Motion made, and Question proposed, That this House do now adjourn.—(Mr. Blizzard.)
According to figures from the British Furniture Confederation, the UK furniture industry is currently worth nearly £10 billion at retail prices. It directly employs about 131,000 people in 7,500 enterprises and makes a significant, but often overlooked, contribution to the manufacturing economy. Indeed, furniture makers, large and small, represent 5 per cent. of the UK manufacturing base. In addition, the industry supports, and is supported by, a large supply chain of materials suppliers, designers, component manufacturers, distributors, contractors and retailers.
Although there is no traditional geographical base for the furniture industry, there are clusters of companies in south Wales, Buckinghamshire and the east midlands, including Art Forma in my constituency and a number of furniture makers in Long Eaton, in the constituency of my hon. Friend the Member for Erewash (Liz Blackman). This is consistent with the fact that our region remains the area with the highest proportionate number of manufacturing workers. The industry is divided between small companies and relatively large concerns. The BFC estimates that 67 per cent. of all furniture manufacturing companies employ fewer than nine people, but also that the largest 300 companies account for 45 per cent. of the total employment. Fifty-eight per cent. of output is for the domestic market, 13 per cent. for the office market, and 29 per cent. for the contract market, which includes Government.
The purpose of my debate is to explore the industrial and consumer implications of the sales and promotion tactics far too frequently used by the large furniture companies in selling to the domestic market. It is all about the myth of the half-price, time-limited sale. Anyone who reads a Sunday newspaper or magazine will be familiar with the resounding slap on the kitchen floor of inserted sales and promotional fliers. Invariably, one of these will be from a large furniture company, offering huge reductions on sofas and other furniture as part of a sale that will “end soon”. Typically, the sales periods will be extended and 50 per cent. discounts, even double mark-downs, will be offered to the public for an even longer period still. One of my contentions is that, despite some caveat in tiny print undecipherable to the naked eye, the discounted products are virtually impossible to find retailing at the full price, so there is no way of knowing whether the undiscounted price represents a real saving for the potential consumer or whether it is just a cynical, deceitful “come on”.
The current law regarding sales periods only requires the discounted price to have been available for a minimum of 28 days consecutively in the preceding six months. Yet advertising literature from DFS and other companies scrupulously avoids quoting the actual dates for these sales periods. Instead, they have cleverly adopted a policy of “rolling” sales, where the sales offers are switched between product lines. One difficulty that trading standards officials face in effectively tackling this sort of dishonest, manipulative practice is that the pricing practices guide issued to traders is not mandatory. Indeed, the introduction to the guidance, issued by the short-lived, now-departed, pre-Mandelsonia Department for Business, Enterprise and Regulatory Reform, is a master-class exercise in lowering regulatory expectations:
“This Guide recommends to traders a set of good practices in giving the consumer information about prices in various situations. It has of itself no mandatory force: traders are not under any legal obligation to follow the practices recommended.”
No doubt somewhere, in a remote retail outlet during the quietest period of the year, there will be gathering dust sofas and other furniture at enormous prices that will then be used as a base for sales elsewhere in the country.
However, there is legislation designed to tackle misleading business in consumer marketing and sales practices. The Consumer Protection from Unfair Trading Regulations 2008—CPRs—were implemented to bring the UK in line with the provisions of the European Union’s unfair commercial practices directive. The CPRs prohibit 31 commercial practices and specifically cover misleading or aggressive promotions. These practices are those deemed to be unfair in all cases, regardless of whether it would have induced the average consumer to make a purchase. I believe that the CPRs have particular relevance to the sort of “perma-sale” tactic used by DFS and others. Schedule 1 to the CPRs, covering banned practices, contains the following prohibition:
“Falsely stating that a product will only be available for a very limited time, or that it will only be available on particular terms for a very limited time, in order to elicit an immediate decision and deprive consumers of sufficient opportunity or time to make an informed choice.”
