Consumer Rights Bill

Public Bill Committee, 27 February 2014.

Clause 24 - Right to price reduction or final right to reject

Stella Creasy (Labour, Walthamstow)

I beg to move amendment 25, in clause 24, page 15, line 34, leave out from ‘(12)’ to end of line 39.

Sir David Amess (Conservative, Southend West)

With this it will be convenient to discuss amendment 26, in clause 24, page 15, line 40, leave out subsection (11).

Stella Creasy (Labour, Walthamstow)

Good morning to you, Mr Amess, and to all members of the Committee. We had a wonderful time on Tuesday. Explaining some of the consumer problems we have had in our lives and how that has influenced our thinking was therapeutic for many of us; I am sure today will be no different. We start with a continuation of our debate about people getting their money back in particular circumstances. In particular, we are discussing the right to a price reduction and the final right to reject goods, which is dealt with in clause 24, and what people should get back when goods have gone wrong.

Amendments 25 and 26 reflect our concerns, and I hope we can have a good debate about the provisions dealing with price reductions, in particular the application of such price reductions to cars. Cars are probably the most obvious example of goods that, once bought, depreciate substantially. The question for us is whether the Government have taken the right approach in the Bill to dealing with depreciation, the right to reject and the right to a refund.

We recognise that the Government have included subsections (10) and (11) to cover the car market and to reflect the fact that cars lose value. The AA estimates that a car loses about 40% of its value in the first year of ownership, and that 9% or 10% of that is lost as soon as the owner drives it off the forecourt. Members will know from our conversations on Tuesday that I recently bought my first car, so looking at those figures was deeply depressing. It is deeply depressing for all of us to think about the amount of money we might spend on something that so quickly goes down in value.

Given that the Bill refers to someone being able to get a full-price refund within six months, except in circumstances where a second-hand market exists for the good, the challenge for us is to consider whether we are unintentionally penalising people who buy cars and creating a loophole that might be exploited by traders. Let me explain why we think we are.

First and foremost, if a new car goes wrong within the first six months, it is obviously unfair for the purchaser to suffer that level of financial depreciation. Let us say that a car has gone wrong, the owner takes it in for repair—as the Bill also says they can do—and it still does not work. If it is not working within the first six months, the idea that they should bear the cost of the depreciation when they have clearly been sold something that is faulty does not for us pass the test of whether this is a fair and appropriate measure. We are concerned that someone could be sold a car that has a serious fault and the dealer will say, “Tough. You may have paid £10,000, £15,000 or even £20,000 for this car, but you can have back only £7,000 or £8,000, because there is a second-hand market for these types of car. Even if it’s a faulty car, you can sell it on. Therefore, we’re not going to give you your money back.” Given that we are talking about sums of several thousand pounds, it seems to us dangerous to create that loophole that traders could exploit.

More generally, the notion in the Bill that a given situation is judged on whether there is a second-hand market for the good creates a worrying precedent. In the age of eBay, when there is basically a second-hand market in everything, it is not inconceivable that traders could use that loophole to suggest in relation to a whole range of goods that the money that someone would get back would be substantial. That might apply to the wonderful kettles and jumpers that we have been discussing, or even sofas. Government Members will remember our lengthy discussions about sofas. There is clearly a market in second-hand sofas, but if someone has been sold a faulty sofa and the fault was unable to be repaired within the first six months, should they get back only a fraction of what they paid for it because in theory, someone else would pay money for it on eBay?

Stephen McPartland (Conservative, Stevenage)

Can the hon. Lady clarify something for me? If a car is sold new off the forecourt, anything that goes wrong with it is covered under a warranty. The issue is the sale of second-hand, as opposed to brand-new, cars.

Stella Creasy (Labour, Walthamstow)

I am not sure whether the hon. Gentleman has read the provision, but it is about the six-month period. In general, the Bill states that if someone wants to return something within six months, they should get a full refund. An exception is made where there is a second-hand market, and the provision would apply in the case of a new or a second-hand car. Our point is that we are asking the consumer to account for the depreciation in the value of a good over the six months when they have been sold something that might be faulty. If someone gets to the point where they want to return a good because it is not working, it is not about the warranty, but about the fact that they have been sold a good that is not fit for purpose. The Bill suggests they should be able to return something, whether it is first, second or third hand.

Our concern is that establishing the rule about getting all the money back unless somebody would pay for the good in its second-hand state creates a loophole, enabling a trader to say, “You might have paid £5,000 for this, but I will only give you back £2,000 because it can be put on eBay”. The money will be recouped elsewhere. That seems unfair.

Rob Flello (Labour, Stoke-on-Trent South)

The point about a lot of warranties—I say this as a consumer who often studies the small print—is that when we start reading them, we often find that they do not cover, particularly with cars, the things we thought they would. So I think that issue is taking us off on a—dare I say it?—wild goose chase.

On the point about the second-hand market, if someone sells an item such as a car that is not fit for purpose, the buyer should get their money back. It is up to the seller to worry about whether they can then find a secondary market to sell on something that is damaged goods. Why on earth should the person who bought it in good faith have to suffer? The person who can perhaps sell it on e-Bay or wherever is the person who should recoup the costs.

Stella Creasy (Labour, Walthamstow)

My hon. Friend hits the nail on the head regarding our concern about the loophole in the clause. I can reassure the hon. Member for Stevenage that we will be coming on to warranties and the confusion caused to consumers about what they can get fixed and what they have to pay for. I alert him now that I have another fantastic story about warranties from my own attempts at buying a car, which I will share with him. He can hardly wait; I can see it in his face.

We are concerned that the clause as drafted is designed to support the car market in general, and that by taking the approach that a second-market exists for anything, it opens up all sorts of issues.

Rob Flello (Labour, Stoke-on-Trent South)

Whether I am spending £5,000 or £50,000 on something, I want something that does the job. I do not want to have to have it repaired and fixed.

Stella Creasy (Labour, Walthamstow)

My hon. Friend is absolutely right. I will give the Committee an example that illustrates our concerns about how the measure might work. A consumer buys a brand-new car for £35,000. After six weeks, the car starts to suffer intermittent loss of speed. The manufacturer is not able to identify the fault and effect a repair, so the consumer, reasonably, especially given the safety concerns about loss of speed, asks for a refund. At this stage, the car has only 500 miles on the clock.

A nearly new car of the same model costs about £30,000, which means that within the six-month period they would lose £5,000, a considerable sum of money, especially when buying such goods. Our point is that when a car has been sold that is faulty from the start, the fact that someone has driven it off the forecourt should not determine the amount of money they get back, because it was faulty before they drove it off the forecourt. They simply did not know it was faulty, or could not prove that it was. So we are worried that the clause creates a loophole in a market where there is a very obvious level of depreciation, given the prevalence of sites such as eBay and the capacity for goods to be resold. There are also outlet centres, and a strong and thriving thrift market. We are worried that traders who are not acting within the spirit of the law could use that loophole for a whole range of goods, to try to reduce the amount of money that a consumer is rightly owed.

Therefore, the idea of a six-month period in which someone is entitled to all their money back would not necessarily stand the test of time. We could certainly get into the situations we were discussing on Tuesday: consumers complaining, knowing they are entitled to a full refund, and then being told, “Actually, we can put it on eBay, so we are only going to give you this amount back, because there is a second-hand market in it.” Amendment 24 would deal with that issue.

There would be a different point of conversation six months hence, and it is right to say that six months is a reasonable period in which to discover whether a good of that nature is working. In that six-month period in which there is a right to a full refund, there should not be a loophole such as this. We should not have the problems that might arise for consumers such as negotiating a price reduction. That is another problem—the price reduction is determined by the trader.

In the example of the £35,000 new car, one might say, “Okay, after six months, if we were really going to reflect the depreciation of the good you are bringing back, which is not brand-new, should we take 5%, 10% or 20% off its value?” The AA says that 10% comes off as soon as a car is driven off the forecourt, and the average depreciation in the first year is 40%. There could be another unclear set of negotiations for the trader and the consumer to get into; nor would it be clear what the consumer could expect out of that situation.

So one issue to recognise is depreciation, and another is not setting out what that level of depreciation could be. This clause, however well-meant, could inadvertently create huge problems for consumers with some quite substantial goods in some very simple situations. An example is that the car has been faulty from the start, it has taken a while to reflect that and it cannot be repaired. Therefore, someone should be able to get their money back and, however disappointed they might be to return their car, start again. They certainly should not have to search on eBay to check how much they will get back.

I hope the Committee will therefore recognise that, in suggesting that the clause be amended in this way, we are trying to protect consumers, and traders, so they know exactly what they have to deal with. Frankly, if they are selling faulty goods, they should not have to be thinking, “Well, I can get away with it if I can put it on eBay.” The amendment would make the Bill stronger and simpler, which, after all, is what we all said we wanted it to be. I hope Members on both sides of the Committee will support it.

Jennifer Willott (Liberal Democrat, Cardiff Central)

As the hon. Lady said, these amendments remove the exception to the general rule in the Bill that in the first six months after buying a good, the deduction for use is not applied. It might be helpful if I first remind the Committee what is meant by “deduction for use”, because it is not exactly what the hon. Lady suggested. Under the current legislation, if the consumer chooses to exercise the final right to reject, the trader may reduce the refund provided. The reduction takes account of the use that the customer has had of the goods. It is not the value of the goods at that point; it reflects the use the customer has had.

For example, a consumer has been driving a car around for three years and has had normal use before a fault manifested itself. The refund could be reduced to take account of the fact that the consumer has been driving the car for three years without a problem. That seems fair, because the consumer has been caused no inconvenience during those three years of use, and it is therefore right that the consumer be accountable for that use. The Government believe that it is important to continue this existing right in the Bill. It allows traders to apply a deduction from the refund for the use that the consumer has enjoyed, and it tries to ensure a fair balance between the rights of the consumer and of the business.

Under the current law, traders can make a deduction for use at any point to reflect the use the consumer has had. Clearly, it is frustrating for consumers to receive only a partial refund if they have had relatively little use of the goods, and if the use they have had has been overshadowed by the irritation of having to deal with a fault. Currently, therefore, a deduction for use can be made at any time. Because of the frustration and irritation that it causes to consumers, the Bill includes a new protection for them that in most cases prevents a deduction from being applied in the first six months. The general rule for those first six months has this limited exception, which the amendment would remove. As the hon. Lady rightly highlighted, the exception is designed to reduce the potential cost for traders in respect of complex and high-value goods where there is a concern that removing the right to make a deduction, even within the first six months, could bring significant detriment.

The trader will therefore be able to apply a deduction during that six-month period if they can demonstrate an active business-to-consumer second-hand market in goods of the same make and model. Importantly, the exemption does not apply to goods that are commonly traded only between consumers, such as on eBay or other online auction sites; the exemption specifically applies to the business-to-consumer market. Online auction sites tend to be for consumer-to-consumer purchases, which are not covered by the Bill. The trader also cannot simply direct a consumer to a market in similar goods. The market has to be in goods of the same make and model—the drafting is tightly worded.

The exception uses the concept of corresponding goods, which is defined in subsection (11). The trader must be able to point to an active market in goods that are the same, taking into consideration any factors that a reasonable consumer would be expected to consider when buying the goods new. If a reasonable consumer would be expected to consider factors such as the size or capacity of the goods in question as being relevant when buying them new, for example, the trader will need to demonstrate an active business-to-consumer market in the same goods of the same size or capacity.

The criteria are designed specifically to direct the exception to where it is most needed, which is high-value or complex manufactured goods. Those are the goods in which traders have an interest in selling second-hand, and they are also the type of goods that might sometimes be subject to a series of minor faults. A car, for example, might have two small faults. Perhaps a windscreen wiper needs fixing and an indicator bulb has failed, both of which are minor faults that can be easily fixed, but as we have already discussed, the consumer has to accept only one repair before they can move on to their final right to reject. It would not usually be reasonable for a consumer to reject the whole car because of a failed windscreen wiper and a failed indicator bulb and expect a full refund.

