Clause 17 - Claims on behalf of consumers

Enterprise Bill – in a Public Bill Committee am 3:15 pm ar 18 Ebrill 2002.

Danfonwch hysbysiad imi am ddadleuon fel hyn

Photo of Nigel Waterson Nigel Waterson Ceidwadwyr, Eastbourne 3:15, 18 Ebrill 2002

I beg to move amendment No. 70, page 8, line 33, after 'specified', insert 'consumer'.

We have been pretty good so far at avoiding unnecessary stand part debates and I am sure that we will continue to do so, as they can be repetitive and tedious, in stark contrast to the debates on the amendments. With your leave, Mr. Conway, I intend to deal narrowly with the amendments in the hope that fortune might shine on me and you might allow a stand part debate on clause 17. I thought that I should say that now.

The amendment is straightforward. It would simply insert the word ''consumer'', so that the provision would relate to a ''specified consumer body''. It is in the spirit of both the clause and legislation to make that clear and I cannot see why it would be

objectionable. I will be surprised if the Under-Secretary does not accept it with enthusiasm.

Photo of Miss Melanie Johnson Miss Melanie Johnson Parliamentary Under-Secretary, Department of Trade and Industry

As the hon. Gentleman said, the amendment would ensure that only consumer bodies could bring consumer group claims. He invited me to accept it, but it would add little to the clause. Organisations that wanted to bring consumer group claims would have to apply to be designated by the Secretary of State specifically for the purpose, as we have discussed. Applicants would then have to meet the published criteria if they were to be included in the list of specified bodies. As we discussed, the criteria will be subject to consultation, but they will include a requirement for organisations to demonstrate that they represent the interests of consumers. As the amendment would not add anything, I do not feel sufficiently moved to accept it. I hope that the hon. Gentleman will take that in the spirit in which it is said.

Photo of Nigel Waterson Nigel Waterson Ceidwadwyr, Eastbourne

It is thoroughly demoralising to hear that one of my amendments is unsatisfactory or unnecessary, but I understand the Under-Secretary's comments. I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Photo of Nigel Waterson Nigel Waterson Ceidwadwyr, Eastbourne

I beg to move amendment No. 57, in page 8, line 34, leave out 'two' and insert 'fifty'.

Photo of Derek Conway Derek Conway Ceidwadwyr, Old Bexley and Sidcup

With this it will be convenient to consider amendment No. 58, in page 8, line 41, after 'may', insert 'only'.

Photo of Nigel Waterson Nigel Waterson Ceidwadwyr, Eastbourne

I am sure that hon. Members will characterise the amendments as another attempt to emasculate the legislation, but they are nothing of the sort. They represent a desire to be clear about how it will work in the real world, which includes business and industry as well as consumer bodies and politicians, whether some hon. Members like it or not.

Photo of Nigel Waterson Nigel Waterson Ceidwadwyr, Eastbourne

I am sure that we can be clear. I am clear about that, as I am sure that you are, Mr. Conway, but as someone once said, ''By their deeds shall they be known''.

For some puzzling reason—one can imagine the poor draftsman late at night stretching his legs and coming up with this whimsical piece of drafting—new section 47B(1) says that a claim may be made

''on behalf of two or more individuals''.

I am puzzled why one would want to specify ''two or more'' on the basis that one complaint should be enough. If a consumer stumbled across a massive abuse or infringement, surely that would be enough on the general whistleblower principle. However, the Government believe that it should be two or more. I do not know whether there is a danger that the one person might simply be bonkers.

I intend to discuss this at as much length as you will permit me on the stand part debate, Mr. Conway, as we are into brand new territory in English and, I dare say, Scots law. It needs careful attention, otherwise a law with unintended consequences will really kick in

with a vengeance. The CBI, among others, was concerned about the phrase and came up with a proposed amendment, which I was happy to adopt. Given that for some reason the Government want to specify a number of individuals, it proposed that we should make it 50 or more. The basis for that proposal is the far-reaching nature and complete novelty of the power, as well as an attempt to be sure that whatever body brings an action represents a significant section of consumers.

In a sense, we are back to the danger of frivolous and vexatious claims and we could re-run that whole debate, but I suspect that we would have the same result. I should be fascinated to hear a ministerial justification for the provision referring to ''two or more'' individuals. I believe that there is merit in the suggestion that if we are to specify a number, it should be a significant number.

