§ 4.31 p.m.
§ Lord RAGLAN rose to move, That this House takes note of the Report of the European Communities Committee on Contracts negotiated away from Business Premises (R/113/77) (Forty-first Report of last session) (HL 227). The noble Lord said: My Lords, I beg to move the Motion standing in my name on the Order Paper. Anyone looking at the title of this report might be forgiven for thinking that it is a fairly dull subject, and I confess I shall find it difficult to make my speech an exciting one. But even if it is not exciting, I found the subject extremely interesting: it is a matter which affects millions of people and also the employment and way of life of many thousands. It therefore merits care and attention. This, I think, the Committee have given to it, and I want to thank our legal department for the very thorough way in which they have examined the ramifications of this draft Directive and 792 prepared the substance of the report. I also thank the members of the Sub-Committee for finding their way through a lot of written and oral evidence to reach a number of conclusions. We do not claim to have explored every avenue, but we think we have done our job thoroughly enough to expose a number of fundamental flaws in the Directive.
§ In this country many transactions of this kind are already covered by law, principally by the Consumer Credit Act 1974; but some kinds of transaction covered by the Directive are not covered in our law at all. I think I should say here that at present the protection of consumers with respect to doorstep sales varies considerably throughout the Community. For example, Denmark and Luxembourg have banned doorstep sales entirely, while in Ireland and Italy there is virtually no controlling legislation. In Belgium, France, Germany and the Netherlands, there is a right of cancellation by the consumer within varying periods after the conclusion of a contract. That is called "a cooling-off period". The United Kingdom also gives this cooling-off period to consumers who enter into contracts negotiated away from the business premises of the trader when there is some element of credit involved in the transaction, as in hire-purchase agreements.
§ The Directive requires that the contract be made in writing; that it should state the parties to the transaction; that it should give a description of the goods and services involved, their price and the terms of payment; and it requires that it shall contain a note of the cancellation rights of the consumer—that is, a right to cancel within seven days after signing the contract. United Kingdom law at present provides for five working days in which the consumer may cancel the contract. During this cooling-off period, no payment is to be demanded by the trader and, if the consumer cancels during the period, the recovery of the goods becomes the responsibility of the trader. Any payments which have been made by the consumer must be returned to him.
§ I have already mentioned the Consumer Credit Act 1974, which is the principal Statute which would be affected by this Directive. This Act comprehensively regulates all contracts in which any element of credit is involved, from hire-purchase to 793 bank loans. The Act already provides for the cancellation of any agreement where the amount of credit to be provided does not exceed £5,000, or where such an agreement was signed away from the business premises either of the dealer or the parties supplying the credit—of course, they are not always the same person—and where there were prior negotiations in which oral representations were made to the consumer. Therefore certain amendments to the Consumer Credit Act would be required if the Directive were to be adopted in its present form. Perhaps the most important amendment concerns the definition of "business premises". We thought the Directive got itself into rather a knot in attempting to define what are and what are not "business premises".
§ The Directive attempts to give a much wider protection to the consumer than does the Consumer Credit Act, since it would permit a consumer to cancel an agreement if it were negotiated anywhere other than at the trader's permanent place of business, even at a temporary place of business. On the other hand, the Consumer Credit Act deems that "business premises" includes temporary business premises. So far as other United Kingdom law is concerned, the Sale of Goods Act 1893 and the Insurance Companies Act 1974 would be affected, together with the common law rules governing contracts or services. I am advised that all these would require amendment or even, in the case of cash sales at the door, new legislation.
§ The Committee wish to emphasise their considerable misgivings over this proposal. Those misgivings were shared, wholly or in part, by the majority of those bodies which gave evidence to the Committee. I think I can summarise our main criticisms as follows. First, we question whether at the moment this rather special area of commercial life is a proper one for Community legislation. We think that, because there is such a wide disparity in the law in this regard between Member States, the Member States themselves should continue to legislate according to their experience of the extent of abuse which occurs and of the particular patterns of trading which obtain in their countries.
§ We think that the scope of the Directive is far too wide. As drafted, it would 794 cover an enormous range of transactions, many of which were probably never envisaged when the Directive was being drafted. It covers the cash sale of goods and services, all forms of credit and hire transactions and purely monetary transactions, such as bank loans and insurance contracts. In addition, it covers certain specialised forms of dealing between a professional man and his client, as I have already mentioned. We feel that the Directive does not come to terms with the complexity inherent in each of these different forms of contractual arrangement. We take the view that the Directive was originally and primarily intended to cover—and it should be confined to covering—only the cash sale of goods and services. We are reinforced in this view by the fact that, very soon, the proposed Directive on consumer credit will be sent to the Council, and that should be the proper instrument for controlling credit transactions.
Next, we thought that the drafting was very unsatisfactory. Indeed, we say in paragraph 13,
Almost every Article of the Directive is defective as a legislative means of fulfilling its own avowed intentions".
It does not give clear definitions of "business premises", "unilateral engagements", "contracts negotiated exclusively at the initiative of the consumer", "price payable", and so on. In addition, the Committee took the view that the basic definition of "doorstep contract" was misconceived, since it ought to be concerned not with where negotiations leading to the contract were initiated, but with where the contract was actually signed.
§ Because of the very wide net cast by the Directive, many long-standing and legitimate transactions carried out daily in this country would become subject to what we thought were wholly unnecessary formalities. The Committee gives a list of recommendations for exemption, but we do not claim that it is exhaustive. We suggest that exempted should be credit transactions, insurance contracts, the sale of perishable goods such as food—one cannot imagine a food salesman accepting a seven-day cooling-off period—and mobile shops, which would be caught under this Directive and which are too much of a convenience to very many people to be included. We also thought that agency 795 mail order trading should probably be excluded, as should professional transactions.
§ We felt that other aspects of the Directive were needlessly inflexible or restrictive; for example the 25 EUA price exemption level should be left to the discretion of the Member States. In this connection, we had a lot of interesting evidence on the question of what should be the lower limit of transactions which would be exempt from legal formalities. Our Consumer Credit Act puts the figure at £30, and we heard from the Department of Prices and Consumer Protection that there is a strong move that exemption should go up to £50. But the National Consumer Council thinks that it should be only £5, and we heard from the Office of Fair Trading that by far the greatest number of abuses in true doorstep sales were related to sums of as low as £5 or £10. An example given was old ladies being sold subscriptions to magazines for which they really had no use. There is a very strong case here for lowering the limit to £5 for doorstep transactions and, in that case, the draft Directive's £16 is too high. We suggest, also, that if the written formalities were not strictly adhered to, the contract should not automatically be void, especially if the consumer wished it to go on.
