§ 5.43 p.m.
§ LORD SHEPHERD rose to ask Her Majesty's Government, following the first major recommendation of the Consumer Council relating to Stamp Trading, whether they are now prepared to support legislation to implement the recommendation. The noble Lord said: My Lords, I beg to ask the Government the Question that stands in my name on the Order Paper, which is in identical terms to a Question I asked on December 5, together with another on the same subject. In view of the unsatisfactory reply I then received, I gave notice that I proposed to raise the matter as soon as possible. My Lords, I would first of all make it clear that I do not wish to enter into the controversy between those concerns who sell retail with the use of stamps and those other concerns who are opposed to it. I wish to raise a very narrow issue, in which I believe the position of the consumer is directly involved.
Before proceeding in this matter I would ask the Minister to take note of
the reply that the noble and learned Lord the Lord Chancellor gave me in answer to a supplementary question which arose on the first Question that I put on December 5. The noble and learned Lord the Lord Chancellor said [OFFICIAL. REPORT, Vol. 253 (No. 14), col. 1012]:
… I do not think that there is any ministerial responsibility whatsoever for the private arrangements entered into by companies with other individuals; and their rights must depend on the terms of the arrangements they enter into.
My Lords, I was at that stage asking what were the legal liabilities of a stamp company to the stamp holder, the stamp collector. I believe that there is a ministerial responsibility directly arising when, in the view of the Minister and the Government, there is a possibility that a consumer may have a fraud committed upon him.
§ If the Lord Chancellor cannot accept that there is a ministerial responsibility to intervene on behalf of the consumer, I would draw his attention, and the attention of the noble Lord, Lord Drumalbyn, particularly, to the Hire-Purchase (No. 2) Bill, for which the noble Lord opposite is responsible. In Clause 12 the Government are clearly taking a line that, in certain parts of a contract between the consumer—that is, the hirer—and the hire-purchase company, there may be declared void certain provisions in a contract relating to the death of the hirer. Therefore I would say that there is clear evidence, not only in this Bill but in other legislation, that a ministerial responsibility is accepted.
§ The main point that I wish to make this evening is to endeavour to establish what are the rights of stamp holders or stamp collectors. I seek to establish that there is a considerable possibility that fraud may be committed upon the consumer, and I would suggest to the Minister opposite that, in quite recent years, the Government have themselves produced legislation where they have felt that fraud was possible. I would cite to the noble Lord opposite the Prevention of Fraud (Investments) Act, 1958, which covered the unit trusts—those companies who were taking in advance money for investment. The Government then thought it right to produce legislation.
§ My Lords, I believe that we must recognise that the system of free gifts is 67 not new. Manufacturers have for many years used free gifts as a sales gimmick and as an advertising effort. I can well remember, as a youngster, collecting cigarette cards. Then there were cigarette vouchers, for which one could get quite useful gifts, such as cutlery; and in recent years the detergent companies and the cereal firms have all been giving different forms of free gifts—plastic flowers and plastic toys. These were quite acceptable to the public, although there was criticism from different parties as to whether it would not be better for the companies to reduce their prices rather than to include these quite useless gimmicks in their packets: but at least it was quite legal.
§ I would suggest, however, that there is a considerable difference between the giving of stamps and the giving of free gifts by a manufacturer. In the latter case, the manufacturer is the sole person who will suffer if he fails to meet the offer which he has made. If he were to produce shoddy gifts, or gifts which did not match up to what was being offered, the customer could soon bring a very heavy penalty upon him by withdrawing her support from that manufactured line. But in the case of stamp trading we have a third party entering the scene—a party over which there is no control, either by the manufacturer or by the retailer. I suggest to the House that a retailer could be put into a very dangerous position with his customers if the stamp company decided to withdraw from, or break, their contract with that retailer. We might well then find customers who had obtained from a retailer stamps which were not sufficient in number to be redeemed for a worthwhile gift; and, because of the broken contract—and perhaps because there is no further outlet for those particular stamps and no means of continuing the collection—these stamps would have become completely worthless.
§ I would ask noble Lords to be clear in their own minds exactly what stamps are. They are, in fact, as it is claimed, merely a sales advertising gimmick. Perhaps in the minds of the stamp trading companies that may be so, although I doubt it. It is perfectly clear, if you look at many of the advertisements of retailers—and I have one here—that these stamps are most definitely being offered as a discount. I do not think 68 there is any question about it; in the minds of the consumers the stamps are being given as a discount.
§ I am sure most of your Lordships are aware of the way in which this business is transacted. We have the case of the stamp company making a contract with the retailer and making the retailer perhaps the sole distributor of stamps within his district. The retailer obligates himself for the period of the contract to buy stamps according to the value of his turnover—and I believe a figure of £10 million to £12 million has been given for 1963. I have seen one contract between a stamp company and a retailer. There was only one clause in it which dealt with redemption; and, as I saw it, the only obligation that the stamp company undertook was to redeem the stamps according to the terms and conditions in the stamp collector's book. This point I will come back to in a moment.
The stamp company makes its profits by buying gifts at a discount and also through those stamps which are not redeemed. This is a figure which is hard to assess; I believe it is close to about 60 per cent., and this is part and parcel of the business. But what really concerns me is the use they make of the money they receive perhaps four to six months in advance of their being called upon to redeem it. In the contract that I saw no protection was called for by the retailer from the stamp company that the stamp company should ensure that when the funds they were collecting on the stamps were called to be redeemed there were funds available to meet that redemption. So far as I could see, there was no protection there whatsoever. When I asked the Government what was the legal liability of stamp trading companies to honour the stamps, the noble and learned Lord the Lord Chancellor replied—I think, quite rightly—as follows [OFFICIAL REPORT, Vol. 253 (No. 14), col. 1011]:
The legal liability of stamp trading companies to the recipients of stamps will depend in each case first on whether it can be said that the arrangements made constitute a contract with the customer, and, if they do, upon the terms of the contract.
§ The contract that I saw was clearly one between the retailer and the stamp company. I do not believe it was possible under that contract for a consumer at any time to make a claim on the 69 stamp company. Therefore, I should have thought that the real answer to my first question was that there was no legal liability on the stamp company to redeem the stamps. I would ask the House to consider the terms that are on the collector's book; and perhaps noble Lords may have seen some of them. This book is the only document that is in the possession of the stamp collector.
§ I looked at one the other day, and it was of a company considered to be in the first flight of stamp companies. The first item in it was this: that these stamps merely record the support that the customer has given to the licenceholder—that is, the retailer. It is merely a record of that support. Secondly—and this is the point I made to the noble and learned Lord who sits on the Woolsack—the title to the stamps remains solely with the stamp company. The title to the stamps never passes from the stamp company either to the retailer or to the consumer or the customer. Thirdly, the terms could be varied without notice; and the number of stamps or books required for a particular gift that appeared in the advertised gift catalogue could be varied without notice. In other words, a Ronson lighter that is of the value of 6,000 stamps could, without notice, be increased to 10,000 or 12,000, and the consumer or customer would have no right whatsoever to complain. In fact, the, only right that the stamp collector has—and it is clearly stated in the book—is to paste the stamps into the book. That is his only right.