The Under-Secretary may reply that that would be the position anyway and that only pretty big league matters would be taken forward under the procedure, which almost by definition would mean large numbers of consumers were affected. I simply do not know, but if we are to specify a number, we could easily incorporate another safeguard by specifying a minimum of 50. I am not dogmatic about the number, but there should be some recognition that a not insignificant number of consumers must be affected. That is the basis of amendment No. 57.

Amendment No. 58 would provide an important safeguard in relation to this far-reaching power. Without it, there is a risk that the consumer body would retain the damages. Before anyone accuses me of facing both ways, I should point out that we shall come later to amendments that consider the possibility of a consumer body using funds obtained in that way for other purposes. If we are to go down that route, let us go down it with our eyes open. It is important to have this modest safeguard and I should be grateful to hear the Under-Secretary's comments.

Photo of Vincent Cable Vincent Cable Shadow Spokesperson (Trade and Industry), Liberal Democrat Spokesperson (Trade and Industry)

As the hon. Gentleman has suggested, the clause raises some big issues. I imagine that the substance of them will be discussed when we reach the stand part debate. I am talking about the philosophy of whether consumer associations should be allowed to have real advocacy powers, followed up by possible legal action. However, we are dealing first with the safeguards, rather than the principle.

When we dealt with many earlier clauses, I sympathised with the way in which the Conservative spokesman was approaching the Bill, but we rather part company in this area. As we shall reach the bigger issues in the stand part debate, I will now deal with the two points that he made.

The first issue is cost recovery and damages. The hon. Gentleman envisages the possible emergence of an American-style, ambulance-chasing culture. Theoretically, that could happen, but surely it depends substantially on which organisations are authorised under the legislation to use the powers. Consumer organisations in this country are not into that sort of game at present; it is not their business.

A few years ago, the Consumers Association took an important action, which I think was essentially a class action, to establish an issue of principle in relation to orphan assets in the insurance industry. It was a big case, involving big costs, and not unreasonably the association would have expected to recover its costs, although not to profit from the process. Again, I am not sure whether the hon. Gentleman is concerned about consumer organisations ensuring that they have full cost recovery or whether they seek to make a profit.

The front-line consumer organisations of which I am thinking—the Consumers Association, the National Association of Citizens Advice Bureaux, and local citizens advice bureaux—are not ambulance chasers. That is not their mission and it is not why they would be authorised to take on the function that we are discussing. They do not operate in that way. We need to face the issue of how, presumably under secondary legislation, those organisations would be defined to prevent the opportunism that the hon. Gentleman described. I am not sure whether it is necessary to enshrine it in quite that way.

The second issue that the hon. Gentleman raised was multiple cases. I listened to his argument and he made the right point early on. Even one well-developed argument by one consumer should be enough to trigger an action. However, he then proceeded to argue that 50 cases should be needed. Even apart from the logic of that, I can foresee all kinds of difficulties with insisting on 50 cases, particularly in regard to a relatively local and minor issue that may be taken up by local CAB.

Photo of Alistair Carmichael Alistair Carmichael Shadow Spokesperson (Energy and Climate Change), Liberal Democrat Spokesperson (Energy and Climate Change)

I bring to my hon. Friend's attention the example of the residents of Papa Stour in my constituency. As there are only 17 of them, if they were disadvantaged in some way—although they are of course blessed in every imaginable way and I commend the island to the hon. Member for Twickenham—and sought to bring a class action, as the Conservatives call it, they would not be able to do so.

Photo of Vincent Cable Vincent Cable Shadow Spokesperson (Trade and Industry), Liberal Democrat Spokesperson (Trade and Industry) 3:30, 18 Ebrill 2002

As the hon. Member knows, I shall visit the residents of Papa Stour in a few weeks' time, so I shall be able to test that proposition at first hand. He makes the point precisely. Most actions that consumer bodies might take up involve fairly localised uses. We should consider the matter in common-sense terms.

As Members of Parliament, we often act as consumer advocates. We do not have legal powers but we have powers to name and shame and to go to the local newspaper. That is often quite effective. When I hear of abuses, I ask myself whether it is an odd case or an example of systematic abuse. At what point does one pass that threshold? It happens when one has two or three identical cases.