§ In general, we think that the Directive is far too biased against the trader. For example, the trader is to carry all responsibility for recovery of cancelled goods, with little corresponding duty on the customer to take care of them during the cooling-off period. Again, the trader is precluded from requiring any surety in order to protect himself against default before the expiration of the cooling-off period. So the Committee also viewed the Directive as a step in the direction of a, complete ban on all doorstep selling and much as we support consumer protection and fair dealing, we should deplore the banning of doorstep selling in view of the history and the popularity of such selling in this country.
§ The Committee believes that the Directive was badly prepared, poorly drafted and far too restrictive in its terms. We feel that it does not begin in its 15 Articles adequately to regulate all those aspects of the subject with which it purports to deal. Moreover, it encroaches 796 upon areas of commercial life in this country which have not, to our knowledge, been the subject of serious, if any, abuse. Even if the present United Kingdom legislation has some deficiencies, it strikes a fairer, more flexible and more realistic balance between consumer protection and the needs of trading. Se we come to the conclusion that this draft Directive should be strongly opposed in its present form. My Lords, I beg to move.
§ Moved, That this House takes note of the Report of the European Communities Committee on Contracts negotiated away from Business Premises (R/113/77) (Forty-first Report of last session (HL 227)).—(Lord Raglan.)
§ 4.47 p.m.
§ Lord LYELL
My Lords, once again, the whole House is grateful to the noble Lord, Lord Raglan, and indeed to his Sub-Committee, for producing this fascinating and very important report. The House may recall that when the noble Lord, Lord Raglan, was introducing a previous report, by his Sub-Committee, he was heard to comment that Sub-Committees such as the one on which he serves, and which he chairs, beaver away upstairs. I have heard how impressed are many of the expert witnesses who come regularly to give evidence to these Sub-Committees, and for this reason the beaverings of these Sub-Committees are not in vain.
The report which we are debating this afternoon may seem to have a very long and complicated title, but, as we have heard from the noble Lord, it covers some of the activities which are commonplace, widespread and praiseworthy. The Directive seeks to correct abuses which can, and indeed do, occur when undue pressure is applied by salesmen and agents who call on housewives and other persons in the home. On these occasions, escape from a practised expert is often difficult, and the prospective buyer is put in what may be the embarrassing position of refusing goods or services that are offered. Such abuses are listed in the report but, as we have heard, the Consumer Credit Act 1974 covers many of the abuses which it is the object of this Directive to cover. Thus I find it utterly incredible that the Commission thinks fit to issue such a Directive.
797 We have heard of the general criticism admirably detailed in paragraph 13 of the Committee's report, but this Directive is incredibly far-reaching and, indeed, damaging to many services which are taken for granted in the United Kingdom and have given rise to ridiculously few complaints. It is for this reason, and for others which I hope will become clear later in my remarks, that I and all of my colleagues want to thank the noble Lord, Lord Raglan, and his Sub-Committee for this devastating report—and I do not believe that that is too strong language to use. It may seem out of place when reading the carefully modulated phrases in the report, together with the emphasis laid upon some of the more fanciful ideas contained in the Directive. However, because of their zeal to prevent abuses in doorstep sales, the Commission would gravely harm the sale of milk and newspapers and the sales from mobile shops, all of which are an essential part of our life in the United Kingdom, particularly in our towns and cities.
In country districts, especially in my own home county of Angus in Scotland, mobile shops are vital to many communities and are part of the way of life. I hope noble Lords will not laugh too much when I tell them that one of the most popular forms of mobile shop in my area is the lemonade lorry. That is in Scotland which is the home of other more famous liquids. However I can assure noble Lords that the lemonade lorries provide a very useful service to the communities which I visit regularly. The lemonade is provided in returnable glass bottles so that the countryside is not littered with plastic or polyurethane containers. To people who live in isolated areas mobile shops are vital when they cannot get to towns or to the general store for their groceries.
If such a Commission Directive impinges upon the effectiveness of mobile shops, I believe that we must see what we can do to alter the thinking of the Commission and support the Forty-first Report. I am not going to apologise for introducing such a quaint or rural note into our important debate today. The point I have raised is one of many covered by the comments in paragraph 10, such as the indiscriminate application of the Directive to many different forms of 798 commercial activity. The report recommends certain specific exclusions, including mobile shops.
Another exclusion which has been touched on by the noble Lord, Lord Raglan, is mail order trading. Many noble Lords may not be aware of what this is and what it involves. Those of my colleagues who are reasonably fleet of foot and who possess adequate physical strength and stamina may be happy to join the large crowds in Oxford Street or in the other retail centres of our cities and towns. If they do this they make their purchases at their leisure and, all being well, return home satisfied, and possibly weary. Frequently, however, when I return from such excursions I pick up a newspaper and read that I could have purchased what I have bought in these retail stores more cheaply, and possibly would have been offered a wider choice by a mail order firm, had I taken the time to read through their catalogue before I set out on my excursion. It seems that I am not alone in this observation. I understand that over 14 million people in the United Kingdom take time to consider what they would like to purchase, to a major or even to a minor extent, from mail order firms. I am referring to all those customers who buy goods through mail order firms.
Noble Lords who have read the report will have noted that the Sub-Committee received evidence from representatives of this branch of the retail trade. The more that we examine the report the more we find that such trading is part of the life of a very large proportion of the people of the United Kingdom. This business grew extensively after the 1920s, and it has grown immensely since 1945. This is no small wonder, since families can apply for a catalogue from one of a number of firms and, without any pressure or sales talk, can read it in the peace and quiet of their own homes. They can discuss with their friends and neighbours which article is the best or will provide the best value for their money, and then those families, or individuals, can make their choice. The family aspect of mail order trading is very valuable, and certainly is much cherished by both the customers and the suppliers, the mail order traders themselves. Most of these firms are still family businesses.