To illustrate the type of practice referred to, the Office of Fair Trading’s guidance on the CPRs cites the example of a trader who falsely tells a consumer that the price of homes will rise in seven days’ time. That prohibition should apply to the “specially extended” sales practice used in adverts such as the one placed by DFS in The Times on 4 September, which stated:
“Final days to save. There’s only a few days left to enjoy half price savings on many great designs and final reductions ...there’s so much choice and so little time.”
The consumer has no idea whether that is accurate but is clearly being pressurised into making a snap decision to purchase rather than an informed choice. Consumer Focus and others have pointed out that the CPRs do not offer direct redress to the consumer. Even if they have lost money, a consumer cannot take traders to court or get direct compensation under the CPRs.
Trading standards offices locally and the OFT nationally are charged with making businesses comply with the regulations, and only they can bring action against traders. Yet to date, the CPRs have been used to prosecute only once. In a country of 60 million people, that is astonishing. It seems pretty clear that the Government need to put the pricing practices guide on a statutory footing, or at least knit together more effectively the PPG and the CPRs. At present, they are cumbersome and difficult for trading standards to apply successfully to the widespread use of the dubious practices that I have mentioned. Trading standards departments may also need more resources to tackle such practices, but I surmise that in the current economic climate that is not likely to happen any time soon.
That aside, I am pleased to tell my hon. Friend the Minister that I take encouragement from the proposals contained in July’s White Paper “A Better Deal for Consumers”, which offers a longer-term prospect of action to modernise this aspect of consumer law. Encouragingly, it commits to a number of actions, such as modernising trading standards powers and
“a new Consumer Rights Bill which will implement the proposed EU Consumer Rights Directive and modernise and simplify UK consumer sales law.”
That is from page 9 of the White Paper, Cm 7669. We await the content of the Queen’s Speech next month with considerable interest.
Keen calendar watchers will note that we are heading towards Christmas, when the sales and marketing efforts of most industries go into overdrive. The big furniture companies are no exception, and the latest flurry of fliers is accompanied by increased broadcast and internet activity. There are just eight weeks to Christmas eve, and a visitor to the DFS website sees the prominent words “Half Price” and “Christmas” on the home page. Again, we see the familiar pattern of a high price discounted, often by 50 per cent. There is no way that consumers can check the accuracy of the amount they are being offered as a discount. So far, so bad.
The internet clearly offers exciting opportunities for retailers and consumers, but we must have the regulatory framework in place to protect and promote consumers’ rights in the virtual marketplace. As I have said, I am encouraged by the content of the White Paper. Its focus on the increasing commercial importance of the internet will be much needed, and I am sure that it will offer yet another important incentive to vote Labour at the general election in the spring.
To return to more traditional media, I was interested to note that the Advertising Standards Authority, hardly the most tenacious of regulatory bodies, has twice upheld complaints from the public in the last year about half-price claims made in DFS’s TV adverts, ruling that they were misleading. Although neither advert was banned by the ASA for using unverifiable price reductions, they point to advertising practices that sail close to the wind, to put it kindly.
DFS has a dubious record in its advertising content, particularly on television. Members might remember its advertising campaign from 2005, which featured tatty old sofas dumped in canals. It rightly drew criticisms of environmental irresponsibility, although the ASA chose not to uphold any of the 70 complaints that it attracted from the public. One is tempted to ask why the ASA exists.
I am struck by the small print on one of the DFS fliers circulated with last weekend’s newspapers, which stated:
“DFS may alter or extend promotions at any time.”
That is the proverbial two fingers to consumer rights.
In addition, DFS and other larger furniture companies make considerable and somewhat emotional and sentimental play of their products being made in the UK. For example:
“DFS don’t just sell sofas, they actually make them in their own factories in Yorkshire, Derbyshire and Nottinghamshire.”
That was in The Sunday Times on 30 August. No doubt some of those products are made in the UK but, as a constituent of mine points out, it is common knowledge in the trade that a significant proportion of DFS’s product range is imported from China. That is another example of misleading information being used to cloud consumers’ judgment.