In any case, if a trader chooses to apply a deduction, the deduction must reflect the actual use that the consumer has had of the goods. The deduction should not simply reflect the second-hand value of the car; it has to reflect the actual use that the consumer has had.

Andy McDonald (Labour, Middlesbrough)

If something fundamental goes wrong, is the Minister saying that there is a fundamental right to reject the car within six months and get a full refund? If I have that wrong, perhaps she can clarify the matter. Secondly, if there is to be a deduction for reasonable use, is that deduction by reference to time? If someone is off the road for a period of time and wishes to pursue a claim of negligence, for example, the claim would be for loss of use. The claim might be for, say, £25 a day. Alternatively, the deduction might be by reference to mileage, which would be pence per mile. Can she offer any guidance on how that might work in practice?

Jennifer Willott (Liberal Democrat, Cardiff Central)

On the hon. Gentleman’s first point, if a fault is identified in the first 30 days, the consumer will, as with any other goods, have the right to reject and get back the full amount of money. We are talking about when a fault develops between day 30 and six months and where either a repair has failed or there is more than one fault. As with everything else, after that point the consumer has to accept one repair, and for most items the consumer has the right to reject and get their full money back if a second fault develops in the first six months. The assumption is that in the first six months, for pretty much everything, the consumer would get their full money back if, after accepting a repair or replacement, an item does not work. We are talking about the very small group of items for which a deduction for use may apply in the first six months.

On cars, I completely understand what the hon. Gentleman says about time and miles. What represents a fair deduction will need to be considered on a case-by-case basis. If someone purchases a car that develops a small fault after they have driven 40 miles and they spend the next four months off the road waiting for the car to be fixed, the use that they have had is clearly miniscule. However, if someone has been driving a lot and so has driven 10,000 miles in that first six months that is clearly a different situation, even if the point at which they were rejecting the item was the same—after five months, for example. The judgment needs to be made on a case-by-case basis, taking the circumstances into account.

Andy McDonald (Labour, Middlesbrough)

Will that be a matter of negotiation between the trader and the consumer, or is there another arbiter who will resolve what a reasonable deduction is in those circumstances?

Jennifer Willott (Liberal Democrat, Cardiff Central)

I will get clarification for the hon. Gentleman in a minute, but my understanding is that initially it would be a discussion between the consumer and the trader. It will need to be considered on a case-by-case basis, taking into account the balance of all the different things he highlighted. We would hope that the consumer and the trader would be able to reach a reasonable agreement in the same way as when a consumer takes an item back to demand a full refund. If that were not the case, there is a legal route that can be pursued, as with the rest of the Bill, and the consumer would have to go down that route. As the provision has been tightly worded, it should be quite clear that only a very small proportion of items is covered, in a specific market, and that what has to be considered is use that the consumer has benefited from rather than the second-hand value. I hope that it would therefore be relatively self-evident.

Andy McDonald (Labour, Middlesbrough)

I can foresee circumstances where the measure could get us into difficulties, for example if somebody has bought a vehicle, left it in the garage for most of the time and so not had any use out of it, and then gets into a negotiation with a trader who says, “You may have paid £35,000 for it, but I will give you £30,000. That is in full and final settlement, so you either take it or leave it.” That puts that consumer right behind the eight-ball. What on earth do they do in those circumstances? They are between a rock and a hard place—they have to get the money into their account so that they can purchase another vehicle, but the way the negotiation is being presented to them means they have no other form of redress if they dispute the difference between their valuation and that of the trader. It is a bit of a worry.

Jennifer Willott (Liberal Democrat, Cardiff Central)

I think at that point the consumer should call the Citizens Advice hotline for advice on what their consumer rights are, what could be implemented and what action could be taken. It might be, for example, that Citizens Advice knows from other calls that there is a particular problem with that trader— it has identified that person as a trader who has caused issues for other consumers, and so needs to be referred to Trading Standards. It will depend on the circumstances.

The measures in the Bill are designed to be clear, so that businesses and consumers understand their rights. The majority of businesses are honourable and want to ensure that they get repeat business. However, there will always be some that are not, as the hon. Gentleman has highlighted. That is why we have the enforcement route, as well, involving Trading Standards if something criminal has taken place, or else the civil courts. We can design a law as tightly as we want but there will always be some people who try to get around it. That is why the Bill is worded tightly, to be as precise as is possible.

When the Department for Business, Innovation and Skills consulted on the issue, only a small minority of respondents to the consultation favoured scrapping the deduction for use. Two thirds of respondents to the online consultation agreed that it was right that the provision be retained. We need to consider the context at the moment, which is that the deduction for use can be applied at any time. The Government are providing more protection for consumers in the Bill, because the deduction will now not generally be allowed to be applied in the first six months. At the moment, exactly the situation that has been outlined could happen at any point for any item a consumer purchases—after 30 days, a deduction for use can be applied for any use a consumer gets from a car, any wear they get from a jumper or any use they make of a sofa. The Government are tightening up that provision to give consumers more protection than they currently have.

The Government believe it is important to have the exception for the very small group of items involved. It is limited in scope, so the vast majority of consumers would receive a full refund in the first six months, and where a deduction is applied, it will reflect only the actual use that the consumer has had of that product.

Fiona O'Donnell (Labour, East Lothian)

I apologise for my late arrival. I had a faulty security pass that became detached—though not within 30 days, so I will not be returning it. Returning to a theme raised earlier with the Minister, buying a car often involves a loan, a credit purchase agreement. What is the situation with interest that has been paid on the original capital loan? Would the interest on any credit agreement also be refunded?

Jennifer Willott (Liberal Democrat, Cardiff Central)

I will write to the hon. Lady about that, because that area of policy falls under the Treasury’s responsibilities rather than those of BIS. It is quite complicated, but we are part-way through doing the work on that. I can promise her that she will get a letter, which we will copy to other members of the Committee so they know as well.

Fiona O'Donnell (Labour, East Lothian)

Often, the other attraction of buying a new car is extended warranties, which may be part of the purchase. What would happen to an extended warranty? Would it be transferred to the replacement vehicle, or would it go back to the original term? Where do extended warranties sit within this part of the Bill?

Jennifer Willott (Liberal Democrat, Cardiff Central)

I think I will have to come back to the hon. Lady on that point. The rights under statute cannot be undermined by anything put into a warranty, so anything in a warranty would sit over and above someone’s statutory rights. I assume it would probably depend on the terms of the warranty and what the contract said, so a warranty would not affect the rights a consumer had in this area. It may be that they had additional rights as a result of the warranty that they had paid for, but we will come later in our deliberations to issues relating to warranties.

Andy McDonald (Labour, Middlesbrough)

Will the Minister bear in mind, as we progress through the Bill, that my hon. Friend the Member for East Lothian has identified an important issue? In circumstances where the goods have failed, the warranty is actually redundant. Any moneys that have been transferred in respect of that warranty ought to be repaid in full, because there has been no ability for the consumer to implement or access that warranty during its term.

We might may have a defective batch of security passes. I do not know whether the consumer services want to have a look, but my badge has also become detached. Something is afoot here that needs to be looked at.

Jennifer Willott (Liberal Democrat, Cardiff Central)

The hon. Gentleman raises issues about the use of a warranty. It would depend on the terms of the warranty. I know that some, for example, enable a consumer to get the full value of the vehicle back if certain things happen within a period of time. It may be that the consumer has already used those terms. The important point is that a level of statutory protection for consumers is laid out in the Bill, and it cannot be affected by the terms of the warranty. With that, I hope that I have clarified the situation and that the hon. Member for Walthamstow will withdraw her amendment.

Stella Creasy (Labour, Walthamstow)

I thank the Minister for her answer, because in talking through this issue, she has raised a number of points that are of real concern to me. First and foremost, she suggests that the value of a car would not be taken into account in deciding on the use that had been made of it. The same goes for goods; we are mainly talking about cars here, because the clause was originally drafted to try to deal with cars. It would be difficult for somebody to go back to the forecourt and say, “This is within my six months, I want my full refund on my lovely, shiny new car that is intermittent in speed. I have only driven it 500 miles”. If the trader then says: “Actually, I look at the second-hand car market and see that it is worth £5,000 less”, that second-hand car market test in and of itself takes into account the value of the good. It does not necessarily take into account the use of a good.

Although the Minister argues that the Bill sets out a test about the use of a good, the Government have determined that the test will about the value of a good on the second-hand market. There is a difficulty there.

Jennifer Willott (Liberal Democrat, Cardiff Central)

The existence of a second-hand market is the test that triggers whether a deduction for use can be considered. It is not the factor that decides what deduction is then given. It is what enables a trader to trigger the exception. That is an important distinction.

At the moment, traders can apply a deduction for use at any point, on any good, so the scenario the hon. Lady mentioned is exactly the position that people are in now. The Bill introduces an underlying assumption during the first six months after purchase that the deduction for use cannot be applied except in certain circumstances. At the moment, it applies across the board.

Stella Creasy (Labour, Walthamstow)

I thank the Minister for that answer. Let me be clear: the Opposition think it is a good thing to give people a clear six-month period in which they should expect a full refund. However, we are concerned that the way in which the clause is drafted undermines that.

I am sorry, but I do not think that the Minister can say that the clause is tightly drafted. Let me be very clear. The clause says:

“No deduction may be made if the final right to reject is exercised in the first 6 months…unless…when the goods were supplied to the consumer, the make and model of the goods were stated, and…the trader gives the consumer clear, independent evidence of an active second-hand market for the sale by traders to consumers of corresponding goods.”

That does not state that it triggers the idea that the consumer and trader can have a discussion about depreciation, but not a discussion about what that depreciation is; rather, it implies that that depreciation should be taken into account when considering the price reduction. She cannot have confidence that the provision has been drafted tightly enough to be in the spirit of her intention that the clause set out simply that if there is a second-hand market, it should be taken into account and there should be a depreciation, but it should not set out what that depreciation should be.

Fiona O'Donnell (Labour, East Lothian)

We are going to discuss extended warranties and add-ons later, but does my hon. Friend agree that the clause is linked to those? Often the reason people buy a new car is to have an extended warranty—that is why I did so. If I had to return the car and take its second-hand value I could not then replace it with a new car with an extended warranty, because the warranty was not free—it was part of the cost of the original car—and so in that case I would have lost out.

Stella Creasy (Labour, Walthamstow)

I very much agree with my hon. Friend. We are going to come on to warranties, and the confusion that can be created with regard to people’s statutory rights. The Bill is giving people a statutory right to a six-month period in which they can get a refund, and that is welcome, but the challenge is that the way that the clause is drafted creates a loophole. It says that if there is a second-hand market in a good, that market can be taken into account when exercising a price reduction. Our problem is that opening that door opens up all sorts of conversations about what the second-hand market means for the possible price reduction. A second-hand market in and of itself reflects depreciation, so the suggestion that the issue is solely the use of the vehicle rather than its depreciation in value does not stand the test of the Minister’s measure.

Rob Flello (Labour, Stoke-on-Trent South)

Having recently bought another second-hand car—within the past month—this issue is close to my heart and very much in my mind. I had to travel a quite a lot of miles to get to the garage from which I bought the car. On the matter of use, there is a second-hand market, and the trader from which I bought the car buys cars in for much less than the value for which it sells them, so that is one difference. Also, if I got the car home only to discover there was a fault, could a trader argue that the miles I had to drive to get it home—we are talking quite considerable mileage—counted as personal use? The situation is complicated and the Bill does not recognise the complications.

Stella Creasy (Labour, Walthamstow)

I very much agree with my hon. Friend. There are ways in which some of those complications could be recognised in the Bill. I think we would all encourage the Minister to think about how the clause could be amended to tighten it up to be more in the spirit that she intends, so that the fact that there is a second-hand market cannot in itself allow the trader to say, “We are not going to give you back all the money you paid six months ago.”

Another concern is that the clause is about goods. As much as we are talking about cars, the provision is not drafted tightly enough to specify that it is about particular types of good. I do not think that the Minister’s comments about eBay and other second-hand sites online hold water either, because eBay is full of businesses selling on second-hand and other goods. Again, the test that is set, about sale “by traders to consumers”, does not refer specifically to online markets.