An example is a case involving energy liberalisation that was brought to my attention at my surgery last Friday. I have to deal with many cases involving companies taking over electricity and gas supply on a questionable basis. A lady came to see me because a competitor company had taken over her supply. She

had been asked whether she wanted it and had said no, but the company had given her the gas none the less. When she got the bill and protested, saying that she did not want the gas and had not ordered it, the company apologised profusely but said that the deadline for cancelling the order had been passed. She said that she had spent the previous two months trying to ring its offices but the phone was always off the hook and no one answered; the company said that the law was the law and that she had to pay because she had not cancelled within the two-month period. I thought that that was perhaps just bad luck—such things happen—but I then had two identical cases involving the same company in the same area. One does not need to be a statistical genius to see statistical significance in that trend and perhaps the basis for a case.

Photo of Nigel Waterson Nigel Waterson Ceidwadwyr, Eastbourne

Maybe we should form our own little interest group on that issue. I have had similar cases in my constituency. I have finally got to the root of the problem: people who are going around trying to peddle the change are working on an incentive basis. There have been cases of requests being falsified.

Photo of Vincent Cable Vincent Cable Shadow Spokesperson (Trade and Industry), Liberal Democrat Spokesperson (Trade and Industry)

The hon. Gentleman provides a common-sense explanation. The abuse that I am describing may not qualify for action under the powers, but I am pointing out that a small sample can provide the consumer associations with the evidence that they need to establish that abuse is taking place.

Photo of Ken Purchase Ken Purchase Labour/Co-operative, Wolverhampton North East

One of the big scandals is what the City likes to call insurance mis-selling; I thought that it was fraud. The surgery case that the hon. Gentleman described—I, and probably all hon. Members, have had to deal with similar cases in my surgery—is not mis-selling, but fraud. The law can and should deal with fraud, including insurance scams.

Photo of Vincent Cable Vincent Cable Shadow Spokesperson (Trade and Industry), Liberal Democrat Spokesperson (Trade and Industry)

Indeed, I think the same way, but there have been massive mis-selling scandals—

Photo of Vincent Cable Vincent Cable Shadow Spokesperson (Trade and Industry), Liberal Democrat Spokesperson (Trade and Industry)

Whether fraudulent or not, there have been many cases of sales of pensions and endowments where people were operating on such a scale that the Government could intervene on behalf of the consumer. Many of the cases with which we are dealing are small-scale, involving a local or regional company, and can be taken up by a specialised advocacy consumer group. The legislation should provide sufficient flexibility to allow that.

Photo of Miss Melanie Johnson Miss Melanie Johnson Parliamentary Under-Secretary, Department of Trade and Industry

First, it is important for hon. Members to recognise and bear in mind that all these provisions relate to named individuals. Those are the terms in which they are put. Consumer group claims about named individuals are an important part of the strategy to encourage harmed parties to claim redress when damaged by anti-competitive activity. Group claims make it more affordable for the average consumer to gain redress in those cases where a breach of competition laws has already been established. That is another point to bear in mind.

Raising the number required to participate in a group claim merely puts barriers in the way of consumers who are legitimately trying to gain recompense for damage incurred as a result of activities that have already been found to breach the competition law. Some hon. Members have illustrated aspects of that point. Indeed, I am getting a little concerned that I may get a load of additional casework from members of the Committee as we share information around this afternoon.

In addition to the useful points that hon. Members have made about some of the scams and problems that they have identified, there is the point that for various reasons some individuals who will have been affected by something may not want to be part of a named action of this kind. There might be sensitive issues where people felt embarrassed to be named in this way. The numbers will not necessarily relate to the numbers of individuals affected. I guess that the draftsman picked two because it was the minimum needed to establish that it was group rather than an individual. To set a number would be artificially to pick a figure and could hinder actions.

Photo of Mark Field Mark Field Ceidwadwyr, Cities of London and Westminster

I appreciate that any number will be arbitrary, but in various areas of life, be it nomination papers for parliamentary or council elections or petitions to go to local councils, a certain number is often needed. To have simply two for such an important class action seems rather low. I accept that even if one had a dozen or 50 names there would be the risk—although surely a lesser risk—of a vexatious claim by a small group of people who just wished to cause difficulties and managed to get a specified consumer body on side to promote their claim. Two seems far too low a number.

