rose to move, That the draft regulatory reform order laid before the House on
My Lords, this regulatory reform order is brought forward under the Regulatory Reform Act 2001 by the Department of Trade and Industry. The Regulatory Reform (Unsolicited Goods and Services Act 1971) (Directory Entries and Demands for Payment) Order 2004 liberalises a code that applies to the authorisation of directory entries in the United Kingdom. That code is set out in the Unsolicited Goods and Services Act 1971, which I will refer to as the 1971 Act. The regulatory reform order reduces the burdens on legitimate directory publishers and advertisers in their directories, while maintaining protection for advertisers from rogue publishers.
The order contains two elements. The first and most important element adds a new method of authorising an entry in a directory to the three methods specified in Section 3 of the 1971 Act. That is a simplified repeat procedure for repeat entries or for renewals of existing directory entries. The other change that we are making is to revoke the Unsolicited Goods and Services (Invoices etc) Regulations 1975. We are replacing them with subordinate provisions that simplify and update the regulations.
By way of background, I should explain that the 1971 Act was introduced to stop scams operated by rogue or bogus directory publishers in the UK. Those scams were based around the practice of invoicing and demanding payments from businesses for entries in bogus directory publications to which they had not agreed. The 1971 Act combated the scams by setting out procedures for authorising directory entries that must be followed if the publisher is to be entitled to payment, as well as making it an offence to demand payment without having a reasonable belief of being entitled to the payment.
The Act also placed significant burdens on both legitimate directory publishers and advertisers. In most circumstances, the Act requires written formalities to be entered into and an exchange of paperwork or e-mails. That is regardless of whether there is a long-term business relationship or whether an entry is simply being renewed from one issue of a directory to the next. Such formalities are unnecessary where an advertiser is already doing business with the publisher, so is therefore well informed of the service offered, and the entry is in many ways simply a roll-over of the existing entry.
The impetus for this regulatory reform order has come from the legitimate directory publishing industry, and in particular the Directory and Database Publishers Association. It has for a long while been concerned about the burdens that the Act placed on the legitimate UK directory publishing industry. The Government also undertook to simplify the 1971 Act in the 1999 White Paper, Modern Markets: Confident Consumers. The order is the result. Subject to approval by Parliament, it will introduce a new simplified procedure for approving repeat entries or renewal of existing entries.
That will save advertisers and publishers alike a lot of time and unnecessary paperwork and red tape when there is an existing business relationship and no substantive change in the new entry, or when the new entry is an improvement on the old. It will remove most of the unnecessary costs to business and administrative burdens in the 1971 Act, while maintaining the necessary protections. The authorisation requirements set out in Section 3 of the 1971 Act will be retained for initial or first-time entries in a directory publication.
We are also simplifying and updating the requirements formerly in the Unsolicited Goods and Services (Invoices etc) Regulations 1975, to ensure that those requirements can be satisfied by electronic as well as paper documents. That is also necessary to meet the United Kingdom's obligations under the European e-commerce directive. We are not removing the protections set out in the regulations, but updating them for the electronic age.
The draft order was subject to a full consultation process from March to June 2003. That consultation was on both elements of the regulatory reform order that I have described, as well as a third proposal that was to introduce a new method for authorising initial directory entries over the telephone. There was general support for all three proposals, although the Office of Fair Trading did not support the proposed telephone authorisation.
The proposals have been closely scrutinised by respective parliamentary scrutiny committees, with their responses noted. The House of Lords Select Committee on Delegated Powers and Regulatory Reform did not consider that the proposal to allow telephone authorisation met the necessary protection test. It recommended that it should be amended to strengthen the protection of business against "rogue publishers". It concluded that, apart from that, the proposed regulatory reform order was an appropriate use of the 2001 Act and met its requirements. I thank members of that Select Committee for the time they spent scrutinising the proposals and for recommending them to the House.
The committee in the other place also concluded that the proposal for telephone authorisation did not meet the necessary protection test. It recommended that the proposal be omitted from the order. The committee also recommended that the second proposal be amended to require that documents which were not intended as demands for payment should continue to bear the precise wording of the statements in the 1975 regulations. The wording of these statements is,
"this is not a demand for payment. There is no obligation to pay. This is not a bill".
Subject to these amendments, the committee recommended that the draft order be laid before the House.
The Department of Trade and Industry has made the amendments requested by both committees. It has omitted the proposal for telephone authorisation from the order and included the requirement for the three statements to be included in any invoice or other document not to be regarded as asserting a right to payment. Both committees have now unanimously recommended that the order be approved. I beg to move.