Jennifer Willott (Liberal Democrat, Cardiff Central)

The Select Committee on Business, Innovation and Skills looked at the provision in detail and made recommendations about how to ensure that it was tightly worded so that it did exactly what the Government were saying it should do. We took on board the recommendations that the Select Committee made. It was satisfied—it was confident—that if we put in the Bill the provision that we have, it would give effect to our intention.

On the hon. Lady’s previous point, I want to make it clear that subsection (8) states:

“If the consumer exercises the final right to reject, any refund to the consumer may be reduced by a deduction for use, to take account of the use the consumer has had of the goods”.

It specifically says that it relates to a deduction for use, not the second-hand value. That is the subsection that relates to how a calculation would be done, and it relates just to a deduction for use, not the second-hand value.

Stella Creasy (Labour, Walthamstow)

I am sorry, but I think that the Minister is not being accurate, because subsection (8) also states,

“but this is subject to subsections (9) and (10)”,

and subsection (10) is the one about the second-hand market, so it does refer to the second-hand market. If the Minister reads out subsection (8), she needs to read it out in its entirety. It says specifically that the provisions about the trader giving the consumer

“clear, independent evidence of an active second-hand market for the sale by traders to consumers of corresponding goods”

can be taken into account. That is the problem that we face. There is indeed a provision in the Bill for sites such as eBay and outlet centres to be taken into account when considering whether someone gets their money back and what sum of money they will get back. That is before we get on to the questions that my hon. Friend the Member for East Lothian has raised about warranties and whether someone has paid money for a credit agreement. There is also the question whether the cost of the petrol for someone going to and from the garage can be taken into account.

The test that the Government are setting—that there is a second-hand market—means that the value of a good will be taken into account, so the question of depreciation as soon as someone drives a car off the forecourt can be part of what the trader comes up with. The provision is not drafted as tightly as the Minister thinks. It does refer specifically to the loophole, in subsection (10)(b).

Jennifer Willott (Liberal Democrat, Cardiff Central)

I just want to clarify this for the final time; I do not intend to stand up again. Subsection (10) says whether a deduction can be applied. Subsection (8) says how the deduction is calculated. The two are separate. Subsection (10) is about whether a deduction can be applied. Subsection (8) is about how that is calculated. The two are separate.

Stella Creasy (Labour, Walthamstow)

The Minister needs to think carefully about the argument that she is trying to make, because subsection (8) says specifically that

“any refund to the consumer may be reduced by a deduction for use”.

We all accept that, but it goes on to say specifically that that is subject to subsections (9) and (10), and subsection (10)(b) mentions the role of the second-hand market in determining whether—

Jenny Willott indicated dissent.

Stella Creasy (Labour, Walthamstow)

The Minister shakes her head. Let us look at the start of subsection (10), then. It states:

“No deduction may be made if the final right to reject is exercised in the first 6 months…unless”—

and then it gives the proviso that the second-hand market can be taken into account. Surely the fact that we are having this discussion and there is confusion makes the case for tightening the way in which the provision is drafted. Opposition Members understand the spirit of the Government’s intention: a deduction can be made for use; there should be some recognition of the use that the consumer has had from a good. However, we are concerned that opening up the test of what use has been made and therefore what deduction can be made to the notion that there is an independent second-hand market creates a loophole that some traders will use to drive up the deduction. Use will be confused with value. There are ways in which the clause could be amended slightly.

Jenny Willott indicated dissent.

Stella Creasy (Labour, Walthamstow)

The Minister shakes her head. I am pleased that she feels confident about it. If I were a consumer taking back a car with the intermittent speed problem that we discussed and the trader said to me, “Look, you’ve had it for four months. I’m looking at the market on eBay that other traders are using and it says that these cars, after four months, are worth only £5,000, so although you paid £8,000, I’m going to give you £5,000, because that is a fair test of what the car is now worth,” would I be able to argue that that did not reflect the use—

Jennifer Willott (Liberal Democrat, Cardiff Central)

Yes.

Stella Creasy (Labour, Walthamstow)

That takes us to the second point, to which the Minister would say, “Well, you’d have to go to the citizens advice bureau.” Given that the Bill specifically states that the second-hand market can be taken into consideration in determining the price reduction, I am not sure that the CAB would say that I have a strong case.

Fiona O'Donnell (Labour, East Lothian)

Is that a second-hand market for goods before or after the repair has been made good?

Stella Creasy (Labour, Walthamstow)

That is an interesting question, because the Bill refers to goods that correspond. We would all hope that a trader who accepted that a car was faulty would not resell it—

Fiona O'Donnell (Labour, East Lothian)

A hoover?

Stella Creasy (Labour, Walthamstow)

My hon. Friend was not here when we were talking about her sofa and our desperate concerns for it. The provision would cover not just cars but any goods being sold. The question is whether the depreciation and the value of goods can be properly identified, in order to differentiate, which is what the Minister is trying to do, depreciation in value over time from depreciation by use. The problem is that the clause is not clear on how that would be determined. It is one thing to say, “You have had this beautiful sofa, but it has wonky legs, so it is not worth as much as it would be with straight legs.” But it is another to say, “The sofa has not been sat on for four months because it has wonky legs. The cushions and the scatter cushions are perfect, but the value of the goods has depreciated owing to length of ownership rather than use.”

Under use, the consumer would be entitled to a full refund, but the value would be deflated because it had been away for four months. However, it will be incredibly difficult for a consumer to argue that on a forecourt or in a shop. I cannot believe that the Minister intends citizens advice bureaux to tell consumers that they have a case because they have not sat on a sofa that has wonky legs but that they must go back and argue it out.

I appreciate the notion of giving people the confidence that they have six months to get a full refund, but I urge the Minister to think about tightening the provision. I know that other hon. Members are concerned about the capacity of Trading Standards to look into these issues, because the acts we are discussing will not fall under the criminal law but will be a matter for debate between a trader and consumer about whether use or value should be taken into account in deciding the amount to be refunded. A trader might say to the consumer, “You have driven 500 miles in this pristine car, but you have driven up and down country lanes and stalled the gearbox a number of times.” I live in horror at what my driving might be doing to my gearbox. I do not know whether that results from a fault or from my being a new driver, but if a trader decided to say, “You might think that I am depreciating it for value, but I am depreciating it for use”, there would be a problem.

Our main concern is that the clause will not do want is intended. We support the Government’s intention, but we encourage them redraft it to make it tighter. If the Minister will not make that commitment, we will push it to a vote and encourage the Government, perhaps in the Lords, to differentiate use from value clearly in the Bill.

Jennifer Willott (Liberal Democrat, Cardiff Central)

The matter has been looked at in detail as part of the pre-legislative scrutiny conducted by the Select Committee on Business, Innovation and Skills. It made a recommendation on tightening the clause to make clear the Government’s intention. We took on board its recommendation and amended the Bill, which proves the point of good pre-legislative scrutiny. The Select Committee was happy with the amendment.

Clause 25 - Delivery of wrong quantity

Steven Baker (Conservative, Wycombe)

I am slightly concerned that subsection (3) might propose a change to the law. I am not an expert, but my understanding is that a consumer who receives unsolicited goods does not have to pay for them. Will the Minister confirm that by accepting a delivery people will not be charged for products that they did not order? I am slightly concerned that unscrupulous suppliers might oversupply a product and that, by merely acquiescing to that oversupply, consumers might be billed for something they did not want.

Fiona O'Donnell (Labour, East Lothian)

I will not detain members long, as I shall raise this in later stages of the Bill on the rights of small businesses as consumers.

I am looking for some clarification about automatic renewal. Unscrupulous traders often do not communicate with vendors when a product is automatically renewed and the terms and conditions may have changed. Consumers frequently change e-mail addresses, but they then would not be in receipt of that information. How will this clause impact on automatic renewals?

Jennifer Willott (Liberal Democrat, Cardiff Central)

I assure the hon. Member for Wycombe that this subsection does not change the law. Consumers who order, say, eight bags of potting compost but receive 10 have a choice. If they wanted 10 they could pay for 10, they could reject the entire lot or they could just keep and pay for eight.

The issue highlighted by the hon. Member for East Lothian would be covered by the provisions on quantities of goods and unfair contract terms.

Clauses 26 and 27 ordered to stand part of the Bill. - Clause 28 - Delivery of goods

Stella Creasy (Labour, Walthamstow)

I rise simply because this is a clause that we want to draw people’s attention to. It relates to the debates we had on Tuesday, about when it is appropriate to set a time scale on something and when it is not. We note that this clause gives consumers confidence that a good has to be delivered within 30 days. I draw the Committee’s attention to it, perhaps slightly pointedly, given some of the conversations and protestations we heard on Tuesday about how difficult it was for traders and suppliers to meet deadlines. If they were trying to fix something in a repair, how could they be asked to do it within 30 days, when they might be trying to get the trader from Italy to fix some wonky sofa legs, or why should they be asked to give a refund within 30 days?

Yet it seems that the Government think it is fair to say that a delivery should be made within 30 days. By intending to give some clarity and simplicity to this legislation about numbers—in the 30-day right to a refund and, as here, a 30-day right to have something delivered—this just seems to us another example of how we can learn to give clarity in other areas of the Bill. We would certainly like to see the 30-day rule more consistently applied. This seems to us an example of where some of the concerns raised by Government Members about suppliers and delivery are not taken into account, yet would be taken into account when it came to a repair. These are all things a consumer would be really concerned about, having got something into their house.

I draw the Committee’s attention to this, on the basis that it should bear it in mind when it comes to some of the work that we will do on Report.

Jennifer Willott (Liberal Democrat, Cardiff Central)

There are differences between purchasing something for the first time and when a consumer asks for a replacement. The initial supply of goods by the trader is under the trader’s control, because they put an item on sale in the first place, whereas the request for a replacement is triggered by the consumer. In the majority of cases when a trader sells an item, they should be in a position to predict the availability of goods. They will know how long it will take them to get it in stock if they do not have it already. They should also know that they can provide it by a particular date. Therefore, it is not particularly onerous on a trader to be required to deliver something within a 30-day period.

On the other hand, in the case of a replacement, the process is initiated by the consumer and the trader has no warning that it will happen. In those circumstances, it is quite possible that the trader will have stock and supply issues and so on, and will not be able to provide a replacement within a fixed 30-day period. The right to request a replacement can extend for up to six years in some circumstances, by which time the trader may not actively stock those particular goods. So it is a very different set of circumstances than the purchase of an item for the first time.

If it is years later, offering a replacement may still represent the most cost-effective remedy for the trader, but they may have to source the goods from elsewhere if they do not sell them any more and so on. That could take longer than 30 days, which is what we were discussing the other day. I hope that that clarifies the difference between the two circumstances for the hon. Lady.

Clause 30 - Goods under guarantee

Stella Creasy (Labour, Walthamstow)

I beg to move amendment 27, in clause 30, page 19, line 26, leave out ‘states’ and insert

‘sets out in full and clearly understandable detail’.

This is the clause that a number of Committee members have been waiting for, in terms of warranties and the additional protections that might be offered when buying something. Let me now satisfy what I know must be the burning inquiry of the hon. Member for Wycombe about my personal experience of a warranty that I was concerned about, which I mentioned earlier. It is the sort of issue that we are trying to tease out in some of our amendments and questions for the Minister.

I think all of us are familiar with the concept of buying something and being offered a warranty to give additional protections for our goods. In many circumstances, it may make a lot of sense if one buys something of considerable value. For me, it was a car, though I am afraid it was second hand, not first hand. It was the first car I had ever bought. The company offered me an extended warranty on top of the provisions that it had already made to get this car serviced and fixed within my first year. This was about extending this warranty and all the provisions with it. For a mere £1,500, I could extend that warranty for three years.

The hon. Member for Stevenage makes the face that I made when I started to go through the numbers. The gentleman in the shop tried to do the sums for me about what this warranty would really cost me and why it was such a great deal compared to what I might end up paying for servicing or if the car was faulty. Obviously, as the Minister would point out to me, at the moment I do not have the same protection that within six months I could take it back and get some kind of a refund, so it was potentially a very valuable piece of paper.

