HL Deb 19 May 1988 vol 497 cc486-95

7.10 p.m.

Lord Beaverbrook rose to move, That the draft regulations laid before the House on 23rd March be approved [21st Report from the Joint Committee].

The noble Lord said: My Lords, I beg to move the Motion in my name on the Order Paper.

If approved, the proposed regulations (together with the Financial Services Act, which I shall come to later) would implement the Council Directive 84/450/EEC (the misleading advertising directive). The regulations would be made under Section 2(2) of the European Communities Act 1972. In the most general terms, the directive requires member states to ensure that they have adequate and effective means for the control of misleading advertising, to protect consumers, other businesses and the general public. In particular, these means of control must include measures for the legal prohibition of misleading advertisements.

The directive defines both "advertising" and "misleading advertising" very widely, and this is reflected in the definitions in Regulation 2 of the draft regulations. The draft regulations do not, however, reproduce Article 3 of the directive, which sets out an illustrative list of examples of information which should be taken into account in determining whether advertising is misleading. The Joint Committee on Statutory Instruments has drawn your Lordships' attention to this omission, which is a deliberate omission and not an oversight. In the Government's view, the list is unnecessary. We consider that it does not add anything and, in practice, may even serve to narrow the interpretation of misleading advertising in the United Kingdom to a degree not intended by the directive. We have therefore not included it.

Member states are required by the directive to provide arrangements enabling any person or organisation, regarded under national law as having a legitimate interest in prohibiting misleading advertising, to initiate legal proceedings against such advertising or to bring it before an administrative authority. An administrative authority must be competent either to decide on complaints or to initiate appropriate legal proceedings. The Government propose to entrust this competence to three named administrative authorities: the Director General of Fair Trading; the IBA; and the Cable Authority.

The principal authority would be the Director General of Fair Trading. Regulation 4(1) would put him under a duty to consider complaints and Regulation 5(1) would empower him, if he thought it appropriate, to apply to the High Court or, in Scotland, the Court of Session for an injunction or an interdict.

The duty to consider complaints would be subject to two qualifications. The director would not be required to consider a complaint if he considered it frivolous or vexatious. More importantly, he would be able to require complainants to satisfy him that they had exhausted the established means of dealing with complaints. In effect, this would be a discretion to refer complainants to other bodies. The main bodies would be the Advertising Standards Authority and the trading standards departments of local authorities. He would however be able to refer complainants to other bodies as appropriate in relation to particular complaints.

To enable him to fulfil his functions, Regulation 7 would give the director a power to require information to be supplied to him, in particular to ascertain whether or not factual statements in an advertisement were true. Failure to comply with a notice from the director requesting information could be followed by an order from the court, on the application of the director, requiring the default to be made good.

The Joint Committee on Statutory Instruments has also drawn your Lordships' attention to this provision, which it says appears to make an unexpected use of the powers conferred by the statute under which the regulations are to be made. My Lords, the Government appreciate the valuable work done by the joint committee and are grateful for its vigilance. But we do not share the joint committee's view on this occasion. The power of the director is necessary (and not merely desirable) for those cases where the evidence as to whether or not an advertisement is misleading is uniquely in the possession of the advertiser. In order to be able to act swiftly and effectively, in the interests of both consumers and rival advertisers, the director needs a power to obtain this information. Two memoranda have been submitted to the jont committee to which the department explains in some detail how the taking of the power in Regulation 7 is within the powers conferred by Section 2(2).

In the case of broadcast advertising and advertising transmitted by a licensed cable service, the administrative authorities would be the Independent Broadcasting Authority and the Cable Authority respectively. Both are already competent to decide on complaints. The IBA may, if it considers an advertisement to be misleading, refuse to broadcast it. The Cable Authority may, under Section 15(1) of the Cable and Broadcasting Act 1984, issue a cable operator with a direction not to transmit a particular advertisement. In the event of a cable operator failing to comply with such a direction, the Cable Authority already has the power to revoke the cable operator's licence.

