HL Deb 25 June 1973 vol 343 cc1808-31

6.30 p.m.


My Lords, I beg to move that the House do again resolve itself into Committee on this Bill.

Moved, that the House do again resolve itself into Committee.—(Lord Drumalbyn.)

On Question, Motion agreed to.

House in Committee accordingly.


LORD DRUMALBYN moved Amendment No. 38:

After Clause 113 insert the following new caluse:

Trading schemes to which Part XI applies



—(1) This Part of this Act applies to any trading scheme which includes the following elements, that is to say—

  1. (a) goods or services, or both, are to be provided by the person promoting the scheme (in this Part of this Act referred to as "the promoter") or, in the case of a scheme promoted by two or more persons acting in concert, are to be provided by one or more of those persons (in this Part of this Act referred to, in relation to a scheme so promoted, as "the promoters");
  2. (b) the goods or services so provided are to be supplied to or for other persons under transactions effected by persons (other than the promoter or any of the promoters) who participate in the scheme (each of whom is in this Part of this Act referred to as a "participant");
  3. (c)those transactions, or most of them, are to be effected elsewhere than at premises at which the promoter or any of the promoters or the participant effecting the transaction carries on business, and
  4. (d)the prospect is held out to participants of receiving payments or other benefits in respect of the introduction of other persons who become participants, or in respect of the supply of goods to other participants or in respect of transactions effected by other participants under which goods arc to be supplied to. or services are to he supplied for, other persons.

(2)For the purposes of this Part of this Act a trading scheme shall be taken to include the element referred to in paragraph (b) of the preceding subsection whether the transactions referred to in that paragraph are to be effected by participants in the capacity of servants or agents of the promoter or of one of the promoters or in any other capacity.

(3)In determining, for the purposes of paragraph (c) of subsection (1) of this section, whether any premises are premises at which a participant in a trading scheme carries on business, no account shall be taken of transactions effected or to be effected by him under that trading scheme.

(4)For the purposes of this Part of this Act such a prospect as is mentioned in paragraph (d) of subsection (1) of this section shall be taken to be held out to a participant—

  1. (a)whether it is held out so as to confer on him a legally enforceable right or not, and
  2. (b)in so far as it relates to the introduction of new participants, whether it is limited to the introduction of new participants by him or exends to the introduction of new participants by other persons.

(5) In this Part of this Act "trading scheme" includes any arrangements made in connection with the carrying on of a business, whether those arrangements are made or recorded wholly or partly in writing or not, and any reference to the provision of goods or services by a person shall be construed as including a reference to the provision of goods or services under arrangements to which that person is a party."

The noble Lord said: It may he convenient—and if not convenient I hope it will at least meet the wishes of your Lordships—if I move Amendment No. 38, and speak to Amendments Nos. 39, 40, 41, and 42. These five new clauses constitute a new part of the Bill.

They are designed to eliminate the form of trading known as pyramid selling and similar schemes, which have been giving rise to a good deal of public criticism and indeed to real hardship, not only in this country but elsewhere. Schemes of this type first started abroad and have been a source of trouble for some time, and various measures have been introduced in other countries to try to deal with them.

There is nothing inherently wrong in adopting a system of trading that cuts out the normal channels of distribution. In theory, and even in practice, to do so may result in the goods reaching the consumer more cheaply. But if schemes are devised simply to make a quick profit for the promoters without any intention of establishing a regular business, they can, in the course of their life, leave a trail of misery in their wake. Let me describe briefly the abuses with which these clauses are designed to deal. First, the promoters of a scheme recruit "participants", who in turn recruit other participants and so on. Secondly, each recruit is required to purchase a "right" to participate in the scheme—a franchise—for which he is required to pay a considerable sum of money, the amount varying with his position in the pyramid. In some schemes, to enter at the highest level costs up to £2,000.

Thirdly, the purchase money is often represented as covering not only the right to participate but also a certain amount of training, often of dubious value, and a specified stock of goods, for warehousing of which the participant may be required to pay. The goods are highly priced and therefore hard to sell to the public. Fourthly the participant is not an agent of the promoter. He buys the goods outright. Any right the participant may obtain to require the goods to be bought back on termination of the contract, if indeed he has obtained such a right, is narrowly defined and subject to conditions so exacting as to be almost impossible to fulfil. Fifthly, at all but the lowest level, the purchase money usually covers also the right to recruit other participants and to receive a share of the new recruits' purchase money for doing so. Because the goods are hard to sell, because payments for new recruits are often substantial and because the contract does not give participants exclusive rights to sell in any particular area, they are likely to try to recruit as many new recruits as they can. Indeed that is the only real prospect they have of recovering their investment. The result is that the areas become saturated with participants, and the goods become harder and harder to sell as the pyramid extends downwards. For these pyramids are constructed from the top downwards instead of in the ancient manner from the ground upwards. The more scrupulous participants, however, become reluctant to saddle new recruits with obligations which they themselves have found intolerable. Sixthly, the methods of recruitment employed by the promoters and the top tier of participants are highly objectionable. Meetings are organised at which an atmosphere of enthusiasm, almost orgiastic in character, is carefully contrived to induce people to participate who want to earn a little extra money or who have just lost, or are about to lose, their jobs. Most of them lose most of the money they pay to enter the scheme—money which may have been borrowed or may represent their life savings.