Given that it is highly unlikely that the Government will reintroduce retail price maintenance, perhaps we should consider alternative measures to tackle the lack of coherent regulation of commercial sales periods in particular. There are useful examples of straightforward, pro-consumer regulation of sales periods elsewhere in Europe. For example, in France retailers of furniture—or anything else—can offer reduced price sales only at certain times of the year, with the Government fixing those dates and notifying the public of them. In Belgium, there are two annual sales periods, preceded by black-out periods when price reductions cannot be announced or suggested by retailers.
I should make it clear, if I have not already done so, that it is not my intention to denigrate one particular company—though it is a large and obvious company—or all the bigger UK furniture companies. I simply wish to point out the unfairness of those misleading sales and promotional practices. They are unfair to both the consumer and the smaller furniture manufacturers in the UK, who can lose out when people decide to buy a piece of furniture on the basis of misleading information. I need not stress that advertising standards and consequent consumer decisions become ever more important during periods of economic recession.
The UK is the fourth largest consumer of furniture in a global market with an estimated value of $240 billion. So furniture is a big and growing sector with great significance in domestic economies. Consumption is growing in real terms in all major markets and is expected to continue to grow in future. That is primarily due to improvements in standards of living in emerging economies such as China and India, and an increase in disposable income in many other western countries, particularly accession countries to the EU. The markets exhibiting the highest growth rates are the new EU members and much of Asia, including China.
At this point, it is important to mention the environmental impact of the furniture industry. The trend of increased imports to the UK from the European economic area and beyond confirms the high carbon cost of an embattled and under-invested domestic furniture industry—and, of course, manufacturing in general. There is no doubt that the UK furniture industry faces tough competition for a proportion of the growing international market. For example, it is estimated that a Chinese factory producing like-for-like products has a 20 to 25 per cent. cost advantage over its UK counterpart at factory gate prices. Competition is also coming from within the EU, with the Polish furniture industry in particular enjoying high levels of investment and growth in recent years. Fundamentally, this debate is an argument not for protectionism but for the larger manufacturers and retailers to be more truthful and honest with domestic consumers. Those are supposed to be two of the four prime guidelines for the Advertising Standards Authority—“legal, decent, truthful and honest.” Truth and honesty are too frequently absent from furniture advertising.
Unfortunately, smaller furniture companies are finding it increasingly difficult to compete domestically or enter the export market. Yet they have the skills and expertise to adapt constantly to a rapidly changing market, which responds to contemporary trends in fashion, art and culture. That difficulty could be alleviated somewhat if Government support to furniture manufacturing were increased, particularly assistance in entering the export market. I look forward to hearing from the Minister about that.
The regional development agencies also have a role to play, as none at present, apart from Advantage West Midlands, classify furniture as a priority manufacturing sector. I hope that my RDA in the east midlands will again consider reclassifying that manufacturing sector as a priority.
Essentially, we must seek to improve the quality of sales and promotion practices used by the big furniture companies. It is not just DFS, but I have used it as an example. Related criticism can be made of several other aspects of retail, but there is no time in such a debate to draw attention to them.
In summary, consumers deserve straightforward and reliable information on the products they buy and we should use the existing regulations to ensure that they get it. If they are unenforceable in the face of artful advertising agencies, let us tighten them. Consumers deserve a better deal than they receive. Standards must be higher.
I am particular pleased to note that my hon. Friend the Minister is replying to this debate. He represents a south Wales seat and will be aware of how important and sizeable the furniture industry in his region is, and of the contribution that it makes to the local economy. He will also be aware, given that he is one of the most astute of the newly appointed Ministers, of the dubious practices that go on. It is a most unfortunate situation. We can do something about it, and I have every confidence that he will do so.
I begin in the usual way by congratulating my hon. Friend the Member for North-West Leicestershire (David Taylor) on securing this debate, which is on a very interesting and important topic, and on elucidating the subject in the House with his usual eloquence. He was as ever well supported by examples from the real world. I thank him very much for his kind words at the end of his remarks, and for the welcome he gave the consumer White Paper that the Government published earlier in the year.