In implementing the directive, we propose to allocate responsibilities between administrative authorities primarily on the basis of the medium carrying the advertisement. There would however be one sectoral division. Investment business advertisements issued by or on behalf of a person authorised under the Financial Services Act 1986 or the appointed representative of such a person would be excluded from these regulations. Implementation of the directive in this sector would be achieved by the provisions of that Act and the administrative authority would be the Secretary of State or any person to whom he had transferred relevant functions under the Act. In practice that would mean the Securities and Investments Board.

My Lords, these regulations, if approved, would be a valuable addition to our already extensive regime of protection against misleading advertisements. Moreover, they would achieve this in a way that created no new criminal offences for traders; did not impose burdens on business; did not undermine the established means; imposed a negligible cost on the public purse; and afforded responsible businesses protection against unscrupulous competitors. In short, this measure is good news for both consumers and business, I commend it to your Lordships' House. I beg to move.

Moved, That the draft regulations laid before the House on 23rd March be approved [21st Report from the Joint Committee].—(Lord Beaverbrook.)

Lord Williams of Elvel

My Lords, the House will be grateful to the noble Lord, Lord Beaverbrook for introducing these regulations. We note that this is yet another example of regulations introduced under the European Communities Act 1972, as a result of directives promulgated by the Commission. I have to say to the noble Lord that the regulations are of such substance that in other circumstances they would form the object of a Bill in your Lordships' House, and indeed in another place. However, we have to accustom ourselves to dealing with measures of this nature resulting from the European Communities Act in the manner which is prescribed; that is, by regulation.

In principle we have no objections to the control of misleading advertisements. It would be wrong for anybody to have objection in principle to that control. I note the noble Lord's comments about the Joint Committee on Statutory Instruments which has expressed some doubt about the regulations. There are some worrying points to which I should like to draw attention.

Regulation 2(1) is the interpretation section. It is quite clear in that it refers to the IBA and the reception and immediate retransmission of broadcasts made by the IBA. Of course, it does not refer to the BBC, but there could be a future occasion when the BBC is entitled and wishes to make advertisements. Furthermore, it does not refer to direct broadcasting from satellites where the jurisdiction is, at best, doubtful. It would be a very odd business if the IBA were constrained from allowing to be broadcast advertisements which are misleading while consumers whom the noble Lord is trying to protect—we appreciate that—can receive satellite broadcasts outside the jurisdiction of the IBA, the BBC or anybody else. I should be grateful if the noble Lord could comment on that.

In Regulation 2(2) the expression "likely to deceive" gives me some problems. I do not know how the courts would interpret the expression "likely to deceive" in respect of an advertisement. I can understand the concept of an advertisement deceiving a person but I find it difficult to see how the courts could decide whether an advertisement was "likely to deceive". However, I have no doubt that the noble Lord has an answer since I gave him notice of the problems I wished to raise. I am sure that he will be able to satisfy me on that point.

Regulation 2(2) contains the expression: an advertisement is misleading if … it is likely to affect their economic behaviour". I do not understand the expression "economic behaviour". I understand economic theory and have learned about it but "economic behaviour" is a very wide expression. I can rise in the morning and make a telephone call which costs me money; that is economic behaviour. How the courts will say that an advertisement which may or may not be deceptive or may or may not be likely to deceive affects my economic behaviour I find very difficult to see. I hope the noble Lord can help on that.

Regulation 3 deals with advertisements under the Financial Services Act. I appreciate the noble Lord's remarks about the regulations under the Financial Services Act being much more stringent in their effect than the regulations which the noble Lord is now introducing. Nevertheless, the question arises: how do the regulations under the European Communities Act, which the noble Lord is introducing, march with the provisions of the Financial Services Act and regulations derived from that Act? How do we tell which advertisement, misleading or otherwise, is subject to the Financial Services Act and its subordinate legislation and which advertisement is subject to those regulations following slightly different rules and slightly different control?

Regulation 4 deals with complaints to the director. I assume from the context of the regulation that when it talks about, the complaint appears to the Director to be frivolous or vexatious the director is acting within the law and will be subject to judicial review if it is felt that the director is behaving unreasonably in saying that a particular complaint is "frivolous or vexatious". I should be grateful if the noble Lord could confirm that.