§ When one thinks of this customer I have spoken about who wanted to get a Ronson lighter for 6,000 stamps, it may seem rather hard when this represents £165 worth of purchases. If you have saved stamps on purchases to the value of £165, I should have thought you would expect a little more title than you have. Therefore, I would ask the Government, in the light of these facts—and they must be as much aware of them as I am and as is anyone who can read them intelligently—what are the value of these stamps at present? What can be the claim? May I illustrate the danger I see in this matter. These companies are selling stamps for cash. The retailer in many circumstances is being merely blackmailed—if I can use 70 that word—into going into the stamp business; and this is particularly so if his competitors are already in it. And this blackmail is stronger upon the smaller retailer who already has enough difficulty in trading against the big combines. The stamp company has collected large sums of money.
§ I do not wish to impute any base motives to any of the existing stamp companies, but perhaps I could illustrate the matter in this way. Let us imagine two of our number, Members of this Chamber with the "gift of the gab", going out and selling stamps to a number of retailers on this kind of contract. Perhaps in six months we could collect £50,000 or £60,000 in cash. It is possible. When the claim for redemption appears we either uplift the number of stamps required for our gifts—and we should be free to do it according to the terms—or we could go into voluntary liquidation. Going into voluntary liquidation, we could honour those debts that we had, but we should not be called upon to honour the stamps because the stamps are still ours, as a company, because we have retained the title to them.
§ LORD SHEPHERD
My Lords, I think we should ask the noble and learned Lord who sits on the Woolsack. But I do not believe this would be an offence.
§ THE LORD CHANCELLOR
My Lords, perhaps I could intervene and be of some help. I have not yet heard the noble Lord say that it was a criminal offence. You can only connect extradition with a criminal offence. Going into liquidation is not criminal.
My Lords, I am not suggesting going into liquidation. I am suggesting "skipping" without giving anything.
§ LORD SHEPHERD
My Lords, I hoped that I had made myself clear. A company could collect this money and fail to redeem the stamps, yet they would not have committed a criminal offence, or even a civil offence, because what they are doing is within the terms in the collector's book.
71 This is the problem with which I wish to confront the Government. I do not impute any base motives to any of the existing companies, a number of which are substantial concerns. But last year there were three major organisations and since stamps have become popular, the figure has mushroomed to about 50. All of them are private companies, the majority having a minimum capital. Therefore, I suggest that if they have the ability to "put it across", it would not be difficult to make a "killing" without calling the law upon them. Another point is that most of these companies are of external origin—American or Canadian.
I would ask the Government whether they would consider not only legislation to put into effect the recommendation of the Consumer Council, that the value of stamps should be printed upon them, but also legislation requiring stamp companies to be licensed, and that the Government should, by Order, lay down provisions to ensure that these companies make available funds to meet the redemption of the stamps they issue. I think that the Government could well accept this suggestion. They have included the provisions I suggest in the Prevention of Fraud (investments) Act, 1958, and there the Government were legislating to deal with responsible unit trust companies. If the Government were to accept the need for the protection of the consumers, it would become essential that the value of the stamps should be clearly defined. Unless there is a value on the stamps, it will not be possible for a consumer at any time to make a legitimate claim on a stamp company.
I have put this as a very narrow issue. I hope that the noble Lord who is going to reply will not say that it is hypothetical. I understand that what I fear has not so far taken place, but there is the possibility and there is concern about it. These companies are increasing rapidly, and I believe that the Government would do well to pass legislation ensuring that they operate in a responsible way. I believe that major companies, like Green Shield Stamps, would welcome such legislation, just as the hire-purchase companies accepted and supported legislation to deal with 72 those hire-purchase companies who were being reported for malpractices. Knowing the dangers, I think that the Government and your Lordships' House should not stand aside, but should take action as soon as possible. I beg to ask the Question on the Order Paper.
§ 6.5 p.m.
§ LORD AIREDALE
My Lords, I should like to support what the noble Lord, Lord Shepherd, is asking for. I am conscious that all those who are waiting to speak know a great deal more about this subject that I do; therefore I promise on this occasion to be extremely brief. May I first add two examples to the example of the Ronson lighter, which the noble Lord gave? You can obtain with trading stamps an Ilford Sportsman Vario Camera. It costs £12. The number of stamps needed to get this camera is 20,280. In order to get all those stamps, you have to spend £507. If you spent £507 at "the Co-op.", you would get a dividend of £25 7s. 0d. which would enable you to buy two Ilford Sportsman Vario cameras. The second example is that you can get a Black and Decker D500 electric drill, which costs £7 retail, if you get 11,232 trading stamps. To get these stamps, you have to spend £280 16s. 0d. If you spent that sum at "the Co-op.", you would then have a dividend of £14 Os. 10d., and if you did not want two electric drills, you could get one electric drill in half the time.
Whether these examples illustrate that "Co-op" dividends represent the most remarkable, abnormal value, I rather doubt; because, after all, rival retailers have succeeded in competing fairly successfully against "the Co-ops" for a great many years now. I think the conclusion to be drawn from these two examples is that one trading stamps scheme, at least, is thoroughly bad value for the consumer. The Consumer Council recommended, as the noble Lord has pointed out, that these stamps should bear their cash value and should be redeemable for cash at the option of the customer. What I think has not been very closely gone into so far is how the cash value is to be determined.
On this point, Mr. John Bloom, who I think runs two trading stamps schemes, was very quick off the mark. No sooner had the Consumer Council made their 73 recommendation than Mr. John Bloom was reported as saying:We"—I think that is one of his trading stamp companies—are now ready to declare war on rival stamp groups and champion the consumer against the anti-stamp Distributive Trades Alliance.The Distributive Trades Alliance includes the following: Home and Colonial Stores, Maypole, Lipton's, Boot's, British Home Stores, the House of Fraser, the International Stores, the John Lewis Partnership, Mac Fisheries, Sainsbury's and W. H. Smith. If I wanted a champion to protect me against that array, he would have to be some champion, indeed. I wonder whether Mr. John Bloom is up to this task.
Mr. John Bloom then goes on to announce his cash scheme. He says that Supa Gold savings books will be exchangeable for about 10s. or a gift worth between £1 or £1 10s. at normal retail prices. That sounds to me a little "airy-fairy", if I may say so. If we are to have values for trading stamps, I would suggest that we need something rather more precise. I should have thought the only satisfactory value was the price paid for the stamps by the retailer, because he might otherwise just as well hand the discount in money, or in savings stamps, to his own customers, without introducing the stamp scheme firm.
That is all I wish to say. I only hope that when the Minister winds up this debate he will not fall back upon that argument, which is another of the dicta of Mr. John Bloom, that "the public are not idiots". I believe that that is rather an absurd argument. It could be used to resist legislation to stop share-pushing. Of course the public are not idiots. But that does not mean that they do not need some measure of protection against new-fangled schemes of one kind and another. I very much hope that the Government will look sympathetically at the recommendation of the Council and the subject matter of this debate which the noble Lord has just raised.
§ 6.10 p.m.