Your Lordships will appreciate that the company promoting the scheme carries little or no risk. It is careful to frame its contracts in such a way as to evade as much responsibility for the goods as it can. It needs little capital, for it derives most of its capital from the participants as they join. It makes its profits on goods sold within the pyramid whether or not the goods ever reach the consumer. The goods, difficult enough in any case to sell to the consumer from door to door—even to friends—because of their relatively high prices, become more and more difficult to handle as disillusioned participants dispose of their stocks at any price. A participant runs the risk of not only losing his money hut his friends.

Before I deal with the measures proposed in the Amendments, I should like to explain why it is necessary to take the flexible powers which they will provide. When the Government published their Consultative Document on Pyramid Selling at the end of March a relatively narrow definition of pyramid selling was proposed; namely, any scheme or arrangement for the supply of goods under which a benefit is conferred by reference to the introduction of further participants. Some of the companies trading in this way promptly dropped their practice of paying fees to participants for new recruits or requiring the recruit to pay a fee to the person who recruits him. They would thereby have evaded the definition and any regulation which might have been based upon it. Instead, the new participant's initial investment is represented as being payment for an inventory of goods, and in some cases, for training. The goods are as hard as ever to sell to members of the public, so the participant finds it easier to unload them on new recruits. He thus obtains commission and recoups part of his outlay. Recruiting methods continue unchanged. In effect, those aspects of the companies' operations which were concerned purely with profiting from the sales of franchises have been abandoned, and the companies now purport to have adopted a system of direct selling of goods rather than the selling of franchises. Since these sales are likely to take place almost entirely within the pyramid, and no new rights or protection are conferred on participants, the effect is only slightly less objectionable than before.

What these companies have done is to demonstrate how easy it is to change the form of a scheme to take it out of any particular definition, into one which contains features scarcely less repugnant. Hence the need both for a wider definition and for flexibility to deal with future inadmissible evasions. I would emphasise that the fact that a trading scheme falls within the definition does not necessarily imply that it is objectionable. Objectionable schemes will be those in which the offences contained in the later clauses are committed, or in which the regulations made under the second new clause are contravened.

After that general introduction to the mischiefs of pyramid selling, I turn now to the detailed provisions of these clauses. I hope your Lordships will agree that I describe them together. Subsection (1) of the first clause lays down four conditions which must all be fulfilled if a trading scheme is to fall within the scope of this part of the Bill. Paragraphs (a) and (b) provide that for a scheme to do so there must be a promoter (or promoters) who supply goods and services to persons, subsequently referred to as participants, who in turn supply them to others. These others may also be participants or may be the ultimate consumers of the product. By themselves, these two conditions clearly apply to a very large area of commercial life. Therefore, paragraph (c) restricts the application of the definition to schemes where most of the transactions under which participants supply goods or services to others are effected otherwise than on their business premises, or on the business premises of the promoter—in other words by door-to-door or other direct selling methods. Normal retail operations, and franchise trading from shop premises, will not be caught by the definition. Paragraph (d) further restricts the definition to schemes where the prospect is held out to participants of benefiting in some way from introducing further participants, from selling goods to other participants, or from sales made by other participants.

Subsections (2) to (5) elaborate certain aspects of the definition in subsection (1) with the object of closing loopholes which disreputable organisations might exploit. Subsection (2) provides that a trading scheme is included whether the participants effect transactions to supply goods and services in the capacity of servants or agents of the promoters or in any other capacity, for example, as principals. Subsection (3) clarifies what is meant by business premises. In effect, in determining whether premises are a participant's business premises, no account is to be taken of his activities under the trading scheme. This is designed principally to ensure that the participant's home, from which he would normally sell under such a scheme, would not be considered to be business premises as a result of those selling activities alone.

Subsection (4) provides that the prospect of benefiting from the introduction of further participants to the scheme is to be taken to be held out to a participant, whether or not a legally enforceable right is conferred, and whether or not the introductions are to be made by him only, or extend to those made by others as well; that is, to recruits introduced by those whom he recruits and/or people introduced by those recruits and so on. Subsection (5) provides, first, that for the purposes of this part of the Bill, a "trading scheme" includes any arrangements for the carrying on of a business, whether or not they are recorded in writing. Secondly, it lays down that provision of goods or services by someone shall be understood to include any provision of the goods or services under arrangements to which he is a party. This is designed to cover a situation where, for example, the promoter simply arranges for another and perhaps quite independent company to supply goods to the participants in his scheme.

The second new clause sets out the matters which the Secretary of State may regulate by Statutory Instrument. These are the distribution and contents of circulars and advertising material, and the conditions on which goods or services may be supplied to participants. The conditions may include the terms of contract and a limitation on goods to be supplied. Regulations may further provide for the possibility of recovery of monies paid by participants, and the rendering of a contract void or partly void for civil proceedings, if the regulations have not been observed. The power may also be exercised so as to make different provisions for different descriptions of trading schemes within this Part of the Bill for trading schemes in operation on different dates, and for different descriptions of participants.

