Amendment 122

Digital Markets, Competition and Consumers Bill - Report (2nd Day) – in the House of Lords at 6:45 pm on 13 March 2024.

Alert me about debates like this

Lord Offord of Garvel:

Moved by Lord Offord of Garvel

122: Clause 254, page 167, line 37, at end insert—“(5) See section 274(4) to (8) for how this Chapter applies in relation to a contract that—(a) was an excluded contract at the time it was entered into, and(b) on subsequently ceasing to be an excluded contract, becomes a subscription contract.”Member’s explanatory statementThis amendment is consequential on my second amendment to clause 274.

Photo of Lord Offord of Garvel Lord Offord of Garvel Parliamentary Under Secretary of State (Department for Business and Trade)

My Lords, I am delighted to speak to this group of amendments, and I thank the noble Lord, Lord Clement-Jones, and my noble friends Lord Lucas and Lord Mendoza for their amendments. I will first address the government amendments.

Amendments 122 to 125, 138 and 139 aim to address the concerns raised by my noble friend Lord Mott about certain microbusinesses, such as small local farm shops, being unintentionally captured by the new subscriptions rules simply because they are incorporated. Together, these amendments alter the requirement for a business to be unincorporated in order to benefit from the exclusion. Instead, a business will benefit from this exclusion so long as it meets the “micro-entity” thresholds in the Companies Act 2006. The other requirements of the exclusion, which require a business to deliver foodstuffs to the home or workplace without the use of couriers, remain unchanged. This ensures that the exclusion remains well targeted and captures only the smallest of businesses. I am grateful to my noble friend for highlighting this issue, and I hope he is reassured by these amendments.

I turn to gift aid. Government Amendments 154 to 156 address the concerns raised in Committee by my noble friend Lord Mendoza, and many other noble Lords, about the Bill’s impact on the ability of charities to claim gift aid. The Government’s intention is that charities can continue to claim gift aid and comply with the subscription measures, where they apply. Our amendments achieve this by amending the consequential power in Clause 335. This will enable the Treasury to amend the gift aid rules in the Income Tax Act 2007.

The Treasury has committed to introduce secondary legislation to do this, and I am pleased to point noble Lords to the statement to this effect made by the Chancellor in last week’s Budget. It is our firm intention that this will be in place by the time the subscription regime commences, and the Government will of course continue to engage with the charity sector through this period. I hope this reassures your Lordships of the Government’s commitment to resolve this issue. I know that my noble friend Lord Mendoza and the noble Lord, Lord Clement-Jones, have tabled their own amendments on this matter, and I look forward to hearing from them.

I turn now to a package of amendments—Amendments 128 to 130, 132, 136 and 137—which are intended to provide greater assurance and clarity for businesses in relation to the subscription measures. Government Amendment 128 removes the requirement that consumers can exit their contract “in a single communication”. Instead, traders must ensure that consumers can exit

“in a way which is straightforward”.

The purpose of the amendment is to make it absolutely clear that businesses are not prevented from engaging with their customers during the exit process, and to replace prescriptive language with a principle-based approach. I stress that traders will not be prohibited from requesting feedback or from volunteering counter- offers to consumers who want to end their subscription, so long as this does not unreasonably hinder a consumer from ending their contract if they so wish.

Government Amendments 129, 130 and 132 also relate to how a consumer can cancel or end a contract. These amendments remove the phrase “by any means” and replace it with language from the Consumer Contracts (Information, Cancellation and Additional Charges) Regulations 2013. This simply means that a consumer can exercise a right to exit their contract by making a clear statement to this effect. The intention of these amendments is to bring greater clarity, particularly to businesses, by aligning the language with that of familiar consumer law provisions. I ask noble Lords to support these amendments, and I hope that, alongside government Amendment 128, they put to rest the notion that consumers will be able to end their contract via unconventional means.