Photo of Miss Melanie Johnson Miss Melanie Johnson Parliamentary Under-Secretary, Department of Trade and Industry

Again, I remind hon. Members that the issue of damages arises only in cases that have already gone through the process and have come to a conclusion or have gone through an appeal and survived. Groups cannot bring things forward. The CAT will have the power to throw out claims with no reasonable grounds or that appear vexatious, but such claims would be as unlikely as vexatious super complaints. There will be a similar process of designation by criteria, on which we will consult, to designate groups to make damages claims under the clause. Again, organisations will be considered carefully before they are given that status. When they have that status there will be a huge obligation on them to act sensibly. At the end of the day, the tribunal itself has powers to throw out claims. It is superfluous to put a lower limit on the number that is needed for a claim because we could unwittingly rule out a particularly valuable claim that was being brought on behalf of, for example, 45 named individuals. That would seem very unfortunate.

Photo of Vincent Cable Vincent Cable Shadow Spokesperson (Trade and Industry), Liberal Democrat Spokesperson (Trade and Industry)

Is it not the case that not only is there protection against vexatious claims by consumer organisations, but they have no incentive to make them? If the citizens advice bureaux were to use their scarce legal and manpower resources to pursue frivolous cases, they would inflict considerable costs on themselves. As CABs are cost-constrained bodies constantly seeking money from local councils, why

would they fritter away their resources on vexatious cases?

Photo of Miss Melanie Johnson Miss Melanie Johnson Parliamentary Under-Secretary, Department of Trade and Industry

I entirely agree with the hon. Gentleman. It goes to the heart of the matter that such a case will already have been proven on behalf of consumers when there has been a problem with the market; it will have gone through the process. Under the conditions I have stated, an additional claim for damages would be highly unlikely to be other than a serious claim, with a strong chance of succeeding, for the reasons that the hon. Gentleman gave. I therefore urge the Committee to resist the amendment.

Photo of Nigel Waterson Nigel Waterson Ceidwadwyr, Eastbourne

I will not resist the Minister's urging. I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Question proposed, That the clause stand part of the Bill.

Photo of Miss Melanie Johnson Miss Melanie Johnson Parliamentary Under-Secretary, Department of Trade and Industry

I do not have a great deal to add, but I appreciate that hon. Members want a further debate. I shall therefore outline our view of the clause.

The clause was drafted to give consumer groups the opportunity to bring forward the sort of complaints that they might want to make.

The group representative claims can only be made before the CAT and, as in the case of other damages, claims brought before the CAT will be possible only when a breach of competition law has already been established. When the full appeals process relating to the relevant decision has been exhausted, organisations will be able to bring the claim, provided that the consumers concerned have given their consent.

Organisations will have to apply specifically for designation; there will be criteria, and a list of specified bodies will be contained in a statutory instrument made by the Secretary of State and subject to the negative resolution procedures of the House. Consumer group claims will make it more affordable for the average consumer to gain redress. Those harmed by anti-competitive activity will be often harmed to an extent that, although significant for the individual, would be difficult for people to take on themselves and would not necessarily justify the cost of a damages claim. In future, such consumers will be able to group together to claim the compensation that is rightfully theirs.

Photo of Nigel Waterson Nigel Waterson Ceidwadwyr, Eastbourne

The clause cries out for a stand part debate, for reasons that I have already mentioned. It is a massive departure for the English legal system.

I said on Second Reading that the Bill had the Chancellor's fingerprints all over it and the clause is a good example. He seems to have acquired from his young days a superficial love of many things American, without fully understanding that what makes the American economy work is that people like him do not interfere in it too much. If we are not careful, we will be in ''Erin Brockovich'' territory. It is a very good film.

Photo of Nigel Waterson Nigel Waterson Ceidwadwyr, Eastbourne

Yes. However, the systems are quite different. There is a superficial similarity in the

common law system and the legal language but that is where the similarities end. Things are very different in America if one is seeking redress. There is no concept of legal aid as we know it, although the situation is rapidly being harmonised by our Government. In the most unlikely cases, juries take decisions not just on liability, but on the quantum of damages and come up with some astronomical figures. In the United States, there is the highly developed system of the contingency fee, which, I regret, we have begun to import. Lawyers often take a high percentage of the damages ultimately recovered. People have access, whether in consumer or other sectors, to different mechanisms for justice.