The third new clause, which is Amendment No. 40, sets out the offences, which will be, first, distributing prohibited advertising materials; secondly, supplying goods or services to participants otherwise than in accordance with regulations; and, thirdly, the taking by promoters or participants of payment from a new participant, or inducing a person to make a payment, in respect of the right to benefit from recruiting others. Subsection (6) provides that where the person taking such a payment or inducing another to make such a payment is not himself the sole promoter, or is one of a number of promoters, then the promoter or promoters of the trading scheme shall also be guilty of the offence. The fourth new clause, which is Amendment No. 41, provides certain defences for those charged with offences. First, in connection with publication of advertisements it shall be a defence to show that prohibited material was published unwittingly and in good faith. Secondly, it will be a good defence for the promoter of a scheme started before the Act came into force to show that any unlawful action taken since that date was done without his knowledge or connivance. The fifth new clause sets out the range of penalties which attach to offences.

We should have liked, had it been possible, to define the offence of pyramid selling in one sentence. I hope I have succeeded in explaining why that is not possible. I am sure your Lordships are as anxious as we are to get rid of these unwholesome terms of trading, and I hope that you will feel able to agree with the proposals contained in these five new clauses. I apologise for the length of this explanation, but this is the first opportunity we have had to explain the way in which we propose to deal with the problem. Although we think the definition is comprehensive and will draw on all those schemes whose objectionable features we wish to outlaw, we shall, of course, be glad to consider suggestions, put forward during this stage or the next stage, designed to ensure that the provisions of this Part of the Bill cannot be evaded. I beg to move.

6.44 p.m.


I should like to thank the Minister for his very clear explanation of so many long clauses. Those of us who have worked in the field of consumer education and protection for many years have always been concerned to watch undesirable selling methods, and this is one which has received widespread publicity. I can remember feeling very doubtful about party plan selling, although that has not had the same disastrous effect as pyramid selling. The noble Lord referred to the atmosphere at sessions of pyramid selling, and I gather that the congress at which awards are made to people who have the greatest number of party plan organisers is also of a somewhat evangelistic character. So there is no doubt that one can get very worked up about anything, whether it is selling franchises or selling detergents.

I should like to congratulate the Government on bringing forward these new clauses. The subject has been debated in another place, there has been a series of Questions, and it has been the subject of a Private Member's Bill. The fact that the Government have provided a consultative document on which they are now acting is something for which we on this side would commend them. As the noble Lord has explained, possibly the most disastrous effect of pyramid selling—which, so far as I can see, works on the principle of the chain letter—is in the fact that people who are desperate, often unemployed or greatly in need of some kind of work, will put their last penny of savings into a scheme of this kind, only to be left with a quantity of goods which they cannot sell. They are faced with the rather unfortunate alternative that they themselves must involve other people if they are to get higher rewards.

I know that the laws have been toughened in Canada, in New Zealand, in South Africa and in certain parts of America. which probably accounts for the fact that some of the people who have been busy in this field of operations have now come to this country. I am very glad that we have got on to this subject so early. The only concern that one always feels with legislation of this kind is in the fact that those who really intend to cheat will be very busy at this moment looking at the clauses, to see whether there is a way of getting round them. I would accept the invitation of the Minister to see whether, as the Bill progresses, there is any way in which we can toughen the clauses. At first glance they appear to meet the case—certainly, of all those concerned in pyramid selling whom we have heard about so far. I would commend these clauses to the Committee.


I have very little to add to what my noble friend has said, but opportunities for congratulating the noble Lord, and particularly his Department, must not be missed. It seems to me that the Government are to be congratulated on taking on something which is extremely difficult to define. I know a little about this matter, because for the past few years I have been concerned in trying to define "inertia selling" and the various edges of that. I know what fits the Board of Trade, as it then was, used to go into, because whatever we said would not do. An enormous amount of trouble has been taken over this matter, and I hope that it will be effective.

I should like to admit to a rather murky thought in the past. I am almost certain that when I was about 15 I made about £4 from a chain letter, and I have been trying ever since to find out how they work. I now have much more idea than before. Of course I got out very early and let a few other people in, but it was a long time ago and before the age of consent and so I do not think it can be held against me. I think that this is a valiant effort and I hope it is effective.


I wish only to say that I should like to welcome the proposals and to join in the congratulations to the Government for the active and vigorous interest which they are now showing in the interests of the consumer.


While echoing everything that has been said in heaping congratulations upon the head of the noble Lord opposite, I wonder whether I may ask a question to clarify a doubt in my own mind about the need for this provision at all. Clearly, the noble Lord thinks it is necessary and not only has he introduced many clauses but he intends to alter the title. Therefore, that gives me cause to say that this is a Fair Trading Bill. The noble Lord has made a careful explanatory speech about an example of unfair trading. I presume that that matter of unfair trading is not covered by this Fair Trading Bill, and that is why the noble Lord has said that from now on it will be covered. But this is one practice that one knows of now. If the Bill does not cover it, I assume that it is because we are now dealing with pyramids and selling to pyramid organisers or participants, rather than to consumers. But if it does not cover this practice, why not? Or why does it not take power to cover similar practices of which we do not know at the moment but which may come to light and which the Government, and indeed your Lordships' House, would want stopped? Does this illustrate a lack of powers in the Bill itself?