Government Amendments 136 and 137 relate to the cooling-off period, an area in which the noble Lord, Lord Clement-Jones, has also tabled amendments. Noble Lords raised concerns in Committee about consumers binge-watching services then cancelling for free. The Government wholeheartedly agree that consumers should not be able to sign up, use a service or digital content and then cancel for free. The rules governing what happens when a consumer cancels in the cooling-off period will be set out in secondary legislation. The Government will consult on these rules by the end of this year. Crucially, this consultation will include a proposal to introduce a “use it and lose it” rule, whereby consumers lose their right to a full refund if they use a product during the cooling-off period. Our amendments now make it clear that regulations can apply such rules.

Amendment 136 states explicitly that the regulatory power can be used to introduce a waiver from cooling-off rights, including for digital content. Amendment 137 makes it clear that a consumer may lose their right to a full refund if they cancel during a cooling-off period, particularly if they have received digital content or services during that period.

Finally, I am sure noble Lords will be pleased to hear that, further to assurances provided in Committee, the Government have decided that the subscription contract measures will come into force no earlier than spring 2026. This will guarantee that businesses have sufficient time to adapt their operations, while ensuring that consumers benefit from the protections in a reasonable timeframe. I hope these amendments demonstrate that the Government have listened to concerns expressed across the House and in Committee, and that noble Lords agree that they will provide businesses the assurance they have been seeking. I beg to move.

Photo of Lord Mendoza Lord Mendoza Conservative 7:00, 13 March 2024

My Lords, Amendment 126 is in my name. I declare my interests as set out in the register, particularly as chairman of Historic England, which also has oversight of English Heritage. I want to talk about the very narrow point the amendment tries to cover, which is the specific treatment of contracts relating to charity membership subscriptions. I am sure that many in this House have purses and wallets bulging with membership cards for museums and wonderful organisations such as the National Trust, English Heritage, the Woodland Trust, and so on, and this issue is causing great concern across the charity sector. I am sure many noble Lords’ inboxes have been filled with briefings and pleas from charities. The point is a very narrow one: according to the Income Tax Act 2007, if a subscription is refundable, it will become no longer eligible for gift aid, which is a very large number for charities up and down the land.

I have been grateful over the last weeks for the assiduous attention of my noble friend the Minister and the Bill team. I am also grateful to organisations we have probably all heard from, such as the NCVO, the National Trust and English Heritage, for helping with the background on this. I was even more impressed, as my noble friend the Minister has set out, that the issue was directly referred to with its own lines in the Budget, and that the Treasury has committed to amending gift aid legislation by SI before this part of the Bill comes into force.

As the Minister has said previously, there is no intention to change the status quo on the eligibility of gift aid on these membership subscription contracts. However, I will make three points. No specific changes are being proposed for the provisions in the Bill so there will be a contradiction, before it is sorted out, between this primary legislation and the Income Tax Act 2007, which creates uncertainty. I know it creates uncertainty because we talk to charities, and they need security and confidence and the ability to plan and budget their operations. I know that the noble Lord, Lord Clement-Jones, has put a lot of work into this and I look forward to hearing him present his mechanism for the timing of how this might be helped.

In a way, despite the lines in the Budget, the Government’s amendments have conferred only a general power on the Treasury to make secondary legislation: there is no statutory commitment to get around to actually doing so before these measures come into force. This raises a risk that the provisions of the Bill could be enacted by this or a future Parliament without the issue actually being resolved. The Government’s amendments do not address the concerns raised regarding the application of consumer protections to charity memberships, which are treated as donations for tax purposes. We are certainly not asking for charities to be exempted from consumer protections, and I agree with my noble friend the Minister that many parts of a charity’s operations should not be—its shops, restaurants, cafés, and so on.