The Library brief on the clause is particularly helpful. It recalls the Competition White Paper in which the Government were in favour of representative claims

''in cases where although there might be a large number of affected consumers each would have only a fairly small individual loss.''

The original thinking was that consumers had a right to some sort of claim, but because their individual loss was relatively small, they had no real incentive to pursue it. Hence the idea in the White Paper of banding together and allowing representative organisations such as the NCC or the sectoral consumer panels in the utilities to bring cases on behalf of consumers.

A potential problem in the application of damages was, however, recognised. As the Library brief says:

''The White Paper suggested either holding an award in trust and allowing claimants to make an application to the trust for their share, or using the award to benefit the affected class of claimant indirectly by using it for purposes which benefit consumers in that market (such as consumer information or community facilities).''

It is a benign version of the contingency system whereby the matter is pursued on behalf of consumers and the moneys obtained by way of damages are used on behalf of consumers, but not just the group involved in the particular case. To use a wonderful civil service term in the briefing, ''mixed responses'' were made to these suggestions, and

''the Government decided that representative claims can only be brought on behalf of named (as distinct to identifiable) consumers''.

Hence we have the clause, the references to ''two or more individuals'' and so forth. The idea is that designated bodies bring claims on individuals' behalf, but not through the ordinary court system—that possibility is excluded, though the Under-Secretary will correct me if I am wrong—and only on behalf of consumers against businesses.

Understandably—it is a relatively novel area—the provision has provoked some worries among the business community, particularly the CBI. I quote from its parliamentary brief:

''In our view, allowing consumer groups the right to bring actions for damages is one of the most ill-conceived and potentially damaging proposals in the entire Bill. Overall, the precedent of class actions in the USA is a very disturbing one and should be avoided here at all costs. The task of consumer organisations should be to bring suspected anti-competitive practices to the attention of the OFT, not to bring proceedings themselves, which would effectively turn such bodies into prosecuting authorities.''

That strong language from the prime business organisation in the country deserves the attention of the Committee, even if hon. Members believe that the CBI is overstating the potential problem. I referred to class actions in the USA and I recall a good film called ''Class Action'' in which Gene Hackman starred as the lawyer and an action was brought by many people affected by a dangerously malfunctioning vehicle. Class actions occur in this country, but nothing like on the scale in the USA.

The legal professions should focus more on the massive implications of that change in English law. For all I know, there may be a similar procedure in Scots law. If such a procedure exists in the civil system, we need to know how, and if, it works.

The CBI continues:

''allowing such actions would give consumer bodies huge powers without any countervailing obligations, and could provide a huge incentive on them to pursue disruptive litigation regardless of the merits of their particular case.''

I take the view that has been expressed by other hon. Members including, most recently, the hon. Member for Twickenham (Dr. Cable), that the bodies that the Secretary of State is most likely to designate would not pursue unmeritorious claims, or pursue claims irresponsibly. However, that concern is exercising business and industry.

The CBI also expresses concern about identifying which organisations will be able to perform such an important role, although it is possible that it will become one of the rarely used powers on the statute book. I sometimes think that much of what we discuss in Committee ends up in that limbo. Equally, a whole range of consumer organisations may grasp it with enthusiasm.

The CBI is also concerned about damages, which I will briefly discuss without getting into too complex a legal discussion. Clauses 16 and 17 relate to damages, but it is easier to deal with the matter in one fell swoop. Clause 16 makes it clear that:

''the same principles would be applied by a court in awarding damages in tort'',

or delict in Scotland, which I assume is similar.

How does the Under-Secretary envisage the damages being calculated? Perhaps she can write to me if she does not have all the facts at her fingertips. Damages are a discrete claim, and one can draw analogies from the tort of interfering with business relations, which tends to be based on loss of business profits. There are often difficulties in English law in arriving at what is recoverable and what is not, as the loss is generally consequential. That may be a useful analogy.

