CODE OF PRACTICE (Hansard, 13 May 1987)

§ Mr. Howard
I beg to move amendment No. 14, in page 22, line 49, at end insert— '(1A) A contravention of a code of practice approved under this section shall not of itself give rise to any criminal or civil liability, but in any proceedings against any person for an offence under section 20(1) or (2) above—

(a) any contravention by that person of such a code may be relied on in relation to any matter for the purpose of establishing that that person committed the offence or of negativing any defence; and

(b) compliance by that person with such a code may be relied on in relation to any matter for the purpose of showing that the commission of the offence by that person has not been established or that that person has a defence.'

The First Deputy Chairman
With this it will be convenient to discuss Government amendment No. 15.

§ Mr. Howard
As it stands, clause 25 makes provision for the Secretary of State to approve codes of practice for the purpose of giving traders practical guidance on the requirements of this part of the Bill and promoting desirable practice in the giving of price indications. It also provides for the approval of such codes to be subject to parliamentary procedures. However, as a result of amendments made in another place, it does not at present provide for an approved code to have any legal effect.
As introduced in another place, the Bill provided that compliance with the code should provide a complete defence to a charge of giving a misleading price indication. There were a number of reasons for proposing such an arrangement.
Clause 20 creates a wide general offence of giving a misleading price indication. That approach was adopted because the prohibition of specific practices — the approach followed in the existing legislation —allows rogue traders to invent new misleading practices not subject to the prohibition.
It does, however, have a potential disadvantage— that it may leave some uncertainty for the honest trader who wants to advertise that he is offering a bargain about whether a particular indication complies with the law. One way of overcoming this uncertainty is to provide that compliance with the code should be a complete defence. A trader could thus follow the relevant provisions of the code and be certain that he could not be convicted.
Against this, it has been suggested that making compliance a defence would allow rogue traders to exploit loopholes in the code. That argument is misplaced for two reasons. First, a trader could rely on the code only so far as it was relevant. He could not, for example, comply with the code in one respect, adopt an additional practice not addressed by the code and claim a defence in respect of that latter practice. He would have to argue that the practice was not misleading on its own merits with no reference to the code.
Secondly, should it transpire that any practice sanctioned by the code is open to abuse, there is a procedure for amending the code which could, if appropriate, be operated very quickly.
While the Bill was passing through the other place, we were presented with a package of proposals having the agreement of many of the main interests involved. The package included a proposal that compliance with the 352 code should not be a complete defence. Instead, it was proposed that contravention or compliance should tend to establish guilt or innocence.
Clearly, proposals having the agreement of those interests must be taken seriously, but there were others not represented by the Condordat, as the group came to be known, whose views had to be heard. Therefore, we consulted widely and undertook to reflect the outcome of the consultation in the Bill. The consultation revealed a consensus in support of the status proposed by the Concordat. I therefore informed the House on Second Reading that I intended to lay the amendments now before the Committee.
The amendments that I have laid achieve what the Concordat sought; that is, that contravention of or compliance with the code will tend to establish that an offence has or has not been committed but will not be conclusive of either.
The amendment also has another effect. If a court is satisfied that a misleading price indication has indeed been given, the defences provided by the Bill may arise. The code may, in some circumstances, be relevant to some of those defences, in particular the due diligence defence provided by clause 39. In those circumstances, the amendment will enable compliance with or contravention of the code to be used in evidence as tending to establish or negative the defence.
Thus, a trader who complied with the code would not have a certain defence, but he would be very unlikely to be convicted of an offence. I believe that it will be in very unusual circumstances only that an enforcement authority will bring a prosecution against a trader who has complied with the code's relevant provisions.
In the light of these considerations, I believe that the status given by the amendment would give honest traders almost the degree of confidence that would have followed from the Government's original proposals. However, should rogue traders find any loophole in the code, which they can exploit to give a misleading price indication, the courts will now have the opportunity to convict in appropriate circumstances. There will, therefore, be powerful incentives for traders to comply with the code, which I am sure we can all agree is the desirable outcome.
Given the extent of support for this alternative in both Houses of Parliament and outside, I therefore think that the amendment is the most appropriate way to proceed.