799 The Association of Mail Order Traders covers 85 per cent. of all the purchases and turnover involved in mail order trading. At all times we should remember that the main link with the consumer is a vast group of agents who act as focal points for the purchases. There are approximately 4 million of these agents. Doubtless, the Commission envisage these people rushing eagerly from door to door inveigling innocent citizens and housewives into contracts which it would be hard for them to fulfil. Such a scenario may be accurate in some countries of the Community, but most certainly it is not true of the United Kingdom—nor, indeed, of any aspect of mail order trading which is almost unique to the United Kingdom, although similar trading is taking place increasingly in Germany and is in its infancy in France. The 4 million agents in the United Kingdom are all members of the public. They are consumers, the very object of the protection which is sought by the Directive and which is discussed in the report. These agents are not highly trained to push any particular line of goods; they are not working on a commission basis; they act merely as a focal point for their families, friends and neighbours who may wish to buy particular goods or articles in their homes. Furthermore, the goods are delivered to the agent, or to the consumer, without any further charge.
Noble Lords may ask why these 14 million customers cannot do as any of us do and go out to the shops to buy what they want. Beyond making one or two mild suggestions, I am not going to try to give a conclusive or definite answer. May we look first at the case of many mothers with young families. They are both unwilling and, indeed, unable to drag their young children several miles from an outlying housing estate in one of our great cities to the city centre and then to coerce and shepherd their young children, who may become recalcitrant and somewhat uncontrollable, through a large store while they look around and attempt to make purchases of bedding or household equipment which may involve quite a financial outlay and for which peace and quiet of mind is desirable. For such families there may be transport problems; the husband may be working or otherwise occupied at the weekend. In these cases, mail order 800 trading means that the goods can be chosen in peace and quiet and that, when they are chosen, the goods will arrive at the door.
Secondly, this is a popular form of trading and it is becoming increasingly popular. I understand that in 1976 the turnover of goods by this method amounted to over £1,200 million, which I expect the noble Lord, Lord Sainsbury, will agree is a very reasonable sum in the non-food sector. Thirdly, it should be noted that it is part of the sale agreement that the goods can be returned to the supplier within 14 days, at the supplier's expense. Of the goods that are sold, around 25 per cent. are so returned. The only point which has to be noted by the consumer is that he has to do whatever he can to facilitate the return to the supplier and that he must take reasonable care of the goods while they are in his possession. I was glad that the noble Lord, Lord Raglan, pointed that out when he was going through the report.
It is the ease of deciding what can be bought, the ordering of the goods and examining them at leisure in the home and their return without any further charge or complication which makes this form of trading so much a part of the life of millions of families. That is not to say that these families and the public do not flock to our retail stores and make major purchases in the traditional way. No, my Lords, mail ordering provides a convenient way of buying, and it is much more than this in many of the cases that I have mentioned. I was at a concert this weekend and mentioned the effect of the Directive on mail order business. I see that the noble Baroness, Lady Stedman, agrees with me. I can assure noble Lords that real passion was engendered in the hearts of several sensible Scottish housewives when I pointed out the effect of the additional burdens upon mail order trading that the implementation of this Directive would have.
I was indeed quite apprehensive and I was pleased to get down here in order to put my case before your Lordships. Some of the housewives I met stressed that fleetness of foot (as I pointed out earlier) is not present in all of us and that delivery to the door at no extra charge is a valuable bonus in trading, especially when the 801 14-day return clause is considered. I believe that this aspect of convenience is foremost in our minds.
The House will be aware that feelings about this subject are running high in other Legislatures, such as the European Parliament. There was a lengthy debate in September of this year in the European Parliament—I think it was in Luxembourg. Mr. Spicer, who is a Member of another place, is also the Rapporteur of the Committee which deals with consumer protection and he made the strongest possible plea for mail order trading to be exempted from the provisions of this Directive. He received wide support from members of the Committee from all the nations of the EEC. He received wide support from Mr. Noè of Italy and Mr. Nyborg from Denmark. I was also delighted to note that our colleague the noble Baroness, Lady Fisher of Rednal, spoke out but her complaint was that the Directive would harm mobile shops. It seems that rural areas are not forgotten either in the EEC or in this House.
We await the reply from the Government and particularly from the noble Lord, Lord Oram. Certainly at all times he has much charm, but I could not necessarily use the same words to describe the stone-faced attitude of the Commissioner when he was replying to the debate in the European Parliament. Indeed, Commissioner Burke showed to me a frightening lack of appreciation of what mail order trading does for the consumer. He commenced by commenting that any concessions to mail order business would be a distortion of competition. I suppose that is a useful opening salvo, spraying the shot everywhere. He then went on to suggest that when any concession was to be granted every other business or branch of trade or commerce would require the same concession. I grant him credit. At least he is a realist and he can see what goes on, probably in his own Parliament. I know what would go on in this House. But, most amazing of all, he declared that the Economic and Social Committee of the Commission had been unable to note any significant difference between the canvassing of an ordinary trader or his agent and the canvassing of a mail order trader or his agent.
§ Lord DAVIES of LEEK
My Lords, I am grateful to the noble Lord, Lord 802 Lyell, for giving way because I came in specially to hear this debate. He has just said that they see no difference at all between the mail order system and negotiation over the counter. Is the noble Lord aware that a poor humble fellow like myself has been told about 57 times by a magazine that I have won £10,000 and that if I buy x, y and z I shall have one of my numbers in a pool? One of the biggest rackets in mail order business all over Europe is communicating with humble people and making them think they are going to win prizes by buying certain items.
§ Lord LYELL
My Lords, I believe the noble Lord, Lord Davies of Leek, is guilty of repeating what the Commissioner, Mr. Burke, has done. He has taken a large blunderbuss and sprayed me with shot. The point I would make, and with which I think noble and learned Lords would agree—and I see that the noble and learned Lord, Lord Diplock, is present—is that great care should be taken before firing such a blunderbuss. I have already mentioned, and indeed I quoted from the report, that the point was not that the Commission was unable to see the difference but that it was unable to see the difference in canvassing. That word "canvassing" was the crucial point. It may well be that the noble Lord, Lord Davies of Leek, receives stuff through the letterbox and I suppose he does what I do with it. I throw most of it away. Goodness knows how many prizes I have thrown away! But mail order trading has nothing to do with telling people that they are going to win prizes.