However, it cannot be right that we apply a cooling-off period to a form of charitable donation in the same way that you would to a TV subscription service. If I put £5 in the tin for the Royal British Legion, I do not expect to be able to claim it back the following week, saying “I made a mistake”. Membership subscriptions are accepted as donations under the Income Tax Act, and have been for a long time; donations are not refundable, so how can you have a cooling-off period? You have circular contradiction going on. Naturally, I prefer that these contracts might be protected by the amendment as I have set it out; it simply puts this very specific narrow bit of a charity’s operation—membership subscription contracts—into Schedule 21. I am very grateful to the noble Lord, Lord Clement-Jones, and the noble Baroness, Lady Jones of Whitchurch, for helping get these points across.

Charities are concerned, and perhaps while the Government are in a giving vein during the Third Reading of the Bill, they might reconsider putting in this very small amendment, which would provide huge relief for charities, and the certainty and reassurance they need, because they do such incredible work right across the country, and they are deeply concerned.

Photo of Lord Lucas Lord Lucas Conservative

My Lords, I will speak briefly to Amendment 127 in this group. I do not hold, in any particular way, to my choice of wording, but I am fairly sure the Government’s choice of wording is not right. We all receive a huge quantity of emails; we do not want multiplicity—we want effectiveness—and to demand that these emails come separately is a mistake. I hope the Government will see this as an opportunity to rationalise and reduce the size of my inbox and everybody else’s inbox. If we allow more than one thing to be in the message, then the prominent message must be the statutory one. To have it in the subject line and in the first sentence, so that it comes up in the summary when you look at what the email is about, would be a better way of putting it than my amendment, but I am sure the Government can improve on that.

Photo of Lord Black of Brentwood Lord Black of Brentwood Conservative

My Lords, I refer to my earlier declarations of interest.

I raised a significant number of issues relating to subscription contracts in Committee. I am very grateful to both my noble friends on the Front Bench for listening to those arguments, and for bringing forward amendments to deal with them, and I strongly support them. They help fulfil the Government’s aims without placing unacceptable burdens on business.

There is only one remaining issue that we dealt with in Committee, and that is why I am supporting the amendment in the name of my noble friend Lord Lucas. His amendment would remove the prescriptive wording that is currently in the Bill and allow for traders to provide notices

“in a clear and prominent manner:”

His wording simply recognises that the prescribed renewal information is at the heart of the notice and must not be skewed out of view, while allowing for other beneficial information to be included, if desired. I am sure all noble Lords will be very happy that it ensures notices do not become a GDPR-style irritant, but something which is actually helpful to consumers. It would certainly be counterproductive if consumers experienced information fatigue and stopped opening communications from traders or simply opted out of them all together.

Equally, it will alleviate the burdens on traders, who may feel obliged to send emails around the time of renewal notices, to provide information on alternative deals, packages and so on, which could otherwise be dealt with in one communication. As my noble friend said, there may be other ways of dealing with it, or other wording, and I look forward to hearing what the Minister has to say about this amendment, which I support.

Photo of Lord Clement-Jones Lord Clement-Jones Liberal Democrat Lords Spokesperson (Science, Innovation and Technology)

My Lords, I am going to be extremely brief as I think we are all anxious to move towards seeing whether the noble Lord, Lord Moynihan, will move his previous amendment to a vote.

There is a common factor here; all these amendments were designed to flush out the Minister to give more assurance and information, and in large part that has been successful. There are still some outliers in terms of reminder notices; the Minister is well aware that there are some players, like Adobe, who will find, when they work it out, that they are going to have to give five notices for an annual contract. I do not know whether the Minister has looked at that and has answers to it.

There are still issues at the moment about the lack of clarity on what kind of cooling-off periods would be appropriate for digital services; perhaps the Minister can give more detail on that.

We also come, of course, to the gift aid issues, which the noble Lord, Lord Mendoza, has been so brilliant at raising, and at getting government assurances on. But there is still a big lack of clarity, and that is why I put down Amendment 140, because it would be extremely helpful for the Minister to explain exactly how it is all going to work, in terms of consultation, timing and so on and so forth. There is a lot of concern out there from the charities, particularly in relation to donations and how they fit in relation to subscriptions, because they raise funds in different ways and they want to preserve the benefits they get through the tax system. There is also the question of what kind of consumer protection is appropriate, so that they are not just caught up into a net when they ask for donations.

