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Regulatory Reform (Trading Stamps) Order 2005

Volume 670: debated on Wednesday 16 March 2005

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8.2 p.m.

rose to move, That the draft order laid before the House on 17 January be approved [8th Report from the Regulatory Reform Committee].

The noble Lord said: My Lords, this regulatory reform order is brought forward under the Regulatory Reform Act 2001. Subject to approval by Parliament, it will lift regulatory burdens from the retail sector while protecting consumers from possible detriment.

The Trading Stamps Act 1964, which I shall refer to as the 1964 Act, was designed to regulate what was, in those days, a flourishing market for incentive schemes that encouraged consumers to collect trading stamps and exchange them for goods. I shall briefly summarise the main requirements of the 1964 Act for businesses engaged in trading stamp schemes. They are: to restrict who may promote trading stamps; to display certain information, including the value of trading stamps when they are redeemed for cash; to establish a mechanism for customers to redeem trading stamps for cash, subject to a minimum value of 25p; to ensure that any goods provided to consumers on redemption of trading stamps are of satisfactory quality and that consumers have a clear title to them; and to observe sundry other obligations.

Over the past 40 years, however, there has come into being a comprehensive range of more general consumer legislation, some of which overlaps with, or replicates, provisions of the 1964 Act. In particular, the Sale of Goods Act 1979 and the Supply of Goods and Services Act 1982 now apply generally to most sales or supplies of goods. Those Acts provide consumers with almost identical rights to those that the 1964 Act implies on the redemption of trading stamps. Yet it is the 1964 Act, and not the subsequent Acts, that applies to goods transferred in exchange for trading stamps.

The once-popular schemes—although in the distant past, I remember them rather well—such as the Green Shield Stamps system, have largely been supplanted by state-of-the-art promotions using cards that register electronic points. Those schemes are far more cost-effective than their paper-based forerunners and can be used to provide valuable insight into the buying habits of consumers. Not surprisingly, they have been adopted by numerous supermarket chains, garages and other retailers. Consumers have joined those modern schemes in droves, although it must be said that many of us now walk around with wallets that strain to accommodate the cards that we have been given. So what are the burdens on business that the order is intended to reduce? In the retail sector there is now limited use of trading stamps as a promotional device, but businesses nevertheless need to consider whether promotions that offer discount vouchers might fall within the scope of the 1964 Act and would have to comply with its specific requirements. That process is expensive in terms of both legal advice and the measures that must be taken in the light of that advice. Those costs, which are directly related to the 1964 Act, are not reflected in meaningful benefits for consumers, since the main body of consumer legislation can provide sufficient protection in any case.

By repealing the 1964 Act this proposed order will remove a number of disproportionate burdens from the retail sector. For example, the provisions concerning cash redemption are unworkable in practice because trading stamps are commonly attributed a value of one-thousandth of a penny, but at the moment that does not relieve businesses of the obligation to display the relevant information. The order will, however, maintain important consumer protections relating to the quality and safety of goods exchanged for trading stamps by ensuring that the terms of the subsequent Acts will apply on the redemption of trading stamps. Those Acts are familiar to businesses as well as to consumer bodies that are confident of their ability to pursue any complaints that may arise.

Some provisions in the 1964 Act—for instance, those concerning misleading advertising—are not being taken forward specifically because alternative measures now exist in consumer legislation. I know that retailers and their agents will welcome the harmonised legal regime that will result from this reform, as will consumer advisory services.

The order applies to England, Wales and Scotland. Northern Ireland has parallel legislation, and steps are being taken by the authorities there to make changes on similar lines, subject to parliamentary approval.

In conclusion, there has been extensive public consultation on this proposal, and it has received widespread support from business and consumer interests. The respective parliamentary scrutiny committees have examined the proposal, and their responses have been noted. The House of Lords Select Committee on Delegated Powers and Regulatory Reform has unanimously approved the order, and I thank its members for their work. The committee in the other place initially recommended an amendment to the draft order, but the department has conducted a further consultation of business and consumer stakeholders. As a result, that committee was also satisfied that the proposal should proceed. I beg to move.

Moved, That the draft order laid before the House on 17 January be approved [8th Report from the Regulatory Reform Committee].(Lord Triesman.)

My Lords, I am extremely grateful to the Minister for introducing the order so clearly. As I look around the far-from-crowded Chamber, I think that that makes the argument for taking such debates at a more sensible time of day in the Moses Room ever stronger. I hope that that will increasingly become the practice of the House.

The order is one of those happy things—a repeal of redundant legislation. The problem that we often face is that the statute book is far too heavy with redundant legislation. While we all have great enthusiasm for adding to it, we have far less enthusiasm for deleting things from it. Therefore, the order is much to be welcomed from that point of view if from no other.