As I said, that sort of loss is often inferred in the tort of inducement of mutual contract, according to MacGregor on damages, which is the lawyers' bible on the subject. Cases such as Exchange Telegraph Co. v. Gregory and Co. in 1896, Goldsoll v. Goldman in 1914, and Brents Brewery Co. v. Luke Hogan in 1945 established the broad basis on which damages are arrived at, and which damages are recoverable. My

days as a law student remind me that there are all sorts of issues in tort about foreseeability and remoteness; concepts about which lawyers are apt to argue when they are students or in the House of Lords.

It would be useful to me and, I hope, to the Committee if the Under-Secretary gave us some idea of how the calculation of damages would be approached in such cases. That might also reassure the CBI and those whom they represent, not least because it will be difficult to make the direct link between a large group of consumers, on whose behalf an action is being taken, and the losses to be claimed from and paid by the relevant company or organisation. I do not want to rain on the Under-Secretary's parade, because this is a big step forward from the consumers' point of view. I will quote the Consumers Association briefing for our Second Reading debate, which said:

''We welcome the decision to allow specified bodies to act on behalf of consumers who have suffered harm as a result of anti-competitive behaviour . . . Our only disappointment is that the Government did not take the opportunity to introduce legislation to allow representative actions on behalf of consumers who have been harmed by rogue traders. It appears anomalous that consumers can be assisted with redress against price fixers but not against a trader who has misled them.''

The second part of that quotation is perhaps more a debate for another day, but it points out the pressure that the procedure will bring. Once it is established in this context, how long will it take before there is intense pressure on the Government of the day to extend the measure more widely? We would then be firmly into the world of regular class actions. Some Members might wonder what is wrong with that. The answer in principle is nothing much, as long as we go into it with open eyes and know the effect that it will have on our existing legal remedies and system. We must understand how that will work in practice, and how claims will be approached and damages calculated and allocated. It is useful to have a stand part debate on such an important clause. I hope that other hon. Members agree.

Photo of Vincent Cable Vincent Cable Shadow Spokesperson (Trade and Industry), Liberal Democrat Spokesperson (Trade and Industry) 3:45, 18 Ebrill 2002

I wholly agree with the hon. Member for Eastbourne that we need to have a wide-ranging discussion about the introduction of an important principle. Like him, I was struck by the strength of language and feeling in the CBI submission. I do not routinely disregard what the CBI says, as much of it is sensible. Indeed, I happen to agree with a lot of what it said this morning about the revenue-raising part of the Budget. However, I find it difficult to understand why it has been so wound up. I want to comment on the hon. Gentleman's contribution, too. He spoke moderately and raised the right questions, but came to conclusions that were, if not necessarily wrong, different from mine.

We must recognise the importance of consumer advocacy as a principle to be enshrined in the law. It is a fact of life that the people who are most likely to be exploited as consumers, because they are old, ill, infirm, poorly educated or lacking in literacy skills—sadly true of many adults—are those who are least able to pursue an action on their own. That is why we need advocates and one of the important reasons why the consumer movement exists.

Photo of Mark Field Mark Field Ceidwadwyr, Cities of London and Westminster

I appreciate where the hon. Gentleman is coming from, but does he not appreciate that while consumer groups exist as advocates, under the terms of the clauses that we have already discussed, the idea is that it is the OFT that should take cases further forward? The great concern, which was espoused by my hon. Friend the Member for Eastbourne, is that we may find ourselves with super consumer groups, undoubtedly with strong media links, that effectively work as judge and jury, rather than by putting their evidence forward to the OFT.

Photo of Vincent Cable Vincent Cable Shadow Spokesperson (Trade and Industry), Liberal Democrat Spokesperson (Trade and Industry)

That is a good question. The hon. Gentleman asked why consumer groups should not stop at simply being advocates and leave cases to the OFT, and there are certain reasons why it would be inadequate to leave things as they are. One is the problem of litigation, about which the hon. Member for Eastbourne made some helpful comments. It is extremely difficult—the present Government have a lot to answer for in this regard—for people of modest means in vulnerable circumstances to get legal help. Under the capital rules of the Lord Chancellor, there is probably not one single owner-occupier in my constituency who would be able to achieve legal aid, because of the nature of property prices. The only way that such people could possibly get legal help is by visiting an advocacy group such as the citizens advice bureaux or the Consumers Association, which have in-house lawyers who can take cases up on their behalf.