The amendments I put down are pretty self-explanatory, and I hope the Minister will respond.

Photo of Baroness Jones of Whitchurch Baroness Jones of Whitchurch Shadow Spokesperson (Science, Innovation and Technology) 7:15, 13 March 2024

My Lords, I hope that I too can be brief. When we discussed the provisions on subscription contracts in Committee, there were a number of concerns raised about the original wording. There was, at the time, a recognition that some consumers were being trapped into subscription contracts from which they could not easily withdraw. There was a further issue of subscription auto-renewing without people realising, which cost individuals an estimated £500 million a year.

However, against that, there was a strong case made for the many regular subscriptions for the goods and services which were genuinely wanted and loved, and for the many other subscriptions to good causes and charities on which those organisations depended. There was a growing consensus among noble Lords that we had not got that balance right, so I am very pleased that the Minister has listened and engaged with these concerns and we are pleased with the Government’s amendments now tabled.

First, we welcome the decision to exclude micro-entities, such as milkmen and farm shops, from the provisions.

Secondly, it is helpful that the new amendments clarify the way that consumers should notify the business that they wish to end a contract. We would have welcomed a clearer provision for a simple on/off toggle button to end subscriptions; we hope that the Government will keep that option under review.

Thirdly, we welcome the new government proposals to prevent binge-watching of digital content for free during the cooling-off period. The noble Lord, Lord Clement-Jones, has further amendments on this issue which provide helpful clarification on those outstanding issues. I hope the Minister can provide some reassurance that these issues will be kept under review.

We are pleased that the Government have addressed the very real concerns from the charity sector that gift aid claims would be lost under the new regulations. The Government have explained that this requires a change to the Treasury regulations and have given an assurance that these changes will be implemented before this section of the Bill comes into force in October 2025. I pay tribute to the persistence shown by the noble Lord, Lord Mendoza, in trying to resolve this issue, which we have been pleased to support. His Amendment 126 pursues this issue, and I know that there are many in the charity sector who would like further clarity and certainty on how those assurances can be delivered in practice. I was pleased to hear from the Minister that they will be subject to further engagement with stakeholders to get this right, and I think that is the way forward.

The amendments proposed by the noble Lord, Lord Clement-Jones, helpfully set out a route that could be taken to bring about a successful resolution, and I hope the Minister can confirm that those principles will underlie any ongoing discussions.

Finally, Amendment 127 from the noble Lord, Lord Lucas, raises the need for reminder notices to be prominent in any correspondence, and we very much support the intent behind his amendment. We hope the Minister will feel able to give the reassurances that the noble Lord, Lord Lucas, seeks, that these issues will be addressed.

Overall, the provision in the Bill has made good progress, but it is not the end of the matter. I hope the Minister can assure us that the operation of these changes will be kept under review and, if necessary, brought back to the House for further attention. I look forward to the Minister’s response.

Photo of Lord Offord of Garvel Lord Offord of Garvel Parliamentary Under Secretary of State (Department for Business and Trade)

Once again, I thank all noble Lords for their passionate and eloquent speeches. I turn to Amendments 126A, 126B and 127A in the name of the noble Lord, Lord Clement-Jones, and Amendment 127 in the name of the noble Lord, Lord Lucas, relating to reminder notices.

The purpose of these notices is to give consumers essential information about their next renewal payment, and how to end their subscription if they no longer want it. That is why they are only required ahead of certain payments being taken, where the consumer could alternatively avoid paying by exercising their right to end the contract. We believe reminder notices are particularly important for 12-month contracts that automatically renew, given that a consumer may commit to another full year of payments if they miss the opportunity to end their contract.