When to hold a sale or a sales promotion is a commercial decision for a business. For that reason, in general, the Government do not believe that it would be in consumers’ interests to follow some of the practices of our European partners which my hon. Friend outlined and to restrict sales periods to certain times of the year. I am sure that many consumers benefit from, and look forward to, the weekend sales that many retailers hold in the run-up to Christmas.
However, the law requires sales to be conducted honestly and fairly. We all love a bargain, but sales should not unfairly mislead consumers into believing that they are getting one when they are not. As my hon. Friend says, that is especially important given that the economic downturn is putting greater pressure on household budgets. I share his concerns about whether that type of fair trading is the reality in certain sectors—he highlighted the furniture sector. We know that many consumers have the impression that some sales last all year round, which makes it difficult for them to know whether the reductions claimed are genuine. Indeed, it is questionable whether any consumers would pay the higher prices against which the reductions are claimed.
The main legislation intended to protect consumers from underhand marketing and sales tactics is the Consumer Protection from Unfair Trading Regulations 2008, which came into force in May of that year. The regulations ban traders in all sectors from engaging in unfair commercial practices with consumers, and cover acts or omissions by a trader directly connected to the promotion, sale or supply of products to or from consumers.
The consumer protection regulations are principles-based and operate flexibly to catch unfair practices. At their heart is a general ban on the use of unfair commercial practices. That is supplemented with more detailed rules on practices that mislead by action or omission, and on aggressive selling techniques. They also contain a schedule of 31 specific practices that are banned outright.
Misleading consumers about the price of a product, or of the existence of a specific price advantage, is one type of unfair commercial practice that is banned by the CPRs; another is misleading consumers about the geographical or commercial origin of a product. The blacklisted practice to which my hon. Friend referred may also apply when a promotion falsely claims that the offer will end very shortly, so as to elicit an immediate decision by consumers to make a purchase.
The regulations apply to all businesses, irrespective of whether they sell on the internet or the high street. A breach is generally a criminal offence. Enforcers can also apply to the courts for enforcement orders, equivalent to injunctions, to stop the use of unfair commercial practices. As my hon. Friend rightly pointed out, the OFT and local authority trading standards services have a duty to enforce the CPRs. In addition, my Department issued a pricing practices guide for traders at the same time that the regulations came into force—
The Minister raises the interesting point that local trading standards have that duty, although it is debatable whether they have the resources to carry it out. However, in an internet era, it is difficult to know which trading standards authority should examine the trading practices that are causing concern.
The Government recognise that and, as my hon. Friend said in his speech, the consumer White Paper talks about some of the challenges of consumer protection in the internet age, and some of the measures that we are planning to put into force to tackle some of the problems that arise when selling over the internet. In addition, the White Paper envisages a future consumer rights Bill and the post of consumer advocate, empowered to take up cases on behalf of consumers in a new way, especially in cases involving a general interest.
As I was saying, the pricing practices guide recommends to traders a set of good practices in giving consumers information about prices in various situations. The CPRs implement the EU unfair commercial practices directive, which sets out rules on business-to-consumer commercial practices that all member states must apply. As a full harmonisation measure, it does not allow member states to apply stricter provisions in the area in which the directive applies. It would not therefore be possible to make the pricing practices guide mandatory, much as my hon. Friend might like that.
However, the new pricing practices guide significantly tightens the guidance compared with the code of practice on price indications, which it replaced. This new guidance is especially pertinent to the length of time businesses should advertise a price reduction. The old code of practice included recommended practice where a trader compares a current price with a previous one. The recommended practice was that the price used as the basis for comparison should have been the most recent price at which the product was available for at least 28 consecutive days in the previous six months. That enabled some traders to argue that they were adhering to the letter, if not the spirit, of the code by having a high price for one month and then reducing the price for the following five months. Because the code had evidential effect in court, this made trading standards reluctant to challenge that practice.