§ BARONESS BURTON OF COVENTRY
My Lords, I am sure we are all grateful to my noble friend Lord Shepherd for giving us the opportunity of discussing 74 this matter tonight. He asks the Governmentwhether they are now prepared to support legislation to implement the recommendationof the Consumer Council relating to stamp trading. I should like—I think it probably would help—just to get on the Record what are these recommendations that we are now discussing. I quote from The Times of November 30, which said that the Consumer Council had stated:To enable consumers to know what advantage, if any, they are obtaining from the retailer giving stamps, the council considers that the following conditions should be complied with: (a) each stamp or page should be marked with its cash value; (b) goods in catalogues and the redemption centres should be clearly priced in cash as well as in stamps; (c) stamps should be redeemable for cash at the customer's option. The Council proposes to explore, with other interests concerned, by what means, including legislation, these requirements can be achieved.In discussing trading stamps tonight, we are talking about something that was actually being used before the First World War; and so, as the House obviously knows from that, trading stamps are not new. What is new is the extent of their impact on grocery, plus the fact that they have now been taken up by some of the bigger traders. If your Lordships have not already seen it, I would commend as worth reading an article on stamp trading in the December issue of Marketing, which is the Journal of the Institute of Marketing and Sales Management. It seemed to me very adequate and completely unbiased.
Obviously, there are wide differences of opinion as to the merits and demerits of stamp trading. There is little doubt that everyone, in this House and outside, could cite actual examples which would be correct and would prove either side of the argument. But, amid all these pros and cons, one thing is certain: that the amount of publicity obtained by editorial coverage throughout the Press would have cost trading stamp companies hundreds of thousands of pounds—if they could have bought it. And, of course, as we know, in this country they could not have bought it. I would emphasise that I am speaking of editorial coverage, and not of paid advertisements.
My Lords, many well-informed people to whom I have talked about this matter, 75 people with no axe to grind at all, believe that this whole affair is really a struggle for outright leadership in the British food market. I have heard that from a great many sources, and it seems to me that there is a good deal in it. I have said before that I think this is a selling gimmick. As we all know, in recent years we have had a good many of these. We have had free gifts, offers of "two for one", and giant packets and plastic flowers. Some weeks ago I was reading an article about coupons cut from cornflakes packets, and until I read that article I was unaware (I do not know whether your Lordships are) that more knives, forks and spoons are bought in Britain to-day with coupons cut from cornflakes packets than ever go through the shops. I understand that this fact is accepted in Sheffield, which, as we all know, is the home of the cutlery business. If we leave on one side for the moment the huge purchases of the stamp companies, I think this one fact that I have quoted helps us to realise the size and importance which the "premium" trade is beginning to assume in quite substantial parts of our economy.
I should like to quote the final short paragraph from an article which appeared in the Sunday Times on November 17 last. It said:Some people, of course, regard premiums as a perfect pest. But ever since Which?, to its own surprise, found there was thicker plate on cornflakes premium spoons than there was on most of the conventional variety, the movement has shown little signs of looking back—let alone of self-liquidating itself.To be quite honest, my Lords, these offers do not attract me—quite the reverse; I have got tired of them coming through my letter box. But they do attract a good many people. I have mentioned premiums because I think these premium offers are not far removed from stamp trading, and are, I believe, allied to the principle of getting something for nothing, or getting a little more than one otherwise would get.
That brings me to the first point I want to make on the question of stamps. I believe—and nothing will shake me in this belief—that the housewife stands to gain: she must, my Lords, if she is a good shopper. With due deference to the noble Lord, Lord Airedale, 76 women are not stupid. I do not mean that he said they were, but he said he hoped that this view would not be advanced as an argument for not doing anything. As I say, women who do the shopping are not stupid; and neither are men who do the shopping. Those of us who do our own shopping, week by week, obviously know prices. I know if I go into a shop whether something has gone up by a ½d., 1d. or 2d. from the previous week. I must know if I go there each week. If we find that prices have gone up, obviously it is up to us to decide whether or not we continue to shop at that shop. If they have not gone up, and stamps are given, then we must have gained. Stamps do not appeal to me—I have said that on many occasions—but I feel that there is incontrovertible proof that many shoppers like them.
I have said before, and I still maintain, that the way to fight trading stamps is with first-class quality, first-class service and good prices. Perhaps I can do a little advertising here, as it is not for me. I do a good deal of my shopping at the organisation run by my noble friend Lord Sainsbury; and, equally, I shop a good deal at the organisation run by the noble Lord, Lord Marks of Broughton, who sits on the other side of the House. I think that the value for money offered by these two organisations would be proof against any customer loss due to trading stamps; and I should like to say to my noble friend Lord Sainsbury that nothing would induce me to leave his stores to go elsewhere to get trading stamps. But what I deplore is the stoppage of supplies to retailers from the opposing camps in this battle, because this can only harm the shopper and restrict choice.
That brings me to my second point, resale price maintenance. I should like to say to the Minister (though I hope it is unnecessary) that it is not the slightest use the Government or anyone else saving that resale price maintenance and trading stamps are not connected. Suppliers have been withholding supplies on the basis of resale price maintenance, declaring that the giving of trading stamps with price maintained goods is selling below the agreed price. I believe that resale price maintenance should go, as do most people, including, I believe, the 77 Board of Trade; but I would add a proviso. As I said on November 21 last in this House [OFFICIAL REPORT, Vol. 253 (No. 6), col. 517]:… any rule either for or against resale price maintenance would have to make provision for exceptional trades so that either way each case would be treated on its merits.I do not know whether the Minister, when he comes to reply to-night, will give us any indication of the attitude of the Government on this matter, or whether we have to wait until January 17, when the Bill comes up in another place. I would assure him that we are all, in this House and outside, anxiously awaiting the decision which the Government have taken in this matter, and hoping that the kites that have been flown indicate a change of heart in public, anyway.
With that I come to the third point on this matter. With the abolition of resale price maintenance, I think the trading stamps should be made encashable. I would suggest that customers should have an option of cash or goods. I took note of what the noble Lord, Lord Airedale, said, but it is obvious to us all that the cash value must be less than that of the goods, because the merchandise is bought by bulk purchase in vast quantities wholesale. I think that has to be faced. What I thought was interesting was that in the United States, in those States where stamps are encashable, only 2 per cent. are redeemed for cash. That seemed to me a most interesting pointer. I do not know about the rest of your Lordships, but I do not hold very strong views about whether the goods in the stamp companies' catalogues should be marked for cash as well as for numbers of stamps. I believe that shoppers should keep a watchful eye to see that the goods in the catalogue are good merchandise. Branded merchandise will be known for its prices by most shoppers, and at the moment I do not think that I should be prepared to go to battle on that particular issue.
We must be fair, and I am sure we all agree that it is not for us to tell people what they should or should not collect. On the point of being fair, if we secure the abolition of resale price maintenances so that those retailers who wish to do so may legally lower prices on their price maintained goods, and if trading stamps are made encashable, with an option for cash or goods, then surely trading stamps should be allowed 78 to take their place with other selling gimmicks, and the shopping public should be allowed to decide by its purse whether or not they are desirable. I submit to your Lordships that it is not for us to legislate either side out of existence.
In conclusion, I do not know whether he still holds these views—and I have never met him—but I remember the chairman of Pricerite saying on October 14 last that it was not his concern to question the merits or demerits of stamp trading on a theoretical level. I was struck by his last sentence, and I made a note of it. He said that what mattered was that "the customers had made it quite plain that they wanted trading stamps." From last week's Economist, that of December 7, I noted that the Motor Agents' Association estimates that 4,000 out of some 35,000 filling stations now use stamps; that Blue Star maintains that stamps were essential because it was losing business to retailers who were using them; and that its managing director, Mr. Maurice Deen, says he would not mind if stamps were prohibited but that the public wants them. I see our job in Parliament as one of ensuring, so far as is humanly possible, that the battle is a fair one.