That is the sort of problem we are dealing with. When I looked at the amount of money that the tradesman tried to tell me that I would pay for this wonderful guarantee, it simply did not stack up. That is even before I looked at what I would actually have had to do if I tried to use that warranty. Anybody who has ever tried to exercise a warranty and been told by the trader that the small print says that in that particular circumstance that particular issue does not apply will be very glad of some of the provisions in the legislation. They will be glad that the Government are saying, “There are some statutory rights that you should have, independent of whether you’ve bought a warranty.”

The question for all of us though is that, given that the terms “warranty” and “guarantee” are so well used and well known and given the tendency for traders to use them in conversation with consumers, how do we ensure that consumers know what is their statutory right and what is part of a warranty, what they get as standard and what the added benefit of such a deal is? I can reassure the hon. Member for Stevenage that I did not buy the warranty I was offered. When I did the sums and pointed out to my partner what a bad deal it was, he said, “You’re going to make a fuss, aren’t you?” I said, “Yes, clearly.” At which point, we walked away. Having the time and confidence to do that is about knowing what our statutory rights are as opposed to what a warranty might offer.

The amendment would introduce a rule similar to that which we were developing around point of sale and point of complaint, to ensure that when a customer is sold a warranty they will know what is statutory and what is additional. When they get a warranty, they get a piece of paper—a record of what they have bought—as added protection. First, what does their money buy them and, secondly, what can they complain about and under which laws? It is not a particularly onerous request to make of a trader; after all, if they are going to provide the details of their warranty, as they should because the customer is buying a separate good, surely they can at the same time provide details of the customer’s statutory rights. I know that the Minister has thought differently about whether consumers need all the information at that particular point.

Andy McDonald (Labour, Middlesbrough)

My hon. Friend makes an excellent point. We had the argument before about information on statutory rights at the point of complaint. When someone is purporting to offer a guarantee or a warranty that provides rights and abilities over and above the statutory rights, is not such information even more important at that point, to make the nature of the available statutory rights abundantly clear? I am not saying that what those rights are necessarily has to be in the clause now, but there should be an obligation on those providing warranties to state what consumers’ ordinary statutory rights are. A consumer might decide that it is pointless to have the alleged benefit of the warranty.

Stella Creasy (Labour, Walthamstow)

I completely agree with my hon. Friend. Looking at what was offered by the extended warranty and comparing it with the warranty that the car company claimed was standard with the car I was buying made me realise that it was not a particularly good deal. “As standard” is what we are talking about in terms of statutory rights. Helping consumers know what they should expect as protection, as opposed to what additional benefits they might buy, seems welcome. Let me give the Committee an example of how that might apply.

If a consumer buys a computer and an extended guarantee that says that it will not break down in the first six months, the consumer might believe that they are buying an additional guarantee that it will not breakdown in the first six months. As we discussed, under the Bill, they will be entitled in any case to a full refund, so why would they need to buy an extended warranty? They would be buying something superfluous. If they were told their rights at the point of purchase, it would, first and foremost, probably stop computer companies and so on from selling extended six-month warranties, because those rights would clearly be provided already, and it would mean that consumers could make a more informed choice about whether the additional protections and costs they incur by taking out the warranty were warranted. Martin Lewis talked about that in his evidence. He said that there was confusion among consumers between a warranty and statutory rights. If we make the system simpler and improve people’s understanding of what consumer rights are when they buy goods, it would first and foremost stop them buying unnecessary warranties. We have all had the frustration of saying, “It wasn’t worth the paper it was written on.” Given that the legislation gives protections, it is more important that we protect those rights by ensuring that people have information.

The amendment does something simple. The Government’s legislation says that consumers should have information. Consumers should not just be told when they buy something that they have statutory rights, they should be told what those rights are. In the same way, when a consumer buys a warranty, they should not just be told that they have statutory rights, but what those rights are. That way, a consumer can compare them against what a warranty offers and make a better informed decision about whether they want to buy it. I hope the Minister will accept the amendment.

Steven Baker (Conservative, Wycombe)

The hon. Lady makes a reasonable point. Considering the length of the Bill, how long does she envisage that such a statement of full and clearly understandable detail would be? I hope it would be fewer than 120 pages.

Stella Creasy (Labour, Walthamstow)

I admire the fact that the hon. Gentleman believes that the Bill is purely about people’s statutory rights and not about how they are accessed. He will recall the conversations on statutory rights we had on Tuesday and on the Thursday before the recess, and how simple the Government seek to make them. There are not that many to remember; Citizens Advice and Which? have come up with pictures of them.

Steven Baker (Conservative, Wycombe)

How long?

Stella Creasy (Labour, Walthamstow)

If he has not done so, I encourage the hon. Gentleman to look at the picture from the Citizens Advice briefings on rights, such as that goods should be fit for purpose, satisfactory and returnable within 30 days. I am sure he could give me his own test, because I know he has been listening adamantly to all the conversations on the Bill.

Steven Baker (Conservative, Wycombe)

It is the hon. Lady’s amendment. I am asking how long she thinks that a full statement in clearly understandable detail should be. I am not asking how big the picture is from Citizens Advice. How long does she think a full statement of people’s rights should be?

Stella Creasy (Labour, Walthamstow)

I am surprised that the hon. Gentleman does not believe that Citizens Advice offers a good metric on the length. Let me be clear. For the avoidance of doubt, what Citizens Advice has suggested is entirely reasonable, and that is what should be included. We had this discussion about point of sale and point of complaint information before.

Andy McDonald (Labour, Middlesbrough)

I am becoming confused. Did we not hear evidence from Martin Lewis, who produced a card no bigger than a wallet, clearly stating statutory rights? I do not understand the problem. Is my hon. Friend equally puzzled? It is a fairly simple issue. It is a piece of paper that could go inside a wallet.

Stella Creasy (Labour, Walthamstow)

I thank my hon. Friend. I would like to ask the hon. Member for Wycombe why he has not sought to amend the Bill to limit the size of a guarantee. I hope his concern comes from the possibility that somebody might be deluged with pieces of paper. The Bill does not preclude that happening as a way of trying to confuse a consumer.

We have clear examples of how these rights could be simply set out and applied and the remedies simply defined. Perhaps the hon. Gentleman can tell me whether he thinks it is right to tell people that they have six months to get a full price refund, except when they can buy something on eBay. That sentence could be included in a guarantee. Does he feel it would be a terrible burden on the trader to change warranties to include that? Perhaps he is already on eBay looking at a new product to check these items.

Steven Baker (Conservative, Wycombe)

I was listening carefully as I checked what was being proposed. I am not sure that I accept her assertion that a full statement of rights can be fitted into a wallet. I think the hon. Member for Middlesbrough used that example. If the hon. Lady believes that the Citizens Advice picture or Martin Lewis’s guide on one page is acceptable as a full statement of our rights, that is fine. I understand that that is her position.

Stella Creasy (Labour, Walthamstow)

I recognise the hon. Gentleman’s genuine concern that people should not be weighed down with paper or long e-mails. I assume that that is his concern. He would rather that people were simply told that they had rights at the point of buying something, rather than ensure that they were able to cross-compare. He says, “Buyer beware!” If you will permit me, Chair, we can reassure the hon. Gentleman by showing him the length of the item that fits neatly on one page of A4. If we had with us the warranties from previous sales contracts they would be length of this briefing. Perhaps the hon. Gentleman would agree with us, since we argue that people should have this information at the point of sale, that statutory rights should be on the wall clearly displayed.

The amendment would ask that that

“sets out in full and clearly understandable detail”

people’s rights. The Opposition do not wish to direct businesses to the extent that the hon. Gentleman wants.

I have been shown that the terms and conditions can be fitted on the back of a receipt, no less. I appreciate the hon. Gentleman’s genuine and reasonable concern to avoid people being deluged with information, but given that Citizens Advice has done so much work on the issues I hope I can assure him that a solution is possible. Indeed, I am sure that the Minister will tell us that the implementation group is looking at this very issue.

Steven Baker (Conservative, Wycombe)

Does the hon. Lady believe—yes or no—that a statement of rights on the back of a receipt is a full statement of people’s consumer rights?

Stella Creasy (Labour, Walthamstow)

Yes, because if it is a statement of people’s rights, that is what it should list. It is one of our concerns that such a list is not required currently. I have said to a number of people in recent weeks, “Please take me with you if you want to return an item, because I feel I could make a good case”. I am sure that, in the course of our conversations, many other members of the Committee have become much more aware of what they can and cannot request and, therefore, the simplicity of what we propose.

I am surprised by the hon. Gentleman’s new-found concern that providing people with information might not be a good thing. I caution him, because I have listened intently to the Minister who has spoken time and again about how people might access such information. She said that the Government oppose our attempts to ensure that everyone has such information in a simple and standardised format because the implementation group is looking at precisely how to do that. I am concerned that the Minister might have a bit of a Back-Bench rebellion on the need to provide the information at all if the hon. Gentleman continues with such questions.

The hon. Gentleman is making a strong case for why it is important that people can separate out what they are being offered. Surely he would not want someone to be offered a warranty without being given its full details. After all, someone seeks recourse to a warranty only when something has gone wrong. They would look at the clauses of their warranty to see whether they were covered—whether, for example, the sofa with the faulty legs was covered or whether it had been purchased sold as seen, in which case the trader would say, “Tough”.

If we can be so confident that we want people to have details of a warranty, is it unreasonable to argue for an additional page informing them of their entitlements in law? There should be no chance of a trader trying to tell them, “Well, tough. The legs might be faulty, but I told you that that wasn’t covered in your warranty”, and for that to supersede their statutory rights. I am sure that the Minister would agree that, in such circumstances, we should have no truck with someone who tried to confuse a customer with a warranty that they wrote to try to supersede a national law on what can and cannot be expected.

People need that knowledge in such awful moments when they have to complain. I return to the conversation we had on Tuesday and I hope that I can bring a little of my psychological background to the debate. No one likes complaining and no one likes it when things go wrong. We want to try to make it as simple and easy as possible for people to put things right.

Mary Glindon (Labour, North Tyneside)

Is my hon. Friend aware that many retailers that sell white goods or televisions advertise longer guarantees? I worked for a well-known department store that gave two-year guarantees on items guaranteed by the manufacturer only for one year. That adds an extra complication, as the second year’s guarantee is allegedly the same as the manufacturer’s guarantee. Consumers could, however, buy the same item in another shop and get only a year’s guarantee. It is important that customers know their statutory rights when even guarantees can vary.

Stella Creasy (Labour, Walthamstow)

My hon. Friend is absolutely right. I am sure that the Minister would point out that she said earlier that some people are still entitled to a price reduction up to six years after buying something. There are all sorts of scenarios in which warranties and guarantees may apply.

Stephen McPartland (Conservative, Stevenage)

Will the hon. Lady clarify which rights she suggests would fit on the back of a receipt? Are they a summary of a customer’s rights or their full legal rights? The right to reject, for example, which is outlined in the Bill, takes up five pages of A4.

Stella Creasy (Labour, Walthamstow)

I think the hon. Gentleman has hit his head—[ Interruption. ] In my own mind, I am already re-reading Freud as well. Where he wants to hit his head is not up to me.

I am sure that the Minister will tell us that the implementation group is looking at such questions. Our amendments are about not missing the opportunity presented by the Bill to ensure that when the implementation group has come up with the perfect way to describe something—a neat, clear and understandable format—it does not add to the paperwork that people receive when they get their warranty; it will be possible to put it on the back of a receipt.

That should not be only a guidance issue—every consumer should have it, so that at that awful moment when they complain they can turn it over and say, “Here is what I have, and you are in breach of my rights”, or “You are trying to sell me a warranty that existing law already gives me, so do not tell me that when I bring my broken computer back you cannot fix it, or I cannot have a refund. That is my legal right, and is nothing to do with whether I bought your warranty.”

People encounter those situations regularly, and we are trying to ensure, in the light of the hard work being done by the implementation group, that it will be every trader’s responsibility to give out the information. It should not be done by only the best traders—those who offer excellent additional warranties, which unlike the one someone tried to sell me are worth the paper they are written on. Independently of those warranties, people should know that if something goes wrong in six months they can take the item back.