The work involves going beyond the advocacy stage to working alongside lawyers, so the question is why the Consumers Association should not stop at only preparing a brief and then handing it to the OFT. The answer has probably to do with scale. The OFT is a national body. It will be a kind of quango, presumably sitting in London. I suspect that many issues that consumers and consumer groups want to pursue will be local and of a small scale. There may be an answer to that problem, but I suspect that there is a gap in the scale on which people might wish to pursue actions. Consumer organisations are probably much better at bringing both difficult test cases and small cases.

Photo of Jonathan Djanogly Jonathan Djanogly Ceidwadwyr, Huntingdon 4:00, 18 Ebrill 2002

That is exactly the point. The scale will be different. We are talking not about super complaints or small consumer-related issues, but about article 81 and 82 prohibitions. Is it not the case that individuals will simply be used for other people's purposes?

Photo of Vincent Cable Vincent Cable Shadow Spokesperson (Trade and Industry), Liberal Democrat Spokesperson (Trade and Industry)

That may be the case, which is why I shall raise two useful points that I picked up from the hon. Member for Eastbourne. First, there is an anomaly, whereby the powers appear to exist for big complaints, but not for rogue traders. Perhaps we can eliminate that as we go through the Bill.

The second consideration, which lies behind the question from the hon. Member for Huntingdon, is the motivation of the people who bring the action. We have referred to that issue several times in the discussion on the amendments and in this debate. How do we differentiate between disinterested bodies such as the citizens advice bureaux and the Consumers Association, and opportunistic lawyers who pursue

no-win, no-fee cases? I genuinely do not know how that distinction will be made after the Bill is enacted and how there will be a disciplined procedure for identifying those consumer associations that will quite properly bring actions on behalf of our constituents, as compared with those whose motivation is wholly different and less disinterested.

My final and major point is that lying behind the CBI's concern is a view of the world that I do not recognise. The picture is of poor big business cowering in the face of all the consumer pressure groups. However, that does not tie in with reality. In many markets, the balance of power is very different. I shall give one example, which relates to the intervention by the hon. Member for Wolverhampton, North-East. Many hon. Members, probably including some in this Room, and many clever people in the legal profession have been victims of mis-selling by Equitable Life. Indeed, in some cases, the most sophisticated people in the community have been victims of the abuse of mis-selling.

The balance of power in the relationship between consumer and producer is very often in the hands of the producer when it comes to sophisticated products with a lot of small print attached to them. However, the balance of the argument must be shifted in favour of consumer protection, which is why my instinct is to support the clause as it is.

Photo of Mark Field Mark Field Ceidwadwyr, Cities of London and Westminster

Following the earlier comments by my hon. Friend the Member for Eastbourne, I am glad to be joining the all-party group on film. He has made many of the points that Opposition Members wished to make. We are concerned about aspects of the clause and we are interested to hear what the Under-Secretary has to say.

I am sceptical about the power of many large lobby groups. My great concern is that consumer groups will turn from advocate groups and a voice for those with very little voice, as the hon. Member for Twickenham said, into part and parcel of the legislative process and little more than prosecuting authorities. We should not be naïve about the way forward. It is with great regret that one considers many other areas of public life. We need only look across the Atlantic at the trends there 20 years ago to discern how they will develop here. Class actions are a retrograde step. We should look at all the television advertisements for Claims Direct and other organisations telling people that if there is someone to blame, they have a claim. We will see a rapid unwinding of ethics in many ways if class actions come into play.

I am concerned that these designated consumer bodies will have great power. One recalls the phrase that Baldwin took from Kipling about power without any responsibility. Clearly there will be great media opportunities. Class actions have gone into a high-profile media arena. It is all too easy to see how the media can be whipped up into something of frenzy, particularly over certain campaigns, such as those where a little granny has had some difficulty. The consumer groups will no doubt get their public relations departments to do their best to ensure that their claims are seen in that light. We are being naïve. As my hon. Friend the Member for Eastbourne rightly

said, we must go into this with our eyes open as to what the medium-term consequences may be.

