Second Reading

Part of Consumer Rights Bill – in the House of Lords at 4:50 pm on 1st July 2014.

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Photo of Lord Clement-Jones Lord Clement-Jones Liberal Democrat 4:50 pm, 1st July 2014

My Lords, I very much welcome the Bill and pay tribute to the work of my honourable friends Jenny Willott and Jo Swinson in particular. I hope that the Bill eventually gains the same stature for digital content as the landmark Sale of Goods Act 1893 achieved in its time in consumer protection on the sale of physical goods. In this context, I am absolutely delighted to see the noble Lord, Lord Borrie, in his place. As the author of

The Consumer, Society and the Law

, with Professor Aubrey Diamond, he was required reading for ignorant law students, and many subsequent law students, like me.

The Bill achieves the feat of being both pro-business and pro-consumer by giving greater clarity about rights redress and enforcement to all concerned. As we have heard, the Bill has of course undergone extensive pre-legislative scrutiny, and the Government have responded comprehensively to many of the recommendations made by the BIS Select Committee. However, there are still quite a number of outstanding issues. There is the general question of whether software should be treated as content. Software has its own directive in copyright law—the software directive. The question is therefore whether software should have special provisions in consumer law, and whether those should be reflected in Chapter 3 of Part 1 of the Bill.

As the impact assessment makes clear, software is special. It states:

“Bugs are considered standard in digital content on issue”.

The Explanatory Notes also recognise that, but the legislation does not. As Professor Bradgate said in his report for BIS:

“Even with extensive testing, it is quite common, and an experienced computer user will be aware of the fact, that the complexity of modern programs is such that bugs in the program are likely to manifest themselves throughout the program’s lifetime. Modern complex programs therefore need regular updating and patching to correct bugs and/or other potential weaknesses in the program as they arise”.

There is therefore a strong area of concern in the software industry which relates to the implied terms as regards “satisfactory quality” in Clause 34, “fitness for purpose” in Clause 35 and correspondence to description in Clause 36. For example, in Clause 34—as techUK, one of the bodies representing the industry, says—the term “minor defects” is too broad. What is the distinction between a bug and a minor defect? Likewise, Clause 36 does not recognise the evolving nature of software, where functionality may change over time.

Plainly, breach of any of those requirements gives rise to a right of repair or replacement; the right to a price reduction or a refund; and a potential right to the measures referred to in Clause 46, which itself does not recognise the particular context in which software is often supplied. In addition, and very significantly, the effect of Clause 47 is that liability under most of these provisions cannot be excluded or restricted. The Federation Against Software Theft suggests that a more equitable approach would be to permit the exclusion or restriction of liability to the extent that it is reasonable to do so, taking into account factors analogous to those under the Unfair Terms in Consumer Contracts Regulations. That would enable the courts to develop a fair and equitable system on a case-by-case basis.

In summary, the overall difficulty with all the new implied terms as drafted is that they do not appear to cater explicitly for the presence of bugs. There is a real danger that an ordinary reader of these provisions may well be led to conclude that digital content containing bugs is not of satisfactory quality, fit for purpose or as described. Clearly, other forms of digital content are not expected to contain bugs, but that brings into question again whether software should be treated differently under the Bill. It is disappointing, too, that we can introduce these digital quality provisions only for the UK. It is absolutely crucial that we build a European single digital market with a common consumer regime.

I welcome the greater role envisaged in the Bill for trading standards officers, but like many other noble Lords, I have concerns about whether these powers are adequate for the digital age, particularly in terms of powers of entry. Not just trading standards officers but many suppliers of software believe that new requirements to serve advance notice of an inspection will act against the interests of consumers and businesses. Trading standards officers use their powers under the Trade Marks Act 1994 and the Copyright, Designs and Patents Act 1988 to enforce the criminal provisions of these Acts for counterfeit and pirated software. If notice routinely has to be given, then infringing software will be much more difficult to track down and identify.

The current power to inspect without notice has resulted in illicit copies of software being removed from possible purchase by unsuspecting consumers. Digital evidence can be destroyed easily; these changes may deter trading standards officers from carrying out checks and certain illicit activity may slip through the net unnoticed. By contrast, as we heard from the noble Baroness, Lady Crawley, and as the Trading Standards Institute says, reviews of food-safety powers have left powers of entry for trading standards officers untouched in this area, after concluding that the use of unannounced inspections is proportionate to the risks involved.

There are also some omissions from the Bill, some of which were debated in the Commons and about which we have heard today. I will also attempt to test the Government’s intentions in a number of areas. Look-alikes or misleadingly similar packaging is unfinished business from the Intellectual Property Act and is clearly a consumer issue. So-called parasitic copies are potentially unlawful under the existing consumer protection regulations as they mislead consumers. As I said when we debated the then IP Bill, the lack of enforcement of the CPRs appears to be at odds with the unfair commercial practices directive’s requirement for member states to provide adequate effective remedies against unfair practices. Earlier this year BIS launched a consultation on the enforcement of the CPRs for these issues. Is it not time for a new clause to be inserted in the Bill that would give brand owners the right to take private civil action under the consumer protection regulations?

There is then the whole question of ticketing abuse, which was dealt with so ably by my noble friend Lady Heyhoe Flint. Increasingly—as Channel 4’s “Dispatches” investigation and the BBC’s “Watchdog” have shown—professional secondary ticketing touts buy tickets solely with the intention of denying them to real fans, to whom they then resell their tickets at inflated prices.

With internet ticket selling becoming more streamlined, touts are able to use sophisticated computer systems to buy large volumes of tickets automatically, seconds after they go on sale. That often means that it is practically impossible for genuine fans to access the event. An artificial shortage of tickets and an inflated secondary market are created. Content providers gain no share whatever of the inflated prices charged.

As the All-Party Group on Ticket Abuse—of which I am a member—noted, that market does not adhere to the same principles of transparency and consumer protection as other markets. Members of the group believe, as I do, that the large-scale, unauthorised resale of event tickets is against the interests of both consumers and content creators. We believe that the solution is greater transparency in the secondary market and a greater ability for event holders to control who can resell their tickets. The Metropolitan Police report drawn up by Operation Podium after the Olympic Games stressed the need for an open and transparent system for ticket reselling, with clear and appropriate regulations. Secondary websites should be required to publish full details of the ticket being offered, including the original face value, seat number and location. They should identify the seller, state whether or not the seller has the permission of the originator to resell the ticket, and declare where the tickets are being listed by the event organisers.

I welcome the revised guidance on consumer contracts referred to by my noble friend, but for all the reasons she adumbrated, they are not adequate. They should be reflected in statute.

There are two final further aspects. There is a need to examine further whether we have the balance correct between writers and performers and those with whom they contract. We looked at those issues during the passage of the Enterprise and Regulatory Reform Act. Is now not the time to revisit the question of whether the Unfair Contract Terms Act 1977 should continue to exclude contracts that relate to intellectual property?

Finally, why cannot the Bill include provisions to enable supplier-switching for mobile consumers? I look forward to my noble friend’s response.