Andy McDonald (Labour, Middlesbrough)

The Martin Lewis summary of rights is a simple, concise statement of statutory rights. It is perfectly proper and easy to refer someone to the entire Act, or even to give a website link to it, or the telephone number of the citizens advice bureau, if someone wants to take a matter up. That is infinitely better than leaving people in the dark, which coalition Members would be perfectly happy to do. They should stop digging.

Stella Creasy (Labour, Walthamstow)

Opposition frustrations with the concerns that coalition Members express are about a preoccupation with how to help people in such situations to get things right, and to feel able to complain and resolve issues quickly and appropriately. I hope that coalition Members recognise that we are trying through our amendments to prevent the good work of the implementation group from going to waste. I hope that the Minister will take them in the spirit in which they are intended, as a way to ensure that people who buy things have the information they need about what type of good to expect and what to do if things go wrong. That is all we ask.

Amendment 27 is also intended to prevent traders from using warranties to confuse the issue.

Stephen McPartland rose—

Stella Creasy (Labour, Walthamstow)

The hon. Member for Stevenage wants to intervene. I shall take his intervention and then we should hear from the Minister. I am sure that she takes a positive view of the work of the implementation group, even if some Back Benchers perhaps do not.

Stephen McPartland (Conservative, Stevenage)

I am grateful to the hon. Lady for letting me intervene again. The amendment uses the words “in full and clearly”, but we have been talking about a summary. I am concerned that an elderly person might be given 72 pages of documentation to sign when she buys something.

Stella Creasy (Labour, Walthamstow)

I am disappointed, then, that the hon. Gentleman did not table amendments to prevent warranties consisting of 72 pages of extra paperwork from being given.

Stephen McPartland (Conservative, Stevenage)

I may do.

Stella Creasy (Labour, Walthamstow)

The hon. Gentleman says he may do so. We are debating the clause today and I have seen no amendments from him so far, so his concern about paperwork does not necessarily ring true. He has not put his money where his mouth is.

Rob Flello (Labour, Stoke-on-Trent South)

If someone gave me a warranty 72 pages long, the alarm bells would go off in my head and I would wonder how many caveats, get-outs and wrangles there were. I am not sure I would want to buy something with such a warranty, because I would think “You are effectively saying it does not cover anything.”

Stella Creasy (Labour, Walthamstow)

My hon. Friend highlights why, in the light of the concerns of the hon. Member for Stevenage, and the fact that he is obviously aching to table an amendment limiting the length of warranties so that people can be confident about the information, it is disappointing that he has not done so. [ Interruption. ] I am pretty confident that it would have been in order to do that for this clause. I hope the hon. Gentleman will reflect on that, and I look forward to seeing the amendment he will table on Report.

In the meantime, all we are seeking to do, given that the legislation already sets out that people should be told their statutory rights as part of a warranty, is to establish what form that would take, so that we can be confident that it fits in with the implementation group’s suggestion, meets the concerns about point of sale and point of complaint, and means that people cannot be sold a duff warranty. That is not a particularly radical idea. I hope that the hon. Member for Wycombe is never sold a duff warranty, because it is very distressing when it happens, not least if it is 72 pages long. Goodness knows how he would fit that in his car on the way home.

I hope the Committee will support the spirit of and intention behind the amendment. I fear they will not, but I hope that, when we discuss the implementation group, the Minister will be a bit more positive.

Fiona O'Donnell (Labour, East Lothian)

I promise not to detain Members for too long, but I would say to the hon. Member for Wycombe, who was concerned about the semantics of the amendment and the use of the word “full”, how full was the coalition agreement? It was supposed to be a full programme covering every aspect of our lives, but I think they probably condensed it.

For the first time, I am going to have to disagree with my hon. Friend the Member for Walthamstow. She said that no one likes complaining and taking back faulty goods, but I have to admit that, on the rare occasions when my grumpiness needs an outlet, I relish finding fault with something and taking it back to the shop, despite awful memories of shopping with my mother, who would ask in stores, “Do you have any slightly soiled or damaged goods?” It was a brave attempt to obtain goods cheap, but it was extremely embarrassing, as a child, to be there.

This is an issue that I genuinely get very angry about, and I have been known to stand in the queue at well-known large electrical outlets and inform consumers of their rights as the salesperson is trying to sell them an extended warranty. People are often put under pressure to sign up to and pay for the warranty there and then. They are told that it is only available now, and they are not made aware of any cooling-off period. It is not just a question of how such warranties interact with their statutory rights; often, they duplicate rights that they may have under other insurances such as home insurance. That can cause problems further down the line. As we all know, when we make an insurance claim, the insurer asks whether the item in question is covered by any other policy.

I was standing next to someone when they were buying a fridge-freezer and heard them being told, “If you’re moving house, don’t worry—that will be covered by this warranty.” However, it was probably already covered under their home contents insurance. Moreover, removal firms provide policies that cover all the goods being moved. That person was then told that, in the event of a fault, the goods inside the fridge-freezer would also be covered by the extended warranty. I then chipped in and said, “I think you’ll find that they are already covered.” At that point, I was asked to leave the store, but never mind. The market is slightly healthier these days, but a lot of retailers saw this as a way to pressurise worried consumers into paying for such warranties on the day. To me, selling someone goods in the hope that they will break down or develop a major fault shortly afterwards seems rather pessimistic.

I would have liked us to have gone further, saying that retailers have to make people aware that they could be duplicating cover by purchasing such warranties.

Mark Durkan (Social Democratic and Labour Party, Foyle)

Does my hon. Friend agree that this and any similar amendments that would help to curtail the racket that is extended warranties would not just protect consumers, but would protect staff from being pressured into persuading consumers to buy payment protection insurance that they do not need? Many staff are compelled to do this, even though they know in their heart of hearts that it is not in the consumer’s interest for them to make that extra payment.

Fiona O'Donnell (Labour, East Lothian)

Absolutely. My hon. Friend makes an excellent contribution to the debate. That is indeed the case, and sometimes staff are even on commission and given targets to achieve in selling the products. I therefore hope that the Minister will see that there is an opportunity here. The Government are making a great and brave attempt to improve consumer rights, and the amendment is an opportunity to ensure that we go that extra distance.

Jennifer Willott (Liberal Democrat, Cardiff Central)

I am sorry that I have to upset a number of hon. Members this morning.

Extended warranties, which several hon. Members spoke about, do not come under the clause at all. The clause is about guarantees that are given without extra charge and covers only guarantees that are part of the package handed out by a shop. If someone purchases an extended warranty, they would not be covered by the clause anyway. Although the hon. Member for Walthamstow mentioned sold warranties a number of times, they are not related to the clause, which deals just with guarantees that are not paid for. Extended warranties that are paid for are covered by other parts of the Bill and the unfair terms provisions, as we discussed. They are also covered by Financial Conduct Authority regulations. The clause relates just to free guarantees.

The Government acknowledge that confusion might be caused by the wording that was highlighted by Which? in its evidence to the Committee. It raised concerns about the phrase that is probably on the back of the receipt that the hon. Member for Middlesbrough produced: “This does not affect your statutory rights.” People do not understand what that means. It does not help anyone to have that information.

I want to reassure the Committee that we are committed to clarifying the situation and to making it easier for people to understand what their rights are. I have said this before, and I will say it again: that is what the Bill is all about. It is about providing clarity and simplicity both for businesses and consumers. To make the Bill work, consumer education is critical, so that people know what their rights are without having to wade through acres and acres of pages.

Clause 30 already requires any guarantee to include a statement informing the consumer that they have rights under the Bill that are not affected by the guarantee. It will also require the guarantee to be written in “plain and intelligible language”, in an effort to get round problems with jargon that people do not understand. Those provisions are already in the clause. I think we all agree that it is sensible that guarantees contain that reminder, so that people know that they have rights under the Bill.

It is important that the consumer can make sense of the reminder. Which? pointed out that ensuring that it is intelligible and that people understand how to access information are equally important.

Fiona O'Donnell (Labour, East Lothian)

I apologise that I was not accurate. The Minister should have stopped me.

Often, when free, additional extended warranties are offered, the retailer will ask the consumer to register the warranty, for some reason. It requires the consumer to give out their personal contact details. Is that a condition of statutory rights or only a condition of extended warranties? I would like a shop to tell me about that when I am buying something. I was always under the impression that I had to give those details to have my statutory rights.

Jennifer Willott (Liberal Democrat, Cardiff Central)

Statutory rights apply when a consumer purchases something. Whatever the guarantee says on top of them, it cannot limit them. If the trader includes something that is contrary to a consumer’s statutory rights, then it is not binding; statutory rights take priority.

Often, traders will ask for personal contact details. A related issue—electrical recalls—was raised on Second Reading by Members from Northern Ireland; I think the hon. Member for Foyle mentioned it. Often, traders will ask for information so that they have a way of getting in touch with consumers. Otherwise, they have no way of knowing who bought their items and how to get in touch with them again. The two issues are often linked, but statutory rights cannot be undermined or removed.

As ably pre-empted by the hon. Member for Walthamstow, the issue is one for the implementation group to work on. It is important that the group identify a clear and understandable wording, which will be published in the form of guidance to provide the information. The debate on what “full” would mean when providing information, on which members of the Committee have very different ideas, illustrates that, if it were a requirement, it would be difficult for businesses to know what they are supposed to be providing. The information that is provided to businesses is important, and the implementation group has a critical job in identifying the best way to provide that information.

Steven Baker (Conservative, Wycombe)

The Minister is right, but does she agree that the practical experience of life today is that we are constantly provided with agreements that are far too long because businesses wish to protect themselves from being sued? Opposition Members, by supporting this amendment, are being unrealistic about the common practices of businesses that overload consumers. I welcome what the Minister is doing to try to ensure that people get reasonable information.

Jennifer Willott (Liberal Democrat, Cardiff Central)

The hon. Gentleman is right. That is one of the issues about which we are concerned. I have referred in previous debates on similar subjects to the research on how information overload is counter-productive. How many people read all the information before they tick the little box to say that they have read all the terms and conditions? We know that nine out of 10 people have not read all the information. Just providing the information is not very helpful. We need to consider how we can provide information in a form and channel that people can access and easily understand.

Andy McDonald (Labour, Middlesbrough)

The Minister has been extremely helpful with her clarifications. I will restrict my intervention to guarantees. Does she agree that it is offensive—whether it is an offence is another matter—when traders incorporate within a guarantee the rights that the consumer already has by virtue of statute? On the related point of people offending under this clause, subsection (8) states that it applies if

“a person fails to comply with a requirement of this section”.

I am happy for the Minister to come back to me on this, as I do not intend to ambush her, but is the drafting correct? I might be entirely wrong, but when I look at the definition, it seems that a “person” is a consumer. Was the intention to refer to “a guarantor or any other person”? I do not know whether that is right—I could be entirely wrong.

Jennifer Willott (Liberal Democrat, Cardiff Central)

If it is okay with the hon. Gentleman, I am keen to wrap up, because we are coming to the end of the sitting. I will get back to him on his last point.

On the point about including statutory rights in guarantees, we are talking about guarantees that are provided free of charge. It is perfectly fair for a guarantee to set out the consumer’s statutory rights. Particularly as the consumer is not paying for the guarantee, it should include the consumer’s rights. The amendment addresses how we ensure that people know their rights and how that information is shared through guarantees.

As the hon. Gentleman said earlier, the most appropriate way to provide information to a consumer might be to direct them to Citizens Advice, or a website, or whatever it might be. That may be a more effective way of directing someone to a summary of their statutory rights, and it is something that might be considered. As the hon. Member for Walthamstow said, Citizens Advice has suggested how that might be done, which is welcome. That may be the best way forward. My understanding is that the work has not yet been tested on consumers, so we are not completely sure of the best and most easily accessible way for consumers to get information on their rights.

It would not be helpful to keep adding to the list of things that businesses have to tell consumers, because we would end up with a morass of information that was difficult for people to access. The implementation group’s work to identify how to ensure that people get the right information at the right time in the right way is important to making the Bill work. I therefore do not think that including the matter in the Bill is the right way forward.

