Gas Supply: Marketing Practices (Hansard, 10 May 1999)

§ The Parliamentary Under-Secretary of State, Department of Trade and Industry (Lord Sainsbury of Turville)
My Lords, the Government believe that misleading selling practices are unacceptable. Last year the Office of Gas Supply introduced a licence condition for gas suppliers concerning marketing practices. This includes rules on the selection and training of sales staff and puts an obligation on the supplier to contact the customer within 14 days of the contract being signed to ensure that they are content with the sales approach. This is helping to curb abuses in the marketplace. We are, however, keeping the situation under review.

§ Viscount Hanworth
My Lords, I thank the Minister for that enlightening and partially reassuring reply. The Minister has indicated that he is aware of the many complaints from customers who have unwittingly signed contracts with new suppliers when they had imagined that they were simply extending their contract with an existing supplier. Are the salesmen of gas supply companies who are liable to be working on commission subject to the regulations governing doorstep trading? Are those adequate to restrain them?

§ Lord Sainsbury of Turville
My Lords, yes, they are covered by the doorstep selling regulations. Those have been tightened up. The new regulations came into force on 31st December 1998. They require a seven-day cooling off period. They require the trader to give the consumer details in writing of the right to cancel. It is now a criminal offence not to inform consumers of the right to a cooling off period. The maximum penalty is a fine of £2, 500 which we believe will make unscrupulous traders think twice. Finally, we have tightened up the definition of an unsolicited visit so that it is less easy to get round.

§ Lord Ezra
My Lords, does the Minister agree that, under the present competitive arrangements for gas, the prime objectives of suppliers and their salesmen must be to increase market share and sell as much gas as possible, with much less attention paid to providing services, improving efficiency and the reduction of emissions? Do the Government, through the regulator, or in other ways, aim to correct that imbalance?

§ Lord Sainsbury of Turville
My Lords, in any competitive situation there will always be the danger 956 that the sole goal of the salesmen becomes that of selling their product and increasing market share. In the long term I hope that most companies in the market economy realise that their best interest is served long term not only by increasing market share but also by gaining the goodwill of their customers. It is part of the regulatory process that we seek to control the situation where, as a short-term goal, people focus on increasing market share.

§ Lord Peston
My Lords, surely it is to the advantage of the consumer that the gas market is opened up to broader competition? Although there may be excesses, do we not agree that that at least was a good step forward?
In this market is there not a complication relating to the nature of contracts? People seem to be making verbal contracts without understanding that they are contracts; and not knowing that the cooling off period applies?

§ Lord Sainsbury of Turville
My Lords, I agree very much that some real benefits have come from competition. Out of some 20 million domestic customers, over 4 million have switched gas supplier, some of whom are saving up to 20 per cent of their annual gas bills. For many people that is clearly highly desirable.
I believe that verbal contracts take place but they would be covered by the same regulations concerning the cooling off period.

§ Baroness Gardner of Parkes
My Lords, I speak from personal experience. We are being approached on the doorstep with a hard sell from people from an electricity company asking us to take their gas. I understood that the electricity system was not meant to start for a while. However, on the doorstep I have been pressed to sign agreements for an electricity company to supply me with gas.

§ Lord Sainsbury of Turville
My Lords, doorstep selling by Ofgas has been watched carefully by Offer on the electricity side. Similar licence conditions have been introduced. The appointment of Callum McCarthy as both electricity and gas regulator pending legislation is in order to make certain that there is no abuse of a similar kind on the electricity side.

§ Baroness Oppenheim-Barnes
My Lords, does the Minister accept that there will be tremendous confusion among consumers as to their rights and the best course for them to take. Most of all, they wish to be reassured that all the safety regulations and codes of practice are being adhered to.

§ Lord Sainsbury of Turville
My Lords, there are dangers that the situation will be abused. That is why we have introduced tightened-up regulations on doorstep selling and the licence condition. In addition. we recognise the need to ensure that consumers are properly protected. That is why as part of the parcel of proposals announced following the review of the utility 957 regulation, we intend to put in place an independent energy consumer council. That council will champion consumers' interests and act as a one-stop shop for consumers' inquiries. The new council will have responsibility for seeking to resolve complaints which have not been resolved by the company concerned. Where further measures, such as enforcement action, are required, the council will pass on the complaint to the regulator. Therefore, we have taken stringent action in terms of the regulations and the representation of the consumers.

§ Lord Clarke of Hampstead
My Lords, do similar regulations govern "cold" telephone sales people who establish or seek to establish a contract without the person being fully aware of the situation and feeling pressurised by the salesman on the other end of the telephone? Do the regulations to which my noble friend earlier referred apply to cold telephone sales?

§ Lord Sainsbury of Turville
My Lords, the regulations on doorstep selling cover all those markets. However, I need to write to my noble friend on the situation which applies to cold telephone selling.

§ Baroness Miller of Hendon
My Lords, does the Minister agree that competition is of benefit to consumers? It is very easy to confuse that sort of competition, as, indeed, the Question does, with talking about undesirable sales pressures and tactics. Does the noble Lord agree that it would be helpful if both the gas and electricity regulators were to require fuel suppliers to publish unified tariff systems so that customers can decide pricing issues on a like-to-like basis?

§ Lord Sainsbury of Turville
My Lords, the issue of consumers being able to make comparisons is something that we have in mind. An agreement has been reached with the Association of Energy Suppliers that a consumer will be provided with a written tariff of the options for that customer. One cannot have a situation where everything is published on a common basis because tariffs will vary. But that point has been taken on board and the Association of Energy Suppliers has agreed to do that.