I have not myself perused too many of these catalogues because, as I pointed out earlier, being reasonably young and reasonably fleet of foot and having adequate physical strength I am more than pleased to take my chance among our great retail centres—I hesitate to say "bazaars". But for those who like to take advantage of mail order trading as an expedient—and I gave as an example families living some way away from the major centres, although they probably receive misleading correspondence—I am advised that certainly the Association of Mail Order Traders takes a very responsible line, particularly in regard to canvassing. I think the aspect of doorstep selling and the abuses which can arise from this particular form of canvassing is what this 803 Directive seeks to stop. I do not think the Directive seeks to reward the noble Lord, Lord Davies of Leek, or to suggest that he might gain great betting winnings. Probably that might fall into the lap of the noble Lord, Lord Wigg!
To complete the point on canvassing, I believe the Commssioner and his Committee were unable to note any difference between the canvassing of an ordinary trader and a mail order trader, and in my view that qualifies him for an award which we tend to give to tennis umpires, cricket umpires and football referees—something we call "the white stick award" for those who tend to be a little short of sight. I do not think it is out of place to refer to that. I, too, suffer on occasions so the remark could easily apply to me, but to find in the European Parliament an admission of this type is utterly breathtaking. In my view it is extraordinary that the members of the Committee cannot make this distinction.
Mr. Spicer, the Rapporteur of the Committee looking into this matter, warned the Commission of two things. First, he said he stood firmly by his report, seeking to exempt mail order traders and indeed most of the other exceptions, I think in paragraph 10 of the report, to which the noble Lord, Lord Raglan, referred—and I will certainly discuss it with the noble Lord, Lord Davies of Leek, later. Mr. Spicer believed that the Commission should exempt these particular aspects of trade from the provisions of the Directive. Secondly, he warned the Commission that such a blanket provision would do great harm to commercial institutions which are much appreciated and would bring the European Parliament and other institutions into great disrepute among the Community.
The main misapprehension which affected the Commissioner and the Committee was that the consumer receives unwanted visits from mail order agents. I do not necessarily regard something being put through a letterbox as an unwanted visit. I think the noble Lord, Lord Davies of Leek, will accept that point. But that aspect was stressed. Thankfully the Sub-Committee under the noble Lord, Lord Raglan, was not so muddled. The evidence submitted to 804 the Sub-Committee showed that mail order business specifically discourages canvassing and, in spite of that, the business turnover of this aspect is growing by some 12 per cent. per annum in the United Kingdom, and it is I think growing by a lot more in France, and certainly in Germany it is around that level.
How can such trade be seen as a distortion of competition? Certainly in this country there is a proven need for it, yet the Commission's proposal would add 2 per cent. to prices in that area. It would cost a minimum of £20 million per annum and would require 280 million additional forms. What is the reason for all of this? It is surely not to remove a distortion in competition. Has the consumer been harmed? Apparently not, since the Office of Fair Trading, which we should all regard as being a fair referee in such matters, could discover only 41—about as many as there are noble Lords in this Chamber at the moment—41 complaints in two years within the United Kingdom so far as mail order trading is concerned. That is an incredibly small number, yet the figure appears to be quite realistic.
I should like to make a point on another subject. It has been explained to me that one aspect of doorstep sales, which are covered by the Consumer Credit Act 1974, could be affected by the provisions of the Directive. Some sales are indeed conducted as a result of advertisements in newspapers or on television and I take the caveat of the noble Lord, Lord Davies of Leek. It appears that the Directive would require a sales person to call seven days after the first call merely to collect cash as a deposit. The Act allows a customer to pay his deposit and, having had second thoughts, to reclaim that cash within the cooling-off period, whereas the proposals in the Directive would require the salesman to call at the end of the cooling-off period to collect the deposit.
I am given to understand that two things would happen: first, needless expense would be incurred through duplicating visits, and, secondly, the consumer would lose, since experience in this particular field has shown that he or she tends to make up his or her mind about the wisdom of the sale after the deposit has been paid. In this case, the Directive would clash with our 1974 Act in that, once the cooling-off process has elapsed, 805 the customer cannot reclaim the deposit. I wonder whether the Government would look at this point. I am sorry that I did not give the noble Lord notice, but perhaps he could give some attention to that point at some stage.
My Lords, I have taken too long. I hope I have not appeared to be aggressive, hard or far from my usual fresh, innocent self this afternoon. I do not make any apology, since this Directive seeks to improve the lot of the consumer and to protect the housewife from abuses on the part of doorstep sales persons, but, alas! the objectives are very wide of the mark as far as the United Kingdom is concerned. The exceptions which are sought by the Sub-Committee in paragraph 10 of the report are the result of practical experience and realistic appraisal. Our colleagues in Europe and elsewhere support the view of the Sub-Committee. It is a real pleasure for the whole House, and, certainly, these Benches, to congratulate the noble Lord, Lord Raglan, and his Sub-Committee on their report, since the good sense which is contained in it will do much to make the workings of the Commission realistic. Certainly, I should like to commend the report to the close scrutiny and approval of your Lordships' House.
§ 5.12 p.m.
§ Lord SAINSBURY
My Lords, I think everyone agrees that the practice of doorstep selling is wide open to abuse. The householder is caught unawares by a ring of the doorbell. Because she is in her own home she literally has no means of escape from what is usually a well rehearsed and convincing-sounding patter of sales talk, and, perhaps most important of all, she has no means of assessing whether the goods she is offered represent value for money; she cannot look at other makes, as she can in the shop, or go to another store down the road.
It is because of this concern, which many involved in consumer affairs have shared for a long time, that I had hoped to be able to give an unreserved welcome to this Directive. As it is, I find myself taking up what has become my usual position in our debates on draft European legislation. I can welcome the intention that lies behind parts of the Directive. Other sections, however, seem to me to be quite irrelevant to the real problem.
806 Once again, the Commission is swinging a sledgehammer in the wildest of ways when all it needs is a pair of nutcrackers.