§ Mr. Michael Shersby (Uxbridge)
First, I wish to declare an interest. I am a member of the council of the Food and Drink Federation. As I understand it, the amendment will change the status of the code of practice so that it will be of evidential weight only in legal proceedings. Both the food and drink industry and the confectionery industry supported the original drafting of the clause, and, for reasons that I should like briefly to explain to the House, they are concerned about the clause as it will be if the amendment is carried.
The Concordat, which is comprised of retail, consumer and enforcement associations, has made representations about the status of the proposed code of practice and it argued that some provisions should be covered by regulations. The Minister has said that he proposes to accept the Concordat's proposal on the status of the code of practice and I assume that that is why he has tabled the amendment. If the amendment is carried, the code of 353 practice will no longer constitute an absolute defence, as he has mentioned, but will merely be of evidential weight in legal proceedings.
Originally, as the clause was understood widely by those in the food and drink industry, the code's status as a defence meant that it set out what was good practice. Therefore, traders could see clearly what action they could take to remain within the law. Enforcement officers would also have the certainty that practices endorsed by the code were within the law. Disputes about whether particular practices were misleading or not therefore would be confined to those actions by traders who fell outside the provisions of the code, thus considerably narrowing the scope of such disputes to arise in the first place.
Furthermore, traders would have considerable flexibility in the use of price indications, and scope to develop new pricing practices that were not misleading. Consumers' interests would have been served by the widest possible adoption by traders of pricing practices in the code of practice which would set a standard of behaviour that would prevent consumers being misled. It would facilitate consumers comparing price claims by competing traders, and price comparisons would be more transparent than at present.
The original absolute defence status of the code of practice was, in the view of many people in the food industry, preferable in that it added a degree of flexibility. The person giving the indication still had the option of being able to show that, despite non-compliance with the code, he had not misled in practice. This would have avoided the arbitrary and rigid rules that are a feature of the present Bargain Offers Order. The fear that rogue traders could get around the provisions of the code and give misleading price indications while still being able to show that they had complied with the code, does not stand up. If there are practices which are endorsed by the code but which are misleading, I understand that so far none have emerged in the Department of Trade and Industry's consultations to date. Furthermore, the Bill contains provision to enable an amended version of the code to be approved at a subsequent date.
Given that my hon. and learned Friend the Under Secretary of State for Trade and Industry, has taken this Concordat proposal on hoard, it seems clear that the House will not reinstate the original status of the code of practice; that is to say, the absolute defence if the amendment is carried. However, while manufacturers and traders will be able to live with the amended status, there is a feeling that this route will introduce rigidity into the system, whereas the original proposal would have allowed greater flexibility in interpretation to ensure that action is taken only when there is a genuine concern that a price comparison or promotional offer is misleading to the consumer.
I am not clear whether my hon. and learned Friend the Under-Secretary has accepted the Concordat's proposals for regulations on specific provisions. Will he clarify his intentions a little further on these points: the 28-day rule; recommended retail prices; introductory offers; worth and value claims; and substantiation? In the view of the food industry, it is not necessary to regulate on those provisions. Traders and consumers will benefit from having the requirements covered in a comprehensive code of practice rather than the rigidity and relative technicality of regulations.
354 Price indications cover a wide range of circumstances and in the past have not been easy to regulate in specific statutory controls. The code of practice approach offers greater flexibility for traders than an approach which involves specific requirements in regulations. Regulations would lay down requirements that must be followed, giving rise to a number of specific offences rather than a single general offence, and would give rise to potential difficulties for enforcement authorities in identifying the appropriate charge to bring.
The Bill does not make it a legal requirement to follow the provisions of the code of practice in respect of the 28-day rule. Therefore, provided that the price indication is not misleading, it is open to traders to adopt a different basis for their price comparisons and, if they so wish, to indicate that they have done so. This allows flexibility for traders within the constraints of the general prohibition on misleading price indications. I hope, therefore, having explained to my hon. and learned Friend some of the worries that still exist in the food and drink industry and in the confectionary industry, that he will take those matters into account. Even if the amendment is carried, I hope that he will keep the matter under review.

§ Mr. Howard
The observations of my hon. Friend demonstrate convincingly the impossibility of pleasing everyone. We responded to the views expressed by the Concordat which represented an overwhelming consensus that our original proposals should be revised. My hon. Friend has advanced many cogent reasons in support of the original provisions in the legislation, but in the view of those whom we consulted, those advantages were outweighed by the disadvantages to which I referred when I moved the amendment.
The answer to the questions raised by my hon. Friend in relation to the regulations is that no final decisions have yet been taken as to which areas will be covered by regulations. However, he can rest assured that we will consult widely on those matters. It may be that the interests that he has represented this evening will be more fortunate in the context of those consultations and representations than they may have been in the context of the ones that led to the amendment.