I am very grateful for the reception which the noble Baroness, the noble Lord, Lord Roberthall, and the noble Lord, Lord Diamond, have given to this Amendment. I wondered where and in what circumstances the noble Lord, Lord Donaldson, had learned his business acumen. It is now more apparent!

The noble Lord, Lord Diamond, has raised a real point here—the Bill is concerned, of course, with consumer trade practices. It was not possible in the Commons to move the Amendment that we are now moving, but this has given us a little more very valuable time to study what needs to be done, and I think it has been useful. It shows again that your Lordships' House can play a useful part.

I said earlier on, when introducing this Amendment, that it was intended to deal with pyramid selling and similar trading schemes. I am afraid that could not be carried very far. The Bill was not conceived with the idea of dealing with fraudulent schemes right across the board, partly of course because company law itself, where the operator is a company, in fact covers this matter. In many cases, of course, the scheme may be based on pure fraud (if there is such a thing) and can be dealt with in that way. What we are trying to do here is to define precisely the sort of scheme that is declared not to be acceptable, and to deal with a nuisance that exists now. I suppose that if we had considered it in this way from the start the Bill might have been a little different; but one has to seize one's opportunities in dealing with legislation, and I think that the noble Lord would at least commend us for taking this opportunity to deal with this particular scheme. I do not think I can go farther than that. I hope that the powers which are given here will prove sufficient and very useful, and will serve to eliminate something that has been causing real hardship.


I share that hope entirely, and I am certainly not going to delay the Committee on this issue, but perhaps I could ask the noble Lord to give a little more thought—that is all—to the wording of the powers taken here. Is it sufficiently wide to cover not only offensive practices about which we know but offensive practices which may be created? To say that you are protected by Common Law or by company law is not really a complete answer, otherwise we should not be having this Bill at all; and the Bill, I repeat, claims the title "Fair Trading Bill". It is natural, therefore, to have regard to that, and to make the fullest use of this legislation while it is going through Parliament. But we are very grateful to the noble Lord for the explantion he has given.


I am grateful to the noble Lord, and perhaps I could add one thing. It is obvious from what I said at the start that these measures are designed also to help the consumer, because the esssence of these schemes is that the goods are sold to them at higher prices from door to door under a certain amount of pressure. Quite obviously the pressure is very strong from the point of view of what is known as motivation, and of course, as it is, the consumer is in a difficult position vis-à-vis the seller in that, as I have said, the seller is acting as a principal and the extent to which the consumer would have any kind of redress in respect of those goods is abnormally limited. The provisions benefit the consumer in this respect, and thus there are consumer considerations. To that extent at least I think we are fully justified, within the terms of order of procedure, in proceeding in this way. But how far we could go on this Bill in matters which do not affect the consumer at all would, I think, be another question.

On Question, Amendment agreed to.

LORD DRUMALBYN moved Amendments Nos. 39 to 42. After Clause 113 insert the following new clause:

Regulations relating to such trading schemes

(".—(1) Regulations made by the Secretary of State by statutory instrument may make provision with respect to the issue, circulation or distribution of documents, whether being advertisements, prospectuses, circulars or notices, which—

  1. (a)contain any invitation to persons to become participants in a trading scheme to which this Part of this Act applies, or
  2. (b)contain any information calculated to lead directly or indirectly to persons becoming participants in such a trading scheme,
and may prohibit any such document from being issued, circulated or distributed unless it complies with such requirements as to the matters to be included or not included in it as may be prescribed by the regulations.

(2)Regulations made by the Secretary of State by statutory instrument may prohibit the promoter or any of the promoters of, or any participant in, a trading scheme to which this Part of this Act applies from supplying any goods to a participant in the trading scheme, and from providing any goods or services under a transaction effected by such a participant, unless such requirements as are prescribed by the regulations are complied with.

>(3)Any requirements prescribed by regulations under subsection (2) of this section shall be such as the Secretary of State considers necessary or expedient for the purpose of preventing participants in trading schemes to which this Part of this Act applies from being unfairly treated; and, without prejudice to the generality of this subsection, any such requirements may include provisions—

  1. (a)requiring the rights and obligations of every participant under such a trading scheme to be set out in full in an agreement in writing made between the participant and the promoter or (if more than one) each of the promoters;
  2. (b)specifying rights required to be conferred on every such participant, and obligations required to be assumed by the promoter or promoters, under any such trading scheme; or
  3. (c)imposing restrictions on the liabilities to be incurred by such a participant in respect of goods or services provided by the promoter or any of the promoters under such a trading scheme.