§ 6.25 p.m.
§ LORD SAINSBURY
My Lords, may I, before saying a few words on the issue raised by the Question of my noble friend Lord Shepherd, declare an interest in the matter as a retailer. May I then turn to my noble friend Lady Burton of Coventry, and thank her for her unsolicited testimonial, and then may I proceed to disagree with her? May I say, first of all, that I think it is entirely misleading to draw a comparison between ordinary sales promotion and stamps. Stamps are a permanent levy of 2½ per cent. on the total turnover of the retailer. To compare that with a free gift of some artificial flowers with a packet of detergent which is paid for by the manufacturers is, I think, misleading. Secondly, my noble friend said that the housewife will gain. Here I think it is most important to draw a distinction between short-term and long-term. The housewife may well gain in the opening stages of any stamp promotion schemes when retailers take up stamps. I do not know about Lady Burton of Coventry, but I am more 79 concerned with the long-term effects of stamp trading, and not the short-term effects.
The long-term effects in the United States of America, so far as food is concerned, make it abundantly clear to anybody who studies the evidence objectively that stamp trading raises the price of food. It raises the cost of distribution, and one of the leading executives of one of the biggest and most successful supermarket chains in the United States of America told me less than a month ago that it does not stop at 2½ per cent. and it does not stop at ordinary stamp promotions. You get double stamps, you get treble stamps, and you get special stamps at certain times of the week. And you do not stop at stamps. You have a 100-dollar competition in your stores as well. The result of all this is that promotion costs among supermarket operators in America to-day are not 2 per cent., but 4 per cent.—their biggest expense after the wage bill.
As regards resale price maintenance, I agree with the noble Baroness, as I think I indicated in my maiden speech in your Lordships' House. When discussing some form of regulation and control for stamp trading, it may be worth while to survey briefly what has happened in the field of legislation in other countries. In the United States about half the States have considered legislation in the matter during recent years. As a result of this, Kansas State bans stamp trading. A number of other States have imposed various restrictions on the stamp companies, such as compulsory cash redemption, periodic auditing of their books, registration, and the requirements to keep reserves for the redemption of outstanding stamps.
Two Canadian Provinces, Alberta and Saskatchewan, have outlawed stamps. In Europe a number of countries have found that stamp trading raises public issues. Norway banned trading stamps as a form of unfair competition. In Belgium stamps must bear their money value, and cash convertibility is obligatory. In France and Germany stamp trading is greatly restricted. Stamps can be redeemed only for cash, for articles of nominal value or for the 80 same article as originally purchased. Finally, in Italy stamp schemes have to be licensed by the Finance Ministry.
This brief summary of procedures in other countries shows the valid form legislation can take. It could take the form of complete abolition, as in Alberta and Saskatchewan, or Kansas in the United States, or as in Norway. In my view, a case can be made for abolition. But I do not myself feel it is justified. I feel there is a very much stronger case for control and regulations in the interests of the consumer, and legislation should cover the points made by the Consumer Council. I will not again enumerate those points, but I should like to refer to the third of their recommendations, that stamps should be redeemable for cash at the customer's option.
I think an important feature of such legislation must be a provision which bars stamp companies from fixing a substantial difference between the gift value and the cash value of the stamps. This has already been referred to by my noble friend Lord Airedale. But a certain washing-machine seller—I will not give him any further publicity—has recently acquired certain stamp companies. He has announced that he is prepared to give rather less than 50 per cent. of the gift value in cash. This is a very well known technique in North America. You make your cash redemption so low in relation to the reputed value of the gifts that you discourage as many people as possible from cash redemption.
In my view, it is necessary and desirable that a fourth point should be added to the recommendations of the Consumer Council when Parliament considers legislation on this issue. Like insurance companies, stamp companies receive money from the public in advance of the services they render. In my view, the fact that the stamp companies get the consumers' money via retailers does not affect this similarity. Stamp companies are tempted to consider this money as capital, and immobilise it by spending it on the expansion of their business. In more than one case, when stamp companies went bankrupt they were unable to redeem stamps which were outstanding and the consumers did not receive any compensation. As 81 your Lordships know, insurance companies in this country have been under a legal obligation for a long time to keep sufficient reserves against their liabilities. In addition to their balance sheets, they must submit special returns to the Board of Trade to prove that their reserves are satisfactory. I think a similar legal provision is necessary as regards stamp companies. They should be subject to public control, and I suggest they should be licensed and supervised by the Board of Trade to ensure that appropriate funds are kept to meet their obligations to the public.
My Lords, my views on stamp trading are fairly well known, but they have never been better expressed than by Sir Richard Burbidge, one of the chairmen of the retail section of the recent "Productivity, the Next Five Years" conference at Eastbourne. At the final plenary session he said:We took the view that stamp trading diverted the attention of the consumer from the essential points of quality and value and. therefore, was not only irrelevant to good and efficient shopkeeping but detrimental to real retail productivity.I believe that the public are entitled to certain safeguards with regard to stamp trading, and that no Government that profess to have the consumers' interest at heart can escape their responsibilities in the matter.
§ 6.37 p.m.
§ THE EARL OF SANDWICH
My Lords, I will not occupy your Lordships more than a moment or two, as I speak as an ordinary member of the public without special knowledge of this stamp trading. I am very glad the noble Lord, Lord Sainsbury, has declared his interest, because I was written to this morning by somebody on the other side of the argument and asked how it was possible that a noble Lord could use his position in your Lordships' House to attack the commercial policies of his rivals. I replied that, of course, these remarks were usually accompanied by a statement expressing a commercial interest, as we have just had, and that that discounted a due percentage of the value judgments of the speaker. In any case, the opinions of the noble Lord, Lord Sainsbury, on this subject are very well known, and even if lie had not declared his personal interest this afternoon I am sure nobody would have objected.
82 This debate so far (if one can call it a debate), with the exception of a brave and genial speech by the noble Baroness, Lady Burton of Coventry, has been a chorus of disapproval of the stamp trading which is going on throughout the country with, I should have thought, increasing public interest and excitement; a chorus of disapproval so characteristic of the Nonconformist conscience of the Labour Party and of the Liberal Party. They are always trying to get the Government to legislate to prevent something; to stop its being done—"Go upstairs and find out what little Tommy is doing, and stop him doing it". That is the attitude of the Labour Party in every aspect of public life. It gets increasingly irritating as time goes on. I hope that in the case of stamp trading there is going to be an absolutely smashing reply from my noble friend Lord Drumalbyn and that he is going to tell the Labour Party where they get off on this whole question.
We have heard the noble Lord, Lord Shepherd, who made three points. First of all, he said—and I think I took down his words correctly—that if more traders go broke, people will be left with un-saleable books, and in the very next sentence he said that stamps are being offered as a discount. Either of those two propositions may carry a calamity with it, but both cannot do so. They cancel each other out. His next point was that Ronson lighters—and we had another example from the noble Lord, Lord Airedale, about the price of Ilford Sportsman Cameras—could be purchased with stamps to the equivalent of £165 of purchases. This is like a sort of inverted little black baby argument. If the amount is infantile, why complain about the giant that stamp trading is becoming throughout the country?