The only question that was raised in the committees was whether repealing the Act would lead to a loss of consumer protection in any significant—or indeed any—way. The Government have explained fully why they believe that not to be the case, and we are satisfied with their explanation. Therefore, we are happy to support the order.

My Lords, I, too, thank the Minister for his explanation of the order and his short history of how it came about. It is, except in one respect, non-controversial, and I certainly have not received any objections to it.

The one area of controversy seems to be a difference of opinion between the DTI and the Regulatory Reform Select Committee of the other place about the liability for any defective goods supplied on the redemption of trading stamps. As far as I can discern from a second-hand account of the exchanges between the Commons Select Committee and the DTI, in the end, they simply agreed to differ. But when the Commons Select Committee withdrew its objections, it issued a mild reprimand to the department in its report. It stated:
"It appears to us that the fact that it was not until the latter stage of the RRO process that the Department has sought adequately to address this issue—
that is, the liability for defective goods—
"confirms that the Department has not hitherto approached this reform with due regard for the position of the consumers".

In the end, not only did the Commons Select Committee withdraw its objections, but the order was approved in the other place without debate on 22 February. Your Lordships' Delegated Powers and Regulatory Reform Select Committee agreed with the DTI's interpretation that only the supplier of the goods is and should be liable.

I simply have three observations about the background to the order—not, I hasten to add, to question its purpose. I am interested just in what the Minister might think. First, what evidence is there of any widespread complaint about the quality of goods that are supplied on the redemption of trading stamps? Is there any evidence of a greater number of such complaints than of complaints about goods supplied in the ordinary way by retailers? If not, what need is there for additional redress against the promoter, as distinct from the supplier, in cases where they are not one and the same?

My second observation is entirely philosophical. The continuing use of trading stamps as a means of sales promotion seems, as the Minister said, practically obsolete. These days, there is a proliferation of so-called loyalty cards issued by the supermarket chains, high street retailers and individual department stores. They generally provide for discounts against future purchases from the same retailer, often in the form of coupons issued periodically, which may or may not technically or legally be trading stamps—Boots the Chemist suggests that they are. The discount may be cash credits against future purchases. In some cases, those credits are transferable into air miles, which would be yet another trading stamp scheme were it not for the fact that no paper stamps are issued, rather just an entry on someone's computer.

I believe that the consensus, shared by the DTI, is that those loyalty schemes are not caught by the Trading Stamps Act, although I am open to correction by the lawyers if I have made a mistake on that point. So the days of retrieving those little pieces of paper from the bottom of one's handbag or wallet and sticking them on a card may be numbered in the light of technical innovations. The trading stamp promoters will not go out of business in consequence. I am sure that they, too, will move with the times.

My final point is that the Government first proposed to repeal the Trading Stamps Act in their consumer White Paper of July 1999. That is four and a half years ago. The Government state that the scheme will save between £250,000 and £750,000, concentrated among a few major firms. I am not sure whether that means in total, for ever, or whether that sum is per annum.

However, the delay in removing what is now accepted to be completely unnecessary red tape has undoubtedly cost a great deal of avoidable expense. Obviously, the order is necessary now. Some updating of a law that first came into force 41 years ago, when trading stamps were a novelty, is urgently needed. Like the noble Lord, Lord Newby, we certainly do not oppose the order. We are happy that it has come to be.

My Lords, I thank the noble Lord, Lord Newby, and the noble Baroness, Lady Miller, for their helpful comments. I think I can answer the questions pretty quickly.

I am not aware of any evidence that redemption has been more of a problem for consumers than any other problems they might experience. Plainly, however, whatever scheme is in place, people need to have confidence in it. On occasions in the past, people have felt that some of the goods they got on redemption turned out to be rather shoddy, because they were related to such small sums of money. That is probably the anxiety we are seeking to address.

I wholly take the point raised by the noble Baroness, Lady Miller, about the various bits of paper that may or may not fall under this. I was asking questions about it myself. Even the little cards we get in coffee shops, which they stamp, and then, once we have drunk 10 gallons of coffee, we get a free latte, are trading stamps, I think. There are probably a number of others that still are on pieces of paper, but it is quite right to say, as the noble Baroness does, that loyalty schemes are sweeping all of those things away.

The final point is about the sums of money involved. My understanding is that the savings for business will be in the region of £1 million per year. That is the most reliable figure I have heard. It is true that the repeal of the 1964 Act was proposed in the consumer White Paper in 1999, but work on other measures, including primary legislation, has prevented the proposal from moving forward as quickly as it might otherwise have done. In part, that is because a full public consultation has taken place, and the proposal was first laid for first scrutiny in April 2004, and final scrutiny was in January 2005, to ensure that the process was thorough. Still, I can see the argument that it might have happened a little faster.

Again, I express my gratitude for the contributions to this short debate. I commend the order to the House.

On Question, Motion agreed to.