Since my noble friend Lord Raglan has already explained in some detail the scope of the Directive and the Committee's conclusions, I shall do no more than concentrate on a few of the most important points. The Directive at least lays down the basic rights of consumers. They must receive and retain a written contract which clearly states the basic information about the transaction. They are also permitted a cooling-off period in which they can think again. This is vital, since we all know how often second thoughts are better and wiser than first reactions. These are important provisions which protect the consumer against abuse, and no honest trader will object to them.
Yet the trader himself receives no comparable protection against the small minority of unscrupulous consumers. For this reason, I strongly support the Committee's recommendation that the consumer should be put under a positive obligation to take all reasonable care of the goods during the cooling-off period and when they are returned on cancellation. They do, after all, remain the trader's property during all that time.
I think it must now be obvious to all your Lordships that a horse and cart can be driven through all the provisions referring to credit transactions. In this country, these transactons are controlled by the Consumer Credit Act. In addition, I understand that a Commission Directive on consumer credit is in the course of preparation at Brussels, though it has not yet been published. Surely it would have been more sensible to confine this Directive solely to cash transactions and to consolidate the legislation about credit in another Directive.
I fully support the Committee's recommendation that price exemption levels should be left to individual Member States to decide. This is just the kind of important decision that is best taken by national governments who understand local needs and practices. The Commission should not feel itself obliged to cross every "t" and dot every "i". The National Consumer Council evidence that many of the complaints they receive concern sums between £5 and £10, already 807 referred to by my noble friend Lord Raglan, was certainly impressive: in my opinion, a low figure must be set if the objective of protecting the consumer is to be achieved.
Not surprisingly, my final points concern the sale of foodstuffs away from business premises. This is almost always done on a regular basis and the element of surprise that normally comes in a doorstep transaction is in no way present here. Indeed, in two very different ways the milkman is an especially valuable member of the community, not only because he contributes to the high consumption of fresh milk in this country, in contrast with many other Member States, but also as a contact with the outside world for the old and immobile. It is the height of absurdity that a family's weekly or fortnightly bill for milk and dairy produce should be subject to any complicated procedure. Even more important, for the old, the infirm or the car-less in remote rural areas, mobile shops stocking a very wide range of goods are the only alternative to the village shop, which may be a long way away from an isolated cluster of cottages. These travelling stores provide an essential service. Therefore, I want to add my voice to the Committee's recommendation that mobile shops and perishable foodstuffs should be exempted from the provisions of the Directive.
My conclusion has now become a traditional one. Consumer protection is vital. It has been increased in the post-War period almost entirely because of the work of bodies such as the Consumers' Association and the National Consumer Council which has roused Governments to action. Had we relied on manufacturers and retailers, very slow progress would have been made. However, the important proviso in that consumer protection, is that it must work effectively. It must isolate areas of abuse and devise practical, and not over-expensive, ways of dealing with them. Even though parts of it are certainly useful, overall, the Directive does none of those things, so I must join with my colleagues in condemning it as unacceptable and unworkable.
§ 5.22 p.m.
§ Lord MOTTISTONE
My Lords, in following with great pleasure the speech 808 of the noble Lord, Lord Sainsbury, I should like in particular to echo his closing remarks. I do not propose to deal with the detail of the report because that has been ably done by other noble Lords, especially the noble Lord, Lord Raglan, who introduced the Motion. I should like to concentrate on what I believe to be a very serious difficulty in the development of the Community spirit, because an increasing number of Directives try to pick out a target and then, for some reason or other, aim their shots in a variety of directions, many of which are the wrong ones.
We have debated many of these Directives during the past year or two since I have had the privilege of being a Member of Sub-Committee D. Almost successively, these Directives have become worse and worse, or, to put it another way, less and less in touch with reality. Certainly, that is so in this country and, from what one can gather from the speech of my noble friend Lord Lyell, they have become out of touch with reality in other States too, as reported in the European Parliament. It seems to me that the Commission must have a long hard think about its procedure and method of approaching these matters.
When considering what I should say to your Lordships, I thought about suggesting that the Commission should do its homework properly. That is what occurred to me when I read our report and after I had heard the evidence that was so ably given to us. However, that would be too easy, because the Commission does a sort of homework but it is obviously not the right sort. There are many absolutely classic potential errors within this particular Directive. For example, in paragraph 5, it questions the very legality of the Directive being based on Article 100 of the Treaty. If it is not based on Article 100 of the Treaty, perhaps the Commission would have to find another one. One would have thought that it would get that right before it started to put anything in the text.
As regards our Sub-Committee, I should like to say, as a humble member of it, that it falls over backwards to pay great respect to what the Commission tries to say. In some respects, I believe that we perhaps support the consumer, where he 809 comes up in our Directive, rather more fully than I personally should like. That may be, but noble Lords heard what the noble Lords, Lord Sainsbury and Lord Raglan, said. Both noble Lords put forward a point of view which is fundamental to the approach of this Sub-Committee and which I thoroughly endorse.
Of course, the consumer must be protected, but he must be protected sensibly, and perhaps more importantly, in a way that can be practically applied. That being the case, in my view, the Commission must examine these problems in a different way. At present, it goes straight into a draft Directive which is, in the eyes of most of us—I have talked to some of our friends in the other Community countries and it is so in their eyes, too—like a Bill being presented to Parliament, even if it is called a Directive. I think the Commission thinks that it is more like a White Paper. It contains an enormous amount of detail. One then finds the Commission becoming wedded to its detail in the same way as Governments become wedded to their Bills—a way that we on this side of the House sometimes think absurd when the Bills come from the other side! The comments of my noble friend Lord Lyell about Commissioner Burke's reaction to the European Parliament was a typical example of this sort of affection for a Bill. I should have thought that the Commission should go back not only to a White Paper stage but to a Green Paper stage and should produce a consultative document.
This Directive will clearly be controversial not because people will disagree with its basic principles but because the detailed application must be so different for every country within the Community. At present, all the countries have different legislation as well as different attitudes. In this country, door-to-door selling, although obviously having its imperfections and, indeed, its dangers, is a well-established process. In other countries of the Community, it is, perhaps, nothing like so well established. Therefore, that will mean that each country must approach the problem in a different way.