Finally, the noble Lord, Lord Shepherd, asked for legislation, as did other speakers with the exception of the noble Baroness, Lady Burton of Coventry, who I do not think actually did, to protect poor purchasers from themselves. The noble Lord, Lord Airedale, exampled share-pushing. If by share-pushing he means issuing false prospectuses, then of course that was a principle against the natural justice of the last century, and this led in due course to its creation as an actual crime by legislation. There is nothing in stamp trading equivalent to getting people to 83 buy on false prospectuses. I cannot think what he meant by share-pushing if he was not regarding it in that light.
We come finally to the noble Lord, Lord Sainsbury, himself, who says that stamps are a permanent levy of 2½ per cent. on the retailer. That may be true. But what does that show and how does it matter if it is? Any retailer is perfectly at liberty to improve his trade by adding a new percentage of some sort of another to his overheads. You can move into a better thoroughfare, install better furniture in your shop, add all sorts of cachets to your trading reputation.
§ LORD SAINSBURY
My Lords, I do not want to interrupt, but I think the noble Earl, on reflection, will agree that in talking of this permanent levy of 2½ per cent. on the retailer's turnover I was drawing a comparison with manufacturers' gift schemes and saying they were not truly comparable.
§ THE EARL OF SANDWICH
Manufacturers' gift schemes have been declared by the noble Baroness, Lady Burton of Coventry, to be quite "O.K." and I think they are myself. I remember before the war, not trading stamps, which she said were in fact in operation, but trading in cigarette cards, as I was at school. One soon acquired large numbers of cigarette cards in an album and sold them at a profit, which enabled one to buy more goods in the school shop. We have had for a very long time past cereal food cartons which can be given to our children to trade in for various benefits. Why is there this extraordinary outcry now about stamp trading?
Then the noble Lord, Lord Sainsbury, says it raises the price of food. If so, what on earth is there to fear? What does he in particular fear? His organisation, highly reputable in every way, has opened up a vast advertising campaign. I see the pages of the Evening Standard absolutely plastered with advertisements of Sainsbury's goods at certain prices—and all power to him, if he wants to do that. But why is he opening up a vast sales campaign to help his shops to maintain their level of activity, and yet comes here to your Lordships' House and gets angry and upset about the possibility that stamp 84 trading is going to raise the price of food? All sorts of things can raise the price of food. Entering the Common Market would have raised the price of food. To get morally excited and disturbed about raising the price of food is a genial occupation for a straightforward politician going into a General Election campaign, but for a man who cares about the principles of public saving I should not think it is the right one to use.
§ LORD AIREDALE
My Lords, may I ask the noble Earl whether he would wish his food to cost more in order that he could save up 11,000 stamps and get an electric drill? If he wants that, good luck to him; but most of us think it better to have cheap food.
§ THE EARL OF SANDWICH
That is the noble Lord's own opinion. I prefer the view of the noble Baroness, Lady Burton of Coventry, of the aspect of millions of independent shoppers throughout the country who, although it is perhaps suggested that there may be a slight increase in the price of the goods they are buying because they get these trading stamps, like to get them and go home and stick them in the album, and have the exciting prospect after 150 years of getting a radio gramophone. And why should they not? I hope my noble friend is going to do what I asked him to do earlier—issue a smashing reply from Her Majesty's Government.
§ 6.45 p.m.
§ LORD SHACKLETON
My Lords, it is unusual in a debate dealing with commercial matters for so many interests to be declared from this side of the House, and indeed it is a reversal of the normal pattern—I say that for the benefit of the noble Earl. But I will do so, even though my original intention was to support my noble friend Lord Shepherd on his very moderate and extremely well argued proposals. I do not intend to answer the noble Earl. I have listened to him many times in another place, and I can only say that he gets more offensive every time he speaks. His reputation in this way may add to the liveliness of our debates but it does not add to the seriousness of them.
This is not a debate, I hope, which anyone is trying to conduct on an emotional basis. We have just had a little 85 bit of emotion. Nor does it help if we try to bring Party politics into everything, even if the Prime Minister has urged us to do so—and it may be that the noble Earl, Lord Sandwich, is following his ex-noble Earl colleague in this matter. But I think we can discuss this question—I hope we can—without bringing in the Party political line, because I am sure that in this matter there are many friends of the noble Lord, Lord Sainsbury, who would be very hurt if it were suggested that they were in any way Labour Party supporters.
We have covered so much ground that I do not think there is very much more to explain on this subject. One or two points have arisen in the debate, on which I would comment. I should have liked, in particular, to refer to my noble friend Lady Burton of Coventry. She did, I think, say that the case for and against trading stamps was so well known that there was no need to deploy the case more.
§ BARONESS BURTON OF COVENTRY
My Lords, I said nothing like that at all. I do not know what the noble Lord has in mind. I certainly never said it was so well known there was no need to deploy the case for or against. I never mentioned it in that way.
§ LORD SHACKLETON
I do not know exactly what the noble Lady said. At any rate she was not going to give the case for trading stamps. My point was that I rather feel that it is a pity the case for trading stamps has not been given, so that we could have debated it. But there are one or two points that need to be mentioned. First of all, in the grocery trade there is very little resale price maintenance left; and nobody, I am sure, knows this better than the noble Baroness. It so happens that I and some of my friends are personally opposed to resale price maintenance, though this is not the issue we are debating to-day.
The argument that in America only 2 per cent. of the people who have taken trading stamps have chosen to change them for cash is simply due to the unrealistic value that is put on those stamps, and I am sure the noble Baroness knew this perfectly well before she put this particular argument. And, of course, it is material to our 86 whole consideration of legislation if, as is recommended by the Consumer Council, the value is to be put on those stamps, what that value should be.
I think it is desirable to examine a little what the cost structure of retail trading is, and particularly in the grocery business. I do not think it is realised just how small the gross margin in grocery is. It is somewhere between 16 and 20 per cent. In department store trade it may be rather higher—it may be up to 30 per cent. And I do not doubt that in certain department stores it is higher still, though no doubt the service would justify it.
§ LORD SHACKLETON
Nothing like that in food. I am suggesting a figure of 16 to 18 or 20 per cent. Let me take 18 per cent. I think we are agreed that the cost of these trading stamps is 2½ per cent., and if the firm that adopts trading stamps has not only to pay its way and regain its money but also make a profit, it has got to increase its turnover not by 20 per cent. but by, probably, as much as 30 per cent. It will be a smaller figure, possibly, in commodities where the mark-un is larger, but in food, in order to make it worthwhile, they have to increase their turnover by 30 per cent.