We are also aware that some furniture retailers would offer a small proportion of their stock at a higher price for one month. That enabled them to have “rolling” sales, in which the sales offers were switched between product lines. The new pricing practices guide says that the period of time for which the lower price will be available should not be so long that the comparison becomes misleading. It recommends that generally the period of time for which the lower price will be available should not be more than that for which the higher price was available. I take my hon. Friend’s point about the lack of action so far, but we hope that this change will encourage enforcers to tackle claimed price reductions that have gone on for so long that they have become misleading.
In addition, the higher price should be a genuine price at which the trader could reasonably expect to sell significant quantities of the goods. In determining whether it was reasonable to expect that goods could be sold at the higher price in significant numbers, all the relevant circumstances would need to be taken into consideration. It could be argued that a store was trading unfairly if the previous higher price was not comparable to competitors’ prices at the time or if relatively few goods were sold at that price.
In summary, the CPRs ban any commercial practice that misleads consumers about the price of goods and services or the existence of a specific price advantage. I hope that that reassures my hon. Friend that enforcers already have the powers to tackle misleading sale offers by furniture retailers, although I take his point, which he made forcefully and eloquently, that so far there have been few actions of that kind. I take this opportunity to say that the powers are in place, and I encourage enforcers, when they find that such practices are being carried out, to use those powers in the manner intended by the Government and Parliament.
I referred earlier to the consumer White Paper, which my hon. Friend mentioned. A future consumer rights Bill could help to strengthen further consumer protection regarding such practices. In particular, the consumer advocate envisaged in the White Paper will be empowered to take up cases on behalf of consumers.
I am encouraged by what the Minister is saying, but does he acknowledge that, of all the areas of retailing for which legislation is in place to eliminate poor marketing practice, furniture is one of the most obvious and common areas where consumers potentially are not getting the information that they deserve and require to come to a sensible purchasing decision? Should he not focus on furniture before he turns to any other area of retailing activity?
Yes, I acknowledge that. I also acknowledged at the beginning of my remarks that there was a particular issue with promotions from the furniture manufacturing industry. My hon. Friend mentioned the industry in this country, and in particular at the end of his remarks he rightly noted that I am aware of the furniture manufacturing industry in south Wales. I recognise that imports from low-cost countries can represent a significant challenge to all parts of UK manufacturing, particularly the furniture manufacturing industry.
The Government are taking action through the manufacturing strategy to help companies to compete on value rather than low wages. That strategy was launched in September 2008 and brings together £150 million of support for the medium term to help businesses to access increased skills and technology support. The annual output from the UK furniture manufacturing industry is worth nearly £10 billion, and the industry employs directly about 124,000 people within 7,500 enterprises and supports a large supply chain comprising of materials, suppliers, component manufacturers, designers, distributors, contractors and retailers.
Many of those are small businesses, as my hon. Friend is right to point out. About 67 per cent. of all furniture manufacturing concerns employ fewer than nine people. Also, however, the largest 300 companies account for 45 per cent. of total employment. I acknowledge the importance of the industry. The “Real Help Now” scheme for business is also available to companies from the furniture sector, and the furniture manufacturing sector can access the manufacturing advisory service and UKFirst—the furniture industry forum—which can offer best practice advice to furniture manufacturers to help to improve their competitive position.
I once more congratulate my hon. Friend on securing this debate and on raising a very important issue. I have tried to confirm that the powers are in place to deal with that issue.
I would be happy to meet my hon. Friend together with representatives from the industry to discuss the points discussed principally concerning consumer issues—in my case—although he might have to meet one of our hon. Friends if he wants to discuss manufacturing issues. However, I am sure that one of my ministerial colleagues would be prepared to meet him as well, if that was the tone of the meeting.
To conclude, the powers are in place and the enforcers can use them. Any retailers engaging in such practices should look carefully at their practices and ensure that they are—
House adjourned without Question put (Standing Order No. 9(7)).