Personally, I believe that we want to have the minimum amount of derogation for national legislation, because, so far as 810 I can see, where we have those derogations we run the risk of building up barriers to trade rather than removing them. Therefore, I am not keen on derogations. However, I am keen on exploration by the Commission on a consultative document basis, perhaps followed by another stage which would, in effect, be a draft Directive, though it could have another name so that it would not look so final. In that way, the Commission and the Commissioners would not be so wedded to it. It would be similar to the way White Papers are sometimes treated by the Governments which launch them—that is, not so seriously as perhaps they might be.
Through that approach, we should achieve a process whereby we might get a cleaner document to discuss when we reach the Directive stage. That would have another great advantage. At present, a Directive is in a rather messy form when it comes to us, but it contains a lot of detail. It is presented to the European Parliament and to the Economic and Social Committee. It is considered by Governments and all sorts of people, as well as in a whole series of council-of-minister stages, by expert advisers and goodness knows how many people—I do not suppose the Commission knows. All that might be reduced in time if the final document were cleaner when it came to that stage.
It may be that that is too hopeful. It may be that one is crying for the moon. However, I certainly think that the present system is creating for us Directives which we find increasingly distasteful, irrelevant, and which seem positively to be working against the whole principle of the Community and working, in many cases, to create barriers to trade rather than to remove them. Above all they seem to be working to make people disillusioned with the principle of the great idea of a European Community. I think that that is tragic and we must change the rules to prevent it taking place.
§ 5.30 p.m.
§ Lord JACQUES
My Lords, I should like to join with Members on both sides of the House and say that I cannot welcome this Directive. I would agree with the noble Lord, Lord Mottistone, that it is tragic that the Commission should be 811 spending its time on this kind of Directive, because it is this kind of Directive that does the Commission more harm than good, especially in this country. Doorstep selling is not something that in any way interferes with or frustrates trade between the States of the Community. Consequently, it is not a matter of urgency. I doubt whether, under the Treaty of Rome, it is a matter for the Commission at all, but it is certainly not a matter of urgency because it has a negligible, almost a nil, effect on inter-State trade.
The conditions in each of the countries which make up the Community are entirely different as regards doorstep selling. Therefore, it is a difficult subject with which to deal and obtain harmony to the satisfaction of all the States. For example, I understand that there are States where no doorstep selling at all is allowed and that there are others where it is wholly allowed, as in this country. That is obviously an area into which the Commission should not step unless it is absolutely essential for the purposes of inter-State trade—and clearly it is not.
Finally, in this country doorstep selling can be divided into two categories: the cash trade and the credit trade. The cash trade is not wholly, but almost wholly, in perishable goods such as milk, bread and groceries, and that is particularly the case in rural areas. Once we start legislating for that category of trade, we create more problems than we resolve.
The other category—credit trading—is better covered by specialist legislation such as the Consumer Credit Act 1974. As conditions in each State differ, it is better that each State should have its own legislation in relation to that sector of the trade. Therefore, I hope that, like the Committee and this House, the Government will say that they do not like this Directive and will not lend their support to it.
§ 5.33 p.m.
My Lords, I should like to begin as others have done by complimenting my noble friend Lord Raglan and his Committee on providing us with this most useful and unpopular report. My noble friend Lord Raglan said that he did not expect to make an exciting speech and no one was expecting him 812 to do so, but I am sure that we all found it most interesting and lucid, and it gave the debate an excellent start. Some excellent speeches followed.
I listened with particular interest to what the noble Lord, Lord Mottistone, said about the way in which these Directives, and therefore the Committee's reports, reach us. He will not expect me to comment formally on what he said, but I am sure that it will be read and pondered upon in Brussels and elsewhere, which I believe will be for the good. But, given the present procedures, there is no doubt that we are, indeed, as a House well served by the Committee that examines these Directives and brings recommendations to us.
From listening to the debate there was, perhaps, only one specific point directed to me and that was in the closing remarks of the noble Lord, Lord Lyell. If I remember correctly, he asked about payment of a deposit. I understand the position to be that Article 9 of the Directive only forbids the seller to require payment of a deposit; it does not prevent the consumer from offering a deposit if he wants to. I think that that is the position and I hope it answers the noble Lord's point.
I do not need to emphasise that the report itself and every speech to which we have listened have focused attention on many objections—many defects—in the Directive. Behind these objections there lie, I think, two fundamental questions: Is there a need for further controls to be imposed on door-to-door selling and, if so, is the EEC Directive on Contracts negotiated away from business premises the proper mechanism to provide those controls?
If we look back a little in history we shall recall that in 1962 the Moloney Committee on Consumer Protection was already concerned about the activities of some door-to-door salesmen. I remember criticisms of a number of high-pressure sales techniques—notably, "switch-selling" and "bait advertising"—and that these gave rise to frequent complaints by consumers. The Moloney Committee concluded that there was no easy answer to the problem of door-to-door selling, but it made a number of recommendations.
It proposed that more stringent "switch-selling" provisions be incorporated in the 813 new advertising code and it also recommended provision for a cooling-off period of 72 hours in the case of hire-purchase agreements. Both these recommendations have now been implemented; indeed, when the Consumer Credit Act 1974 is fully implemented it will go further than that Committee recommended, by extending the cooling-off period to five days and widening the scope of the controls to include all credit transactions over £30 but not exceeding £5,000. There is now little evidence that doorstep selling poses social problems of any significance in this country.
Now, however, we have been presented with the prospect of yet further controls on doorstep selling, in the form of this EEC Directive. As the Directive is at present drafted it permits Member States to prohibit doorstep selling entirely or in relation to certain goods. I must hasten to reassure your Lordships that Her Majesty's Government have no intention of allowing what has proved to be a valuable service to consumers to be curtailed. Nor, indeed, would we go so far as to impose a registration system for contracts negotiated away from business premises, as is proposed by another of the provisions of the Directive. We must be on our guard against measures which purport to protect the consumer but, in fact, merely restrict competition.
It is also argued that Directives such as these pose a fundamental threat to the consistency and simplicity of our contract law. What starts as a harmonisation exercise in one relatively small area of commercial law, may have a much larger impact on the common law than any harmonisation would merit. I share the view that it is not really desirable to regulate matters such as doorstep selling on an EEC basis. None the less, I recognise that for some Member States of the EEC, whose measures for the protection of the consumer are less advanced than ours, a Directive such as this may provide a much-needed stimulus to consumer protection.