It is worth while looking at the economics of this situation, whatever the Government may do. I appreciate, as we all do on this side, the difficulty of legislating in this connection. The last thing we should want to do, even if it were possible—and I do not believe it is—is to ban trading stamps, although this has been done in other countries. But the effect of the present set-up is to create an overwhelming compulsion on the retailer, especially the small retailer, to get in before it is too late. I would not go quite so far as to suggest that this is a form of protection racket, but some of the pressures about which we have heard have been very severe, and I have heard of one chamber of commerce, in particular, who have expressed concern that the pressures are such as to induce a fear in the retailer, again probably one without the resources, to get in first. What then happens? Either the whole of the retail trade adopts it, in which case in order to make the scheme 87 pay, they have to increase their turnover—and in the food side, it must be by 30 per cent. I do not know the exact figures of the size of the food trade—my noble friend Lord Sainsbury might be able to give these. But I think it may be somewhere about £4,000 million—it may be more or less. It is not conceivable that it is possible to produce an extra £1,000 million worth of trade, just like that. The only effect can be that costs go up and the supply of goods to the housewife, or to anyone else, is reduced and a useless form of activity is thereby financed.
I appreciate that it is difficult to legislate in this particular field. It is possible to indulge in certain "gimmicky" practices—to indulge in all sorts of practices in trade and commerce which, providing they are on a limited scale, do not do harm to the body politic. But I would suggest that this practice does harm. It so happens that in the retail trade, and particularly the food trade, one of the most highly competitive industries in this country—except for resale price maintenance, on which there is a special argument, but even discounting that—we approach more nearly the ideal of perfect competition which the classical economist sought, but which we have failed so lamentably to achieve. But this giving of trading stamps is inducing something which interferes with this competition. Furthermore, it becomes a serious distraction in the efficiency of the retailer whose job it is to compete in terms of quality, and service and of price.
The retail and the distributive trades have frequently been criticised on the ground that their productivity has not been as high as it should be, and there have been arguments as to whether so many people should go into the retail trade. This adds another and useless link in the distributive trade. Furthermore, it does so in a way that gently leads—I would commend this to the noble Earl, Lord Sandwich—the purchaser into buying his or her goods in a more restricted market, in having to obtain the Ronson lighter, or whatever it may be, again from a narrower choice, because it is not possible to carry anything like the stock to provide the range that complete freedom to go into any shop, 88 whether it be private or co-operative, would otherwise permit.
§ THE EARL OF SANDWICH
My Lords, may I make a point to the noble Lord? Is that not again a matter where the consumer is capable of making up his own mind whether he wants to buy a Ronson lighter, or any other lighter, for cash in an ordinary shop, Or whether he likes to acquire it through the collection of stamps?
§ LORD SHACKLETON
My Lords, I do not think that the noble Lord is capable of absorbing the arguments on this matter. What I am suggesting is that, without it being made clear—
§ LORD SHACKLETON
I am. I am always delighted to be offensive to a noble Lord who brings an atmosphere into every debate that I have ever known him to take part in which can only be described as slightly venomous on occasions. But the point about this particular argument is that trading stamps do, in fact, restrict the choice. It is possible that the noble Earl, Lord Sandwich, in the interests of freedom, would permit subliminal advertisements on the radio. The Government, however, have seen fit to prevent this under the Television Act. There are all sorts of restrictions, of a kind that the noble Earl, Lord Sandwich may not like, to protect the consumer and the public. My noble friend Lord Shepherd recently referred to the Hire-Purchase Bill, which is designed precisely to do what in fact my noble friend wishes to achieve, if the Government are prepared to adopt the proposals of the Consumer Council.
I think we are obviously steadily advancing towards not the brave new world, but the mad new world, in which simple issues will be distorted and concealed from us. We have had a taste of this in the interview that was published by the Chairman of King Korn. King Korn saidYou British are tough nuts, but we are going to crack you.He said:By the time I am finished with Br[...]in you will be able to get trading stamps with postage stamps.He then went on to indicate that undertakers should provide trading stamps. 89 I suppose that is of some value, if you have a large number of elderly relatives. Providing you go to the same undertaker you can acquire and accumulate something for your book. I notice that he was rather annoyed with British Railways. He said:This Beeching fellow has fouled up that idea. But King Korn is going to be King of England by the time we finish.My Lords, I hope that the noble Earl, Lord Sandwich, enjoys it!
§ 6.58 p.m.
§ THE MINISTER OF STATE, BOARD OF TRADE (LORD DRUMALBYN)
My Lords, I am extremely grateful to the noble Lord, Lord Shepherd, for having initiated a most interesting debate. I am not quite certain whether he realised just how interesting a debate he was going to initiate when he did so, but certainly he was good enough to warn me, unaccustomed as I am to all the ways of your Lordships' House, that this might be the case. If I were to answer the Question that he put and leave it at that, I think I should incur and, indeed, I would deserve to incur the displeasure of your Lordships, because he has asked:Her Majesty's Government, following the first major recommendation of the Consumer Council relating to Stamp Trading, if they are now prepared to support legislation to implement the recommendation.Well, I am bound to tell the noble Lord that, so far as the Government are concerned, the Consumer Council have not yet addressed any recommendation to them. What they have done, I think, is to express publicly certain opinions. As to the second point, about legislation, I hope to be able to deal with that in the course of what I have to say.
I should like first of all to say one or two things about the many interesting interventions in the course of this debate. The first point is whether it is possible for legislation to control stamp trading. In listening to the speeches of the noble Lords, Lord Sainsbury and Lord Shackleton, one could not help thinking that what they really wanted was to abolish stamp trading altogether, although Lord Sainsbury did make some interesting proposals for the control of stamp trading which he added to the suggestions made by the Consumer Council. The noble Baroness, Lady Burton of Coventry, went further still and tried to cajole me, if I 90 may say so, into making statements about resale price maintenance, a subject on which my right honourable friend the Secretary of State has indicated he will be making a statement in due course. Therefore, it would certainly not be proper for me to make a statement on that subject to-night.
I recognise, as the noble Lord, Lord Shepherd, invited me to recognise, that there are certain occasions when it is desirable for the Government to legislate; that is to say, where fraud or abuse has arisen and needs to be stopped. In those cases, provided that somebody can show that legislation is likely to stop them, the Government would not, of course, be averse to such legislation. The noble Lord recognised in the course of what he said that in his original Question he appeared to be inviting the Government to express opinions on, and to accept ministerial responsibility for, a particular contract which might be entered into by an individual. The noble Lord, Lord Morrison of Lambeth (who is not present), seemed to think that the Government ought to be in a position to interpret, sometimes in advance, particular contracts and give advice upon them. I do not think there was any question of that in to-day's debate. I am bound to say that the debate has been very much weighted on one side, although I shall be giving the other side of the picture to some extent in the course of what I have to say.
As has been mentioned by noble Lords and by the noble Baroness, stamp trading is not new. It dates back to the last century. There was a resurgence of it in this country in the 1930s, and I would remind your Lordships that a Committee was then set up by the Board of Trade to consider both gift coupons and stamp trading. It reported in 1933 that these practices were not detrimental to the public interest and did not call for any legislative intervention.
§ LORD SAINSBURY
My Lords, if I may interrupt the noble Lord, I would point out that one of the five members did disagree, and I should like to read from his disagreement:I do not accept the general conclusion in respect of trading stamp companies unless these are constituted by retailers. I am apprehensive of the growth of independent companies strong enough to impose on retailers the costs of a 91 stamp system of which the profits go elsewhere.So that 20 per cent. of the committee did not agree with the main conclusion.