(4)Regulations made under subsection (2) of this section—

  1. (a)may include provision for enabling a person who has made a payment as a partici 1820 pant in a trading scheme to which this Part of this Act applies, in circumstances where any of the requirements prescribed by the regulations were not complied with, to recover the whole or part of that payment from any person to whom or for whose benefit it was paid, and
  2. (b)subject to any provision made in accordance with the preceding paragraph, may prescribe the degree to which anything done in contravention of the regulations is to be treated as valid or invalid for the purposes of any civil proceedings.

(5)The power to make regulations under this section may be exercised so as to make different provision—

  1. (a)in relation to different descriptions of trading schemes to which this Part of this Act applies, or
  2. (b)in relation to trading schemes which are or were in operation on a date specified in the regulations and trading schemes which are or were not in operation on that date,
or in relation to different descriptions of participants in such trading schemes."

After Clause 113 insert the following new clause:

Offences under Part XI

".—(1) Subject to the next following section, any person who issues, circulates or distributes, or causes another person to issue, circulate or distribute, a document in contravention of any regulations made under subsection (1) of section (Regulations relating to such trading schemes) of this Act shall be guilty of an offence.

(2)Any person who contravenes any regulations made under subsection (2) of that section shall be guilty of an offence.

(3)If any person who is a participant in a trading scheme to which this Part of this Act applies, or has applied or been invited to become a participant in such a trading scheme:

  1. (a)makes any payment to or for the benefit of the promoter or (if there is more than one) any of the promoters, or to or for the benefit of a participant in the trading scheme, and
  2. (b)is induced to make that payment by reason that the prospect is held out to him of receiving payments or other benefits in respect of the introduction of other persons who become participants in the trading scheme,
any person to whom or for whose benefit that payment is made shall be guilty of an offence.

(4)If the promoter or any of the promoters of a trading scheme to which this Part of this Act applies, or an other person acting in accordance with such a trading scheme, by holding out to any person such a prospect as is mentioned in subsection (3)(b) of this section, attempts to induce him—

  1. (a)if he is already a participant in the trading scheme, to make any payment to or for the benefit of the promoter or any of the promoters or to or for the benefit of a participant in the trading scheme, or
  2. 1821
  3. (b)if he is not already a participant in the trading scheme, to become such a participant and to make any such payment as is mentioned in the preceding paragraph,
the person attempting to induce him to make that payment shall be guilty of an offence.

(5)In determining, for the purposes of subsection (3) or subsection (4) of this section, whether an inducement or attempt to induce is made by holding out such a prospect as is therein mentioned, it shall be sufficient if such a prospect constitutes or would constitute a substantial part of the inducement.

(6)Where the person by whom an offence is committed under subsection (3) or subsection (4) of this section is not the sole promoter of the trading scheme in question, any other person who is the promoter or (as the case may be) one of the promoters of the trading scheme shall, subject to the next following section, also be guilty of that offence.

(7)Nothing in subsections (3) to (6) of this section shall be construed as limiting the circumstances in which the commission of any act may constitute an offence under subsection (1) or subsection (2) of this section.

(8)In this section any reference to the making of a payment to or for the benefit of a person shall be construed as including the making of a payment partly to or for the benefit of that person and partly to or for the benefit of one or more other persons."

After Clause 113 insert the following new clause:

Defences in certain proceedings under Part XI

".—(1) Where a person is charged with an offence under subsection (1) of section (Offences under Part XI) of this Act in respect of an advertisement, it shall be a defence for him to prove that he is a person whose business it is to publish or arrange for the publication of advertisements, and that he received the advertisement for publication in the ordinary course of business and did not know, and had no reason to suspect, that its publication would amount to an offence under that subsection.

(2) Where a person is charged with an offence by virtue of subsection (6) of section (Offences under Part XI) of this Act it shall be a defence for him to prove—

  1. (a)that the trading scheme to which the charge relates was in operation before the commencement of this Act, and
  2. (b)that the act constituting the offence was committed without his consent or connivance."

After Clause 113 insert the following new clause:

Penalties for offences under Part XI

".A person guilty of an offence under this Part of this Act shall be liable:

  1. (a)on summary conviction, to a fine not exceeding x00BD;400 or to imprisonment for a term not exceeding three months or to both;
  2. (b)on conviction on indictment, to a fine or to imprisonment for a term not exceeding two years or to both."

The noble Lord said: It might be to the convenience of the Committee if I move Amendments Nos. 39 to 42 inclusive. I beg to move.

On Question, Amendments agreed to.

VISCOUNT HANWORTH moved Amendment No. 42A: After Clause 113 insert the following new clause:

Enforcement of regulations

.—(1) It shall be the duty of every local weights and measures authority to enforce within their area the provisions of any regulations made under this part of this Act; and section 37 of the Weights and Measures Act 1963 (power of local authorities to combine) shall apply with respect to the functions of such authorities under this part of this Act as it applies with respect to their functions under that Act.

(2) Nothing in subsection (1) shall be taken as authorising a local weights and measures authority in Scotland to institute proceedings for an offence."