However, is there any reason why we in this country should support the Directive? Despite overwhelming condemnation from your Lordships, I believe that there is at least one area in which the Directive offers us a useful opportunity to promote the very qualities of our 814 legislation which it might seem to threaten. For is it not in the interests of the consistency and simplicity of our contract law that the same rules should apply to cash and credit sales? Is it fair that the consumer who buys goods at the door for cash should enjoy less protection than the consumer who buys on credit or hire purchase? One of the merits of this Directive—and I concede that they are all too few—is that it gives us the chance to fill up this potential loophole in our system of control.
This is not to say that we find the Directive as it is at present drafted an acceptable basis for legislation; and I propose to deal with some amendments that we should wish to see if we are to accept this Directive. Many of our objections to the present draft of the Directive stem, as noble Lords on all sides have said, from its excessively wide scope. It would seem that the real intention of the Commission is principally to deal with true doorstep sales where the consumer is taken by surprise and has no opportunity to check or to compare the goods and services being offered to him or her; but the Directive extends to a far wider range of contracts, many of which we feel it would not be appropriate for this Directive to control. The term "contracts negotiated away from business premises" is not synonymous with doorstep sales as we understand them, and we should try to ensure that a good intention to check potential abuse in one small area of trading does not have the result of restricting a far wider range of business activity.
A number of problems arise, for example, from the definition of "business premises" adopted by the Directive. They are taken to comprise,the permanent place of business at which a trader exercises his commercial or professional activity as well as stalls at fairs and markets".This definition is so wide that sales in church halls, auctions at country houses and exhibitions such as those at the Boat Show and the Motor Show will not be excluded from the controls of the Directive.
The imprecise way in which this definition has been drafted would have other serious consequences. For example, the Directive will not cover contracts concluded at the trader's permanent place 815 of business. Yet what is the position with regard to so-called tripartite contracts—for example, a contract for the hire purchase of a television set? Such a contract will normally be negotiated on the business premises of the retailer but, since it is concluded away from the business premises of the finance company involved, it too will be subject to the control of the Directive. Such a contract will be subject to control, whereas a contract concluded in the customer's home after he has initiated negotiations at a shop will not be. The Directive will not control "contracts negotiated exclusively at the consumer's initiative", yet, if the consumer orders a catalogue, requests a visit or demonstration, or participates in an event organised by the trader, this is not to be considered as initiating negotiations. I add those examples to what noble Lords have said about the inadequacy of the drafting, quite apart from the scope and intention of the Directive.
Another consequence of the narrow definition of "negotiated exclusively at the consumer's initiative" is that mail order trading of the kind involving personal contact between the customer and an agent of the mail order firm will be subject to control. The noble Lord, Lord Lyell, dealt with this aspect of the problem. It has been said that there are very few complaints about this type of trading as opposed to that of mail order traders who advertise in the Press, and that the voluntary code of practice drawn up by the Mail Order Traders' Association, to which mail order catalogue traders in this country already subscribe, offers greater protection to the consumer than would the controls of this Directive. It provides, for example, that goods can be returned within 14 days and without cost to the consumer. These arguments, as the noble Lord, Lord Lyell, pointed out, have impressed the European Parliament sufficiently for it to propose that such trading be specifically exempted from control.
I recognise the force of these arguments, but, if I do not feel able to go quite so far as the noble Lord in agreeing wholly with the European Parliament, it is because of the point I have already made about our concern for the simplicity and consistency of our legislation. Both under 816 the proposed Directive on consumer credit and under the Consumer Credit Act 1974, those who buy goods by mail order on credit will be entitled to a cooling-off period, and we see no reason why they should not enjoy similar protection in the case of cash sales. We believe that mail order traders would not be inconvenienced by the imposition of a minimum standard of protection which most of them already exceed in any case. So long as this Directive imposes the same rules on cash sales as the consumer credit Directive imposes on credit sales at the door, we see no reason why it should not apply to mail order. Both the consumer and the mail order companies should benefit if the rules for cash and credit mail order sales are the same.
May I now turn to the type of goods and services whose sale away from business premises would be subject to control. A figure for an exemption level is still under discussion but, subject to that, the sale of all kinds of goods and services away from business premises will be controlled by the Directive. Ordinary domestic transactions such as the regular doorstep sale of milk, food or fuel may well exceed the exemption level if paid for weekly or monthly, and would then presumably be subject to all the provisions of the Directive as it is at present drafted.
There are several other areas in which the imposition of a cooling-off period would, we feel, work against the consumer. The first of these involves goods and services supplied to meet an emergency, and this was one category to which the Committee drew attention. I think for a moment of the motorist whose car breaks down on the motorway. If he rings up a breakdown firm and asks them to tow it away he will not be considered as having "initiated negotiations", and he will therefore be entitled to a cooling-off period during which no payment can be demanded. How is the breakdown firm to react if, after seven days, the consumer decides that he did not really want the service after all? Are they to tow his car back on to the motorway? More seriously, I suggest it is more likely that they will refuse to perform the service until the seven-day period has expired.
It is difficult to see how a cooling-off period can be practicable for any service 817 contract because a service, unlike goods, can hardly be returned. Even where a contract involves the provision of goods as well as a service—where, for example, goods are incorporated into other goods—it may not be practicable to return the goods. Consider, for example, the trader who completes or partially completes a double glazing installation within the seven day period. If the consumer then cancels the contract it will be very difficult for the trader to remove the installation and leave all as found; in all probability he will wait until the seven day period has expired before starting work. I do not think the British consumer will wish to wait seven days for his car to be towed away when it breaks down, or for a service engineer to repair his television set when it goes wrong, or for a double-glazing firm to start work on his house, although I must say there have been occasions when I have had to wait longer than that. It is clear that further thought needs to be given to the practical consequences of these proposals.