For such contracts, businesses will only need to send two reminder notices per year, with one other reminder required if the contract starts with a free trial. We believe this is reasonable and strikes the right balance between ensuring consumers are prompted to consider their ongoing subscription and ensuring businesses are not overburdened.

I turn now to Amendment 127, tabled by my noble friend Lord Lucas, and I thank my noble friend Lord Black for his contribution, also relating to reminder notices. I am grateful to my noble friend for his amendment and I agree with him that businesses must be able to provide other information in these notices, such as promotional or advertising material. It is, after all, a key means of engaging with customers. However, as drafted, this amendment would mean that, while the reminder notice must be clearly given, the essential information that must be contained in the notice could get lost in marketing material. Therefore, while the Government cannot accept the amendment in its current form, I commit to bringing forward government amendments at Third Reading which will seek to strike the right balance on this topic.

Our amendments will allow businesses to provide other material—as they choose—in a reminder notice, but they will also ensure that the required information remains the most prominent information in the notice. This approach will ensure consumers receive clear and timely information about their current subscription, while allowing businesses the opportunity to provide promotional offers or other information in a reminder notice.

I turn to Amendments 131, 133 and 134, tabled by the noble Lord, Lord Clement-Jones, on cooling-off periods. I share the noble Lord’s intent to ensure the cooling-off rules work for digital content providers. As I explained in my earlier remarks, before introducing the relevant secondary legislation for how refunds work during cooling-off periods, the Government will consult on a “use it and lose it” proposal. It is essential that we consult on this proposal, as the proposal, or a version of it, may well apply to other services or products, such as personalised goods.

We have focused mostly on the digital sector today, but many other sectors, with different circumstances, may also be relevant. In light of this, we do not agree that detailed arrangements just for digital content should be in the Bill. The full range of sectors should be considered in consultation, and such detail is better suited to secondary legislation, which can be updated when required. That is why we have made it very clear, through our Amendments 136 and 137, that secondary legislation can take account of different products and circumstances. That is also why the noble Lord’s Amendment 135 is not necessary. Its objective is already achieved with the existing drafting and has been explicitly clarified through the Government’s own amendments.

I now turn to Amendments 126 and 140 on gift aid, tabled by my noble friend Lord Mendoza and the noble Lord, Lord Clement-Jones, respectively. I also thank the noble Baroness, Lady Jones of Whitchurch, for her contribution on this topic. For the reasons set out earlier, we do not consider excluding memberships which qualify for gift aid to be the best way to address this issue. Instead, the Treasury will amend the gift aid regime to ensure that it is compatible with the subscriptions chapter. As I have already said, the Treasury has shown its firm intention to lay the necessary legislation with the statement recently made in last week’s Budget.

On the points raised by the noble Lord, Lord Clement- Jones, we do not consider placing such conditions for the commencement of the chapter as the best way to achieve these aims. Noble Lords rightly point out that charities will need clarity on how consumer and gift aid regimes work together. I assure your Lordships that we will work closely with the Treasury, HMRC and the charity sector to provide guidance where needed before the regime commences.

For the reasons stated earlier, we do not consider that there should be specific detail about the cooling-off period in the Bill for particular products or services. However, we will consult before the end of the year and will be sure to engage closely with the charitable sector to understand issues specific to it.

As I emphasised earlier, the purpose of consultation is to develop rules which are fair and workable for traders and consumers and take account of circumstances such as those set out by the noble Lord. This will inform the secondary legislation that will be needed for the regime to be operable, and therefore we do not think a specific requirement that the regime cannot commence without it is necessary. As I mentioned before, the law is clear that, where a consumer donates regularly to a charity without receiving goods, services or digital content in return, this will not meet the definition of a subscription contract. Such donations are therefore out of scope of the chapter.

I hope this reassures noble Lords of the Government’s intent and that therefore they will not feel the need to press their amendments.

Amendment 122 agreed.

Schedule 21: Excluded contracts