The noble Viscount said: May I say first how grateful we are for this Amendment on pyramid selling? My own Amendment is a very simple one. It is concerned with enforcement, and the Bill considers it necessary to spell this out Clauses 28 to 33 as far as the first Part is concerned. I feel that it does not always follow that enforcement of an Act is automatic; somebody has to be made responsible. Moreover, Clauses 28 to 33 give powers which would not otherwise be available. The pyramid selling Amendment is a very wide one, and I feel that the provisions for compensation in Clause 32 could be important. Therefore, this Amendment, though I think it is rather imperfectly drafted and unlikely to be completely acceptable to the Government-is of some importance in strengthening the pyramid-selling clause and in providing for fairness if the clause catches people who, in fact, should not be caught under its provisions. I beg to move.


I think all your Lordships will share the noble Viscount's aim in proposing these Amendments, and would agree with him that it is extremely important that the measures by which we are proposing to deal with pyramid selling should be enforced. I would not for a moment dissent from his general argument. However, I am not sure that the practices with which we are concerned are entirely appropriate to enforcement by the local weights and measures authorities. Pyramid-selling often has nationwide ramifications, and at first sight appears to lie outside the usual run of matters with which these authoriteis deal. So I think we should consider carefully any proposal which would widen the scope of their duties too much. I do not wish to oppose the noble Viscount's suggestion but rather to suggest, quite apart from the drafting, that we should like a little more time to consider how best to ensure that these provisions are enforced. It may be desirable to lay upon some particular authority a specific duty of enforcement. There is a lot to be said for that. If so, we should ensure that we place it on the most appropriate and effective body for that purpose. I hope that with the assurance that between now and Report stage we will give the matter further thought, the noble Viscount will feel able to withdraw his Amendment.


There is nothing in principle between the Government and myself. I beg leave to withdraw the Amendment.

Amendment, by leave, withdrawn.

Clause 114 [Publication of information and advice by Director]:

7.1 p.m.

LORD DIAMOND moved Amendment No. 43: Page 88, line 3, leave out from beginning to ("may") in hne 4 and insert ("The Director may").

The noble Lord said: At this late hour I think I can move this Amendment shortly. There is no dispute between any two sides that publication is a good thing. The only question is whether the right to publish should be limited as it is now, by the first two lines of this clause. I understand that originally these lines were not there and therefore if my Amendment were accepted it would merely return the drafting to what it was when the Bill was originally introduced. It seems to me that the restriction is unnecessary. There are many examples which come to mind where the ability to arrange for publication as provided here would be of convenience and benefit to the consumer. Therefore I move this Amendment seeking to find out why the Government believe that you should not have too much of a good thing.


I think I can reassure the noble Lord about this. He was not quite correct in saying that what he was trying to do is to restore the clause to what it was originally. The original clause said that the Director may arrange for the publication in such form and in such manner as he may consider appropriate of such information and advice with respect to consumer trade practices or to any particular consumer trade practice as it may appear to him to be expedient to give to consumers in the United Kingdom. The point is that although in the original version there was no preamble of the kind that the noble Lord's Amendment now attempts to delete, the information and advice then referred to was confined to consumer trade practices. The original version was thus narrower than the current one. The preamble has been inserted to take account of the widening, of the Director's review functions to cover commercial activities rather than simply consumer trade practices and includes matters with which he will deal under his duty under (2)(1)(b) in regard to safety and health. I can fully assure the noble Lord on this point.


I am grateful for what the noble Lord has said. He has made quite clear that far from the Bill being additionally restrictive as it has gone through Parliament the opposite has happened. Excellent! The only question now is this. Why does the noble Lord not continue on this excellent progress and remove the restriction which remains; namely, the restriction which limits the Director in relation to his duties under Clause 2(1)? One example is his possible desire to assist consumers by publishing a little guide, the consumers' guide to getting compensation from having been unfairly dealt with by a trader; a consumers' guide to what steps he is to take if he has been wrongly dealt with by a trader and has to have resort to the courts and lawyers and so on. That may be an example that would not be covered by Clause 2(1), as I understand it; but if the first two lines were omitted the Director would be able to do what he thinks would be useful in helping consumers. Why does not the noble Lord continue on his excellent progress in removing further restrictions?


I must tell the noble Lord that it is quite deliberate that the Director General's functions in relation to advice and information exactly parallel his duty to review and collect information. It would be unrealistic to ask the Director to publish information on anything and everything. He can only be of use on matters for which he is responsible. That is why there is this tie-up between this clause and Clause 2. In subsection (2) of Clause 114 it is made clear that the Director must have regard to the need for excluding, so far as practicable, any matter which relates specifically to the affairs of a particular body or person. It is not the intention—as I thought one observation of the noble Lord indicated that he would like it to be—that the Director General should pursue a kind of vendetta against any particular trader or a propaganda campaign against him. But within this very wide area of Clause 2, that is under 2(1)(a), keeping under review the carrying on of commercial activities in the United Kingdom relating to practices which may adversely affect the economic interests of consumers in the United Kingdom as well as under 2(1)(b) receiving and collating information on such practices which may adversely affect consumers' interests, whether economic or not he has a very wide field indeed.The Director may publish information over a wide field in this way. He could publish free pamphlets advising consumers about dealing with doorstep salesmen; about the laws relevant to consumer practices; about which authorities to approach concerning possible infringement, as well as information about the dangerous nature of particular products. He has a wide field to do this and he can publish the advice himself or arrange for someone else to publish it. He could publish free pamphlets about particular practices and how best the consumer can deal with them; about terms and conditions governing contracts, including exclusion clauses; about promotional practices, labelling special offers et cetera or information on services or products which affect health or safety. He can do all this; but to give him a completely unrestricted field would be unwarranted within the extent of this Bill.