Photo of Jonathan Djanogly Jonathan Djanogly Ceidwadwyr, Huntingdon

The clause is ill conceived and I do not see the point of it. If the loss is so small that the action is not worthwhile, it is a matter for Government to decide whether, taking the infringements as a whole, it would be in the public interest for a claim to go ahead. Many hon. Members have talked about this matter as though we were talking about consumer-type actions. We are not. We are talking about competition-type actions, where sophistication on the part of consumers cannot be assumed. We are heading to a point where individuals' names will be used for little gain for themselves; they will merely suffer disturbance.

That will not earn the Government a reputation as the godfathers of ambulance chasers in the country; that will come from the super complaints clauses. We will be setting up a platform for consumer bodies to flex their muscles on the basis of what they consider to be the overall harm and the public interest. I am not convinced that they are the right institutions to decide what represents the public interest. That is a matter for the Government.

Photo of Alistair Carmichael Alistair Carmichael Shadow Spokesperson (Energy and Climate Change), Liberal Democrat Spokesperson (Energy and Climate Change)

The consumer bodies can certainly flex their muscles in that way, but they will succeed only if they have a case that the tribunal says has merits. There are two alternatives to class actions. Which is preferable; that people who have a claim do not pursue it or that we have individual actions pursued singly?

Photo of Jonathan Djanogly Jonathan Djanogly Ceidwadwyr, Huntingdon

Individuals can join together in a claim in the courts. That is a separate issue.

Photo of Nigel Waterson Nigel Waterson Ceidwadwyr, Eastbourne

Has my hon. Friend considered a third option? Personal injury lawyers in America say that few of their cases ever get to court. They make their money by settling cases out of court and taking their 40 per cent. or 60 per cent. It is in the interest of big business to settle claims, whatever their merits, simply because of the non-recoverability of the costs. But that is another matter. My hon. Friend should consider the possibility of that becoming a practice in this country too.

Photo of Jonathan Djanogly Jonathan Djanogly Ceidwadwyr, Huntingdon

My hon. Friend is absolutely right. We shall increasingly see consumer lobbies themselves lobbied by lobbying organisations, which will create a whole new industry. Questions will have to be asked about who funds it all. It will come back to businesses; possibly even competitors of the business against which the claims were initially brought. If we are not careful, such circularity might work against competition.

Photo of Miss Melanie Johnson Miss Melanie Johnson Parliamentary Under-Secretary, Department of Trade and Industry

On a point of information, Mr. Conway. A letter being circulated to you, to Mr. Beard and to all members of the Committee is now available on the Table. It explains an amendment to part 8 and a consequential amendment and it also provides the lists requested earlier about domestic and community infringements under clause 203. The information is available in good time for future debate.

To return to matters in hand, I was asked why we were going down this particular route. I hope that I have already explained it to some extent, but I highlight what the hon. Member for Twickenham said about the importance of advocacy generally and its successful use on behalf of consumers.

The actions in the clause are not exactly the same as US class actions. One of the important differences is that class actions are allowed in the US on behalf of an amorphous and unnamed group of individuals, but consumer claims for damages will be allowed here only on behalf of named, identified consumers—a significant difference—and only with their consent. US class actions are brought in the ordinary courts, but here they will be brought before the CAT only following a decision of the OFT or the European Commission that established a breach of competition law.

These are clearly targeted measures, which exist to help the victims of anti-competitive behaviour. As several hon. Members have explained, it can be difficult for victims to bring effective damages action themselves, so we have every reason to put the new measure in place. It will strengthen the hand of consumers who have been damaged in the ways described.

In response to Conservative Members' other comments, I am as puzzled as the hon. Member for Twickenham about the strength of the CBI's feelings. Its concerns are greatly overstated. Damages will be calculated in line with principles used in the courts. The competition and related expertise of members of the CAT will enable them to assess damage caused by anti-competitive activity much more effectively than other courts. Nine members already have significant legal experience and the chairman has already presided over courts at high level. The Bill allows the appointment of members with competition or any other relevant legal expertise, so we expect the tribunals to be appropriately provided for in expertise terms. However, the basis of decisions about the appropriate level of damages will not fall outside the principles used in other courts.

In the light of what I have said about the designation process and my further reassurance that claims cannot be brought by bodies engaged in ambulance chasing or other vexatious activity, but only at the end of process through which damage to consumers will have been confirmed, I hope that Opposition Members will understand why the clause should stand part of the Bill.

Question put and agreed to.

Clause 17 ordered to stand part of the Bill.