets out the information requirements attached to this chapter. Specifically, it sets out that, within 30 working days of the consumer’s first payment into the savings scheme, the trader must provide:

“the name, address, telephone number and email address of the insurer or trustees responsible for protecting the consumer’s payments;

where insurance arrangements are in place, the policy number for the policy under which the consumer’s payments are protected;

where trust arrangements are in place, a copy of the trust deed under which the consumer’s payments are held.”

It is a welcome provision, but will the Minister expand on the 30-day time period? On what basis does the Minister believe that the trader would need 30 days to put these arrangements in place? Would these arrangements not happen automatically as soon as the consumer enters the scheme? That is an important question for ensuring that the consumer is informed of their protections.

Clause 281 would add chapter 3 of part 4 of the Bill to the list of enactments in schedule 3 of the Regulatory Enforcement and Sanctions Act 2008. We welcome the clause.

Clause 282 introduces definitions for the purposes of this chapter. Similarly, we welcome the clause in providing the transparency, consistency and clarity needed.

[Kevin Hollinrake]

The hon. Member for Bermondsey and Old Southwark thinks that trading standards is not the right body; the Government think that it is, and that position—of it not being the Financial Conduct Authority—is supported by the Law Commission. These are clearly not financial products. They are not defined as such in the relevant legislation.

Trading standards already has a business relationship with supermarkets. There is already a Primary Authority Supermarkets Group in the trading standards network; it therefore seems logical, given that supermarkets will probably be offering these kinds of services, that this should be handled by trading standards.