Regulation 4(4) introduces quite a different and major point. I believe it is for the benefit of the House if I read it out: In exercising the powers conferred on him by these Regulations the Director shall have regard to (a) all the interests involved and in particular the public interest; and (b) the desirability of encouraging the control, by self-regulatory bodies, of advertisements". That raises the whole question of what is the public interest and which particular definition of the public interest the director is to have regard to when he looks at complaints about advertisements. It will not come as a surprise to your Lordships that over the past few months I have been inviting the Government to define what they mean by the public interest.

It is defined in different categories in different statutes. Perhaps I may give one rather way-out example. The Airports Act 1986 instructs the Monopolies and Mergers Commission to investigate matters concerned with the public interest where referred to the commission. Section 43(5)(b) of the Act instructs the commission: in the case of a matter relating to the granting of a right by virtue of which any operational activities relating to an airport may be carried on by any person or persons, shall in addition have regard to the following objectives, namely, the furtherance of the reasonable interests of persons granted such rights". That is a statute definition of the public interest to which the Monopolies and Mergers Commission is to have regard. If misleading advertisements about which there may be complaints to the director concerning concessionaires in airports, who would normally fall under the provision, are referred to the Monopolies and Mergers Commission and require to be judged by the commission under Section 43 according to the public interest criteria which I have spelled out, it would be very odd if the director were to apply other public interests criteria.

In Section 84 of the Fair Trading Act the director has quite separate public interests criteria which we have discussed many times in this House. I do not wish to spell them out again. However, it seems to me that the public interest here is simply slipped into a regulation without any definition about which particular statute should override the regulation when the public interest is considered by the director.

Regulation 5 deals with applications to the court by the director. The director is entitled to apply to the court to bring proceedings for an injunction and may also apply to an interlocutory injunction. However, there is no provision for what the director should do if the advertisement has already appeared and has misled certain people. All that he can do is to stop the advertisement appearing in future. Perhaps the Minister would clarify what powers of redress the director or anyone else has for those who have been misled by that advertisement.

Regulation 6(2) introduces in my view two rather dubious expressions. First, it says: likely to convey a similar impression". In order not to mislead your Lordships, perhaps I should read out Regulation 6(2), which relates to the functions of the court: An injunction may relate not only to a particular advertisement but to any advertisement in similar terms or likely to convey a similar impression". I have no idea what that means in practical life. I shall be grateful if the Minister can explain it.

Regulation 6(5) says: The court shall not refuse to grant an injunction for lack of evidence that … the person responsible for the advertisement intended it to be misleading or failed to exercise proper care to prevent its being misleading". I ask again: what happens if the person responsible for the advertisement did not intend it to be misleading and indeed exercised proper care but, for reasons quite outside his control, as we know from the Financial Services Act 1986 and derived legislation and practice thereunder, it turned out to be misleading? As the noble Lord will remember, Section 27 of the Act employs the word "recklessly" to the effect that the person is reckless as to whether it creates a misleading impression. There is a difficulty, to which I have referred, about whether the regulation marches with the Financial Services Act.

In Regulation 8, dealing with complaints to the IBA, paragraph (1) simply says that the IBA shall consider any complaint, and so on. It continues: The IBA shall give reasons for its decisions". What decisions? So far as I can see, no decisions are mentioned in the regulation. If there are no decisions, what kind of reasons will be given? If there are decisions, what are they and what kind of reasons should the IBA give, how they should be justified and how should they be considered? Should they be considered as being reasons that can be taken to the court on judicial review? If the IBA is required to give decisions and these are up for judicial review, it introduces quite a novel procedure which, so far as I understand it, does not apply to the Press Council or to the Advertising Standards Authority at present.

Regulation 8(3) says: In exercising the powers conferred on it by these Regulations the IBA shall have regard to all the interests involved and in particular the public interest". What is the public interest? Which definition of public interest are we going to adopt? The same comment applies to Regulation 10(3), under which the Cable Authority is required to have regard to the public interest. I should like to know where the Cable Authority derives its definition of public interest.

Certain points of detail—not of principle, because we are grateful that the regulations should be made and that we have to follow the European directive—need due consideration. I have spelt them out to the Minister. I gave him notice of what I intended to say. I hope that he will come with a good and satisfactory reply.