§ LORD DRUMALBYN
I quite accept that. I thought I ought at any rate to put the majority view to your Lordships' House. I think I should say that the Molony Committee on Consumer Protection last year endorsed those conclusions. After expressing the opinion that consumers would be better off if prices were reduced by the cost of the stamp, they added these words:We would not feel justified however in trying to dictate the forms of publicity or sales promotion to be adopted by manufacturers or other traders provided that alternative methods are not intrinsically objectionable.Then one has to ask straight away: is stamp trading intrinsically objectionable? It is indubitably a form of sales promotion, and one of many. The noble Lord, Lord Sainsbury, pointed out that it was a levy on the retailer, though whether or not it is likely to be a permanent levy remains very much to be seen. I should say also to the noble Lord that there is really no conclusive evidence of the effect of stamps on prices. A report was published by the United States Department of Agriculture in 1959 on trading stamps and their impact on food prices, and they concluded that the cost of stamp schemes is neither met entirely by increased prices nor, on the other hand, met from profits on a greater turnover. It suggested that the schemes are financed partly from increased' turnover, partly from higher prices, and partly by a reduction in profits.
The next question is: are there abuses which need to be corrected? I would agree that the stamps represent a form of rebate on retail selling price to the consumer. They are normally redeemable in the form of goods. Some of the goods which are advertised, as has been made plain this evening by the noble Lord, Lord Airedale, and others, are branded articles, so that their retail value is approximately known; others, I understand, can be examined at one of the stamp trading concern's own premises. Because the rebate cannot immediately be calculated, or can be calculated only with difficulty, it is suggested that stamps should have a cash 92 value printed on them to enable the consumer, if he or she wished, to compare the price of identical goods in shops which do not offer stamps. It is true that such a requirement was imposed in some of the States of America before the war. But the circumstances there are not the same as they are here; and, of course, general economic conditions are now quite different from what they were in the 1930's.
The next question is: is there any inherent reason why the consumer should know the exact value of the stamps?—I am not referring to the legal reason, which I will come to in a moment. If he does not mind not knowing it, well, that is one thing; but if he dislikes not knowing it, and thinks he can get better value elsewhere, the remedy is surely in his own hands. But the fact that stamp trading is enjoying considerable popularity, which may or may not be ephemeral (it is estimated currently to apply to about 7 per cent. of total retail trade in this country) suggests that many people do like getting and collecting stamps, the cash value of which is not declared. In point of fact my right honourable friend the Secretary of State received only to-day a letter in those very terms emphasising that point very strongly.
§ LORD SHACKLETON
My Lords, would the noble Lord not agree that the large number of people who have hire-purchase agreements which do not fully reveal—or have not in the past revealed—the terms adequately, like them; and that on the same basis there is therefore no need to legislate as the Government are now doing on interest rates and advertisements?
§ LORD DRUMALBYN
My Lords, the question I was posing was whether there was an inherent reason why there should be a cash value on stamps. I think what the noble Lord is switching to at the moment is whether, in not having a cash value, there is a source of fraud which ought to be prevented. I think that is a slightly different question. I would not deny for an instant that some people might like stamps if the cash value were declared. As has been mentioned to-day, one firm has indicated in very broad terms its intention to state a cash value on stamps—an intention which has been adversely criticised by the noble 93 Lord, Lord Sainsbury, from one angle to-day. Nevertheless, that in itself—the mere fact that some might prefer cash value to be shown—is not a reason to legislate.
§ LORD AIREDALE
My Lords, may I interrupt? Surely the principal reason for legislating, the principal reason for having cash values shown on stamps, is that the customer is thereby enabled to compare comparative prices in one shop which has a price and no stamps and another shop which has another price and stamps, so that it is possible for the customer readily to ascertain the value of the stamps. In the Weights and Measures Bill, the Government were most careful to introduce legislation whereby people should be able to compare prices and so on.
§ LORD DRUMALBYN
That is perfectly true, and I do not deny that for an instant. But what I am saying is that this is a measure of sales promotion. It takes the form of a rebate, but it is a measure of sales promotion. If there were evidence of widespread deceit or misrepresentation in this country regarding the true value of the goods offered in return for the stamps, then there would be a case for protecting the consumer against such malpractices. I can only say that I have no evidence of the existence of such malpractices and, so far as I know, the giving of stamps misleads nobody.
§ LORD SAINSBURY
My Lords, I am sorry to interrupt again, but surely there is this point. The stamps bear the figure "6d." on them; but that relates to the price of the groceries or other goods purchased, and not to the gift. Is the noble Lord so certain that everybody who is given a stamp knows that that is what that 6d relates to? I do not see that it can be so.
§ LORD DRUMALBYN
I think the noble Lord, Lord Sainsbury, is talking about a particular case. The stamps I have seen recently did not bear "6d." on them. But I have no doubt that a customer who was accustomed to trading in a certain shop would know very well what that"6d." meant.
I can well understand the fear that such malpractices might grow up. But I would ask noble Lords to consider this fact. The stamp trader, after all, 94 has to sell his stamps to the retailer, and he has to satisfy the retailer of the advantages of giving them. I recognise that there can be strong pressure on the retailer in a competitive way, regarding it in competition with other retailers, to consider that it might be an advantage for him to take the stamps. This is one of the considerations that the retailer has to take into account. Before buying the stamps he will wish to be assured that his customers will not be disappointed; because if they are that will react adversely on the retailer; and as the retailer himself is anxious to stay in business he will wish to satisfy himself of the bona fides of the stamp trader. It seems to me therefore that the fears that either, on the one hand, the stamp trading concerns will become so strong as to constitute a kind of protection racket, or, on the other, that there will be such a proliferation of stamp trading concerns so weak as to be unable to meet their obligations, are very much exaggerated. However, this is something that will have to be watched.
It may well be that a consumer who has collected the hundreds or thousands of stamps required for an article is dissatisfied with its quality when he or she gets it. If so, in future he or she may well avoid shops which give trading stamps. However that may be, it is certainly more than likely, to put it no lower, that the retail value of that article will be greater than the amount that she would have been given in cash if there had been the option to take cash. I do not think there is any doubt of that at all. I am not at all sure that many of those who are pressing for trading stamps to bear their cash values are not doing so not so much to protect the consumer as to protect what they conceive to be their own interests.
§ LORD SHEPHERD
No. Is the noble Lord suggesting that the Consumer Council have a personal interest involved?
§ LORD DRUMALBYN
Not at all. The noble Lord, Lord Shepherd, must not read into what I say more than I actually said. I said that many of those who are pressing for this may have their own interests in mind no less, or even more, perhaps, than the desire to protect the consumer—and one cannot blame 95 them for that, if they are in business themselves.
So far, is this not really a conflict between the retailers; a conflict which should be fought out between them in the ordinary way of competition? There can be no doubt that stamp trading companies have a very strong interest in avoiding abuses. My Lords, one major scandal could well put an end to stamp trading for a very long time. As I have said, there is no evidence of abuses, though that is not to say they may not arise in the future. It is to guard against that sort of thing that the Consumer Council has been created. Its function is to be continually vigilant. It can also carry out particular studies—for example, how stamp trading is affecting the interests of consumers and is likely to do so in the future; and I understand that the Council proposes to make just such a study.