I do not want to prolong this discussion, but the argument becomes interesting when one cannot understand it. The noble Lord has given many examples of what the Director could publish. I am unable to see a single thing he could not publish and which this sentence restricts him from publishing which is appropriate and expedient to give consumers in the United Kingdom. I believe it to be meaningless though not harmful; and I should be interested to know whether the noble Lord agrees that that is so.


No, I do not agree because, as I explained at an earlier stage, what we are dealing with here is the supply of goods and services. That means that there is an important area of consumer information with which the Director will be unlikely to concern himself. This is the area of information about the characteristics of particular products and the points to look for when buying them. Essentially, he is concerned with the supply of goods and services rather than with their content. For example, one of the reasons why at an earlier stage I resisted an Amendment to Clause 2(1) was that it is not intended that the Director would have the staff to carry out product testing, and it is not intended that he should duplicate work done elsewhere, whether within his Department or, for example, by the Consumer Association or similar bodies such as the Retail Trading Standards Association. I think it would be wrong that he should do so, and the same applies in the information field.


I am grateful to the noble Lord, Lord Drumalbyn. I think he has made absolutely clear that there is a slight difference of philosophy between us. It relates back to Clause 2. We had a good discussion on that clause and did not reach agreement, and I do not think that we are going to reach agreement on this Amendment either. I see the purpose of tying this to Clause 2, to keep a balanced responsibility in the Bill, but I think that too close a definition of "commercial activities"—because everything depends on those words in the first line of Clause 2 (1) (a)—would hamper the Director in giving advice, which we are all agreed is a useful thing to do in protecting the consumer. It may be that the elimination of the two lines, as the Amendment suggests, goes a little too wide and while not necessarily imposing a responsibility, provides an opportunity for the Director to do a variety of things which no sensible Director would attempt to do, but which may mislead the public into thinking that he is the appropriate person to do those things. I think my responsibility is to try, between now and a later stage, to think of a way to widen his opportunities without placing too great a responsibility on him. The noble Lord has persuaded me that the total omission of the first two lines goes a little far; he has equally persuaded me that the inclusion of these two lines does not go far enough. We will come to this again at a later stage. In the meantime, I beg leave to withdraw the Amendment.

Amendment, by leave, withdrawn.

Clause 114 agreed to.

Clauses 115 to 121 agreed to.

Clause 122 [Offences by bodies corporate];

7.13 p.m.


Perhaps it would be convenient if the Committee took this Amendment and the next Amendment together. These Amendments extend the powers of Clause 122 to the offences created by the provisions to deal with pyramid selling. I beg to move Amendment No. 44.

Amendment moved— Pace 93, line 9, leave out ("or").—(Lord Drumalbyn.)

On Question, Amendment agreed to.

LORD DRUMALBYN: I beg to move Amendment No. 45.

Amendment moved— Page 93, line 10, after ("85(6)') insert ("or Part XI").—(Lord Drumalbyn.)

On Question, Amendment agreed to.

Clause 122, as amended, agreed to.

On Question, Whether Clause 123 shall stand part of the Bill?


I wonder whether I might intervene to say that although of course it is a matter for the Committee to decide, so far as I am able to ascertain there is no one on this side of the Committee who would want other than a very short comment from the Minister on any of the remaining Amendments, or would object if he wanted to put them en bloc.

Clause 123 agreed to.

Clause 124 [Provisions as to orders]:


This Amendment provides that regulations made to deal with pyramid selling should be subject to the Negative Resolution procedure. I beg to move Amendment No. 46.

Amendment moved— Page 94, line 21, after ("order") insert ("or whereby any regulations are made under this Act").—(Lord Drumalbyn.)

On Question, Amendment agreed to.

Clause 124, as amended, agreed to.

Clause 125 [Financial provisions]:


This Amendment simply corrects an obvious mistake. I beg to move Amendment No. 47.

Amendment moved— Page 95, line 9, leave out ("such").—(The Earl of Limerick.)

On Question, Amendment agreed to.

Clause 125, as amended, agreed to.

Clause 126 agreed to.

Clause 127 [General interpretation provisions]:


While moving this Amendment, may I draw attention to the fact that the first word "and" proposed to be inserted, ought not to be there because it duplicates the word "and" which is already in the Bill. With that alteration I beg to move Amendment No. 48 which again is consequential on the introduction of the provisions for dealing with pyramid selling. The clause on pyramid selling contains references to services provided and to be provided, and supplied or to be supplied and the Amendment ensures that the definition covers these expressions, even though it does not use the same words.