7.30 p.m.

Lord McGregor of Durris

My Lords, I thank the Minister for his exposition of the regulations. I do not intend to take up the time of the House beyond stating my interest in my capacity as chairman of the Advertising Standards Authority.

I wish to make one straightforward point. The Director-General of Fair Trading has already emphasised publicly that his new powers were, intended to support and reinforce the existing controls, not to replace them". Accordingly, the Advertising Standards Authority will remain the central independent and self-regulatory institution for enforcing the British code of advertising practice in print, poster and cinema advertising. However, the new long stop power of the Director-General of Fair Trading, which was first recommended after an inquiry in 1979, will be valuable in certain circumstances. I am glad that the regulations will not affect the present machinery, which is efficient, effective, quick, accessible and cheap. It makes no use of lawyers or courts, and it costs the taxpayer nothing. Once the regulations have been approved, the Advertising Standards Authority will work closely with the Office of Fair Trading to ensure its further effectiveness.

Lord Beaverbrook

I am grateful to the noble Lord, Lord Williams of Elvel, for having given notice of what he intended to ask me. First, he asked what would happen in the event of the BBC at some time in the future taking advertisements. There are now a few BBC advertisements carried on BBC I and BBC2; for example, for Radio Times and other publications of the BBC. Any complaints would be dealt with by the director-general. If the BBC were to carry more extensive advertising at any time in future, the arrangements would have to be reviewed to decide what procedure would be appropriate.

As to satellite advertising in this country, I understand that purely domestic transmissions will be covered by the director-general, but problems arise in regulating broadcasts that do not emanate from within these shores. Transfrontier satellite broadcast services will have to be dealt with by international agreement. A broadcasting directive and a Council of Europe convention are being negotiated. I cannot claim that this is an easy matter to solve, but we are mindful of it.

I turn to Regulation 2(2). The noble Lord asked the meaning of the expression "likely to deceive". The regulation enables the director general, the IBA or the Cable Authority to take action without having to show that someone actually has been deceived. They will need to take a view as to whether a reasonable person was likely to be deceived. This expression gives the relevant authority the ability to take action without having to prove that someone has been deceived.

The noble Lord, Lord Williams, asked what is meant by the expression "economic behaviour" in Regulation 2(2). The simplest way to answer him is to give an example. Economic behaviour refers to where someone is persuaded to buy something as a result of a misleading advertisement. This is distinct from an aspect of an advertisement which would affect some other kind of behaviour—social behaviour and so on. Here we are dealing with where someone is persuaded to go out and buy something.

Lord Williams of Elvel

My Lords, I do not expect the noble Lord to answer now, but I wonder whether he could write to me to say where and when in any other statute the expression "economic behaviour" has been used, and what was the definition employed in that statute.

Lord Beaverbrook

My Lords, I cannot answer the noble Lord's direct question but I understand that the wording is taken from the EC directive. I shall look into it further and let him have the results of my research.

The noble Lord's next point concerned the Financial Services Act. He will know better than I that there is a separate and special regime covering all aspects of financial services, including advertisements. We consider that the relevant provisions of the financial services legislation will have the same effect in respect of misleading advertisements. Rules made under the Financial Services Act make the necessary provision in respect of investment advertisements by authorised persons and their appointed representatives.

The Act and the rules do all that is necessary to implement the directive in that area. I do not see any useful purpose in duplicating those provisions in the regulations. Where a firm or person authorised under the Financial Services Act advertises for staff and so on, it may well be that any misleading advertisement would come under the area dealt with by the director general rather than necessarily by the SIB or any other person appointed under the Financial Services Act.

The noble Lord asked me the meaning of the expression "frivolous or vexatious" where the director general finds that a complaint is not to be treated seriously. The director general needs to be protected from having to spend his resources on dealing with such complaints. Although it is up to him in the first place to make that decision, no doubt his decision could be subject to judicial review. There is certainly a point there.