All the examples I have given come from areas which we would wish to see specifically excluded from control or for which, at the very least, special provision should be made. There is however one area which we feel is too complicated to be the subject of a horizontal Directive such as this. I refer to insurance. When buying insurance, consumers usually want immediate cover—when I am travelling abroad I usually remember on the eve of my departure that I must get myself insured—and it is difficult to see how this could be provided if there were allowed a cooling-off period in which to change their minds. We must also remember that a great deal of ordinary life assurance and all industrial life assurance is sold in the home. Any disturbance of the law and of present practice in this difficult and already well-regulated area would require most careful and thorough consideration. The doorstep selling of insurance should be excluded from the scope of this Directive and dealt with as necessary in a directive specific to insurance.
There has been much discussion, and several references in this debate, about the exemption level provided for by the Directive because it is difficult to set a level high enough to exclude the majority of ordinary domestic transactions at the door while not so high as to exclude 818 doorstep sales of the type which the Commission is attempting to control. The exemption level proposed in the Directive is 25 European units of account, which is about £17, while ECOSOC and the European Parliament propose that this should be reduced to 15 units of account. On the other hand, the exemption level for credit sales set in the Consumer Credit Act 1974 is £30, and there have been suggestions, as my noble friend Lord Raglan said, that this figure should be increased because of inflationary effects since the original sum was fixed in the Hire Purchase Act 1965. The National Consumer Council propose that the exemption level should be as low as £5, so that "true" doorstep sales are controlled.
We would much prefer that the level of exemption in this Directive should be left to Member States to provide by national law. First, it would clearly be preferable if the minimum figure could be fixed in national currency rather than be subject to wide yearly variations in exchange rates of Member States. Secondly, this approach is adopted in the proposed Directive on Consumer Credit, and it is essential that the level above which controls apply should be the same in both Directives, at least so far as credit sales are concerned. If different exemption levels were set in the two Directives, credit sales might be subject to different regulations according to the sum of money involved, and the degree of confusion that would result to consumers and traders alike would be completely unacceptable. The controls proposed in the Directive are essentially a requirement that certain information be given to the consumer in the contract and provision for a cooling-off period, and these are similar to those of the Consumer Credit Act 1974 but differ in points of detail As far as the information to be contained in the contract is concerned, while we have no quarrel with the principle involved, we do not agree that a failure to provide this information should render the contract automatically void. Some flexibility ought to be built in, so that where a defect has not prejudiced the consumer, or where he wishes to proceed despite the defect, the contract should stand.
There is also a difference between the cooling-off period provided in the Directive and that provided for by the Consumer 819 Credit Act 1974. The Directive provides for a cooling-off period of seven days after signature of the contract by the consumer. The Consumer Credit Act 1974, on the other hand, provides for a cooling-off period of five days from the time the consumer receives back the second copy of the contract through the post. In practice, this amounts to seven days since it normally takes two days, made up of the day of signing and posting of the agreement and the day following when it arrives with the consumer—despite questions about the services of the Post Office which noble Lords have raised in this House—and there therefore seems little point in altering our existing provisions, and it would be necessary to alter them if the Directive went forward in its present form.
The obvious deficiencies of the Directive, to which other noble Lords and I have pointed, should not be allowed to obscure the merits of some of the principles behind it, and I noted particularly what my noble friend Lord Sainsbury said about the general principles. Like the Commission, Her Majesty's Government have for some time been aware of the need for safeguards when consumers are persuaded, away from business premises, to enter into contracts involving substantial sums of money. We have already gone a long way to provide such safeguards in the case of credit and hire-purchase sales, and this Directive offers an opportunity to extend those safegaurds to cash sales as well. This chance to promote the coherence and simplicity of our legislation would be thrown away if we allowed different controls to apply to cash and credit sales, and it is therefore essential that this Directive should proceed in line with the proposed Directive on Consumer Credit.
I would reiterate my sympathy with those who feel that an Article 100 Directive, at any rate from this country's point of view, is hardly the most appropriate method for dealing with a subject such as doorstep selling. I recognise, however, that other Member States of the Community, which do not all enjoy the degree of consumer protection provided in this country, may welcome an EEC Directive to promote the interests of consumers in their countries. I think it essential above all, that the scope of this Directive should be clearly defined and its many deficiencies be ironed out, so that what is a praise- 820 worthy intention to extend the protection of the consumer does not have the effect of curtailing or restricting a kind of service which, I suggest, has proved to be extremely valuable to old people, the infirm, and those living in rural areas, which apparently includes the noble Lord, Lord Lyell.
I thank all those who have contributed, and I welcome the fact that the general tenor of all the speeches has been in line with the Sub-Committee's report. Once again, I wish to thank your Lordships and the Sub-Committee for the help given in this respect.
§ 6.1 p.m.
§ Lord RAGLAN
My Lords, first, I should like to thank the noble Lord, Lord Lyell, and all other noble Lords who have said very nice things about the Sub-Committee. We appreciate that very much. There are two or three short points that I think I ought to make. My noble friend Lord Sainsbury raised the question of whether the accumulated milk bill might be caught under this Directive. We were not clear about whether it would be caught. This was a matter on which we hoped the Government would seek clarification. Anyway, it is a case for derogation. If the lower limit comes down to £5, I think that the Dairy Trade Federation, among others, would have something to say about such items as Christmas hampers in the sum of £20 to £25 which are a regular part of their business.
I think it is quite clear why the Directive will not do as it is, but I shall follow its progress with interest, and I hope that some day it returns in a greatly modified form, perhaps split into several different Directives. Here I agree with the noble Lord, Lord Mottistone. I think that some of these Directives go off in too many directions. They try to embrace too much at once. My noble friend Lord Oram, in his very useful and wide-ranging reply, pointed out that the Directive has some good points in that it showed that the customer has not the same protection as between cash and credit sales. Perhaps we have been knocking it a little too hard.
There is only one other point with which I want to deal. The Sub-Committee tried to find out whether this matter was put 821 forward under Article 100. If I read out Article 100, which is very short, your Lordships will see why practically anything can be got in under it. The Article reads:The Council shall, acting unanimously on a proposal from the Commission, issue directives for the approximation of such provisions laid down by law, regulation or administrative action in Member States as directly affect the establishment or functioning of the Common Market.We took advice on this matter. Our informant could not see why this Directive should come under Article 100, but, on the contrary, he could not see why it should not come under Article 100. We considered this question in the Sub-Committee, and we came to the conclusion that the European Court would be unlikely to sustain an objection to it being brought forward under Article 100.
§ On Question, Motion agreed to.