Andy McDonald (Labour, Middlesbrough)

If we leave it to the wonderful work of the implementation group, is not the danger that whatever the group comes up with will simply not have any statutory force?

Jennifer Willott (Liberal Democrat, Cardiff Central)

The vast majority of businesses want consumers to return, because they benefit from repeat trade and good customer service. We know that if there is guidance that makes it simpler for businesses to operate with repeat custom from happy consumers, that is the way they will go. As we said earlier, there will always be rogue traders, so we must ensure that there is effective enforcement. We also know that involving both businesses and consumer groups in agreeing a way forward and a best way to share information, so that people know their rights, is effective in ensuring that businesses take up and follow guidance. I hope that hon. Members are reassured by my answers.

Before I sit down, I have a response to the hon. Member for Middlesbrough on subsection (8), which uses the word “person” because the clause imposes obligations on the guarantor and any other person who supplies the goods. By law a person is not necessarily an individual and can be a company. I hope that answer clarifies his point.

I ask the hon. Member for Walthamstow to withdraw her amendment.

Stella Creasy (Labour, Walthamstow)

Welcome to this afternoon’s sitting, Mrs Osborne. This morning was fun, and I am sure this afternoon will be even more so under your chairmanship. What pleasures await us, and we are all excited about them.

The Minister will not be surprised that we are concerned about how people access information, but we are keen to see the implementation group’s work taken seriously. The hon. Member for Wycombe has already got his head on something this morning, and I am sure he will continue in his resolution that nobody understands business quite like him.

We will return to the issue on Report, and I am sure the Minister will as well, because we all want to get it right, but I beg to ask leave to withdraw the amendment.

Clause 33 - Contracts covered by this Chapter

Stella Creasy (Labour, Walthamstow)

I beg to move amendment 45, in clause 33, page 21, line 38, at end insert—

‘(4A) For the purposes of this legislation, intermediary services which enable access to digital content by being a platform for introducing a consumer to a trader shall also not be considered to have supplied digital content.’.

We move on to the excitement that is the digital content section of the Bill. The amendment reflects our concern about how digital content is accessed. We have more general concerns, although you might prefer us to speak to the amendment first, Mrs Osborne. The issues fit together, because we all recognise that the way in which we trade online and use the interactive world to buy goods and services has changed our lives for ever. In fact, I notice that two thirds of Committee members are online at the moment—I am sure they are not shopping, or if they are, that it is purely for research purposes.

The clause sets out what contracts are covered by chapter 3, so it is essentially about stating what digital content is. We want to make it clear that people interact online in different ways, which we should be able to take into account in consumer legislation. The amendment is intended to seek some clarity from the Government. It is a probing amendment about the role of intermediaries when people want to operate their rights with regard to digital content.

Why does that matter? Because intermediaries are an integral part of digital content. They are often the organisations that enable us to access it, and we want to ensure that the Bill’s provisions about how to access rights in the case of digital content reflect that. We must not create confusion for consumers about how their rights are exercised, and particularly about the role of intermediaries in that process.

We particularly want clarity about how intermediaries are perceived in the Bill. For example, if someone bought something faulty from eBay or Google Marketplace, against whom would they seek redress and how would that redress be operationalised? There is inevitable confusion about whether it would be the responsibility of eBay or Google Marketplace to accord people their rights, or whether the rights would come through the person trading with the consumer. That confusion comes because the digital world is evolving. As we buy more things online, including those with additional components, clarity about the interaction between the intermediary and the trader will be more helpful. From talking to a lot of technology companies, I know that it will help them as well. Especially given how online goods and content have developed, if we do not have that clarity it could stifle innovation.

What do I mean by innovation? Some of the most influential platforms that we all now use on a regular basis were not originally constructed for the purpose for which they are now used. I hesitate to suggest that any members of the Committee are on Facebook at the moment, but its provenance is not as the site that it has become. All of us welcome the way in which the world of social media has allowed us to develop new products, new ways of interacting with services and new opportunities for communication. But when the question is whether something is fit for purpose, the way in which that is tested will necessarily be confused by the innovations that have taken place.

We do not want to stifle innovation, but let us suppose a consumer is concerned about a game they have purchased through a Facebook link. How do we ensure that the methods we are setting up in the Bill for dealing with problems with content that a consumer has accessed through an online platform do not prevent a company such as Facebook from coming up with innovative and creative ways to use its platform?

I will go on to talk more generally about contracts and content. Because a lot of content that people access is free initially, issues of how people can exercise their rights if there is a problem will come into that discussion. However, the amendment is about intermediaries. Our aim is to tease out the distinctions between the different organisations and platforms that provide opportunities for consumers to interact with digital content and the content itself. It will be helpful if the Minister sets out explicitly how the Government define those differences. With your leave, Mrs Osborne, I will expand a bit more in the clause stand part debate on content that is initially free, how that content then interacts with payment and possible problems with fitness for purpose.

Jennifer Willott (Liberal Democrat, Cardiff Central)

Welcome back to the Committee, Mrs Osborne. You have the joy of an extended sitting this afternoon.

The hon. Lady is quite right that the issues she raised about clarity and the like are key to the clause. I reassure her that we are at one on the intention behind the clause. As we have said repeatedly, clarity is critical to the Bill; it is what will make the Bill work and make the measures in it more effective for both consumers and businesses.

The hon. Lady is trying to achieve clarity in this particular area with her amendment, which is intended to make it clear that the consumer’s rights apply with regard to the trader and not the intermediary service that introduces the consumer to the trader. I agree completely with her intention, but—I know this is what she wants to know—the matter is already dealt with in the Bill; it is how the Bill is designed to work. The consumer’s digital content quality rights relate to the trader who supplies the digital content to the consumer under a contract and for a price. By definition, the consumer’s contract is with the trader supplying the digital content and not with the intermediary that introduces the consumer to the trader, as the intermediary does not supply the content.

For example, if a consumer uses a search engine to find a download of a film that they want to purchase, the search engine is simply the intermediary, and no contract is made by using it. The contract is between the consumer and the trader that provides the download. If a consumer buys “Angry Birds” using Google Play, the contract is with Rovio, which produces “Angry Birds”, rather than directly with Google Play—Google Play is the intermediary and Rovio is the trader. In that example, then, all the rights provided in the Bill would apply in relation to Rovio. However, if the consumer buys “Angry Birds” directly from the Apple App Store, the consumer has a contract with the App Store and so the App Store will be the trader. The key is where the contract relationship lies.

The situation is the same for distance sales of physical goods over the internet. If I buy a copy of a novel from Amazon, Amazon is the trader. If I use Amazon Marketplace, and the book is being supplied by Books R Us, Books R Us is the trader and Amazon Marketplace is the intermediary.

The Bill takes a principles-based approach to regulation, because, as the hon. Lady said, this particular sector is developing all the time and we do not want the Bill to be out of date within 10 minutes of becoming law or, as she highlighted, to prevent innovation or make it difficult for companies to develop. That principles-based approach provides the flexibility and future-proofing that we all agree is needed, particularly for digital content. Pinning the Bill down to specific definitions of types of digital content products would defeat that purpose. The idea is for flexibility to be built into the Bill. I hope that that has reassured the hon. Lady and clarified the position.

Stella Creasy (Labour, Walthamstow)

I thank the Minister for her response. I think she understands the concern that we raised, and I am satisfied with what she said, so I am happy to move on to the stand part debate. I beg to ask leave to withdraw the amendment.

Stella Creasy (Labour, Walthamstow)

It is worth reflecting at this point on how digital content is changing and what that might mean for some of the rights that we will discuss later.

We know that digital content is now part of everybody’s everyday lives. In fact, all members of the Committee are online at the moment, which is a good thing. Digital content is such a huge part of our economy, our future and our consumer society that the way in which contracts related to it work will be not simply an addition to consumer law but integral to it. We should consider the fact that £103 million was spent on digital music streaming last year alone, and that £233 million was spent on digital albums. A third of Brits are now downloading or streaming music legally, and the UK video games industry, including mobile gaming and downloadable content, is worth £1.7 billion. Some 40% of the increase in spending on digital videos in the past year was to do with downloads, subscriptions and streaming. We want to get the Minister’s response to that situation.

As the world of streaming and downloading digital content evolves, questions arise that become ever more live. At what point does a liability occur for goods? At what point does somebody seek redress if there are problems with digital content? When we discussed the role of intermediaries, the Minister talked about “Angry Birds” and the distinction between iTunes and Google Marketplace for Android apps. I do not know much about Android—I have not gone over to the dark side and have been completely faithful to Apple and the iPhone. However, we know that Google now has 1 million apps, with thousands being downloaded daily, so it holds a huge amount of content.

It may well be worth admitting that I am as guilty as anyone of downloading and playing games. In particular, I should like to front up to playing “Candy Crush Saga”. I would like to say that I have played it purely for research purposes in preparation for the Committee. I know that the hon. Member for South Thanet has admitted that she had to get rid of it because she found it deeply addictive.

Laura Sandys (Conservative, South Thanet)

Me? I didn’t.

Stella Creasy (Labour, Walthamstow)

Well, I do not wish to expose the hon. Lady.

Laura Sandys (Conservative, South Thanet)

The hon. Lady and I have nuptials coming up, and I feel that I might have to invoke my 14-day cooling off period. Despite what she said, if we want to get to the deep-rooted addiction that I have to deal with, it is puzzles on an iPad that I am addicted to.

Stella Creasy (Labour, Walthamstow)

I thank the hon. Lady for that correction, and I am glad to say that the return period is actually 30 days, so I have a little more time to make good and address the fault. We might need to see if we can have a repair on the forthcoming nuptials.

The point about games such as “Candy Crush” is that they are so-called freemium games. Someone can download the original content for free, but anybody who has ever played “Candy Crush” will know the bitter frustration and anguish that comes from not having completed a level, and tried and tried again, only to find that they cannot try any more because there is a time limit on accessing that level. The hon. Member for Stevenage is looking at me quizzically. I can only say to him that it is probably better that he hears about such games from me rather than trying them for himself, because I can promise him that they are incredibly well designed.

We know that such a design is deliberate, because the tactic is to offer premium-quality content to encourage people to spend money in the game, having originally been offered it for free. Someone downloads a product on to their iPhone or Android phone, but the game is designed in such a way as to get them to spend money on accessing more levels or boosters. That freemium approach is becoming increasingly common and raises interesting questions about consumer law. At what point does a trader have duties and responsibilities if there is a problem with the content? If the copy of “Candy Crush Saga” that I have downloaded on to my iPhone becomes corrupted or damages my phone and I have not yet paid for the service, at what point do I have a right of redress on the content and its possible impact on my material goods? We are interested in that because there has been growth in offering free technology as a precursor to a paid relationship that a contract would normally be expected to imply.

That raises interesting questions on where the law sits. What right would I have to complain? The Minister explained earlier that, because I had gone through iTunes, my relationship would be with iTunes, but at what point would I have the right to tell iTunes, “This freemium technology has caused a problem with my phone and I am therefore seeking redress”? If there was a problem with the technology and I could not download a repair, would I have a right to a refund even if I had not paid anything in principal? Would I have the right to redress? I want to understand the Government’s thinking on freemium apps.

There are other examples. Do games that require in-game currencies count? Such currencies are not a form of legal tender, but they are a form of tender that someone might accrue within a game. We all feel Lily Allen’s pain at having refused to be paid in bitcoins, because those bitcoins would now be worth a lot of money, but are there payment obligations not only for bitcoins but for in-game currencies?

Sheila Gilmore (Labour, Edinburgh East)

My hon. Friend might not know that there seems to be a problem with bitcoins. Some people have lost a lot of money. Perhaps we need to be careful with new technology.

Stella Creasy (Labour, Walthamstow)

My hon. Friend is right, as ever. That raises interesting questions in consumer law about the obligations created by such exchanges. Are they the same as when someone hands over money considered to be legal tender, or are they considered to be a part-exchange of goods? The evolution of such technology raises those questions, and it is right that we have digital content laws that can address them. Nobody wants to stop games being constructed—well, some of us might because of the pain caused by not being very good at them—but we want to be able to interact with them.