The expression "public interest" is never an easy matter in your Lordships' House. The noble Lord, Lord Williams, and I have participated in debates on many Bills where the expression "public interest" has arisen in different contexts. I am sure the House will forgive me if I do not attempt this evening to give a statutory definition of the term. I see the noble Lord, Lord Mishcon, on the Opposition Front Bench. I am sure that he will agree with me that this term is used often but has generally been left to the courts to assess what is meant by it. I understand that the courts are well versed in this area.

In this case the director general would probably not regard it in the public interest to seek an injunction in the case of an advertisement which had finished and which he knew would not be repeated. It would be waste of his time, probably a waste of money from the public purse, a waste of the court's time, and therefore would be against the public interest.

The noble Lord, Lord Williams, mentioned the meaning of the expression "public interest" under Section 43 of the Airports Act. The expression appears in many statutory provisions but no statute overrides Regulation 4(4)(a) since it implements Article 4(2) of the Community directive. The directive does not define the expression but I understand that the courts are well practised in interpreting the expression. It would not be appropriate in regulations of this kind to gloss the expression even if a wholly satisfactory definition could be formulated. The joint committee would no doubt comment adversely on any such attempt, and quite rightly so.

Lord Williams of Elvel

My Lords, this is an important point as I am sure the noble Lord recognises. Am I to understand from what he said that the courts are to be the arbiters of public interest under this regulation, and that they will be required to disregard the public interest definitions in statutes such as the Fair Trading Act, the Airports Act, the Gas Act and so on, and simply decide in their own wisdom what under this regulation the public interest means?

Lord Campbell of Alloway

My Lords, the answer to that is probably yes, because the ultimate arbiter on a matter of interpretation under Article 177 is the European Court of Justice. Within the Community context, perhaps the answer is yes.

Lord Beaverbrook

My Lords, I am grateful to my noble friend. That probably is the case. The courts would come to a decision and I understand that they are well versed in that. It is a complicated area but at the end of the day it is up to the courts to come to their own conclusion on this matter.

The noble Lord, Lord Williams, asked what other remedies may be available, as any injunction taken out by the director general, the IBA or the Cable Authority will only stop the offending or misleading advertisement. That is the purpose of the regulations. The purpose is not to punish offenders. There is criminal legislation for that. The purpose is to secure the cessation of the misleading advertisement as soon as possible. The director general will be able to act quickly when necessary.

The role of the trading standards officers will continue as before. They will have the responsibility for the enforcement of a whole range of criminal legislation relevant to advertising, in particular the Trade Descriptions Act. They do an extremely important job and they and the Advertising Standards Authority already successfully deal with the great majority of complaints about advertising. The regulations will not change that but will merely provide an extra means of dealing with those few complaints which cannot be dealt with otherwise. The director general will in effect act as a long stop rather than as one of the principal players.

The noble Lord, Lord Williams, asked me about the meaning of the expression "likely to convey similar impression". It was included necessarily to avoid advertisers escaping from an injunction just by making minor changes to an advertisement or by switching from one medium to another. That is the purpose of the expression.

The noble Lord, Lord Williams, asked me what effect the absence of an intention to mislead would have on the obtaining of an injunction. I understand that any absence of intention is irrelevant in the same way as is an absence of damage caused to the complainant. However, in the Trade Descriptions Act any possible defence is probably on a higher level and there is a defence in that Act—if a matter under such regulations reached the stage where there was a criminal prosecution—of due diligence and of taking all reasonable precautions.

I turn now to the subject of the IBA and the decisions that it would have to make under the regulations. I understand that in normal circumstances the IBA would have to give its reasons for its decisions to the complainant in writing and would probably publish its decisions, as is the present situation. No doubt if the IBA did not carry out its statutory functions correctly it could be challenged under judicial review procedures.

In answer to the noble Lord's final question on the subject of the IBA, I suggest that in the context of the regulations the decisions referred to in Regulation 81 are quite clearly decisions to take or not to take action in relation to a complaint about a broadcast advertisement. I think that what I have said answers the noble Lord's question on that point.

I am grateful to noble Lords for their contributions to these discussions and I am sorry that I have taken some time to answer the points that were raised. However, they are important points and I trust I have been able to clarify the position. I commend the regulations to the House.

Moved, That the draft regulations laid before the House on 23rd March be approved [21st Report from the Joint Committee].—(Lord Beaverbrook.)