My Lords, I thank the Minister for explaining the order. We support it. Unsolicited directory entries are an absolute pest. These include fictitious entries in directories that either are never published or, if they are, have minimum circulation to disinterested recipients. Not to put too fine a point on it, it is nothing less than a form of confidence trickery.
The problem particularly affects small businesses, where there is no adequate system for the authorisation of payment for invoices, which then may be settled by an unsuspecting book-keeper. They also sometimes catch larger organisations where payment is authorised simply because the person who actually opens the bill assumes, wrongly, that someone must have ordered the entry. The explanations given by the Government for the new order refer to, "disreputable directory publishers", or "rogue publishers".
Let us not mince words, we are talking about criminal crookery—very bad behaviour indeed. The scam has hitherto been dealt with by the Unsolicited Goods and Services Act 1971, as amended by the 1975 Act. As someone who, when those Acts were passed, ran a mail order company which operated in the same way as a book club, I remember very well how careful I was not to infringe either of those pieces of legislation. My final longstop regarding a customer who claimed not to have ordered something was either to tell them to keep it free of charge, or to send it back at my expense. That is how it should be with reputable directory publishers. Just cancel the charge. After all, what has the entry cost them to insert? Nothing, or practically nothing.
This legislation is designed to protect the unsuspecting and perhaps the plain careless against such crooks. This amendment to the legislation has received the most careful scrutiny by the separate regulatory reform committees of both Houses, who should be congratulated on performing their duties so effectively. Similarly, it is gratifying to see that the DTI has taken on board the unanimous objections of both committees to the possibility of permitting the publisher to secure repeat entries by telephone, which is clearly open to abuse by unscrupulous operators. Many of these fraudsters operate from abroad and from accommodation addresses. This puts them beyond the reach of the DTI and the police.
If, therefore, I have any reservations about these regulations, it might be that they do not provide for three essential sanctions. First, since in the end, to recover payment, the publisher will have to go to the United Kingdom courts and the defendant will be compelled to go to the expense and trouble of defending the case, I hope that the Lord Chancellor might amend the Court Rules and require a claimant to certify that the claim does not infringe the legislation. This will impose a burden of vigilance on the claimant's solicitors, although it will still not affect cases where the claimant acts in person.
Secondly, I should have liked a clear statement that debts incurred by unauthorised directory entries are irrecoverable at law. I realise that that is already implicit in the existing legislation—the Minister will probably tell me that. But spelling it out to the perpetrators of this type of fraud and reassuring the victims could not do any harm.
Lastly, I hope that some form of voluntary early warning system can be developed between the DTI and the banks to head off the transfer of funds to these criminals. It is not, of course, the responsibility of the banks, but, presumably, they are also interested in protecting their customers from fraud.
As I have said, the order has received the most careful scrutiny and the department has listened to the representations it has received from many quarters. It is in keeping with what is needed by publishers and advertisers alike and we most certainly support the order.
My Lords, on this occasion I entirely agree with the comments of the noble Baroness. We, too, support the order. I shall not rehearse the problems to which both the Minister and the noble Baroness referred regarding scams if for no other reason than that, first, it has been said before and, secondly, one would not want to encourage such an activity by giving the detail of the scams to people who might not otherwise be aware of them.
We were concerned, as I believe were the noble Baroness and organisations such as the Office of Fair Trading, about the original proposals on telephone authorisation. I think that the Minister has now accepted the alterations on the basis of recommendations from the relevant committee that deals with the matter. However, I suspect that the outstanding issue in relation to the scams to which the noble Baroness referred is that many of them originate from overseas. When the Minister responds, perhaps he can indicate whether the Government have given any further thought to how that matter can be dealt with.
My Lords, I thank the noble Baroness and the noble Lord for their support for this legislation and, in particular, I thank the noble Baroness for her passionate support.
With regard to the international position, the vast majority of scams in the business directory field operate outside the UK. These proposals do not, and cannot, seek to regulate the activities of directory publishers, bogus or otherwise, who operate from other European countries or overseas. The best way to combat such scams is through cross-border co-operation between enforcement bodies and prosecution under the laws of the state concerned.
There are some cases where that has occurred. One well known scam was that concerning the Barcelona-based European City Guide. The OFT sought the co-operation of the Catalan authority under Catalan law on misleading advertising. The court ruled that the European City Guide was to be temporarily shut down for one year and fined 300,000 euros for its deceitful advertising. In another case, the Liechtenstein authority shut down the Tour and Travel Guide because its business practices were injurious to the state in accordance with its law. Therefore, it is possible to take cross-border action on this matter. In addition, Section 3(1) of the Act states that a purchaser is not liable to pay and that he can, in fact, recover the payment for an unauthorised entry.
I am very grateful for the contributions to this short debate and commend the order to the House.