Stephen Doughty (Labour, Cardiff South and Penarth)

Is my hon. Friend aware of the services that are available in online virtual worlds? My former housemate works in the business of creating online shops within virtual worlds that sell products and services that exist in both the real world and the digital world. That is an increasingly complex and evolving arena, which is why we have to get it right.

Stella Creasy (Labour, Walthamstow)

My hon. Friend is right. Ways of working and commerce that might have seemed fanciful 10 or 15 years ago are now common ways of operating and generating value and obligations. There are questions about the way in which we access information and content online, and we must ensure that the Bill works with them. We recognise that the Government have thought hard about the Bill and that there are differences in the way in which digital content works.

Given that the clause sets out the contracts that are covered, it would be helpful to address the question of freemium technology. We have already considered the amendment on intermediaries, but at what point does a consumer have a right of redress for digital content that they received for free but that may lead to paid parts? If I were to give in to my addiction by paying for levels on “Candy Crush Saga,” would I have the right to complain if the entire programme was corrupted, or would it just be for the elements for which I had paid? Those points may seem to be technical, but as the world develops and value is generated online in that way, people will seek redress for elements that they have not necessarily paid for but with which they have a relationship. It would be helpful if the Minister could set out her thinking on those issues so that it is on the record for the future.

Steven Baker (Conservative, Wycombe)

I am delighted that Opposition Members have mentioned bitcoins and that I am not the only person in the room who is aware of them. Have the Government considered the effect of bitcoin contracts? When we find that digital content is being used to buy digital content, will the provisions be adequate? I am not saying that they are not; I would just like to know whether the Government have considered that point. Some Members might not know what bitcoin is. For the sake of clarity, it is a peer-to-peer crypto-currency, whereby chains of digital signatures are used to create a currency, which can be used to buy whatever people see fit.

At the moment, someone buying a bitcoin typically has to go to a foreign currency exchange that trades in bitcoin. I do not think the Bill covers foreign currency exchanges, which would rule out that aspect. However, I have bitcoin on my mobile phone now. It is easy now to send a payment in bitcoin. The consequence of consumers using mobile phones to send payments in bitcoin is that paying a price means sending digital content in exchange for digital content. I am not sure that that has been considered in the Bill. It refers to

“the consumer using, by way of payment, any facility for which money has been paid.”

Have the Government considered whether bitcoin is money?

Jennifer Willott (Liberal Democrat, Cardiff Central)

So, talking about premium services and so on, the hon. Member for Walthamstow was quite right to recognise that they are an issue. She said that it is probably increasingly so, as the technology develops. The regulations on consumer contracts address the issue in a number of ways. First, they require information on any price to be made clear before the agreement is made. If there is an associated cost, that has to be made clear at the beginning.

Secondly, under the regulations, where there is an obligation to pay, the trader must make that clear. It cannot be a little tick box at the end that is already pre-ticked, for example. If there is an obligation to pay at some point, the trader must make that clear to the consumer up front, so that the consumer knows that that is part of the contract. Unless the consumer expressly consents to those additional payments, they will not be bound. Those are some of the protections for situations where people get hooked in and pay when they do not realise they are paying.

If the consumer has paid any money for the digital content, the rights will apply. As the hon. Member for Wycombe said, that includes the facility through which money is paid. That is intended to capture virtual currencies—not just bitcoins, but a whole variety of different things that someone can build up, such as points on Xbox. The provisions therefore capture different currencies.

The rights are also relevant when something is given away with something that has been paid for—if a premium has been paid for the item. An example of what we wanted to avoid was a loophole enabling a trader to give away a free game with a software magazine when the magazine costs a lot more than normal. As the game is apparently free, the trader could evade the requirement of the quality rights, but that will not be possible. There is a difference with a magazine that offers, for example, building up people’s box set of whatever their favourite TV programme is, and they pay for that. Another example is the free music CD that comes with a Sunday newspaper, whereby people buy just the newspaper but get a free CD that they do not want to listen to, but that is attached to the newspaper. If someone is paying a premium for the thing they are buying, the digital content that comes with it will also be covered by the provision to ensure that there is no loophole.

The quality rights are designed to be flexible in order to cope with different scenarios. Satisfactory quality is based on reasonable expectations, taking into account factors such as the price paid. The provision is designed to have an element of flexibility. Someone purchasing a Sunday paper at the normal price with something attached to it will be in a different scenario if they bought the paper at double the price with the DVD attached to it.

The hon. Lady also mentioned free digital content for which no money is paid, rather than content that lures someone into paying money to progress in a game. We looked at digital content that is exchanged for something of value that is not money, such as personal information or the like. At the moment there is not enough evidence of a consumer detriment, and things seem to be working well as they are. However, we have included a power in the Bill to extend provisions in future if there is evidence of consumer detriment in that regard.

We hope that the Bill is future-proofed so that it can take into account issues such as virtual currencies, which were raised by the hon. Member for Wycombe, and freemium services and free access, which the hon. Lady raised. I hope I have reassured Members that the issues they have raised have been considered and were taken into account in drafting the Bill.

Stella Creasy (Labour, Walthamstow)

On freemium content, will a consumer have the rights that the Bill will enact if they have not paid for any part of the game? If, for example, “Candy Crush Saga” were to corrupt my iPhone, would I have rights because the product I had downloaded was not fit for purpose? Will she clarify the position in those instances when someone has not paid but has expectations of a particular relationship?

Jennifer Willott (Liberal Democrat, Cardiff Central)

There are rights that are retained. For example, if someone downloads free digital content they have the right to remedy if the trader has not used reasonable care and skill to prevent the content from damaging the consumer’s other digital content or their device. The consumer would also retain rights in the area of unfair contract terms, as those rights also apply to free services. The circumstances the hon. Lady mentioned would be covered.

Stella Creasy (Labour, Walthamstow)

That is incredibly helpful. I have nothing further to add.

Clause 34 - Digital content to be of satisfactory quality

Stella Creasy (Labour, Walthamstow)

I beg to move amendment 28, in clause 34, page 22, line 21, at end insert—

‘(aa) any claim made by the trader as to the outcome the digital content will achieve,’.

Sandra Osborne (Labour, Ayr, Carrick and Cumnock)

With this it will be convenient to discuss amendment 29, in clause 35, page 23, line 34, at end insert—

‘(5A) In assessing whether digital content is fit for purpose any public claims made by the trader as to the purpose of the digital content shall be taken into account.’.

Stella Creasy (Labour, Walthamstow)

These two amendments will be eerily familiar to Members who have been with us through all of our considerations so far, as they deal with the question of what is satisfactory and the concept of fitness for purpose. We have discussed those terms in relation to goods and services. We are now starting to look at how they apply to digital content.

Again, we understand and recognise the points the Government have made about those concepts and how to define them. But the world of digital content is an evolving one, and many people are less comfortable about the quality of the content they are using. We therefore feel that questions of whether someone has a right to complain or to ask whether something is satisfactory are even more pressing than they are with goods or services, where people might have a more traditional understanding of what their expectations should be.

The amendments reflect points we have made in previous sittings. They concern situations where a trader has made a particular claim for a particular piece of content; that claim should in itself be taken into account in assessing whether the content is satisfactory or fit for purpose. In particular, that is important for digital content—and we recognise that the legislation has been drafted differently concerning digital content to reflect this—because by its very nature that content tends to have more minor defects. Pilot schemes tend to be beta versions, for example; nobody wants to stop the production of beta versions or end the possibility of downloading a trial version to see whether a product is a good piece of technology. We want to find a middle way, to make it clear that consumers should expect some level of change or amendment to the content they have downloaded, but that if there is a particular problem or the consumer has been led to have a particular expectation of certain content, they still have a right to complain.

I will give some examples of the issues that come into play with digital content as opposed to other types of goods, and why we thought it was worth raising the issue of satisfaction and fitness for purpose at this point. Let us go back to the kettle. Kettles boil water at high temperatures. When someone buys a type of kettle that risks scalding them, most people will understand that that is not satisfactory. It is not operating as the consumer would expect, so they have a right to seek the remedies that the Bill sets out.

I am sure that many of us have downloaded online calendars in a desperate attempt to manage our time better. If such a calendar does not include certain holidays or the layout of a week does not accord with the design that the consumer saw before they purchased it, because the developers are trying to update the technology and include extra patches, what rights does that consumer have? I know that later clauses deal with digital defects and the right to remedy, but if a consumer has bought a calendar that claimed to include all public holidays but does not, do they have a right to ask for their money back on the grounds that the calendar is not fit for purpose? How do we ensure that consumers know that that is not simply a bug? If a consumer has bought an American version that includes Thanksgiving but not bank holidays, which is not particularly useful in a UK context, how do we ensure that they can navigate between all those things?

How can consumers hold developers to account for the distinction between a bug and a digital product that is of unsatisfactory quality because the developers claimed that it would do x but it only does y? In that context, it would be helpful for consumers to be able to go back to the description in the iTunes market place—which might say, “This will have your public holidays in,”—when they say that the goods were not fit for purpose so they should get their money back. That is why we have tabled the amendment, to make specific reference to the claims that a trader might make as a test of whether something is satisfactory.

I recognise that when we debated a similar point about goods, there was a genuine concern that consumers might have unreasonable expectation. We recognise that digital content and how we use it are evolving all the time, so it is even more important to set some frameworks and parameters for people’s expectations, because there will be some confusion. I am sure the Minister agrees that we never want to see a developer fail to take responsibility for providing faulty goods, or for something that does not work in the intended way, by saying, “That is a bug, and we can do a patch for it. The problem is with your computer or iPad,” instead of recognising that they promised that the product would work on an iPhone 5 but it does not.

The amendments are designed to apply frameworks to a quickly evolving world. We want to give consumers confidence. I hope the Minister will set out how she sees people learning the lessons we will hope they will learn about what is fit for purpose and satisfactory in respect of goods—we will come on to services—in the digital content world, bearing in mind that we realise the differences inherent in digital content. I hope she understands our view that, because the situation is so unclear, it is particularly important to give people guidance on what satisfaction and fitness for purpose look like.

Jennifer Willott (Liberal Democrat, Cardiff Central)

The amendments parallel amendments 3 and 4, which relate to goods, and there are similarities between the two areas. Amendment 28 deals with whether claims made in public statements, such as advertising, can be taken into account when considering whether digital content is of satisfactory quality. For example, if a consumer bought a brain-training app that had been advertised as increasing their IQ, is that a standard against which satisfactory quality can be assessed? It is right that public claims can be taken into account when judging the quality of digital content. However, as we have discussed in relation to mops, falling angels and everything else, a balance must be struck between holding traders to account for claims that they make and constraining what might be said in an advert that is not meant to be taken seriously. To clarify the position about claims as to the outcomes on digital content, clause 34 has the same effect for digital content as clause 9 does for goods. It ensures that the digital content supplied must be of satisfactory quality. It should meet a reasonable person’s expectations of quality, taking into account factors such as any description of the digital content and the price. Just as with goods such as mops, toilet cleaners and all the other things that we discussed last week, the satisfactory quality of digital content will also take into account “relevant circumstances”, including any public statement about the specific characteristics of the digital content. That could include statements about whether a brain-training app would increase your IQ or a diet app would reduce your waistline. So clause 34 already enables claims made by a trader to be taken into account when assessing quality.

As was discussed in relation to my hon. Friend the Member for Wycombe and his addiction to Lynx—or not—not every claim about outcomes is intended to be taken seriously. It is the same for digital content as well, and advertising may be humorous and not meant to be taken literally. Some claims are clearly exaggerations or tongue-in-cheek. Claims that a game will provide the player with the biggest thrill of their life might be possible, although that would probably be quite sad. Clearly, we cannot legislate for the quality of digital content in terms of its subjective enjoyment. The existing provisions strike an appropriate balance, ensuring that statements are taken into account where appropriate.