Then we come to the next point: is the law working badly, or is it obscure? Are the rights of the consumer sufficiently safeguarded?—which was the main point the noble Lord, Lord Shepherd, was making, or exploring. Of course, without examining each of the contracts that stamp trading companies make with retailers, it is impossible to say. But let us look, first, at the relationship between the consumer and the stamp trading company. A consumer who wished to make a claim against a stamp trading company would first have to establish that there was a contract between him and the company. My Lords, I am advised that in order to establish such a contract it is necessary to show that an offer has been made and accepted and, under English law, that "consideration" has been given. I am advised that it may well be that an advertisement issued by a stamp trading company would, in the ordinary way, amount to an offer of a continuing nature to all members of the public that, if they purchase goods at shops at which stamps are issued, they will obtain stamps which can later be exchanged for goods. The consumer who is aware of this offer will be regarded as accepting it when he buys goods at such a shop and obtains stamps from the shopkeeper; and the same act of buying the goods would be regarded in law as good consideration. Prima 96 facie, therefore, there would be a binding contract which would entitle the consumer to change his stamps for goods.
I recognise that this is entirely hypothetical. As the noble and learned Lord the Lord Chancellor said, this entirely depends on the terms of the contract and on the circumstances of the case. But I would venture respectfully, not being an expert, to disagree with the noble Lord, Lord Shepherd, when he said that unless there is a value on the stamps it will not be possible to make a valid claim on the stamp trading company. With respect, my advice does not conform with that view.
§ LORD SHEPHERD
Might I put this question?—because this is important. Would the noble Lord not agree that the stamps will be redeemed according to the terms—and I was very careful when dealing with them, and read them out—which include a term that they can be varied? To take the case of the lighter that I quoted at 6,000 stamps, the stamp company could say that it is now worth 25,000 stamps. In other words, by the mere alteration of those figures they can change the whole basis.
§ LORD DRUMALBYN
I would certainly agree, and that is what I meant when I said that it depends on the contract and it depends on the circumstances. That is certainly so. But again I would come back to this point: that, if the stamp trader wants to go on selling his stamps to retailers, he has to be able to show his own bona fides, and he has to show to the retailer that it is to the retailer's customers' advantage that the retailer should enter into a contract with him as regards stamps.
The second point, I think, is the relationship between the stamp trader and the retailer. Reference has been made by several noble Lords to the possibility that the stamp trader might become insolvent, might go out of business or might refuse to honour stamps which a retailer still had in stock. There, legal difficulties could arise, of course, as to the rights of a retailer and of a third party, such as the consumer. I am bound to say that at present it is not easy to see how legislation could altogether prevent them from arising, but I think it is right to say that the Government are keeping an open mind on this 97 subject. Thirdly, there is the relationship between the retailer and the consumer, and here opinions differ as to the legal position. All I would say is this: that, in spite of the fact that stamp trading is more than half a century old, there does not seem so far to have been a case which has given rise to a general ruling—which suggests that the question has, so far at any rate, been more academic than practical.
So, if I might sum up, my Lords, I would say that there is no reason to suppose that the state of the law in regard to trading stamps is such that legislation is urgently necessary. However, the Government and the Consumer Council will continue to watch this position very carefully, and they will take into account in particular all the various points that have been made by your Lordships in the debate this evening.
§ LORD MABANE
My Lords, may I ask the noble Lord one question? Has the advice of the Inland Revenue been sought in this matter?
§ LORD DRUMALBYN
I shall be very happy to go into the point that the noble Lord, Lord Mabane, has raised, that there might be an opportunity for tax avoidance here. I will certainly look into that further point.
§ 7.33 p.m.
§ EARL ALEXANDER OF HILLSBOROUGH
My Lords, I must say that I am obliged to the noble Lord, Lord Drumalbyn, for the attention he has given to the debate. He has quoted a great many things which have been said. But I am filled with a sense of profound disappointment because, as he thought there were more speakers in the House to-night against trading stamps without some protection for the consumer, he should wish to do as much as he has done to-night to try to justify the position of the trading stamp business. The position is, of course, that the protection racket, which was referred to by my noble friend Lord Shackleton, is more in danger from experience than 98 perhaps from what we can say in a debate in this House to-night. If one looks at the Sunday Times of December 15, one there sees the case of a managing director of a great chain of twenty supermarkets who, after eighteen months' experience of trading stamps, has had to give them up altogether because they meant increasing the prices to the customer. This is the experience of a man and his company running a very large chain of supermarkets. This is surely something the Board of Trade will have to consider in relation to any considered findings of the Consumer Council that it is not in the interests of the general consumer of this country for this kind of thing to go on.
§ LORD DRUMALBYN
My Lords, will the noble Earl forgive my interrupting? I understood from what he was saying before that this concern had given up trading stamps because of the effect on their own business.
§ LORD DRUMALBYN
The noble Earl went on to say, I thought, that the Board of Trade would have to look at the matter because it was not in the interests of the consumer. With respect, are those not two separate points, and did not the firm give up the trading stamps in its own interest?
§ EARL ALEXANDER OF HILLSBOROUGH
I think it probably did give them up in its own interest, but also in its customers' interests, because they were in fact losing trade as a result of the practice of the firm in relation to trading stamps, in using trading stamps. That was the point. However, I do not want to take up too much of the time of the House, because the House has been very well treated by the time it has given to this matter to-night. But what seems to be still escaping the noble Lord who answers for the Government is this: that this is an imposition by a parasitical organisation outside the retail trade, levying upon the retail trade something which they must make up in one way or another. They are promised that there will be larger business because of this so-called sales "gimmick", but once it has spread to the whole of the retail trade (if they are all frightened by the same kind of threat) then there 99 is no advantage to any retailer who has this permanent levy to pay upon his business turnover.
The noble Lord does not yet seem to have properly understood the analysis of the case that my noble friend Lord Shepherd has put, and which has been referred to by my noble friend Lord Shackleton. My Lords, 2½ per cent. is about the average levy upon a retailer's turnover in respect of the stamps. What has to be covered by that levy? First of all, you have to pay for the printing of the stamps. Then, you have to pay for the large headquarters organisation—not one, but more than one headquarters of these stamp traders. Then they have to arrange somehow or other to try to get a little profit somewhere by getting, at a discount if possible, supplies of the presents they are to give on the stamps. To each purchaser of goods in a shop giving trading stamps, the real value of the stamps she gets is certainly well below 2d. for every pound, and has been averaged out at something between 1d. and 1½d. It did not seem to me that the noble Lord quite understood that my noble friend Lord Shepherd wants passed on to the consumer the real value of the stamps she gets. Then, perhaps, she will 100 begin to find out, as has been proved by the actual trading inquiries that we have made, that in many cases she has to spend £35 10s. in buying goods in order to obtain stamps that will give her an article worth 5s. 10d. That is the kind of thing we want to see brought into the open, and nobody has yet really answered that case.
I am very much obliged to the noble Lord, Lord Drumalbyn. He is new to this House, but already I can see that he is going to make a very courteous Member of it, and I wish him every possible success in his work as a Minister. But I hope I shall not have to go away to-night with the feeling that he has made up his mind on these things, although his argument seemed to go that way. The thing is nonsensical in the extreme to everybody in this business except the man who sells the stamps to the trade. It is really nonsense to everybody else. This is a parasitical organisation, pushed on to take profits out of the retail traders in the hope that the consumers will be deceived by the infinitesimal percentage they get of what they have to buy in the shop.
§ House adjourned at half past seven o'clock.