Amendment moved— Page 98, line 4, leave out ("for") and insert ("any reference in those provisions to services supplied or to be supplied, or to services provided or to be provided, shall be construed accordingly.

() For").—(Lord Drumalbyn.)

On Question, Amendment agreed to.

Clause 127, as amended, agreed to.

Clauses 128 and 129 agreed to.

Clause 130 [Short title, citation commencement and extent]:

7.20 p.m.

THE EARL OF LIMERICK moved Amendment No. 49:

Page 100, line 27, at end insert: ("( ) Where any provision of this Act, other than a provision contained in Schedule 11, refers to the commencement of this Act, it shall be construed as referring to the day appointed under this section for the coming into operation of that provision.").

The noble Earl said: Clause 130 as originally drafted provided for all the provisions of the Bill to be brought into operation on a single day. On reconsideration, it was realised that this might lead to unnecessary delay. The Government's intention is to appoint the Director and to bring as much as possible of the Bill into operation as soon as possible after the Bill becomes law. It is hoped that the greater part of the Bill can be brought into operation together, and in that case the Director would probably be able to start on his general consumer protection, monopoly and restrictive practices duties. But there may be practical reasons why selfcontained parts of the Bill cannot be brought into operation with the rest. It would clearly have been unfortunate if the whole process of bringing the Bill into operation had to be delayed until some technical difficulty had been overcome. Accordingly, the Government Amendment was agreed to in another place giving the Secretary of State the necessary flexibility to appoint different dates for different purposes.

Amendments Nos. 49, 50 and 54, which with the leave of the Committee I should like to speak to together, are all purely consequential on the Government Amendment to subsection (3) of Clause 130 moved earlier, and impart no change of substance to the Bill. I beg to move.

On Question, Amendment agreed to.

Clause 130, as amended, agreed to.

Schedules 1 to 10 agreed to.

Schedule 11 [Transitional provisions and savings]:


This Amendment was explained with Amendment No. 49. I beg to move.

Amendment moved— Page 117, line 40, at end insert ("and" the commencement of this Act", where that expression occurs in any provision of this Schedule,:

  1. (a) if the same day is appointed under section 130 of this Act for the repeal of all those enactments, means the day so appointed, or
  2. (b) if different days are appointed under that section for the repeal of different enactments, means such day as may be specified for the purposes of this sub-paragraph in an order made by the Secretary of State by statutory instrument;
and different days may be so specified in relation to different provisions of this Schedule.").—(The Earl of Limerick.)

On Question, Amendment agreed to.


Amendments Nos. 51, 52 and 53 were explained along with Amendments Nos. 29 and 30. I beg to move.

Amendment moved— Page 120, line 22, at end insert:

("Restrictive Trade Practices Act 1968, s. 11

An agreement which:

  1. (a)was made before the commencement of this Act by a society at a time when it was approved for the purposes of section 11 of the Act of 1968 (wholesale cooperative societies), and
  2. (b)by virtue of that approval was not subject to registration under Part I of the Act of 1956,
shall, notwithstanding the repeal of that section, not be subject to such registration.").—(The Earl of Limerick.)

On Question, Amendment agreed to.

Schedule 11, as amended, agreed to.

Schedule 12 [Enactments amended]:


I beg to move Amendment No. 52.

Amendment moved— Page 121, line 13, column 2, at beginning insert ("In section 6, in subsection (1), for the words "the two next following sections" there shall be substituted the words "sections 7 and 8 of this Act"").—(The Earl of Limerick.)

On Question, Amendment agreed to.


I beg to move Amendment No. 53.

Amendment moved— Page 122, line 36, column 2, leave out ("paragraph") and insert ("paragraphs").—(The Earl of Limerick.)

On Question, Amendment agreed to.


This Amendment was explained with Amendment No. 49. Amendment No. 55, which follows, was explained with Amendments Nos. 29 and 30. Perhaps I might be permitted to move those two Amendments together. I beg to move.

Amendments moved—

Page 122, line 43, column 2, leave out ("commencement") and insert ("coming into operation of Part IX").

Page 122, line 44, column 2, at end insert— ("(i)in the case of an agreement which becomes subject to registration by virtue of the expiration or withdrawal of an approval given under section 6A of the Act of 1956, within three months from the day on which the agreement becomes so subject.").—(The Earl of Limerick.)

On Question, Amendments agreed to.

Schedule 12, as amended, agreed to.

Schedule 13 [Enactments repealed]:


Amendment No. 56 was explained with Amendments Nos. 29 and 30. I beg to move.

Amendment moved—

Page 124, line 30, at end insert—

("1968 c.66.
The Restrictive Trade Practices Act 1968
Section 11.")

(The Earl of Limerick.)

On Question, Amendment agreed to.

Schedule 13, as amended, agreed to.

In the Title:


I beg to move, in the Title, Amendment No. 57.

Amendment moved— Line 18, after ("Agreements") insert ("to make provision with respect to pyramid selling and similar trading schemes").—(Lord Drumalbyn.)

On Question, Amendment agreed to.

Title, as amended, agreed to.

House resumed: Bill reported with the Amendments.