As we discussed with goods, it is equally important that consumers are protected if digital content is not fit for an advertised purpose. That protection is in clause 34. As with goods, the standard of satisfactory quality can include its being fit for its usual purpose and also takes into account public statements made not only by the trader but by the producer or any other representative of the trader or the producer.

Clause 35, which ties in with the amendments as well, addresses a slightly different situation. Its purpose is to ensure that consumers are protected when they rely on the trader’s judgment. Where a consumer makes known to a trader that they intend to use digital content for a particular purpose, the clause ensures that the consumer can rely on that digital content being fit for that particular purpose. For example, a consumer wants to purchase a maps app to navigate the Himalayas. They go to a specialist trader and say that they need an app for that particular purpose, because they do not want to get lost in the middle of the Himalayas, and there are a range of apps available. If the trader advises the consumer to buy a particular app on the basis that it has the best and most accurate coverage of the Himalayas, the consumer should be able to rely on the fact that the app will be accurate for the needs that they expressed. Clause 35 protects the consumer even if their intended use is not the usual purpose of the digital content.

Public claims about the purpose of the digital content may not be relevant in such cases. The clause is all about the less usual purposes, about which the consumer seeks the advice of the trader, which may not be public. If we accepted the amendment, it could cut across the consumer protection that clause 35 provides. If the consumer is relying on claims as to the quality or purpose of the digital content, they are already covered by clause 34. I hope that that clarifies the matter. We do not feel the amendments are needed, because the matters are already covered by the two clauses in the Bill.

Stella Creasy (Labour, Walthamstow)

I thank the Minister for her response. There is just one little thing that I want to pick up on about fitness for purpose. We are concerned that when it comes to digital content, especially for business consumers, some small businesses might buy an off-the-shelf package to do something bespoke on the basis of the advice that they have been given by a trader. I am simply trying clarify what will happen in cases when a trader has said, ”If you want to use a particular format to make a database, this is the piece of technology that you need.” Would the consumer be able to say, “This is not what I have been able to do with it. It is not flexible enough. It doesn’t interact with the CSS files it produces, or it doesn’t interact with my mailing software, and I was told that it would”? Would the way in which the trader had portrayed it be taken into account? The Opposition want to protect business consumers, and that is why is so important to include small businesses in the Bill. Those are the types of questions that people will come up with in the case of software shops. It is important to set out on the record that, in those instances, if a trader has made a specific claim about software, people could say that that it was not fit for purpose if it did not match that claim.

Jennifer Willott (Liberal Democrat, Cardiff Central)

The example that the hon. Lady gave was of a business. We have had this debate before, but the Bill relates to consumers rather than businesses. However, if a consumer went in and said, “I want this software for a particular purpose”, and the trader said, “Yes, this is the one that is most appropriate for you”, that would be covered under clause 35. In the example that the hon. Lady gave, the consumer’s rights would be covered under clause 35.

Stella Creasy (Labour, Walthamstow)

I thank the Minister. Further to that, we also know that one of the things that happens with digital content is that people develop it and make mash-ups. They generate new variations from original products. Will the Minister say a little about when a piece of software’s fitness for purpose becomes solely the consumer’s responsibility, given any alterations that they might have made? At what point would the trader retain some responsibility if, for example, they had said: “You can adapt this and put your own patches in, say, to make this software take on a new CSS or be compatible with something else”? It would be helpful for the record for people to have that detail about where the guideline might lay.

Jennifer Willott (Liberal Democrat, Cardiff Central)

The rights apply on the day the content is delivered to the consumer. I think the same thing applies with goods. If a consumer changes the product beyond what it was when it was purchased, then the consumer takes responsibility for the changes they make and the impact that they have. The item that is purchased is the one whose quality a consumer is contracted for. Once they own it, the situation is different.

Stella Creasy (Labour, Walthamstow)

What we are talking about is when software gets mashed up. A lot of software is now sold as capable of doing that. There is a grey area there, but is the Minister saying that if a trader has said that a piece of software can be adapted in what is called a mashing-up process, they would retain some responsibility if that were subsequently found not to be true? That is all we are trying to clarify for people, because we do not want to stop people mashing up software. That is how we get new developments.

Jennifer Willott (Liberal Democrat, Cardiff Central)

If someone purchases something and it says that they can do a particular thing, then if they find that they cannot, there is a breach of their rights. If someone purchases something and alters it in some way, the quality rights are not the same. However, if it does not do what it was supposed to do, and that was the reason why it was purchased in the first place, then that would be a breach of consumer rights.

Stella Creasy (Labour, Walthamstow)

On that basis, we are satisfied with what the Minister has said and that the Government understand that there is an issue around mashing up software. I beg to ask leave to withdraw the amendment.

Stephen Doughty (Labour, Cardiff South and Penarth)

I want to ask a short, clarificatory question of the Minister, because it is important for consumers to understand how this part of the Bill will apply in real examples. I was thinking of what the Minister said in the previous debate, about the situation recently where many consumers were forced to take up the new Apple maps software as part of the overall upgrade of the operating system on the iPhone. Many people found it to be defective. Later versions obviously corrected it, but people were almost forced to take it on. How would the Minister see the Bill applying in a situation like that, where people are forced to take on defective software as part of a wider package that is needed as part of a contract? That was a particular concern. I personally did not upgrade to the new operating system, because I quite liked the Google maps that were included. I know that a lot of people felt the same at the time.

Jennifer Willott (Liberal Democrat, Cardiff Central)

Clause 40 addresses that, and we will come to it shortly.

Clause 36 - Digital content to be as described

Stella Creasy (Labour, Walthamstow)

I beg to move amendment 30, in clause 36, page 23, line 40, at end insert—

‘(1A) Where a trader is selling digital content that has restrictions on who can purchase it, public communications about that digital content, including promotional material and any promotional activities, shall be required to reflect these restrictions.’.

Sandra Osborne (Labour, Ayr, Carrick and Cumnock)

With this it will be convenient to discuss amendment 39, in clause 50, page 30, line 18, at end insert—

‘(1A) Where a trader is selling a service that has restrictions on who can purchase it, public communications about that service, including promotional material and any promotional activities shall be required to reflect these restrictions.’.

Stella Creasy (Labour, Walthamstow)

We now move on to a debate about what someone buys and what they think they are buying. It will test how consumers’ rights are affected by advertising and information about a product. It is bad enough when we find ourselves playing games and perhaps spending too much time failing to make the level on “Candy Crush” that even my assistant’s young niece achieved ages ago. It is something else when small children face advertising and marketing. Anyone who has ever given their phone or iPad to a small child wonders at the ease with which they use them, but if they then start to interact with adverts and run up bills, parents are horrified. There is growing concern about the way in which companies operate and games are designed to exploit the fact that it is so easy and interactive for technologies to be used in that way.

Games that are targeted at children, and the way we use technology to entertain children, gives rise to our concern covered in the amendment. It involves splash pages, which are nothing to do with diving. I am sorry to disappoint the hon. Member for Wycombe, who might have got out his swimming trunks to show us that he is just as good as the hon. Member for Portsmouth North (Penny Mordaunt) when it comes to jumping off high buildings. Splash pages are adverts that appear on screen. The hon. Gentleman looks bemused, but I am sure he would not want to tell the Committee that he was not fully behind his colleague when she so bravely jumped off the high board for a competition in a game called “Splash”. I am sorry if that confused him.

There is an issue for us to consider about how to ensure that adverts that promote and are associated with particular products are appropriate, and that the guidelines about what is appropriate match the intentions for goods and services offline with those for online digital content. We are worried about in-app advertising, and we particularly want to prevent it from appearing in apps and content that is targeted at children. Many Members will be rightly concerned about some of the adverts we have seen recently and some of the advertising in games and digital content. They may be confusing for parents, and that may allow a child to run up a huge bill. As the Minister said, people should be told clearly when material has cost implications. We have seen adverts with inappropriate digital content, and amendment 30 would hold developers to account.

We are also worried about the information that can be collected. The Minister referred to the value that could be created by giving personal information, particularly if a game developer was given access to an iTunes account, and what providing information through that process might mean for consumers. We want to make it much clearer for consumers what their expectations should be. When advertising is inappropriate, games developers and platforms should delist companies or games when they break consumer legislation, as well as when they have questionable content. The amendment would ensure that digital content reflects the concerns that have been set out for offline content of both goods and services, to enable online platforms to delist companies and games and act to protect children from inappropriate advertising.

It will not surprise the Committee to hear that I have a particular concern about payday lending companies advertising on children’s games. We have all seen that, and we have also seen adverts on our social media platforms targeting such content. It is absolutely right that such advertising should not be allowed, and we should use the Bill to tighten up the guidelines on that.

Amendment 39 would match amendment 30 in respect of other parts of the Bill, particularly clause 50, on the regulation of services. Although we will not come to the relevant clauses until next week, the amendments fit together in raising the same concerns about the types of content that I have mentioned.

I want to give the Committee some examples of the things that we are talking about. British American Tobacco had to withdraw an advert for an e-cigarette from a children’s app in October 2013. The advert appeared as a banner—a splash page—inside a game called “My Dog My Style” and was reported by a concerned parent, but that was pretty standard. Indeed, Wonga adverts have been removed from a children’s app called “Talking Ginger”, where a child can interact with an on-screen cat that mimics everything that they are saying. App users could only remove the advert if they were prepared to pay for content with in the app. That takes back to the concept of freemium games, using paid content as a way of generating people’s interest. [Interruption.] The hon. Member for Castle Point appears to have got an e-cigarette out to prove the point. [Interruption.] I am sorry; the light was shining brightly and it rather struck my mind.

Given such examples, it is right that digital content reflects advertising guidelines that we set offline. We want to ensure that the legislation uses the opportunity to set that out so that there can be de-listing. It can be difficult for organisations such as iTunes to take something out of their games listing without clarity and without being able to say, “Actually, this breaks consumer law, and therefore we would like to de-list it.” By including the amendment and providing that opportunity, we can give companies stronger powers. We are not looking for the Government to go through every games app, although I am sure that some might offer to play just to see what they are like and what adverts come up. However, when concerns are raised, it should be simple for games manufacturers and platforms to say, “We are going to de-list you, because you break this law.” The amendment would give them the opportunity to deal with that, so that the content that people download is as described. It will be a game, not an opportunity to tell people’s children why they should take out a loan with a huge rate of interest, before they have even had an opportunity to learn about compound interest in school.

Stephen Doughty (Labour, Cardiff South and Penarth)

Or how to smoke.

Stella Creasy (Labour, Walthamstow)

Indeed, or how to e-smoke, which I make no judgment on. I am sure that that was not encouraged by playing a game called “My Dog My Style”, either, which I am pleased to hear.

I look forward to the Minister’s comments about how we can make this a good form of consumer protection for young children as well.

Jennifer Willott (Liberal Democrat, Cardiff Central)

Generally, the Government are committed to protecting young people in society. I recognise that legislation in that area can be important. Regimes are already in place in relation to age-restricted digital content, and the Government are making further changes to strengthen those regimes. For example, we abolished the dual system for classifying video games in 2012 and moved to the pan-European game information system, known as PEGI. Parents tell us that they welcome the familiar PEGI age rating systems and the content advice on products. That provides the information that they need to be able to make informed choices about the games that their children play. Often, parents feel less well informed than their children are.

Andy McDonald (Middlesbrough) (Lab) indicated assent.

Jennifer Willott (Liberal Democrat, Cardiff Central)

Committee members clearly agree. Having a system that is easy for parents to understand is important to help them manage that process.

Under the existing law, products with 12, 16 or 18 classifications must by law carry the appropriate age rating symbols on their packaging. It is an offence to sell or rent products with those age ratings to someone underage. Anyone breaking the law risks up to six months in prison or a fine of up to £5,000, so that is taken seriously.

On digital content, in relation to DVDs, Blu-ray discs and so on, last year we announced changes to the Video Recordings Act 1984, so that DVDs that are unsuitable for younger children have to be classified by the British Board of Film Classification in future. It is already a criminal offence to sell or rent a BBFC 12, 15 or 18-rated product to someone who is not old enough.

The hon. Lady mentioned advertising to children by payday lenders. Adverts in the broadcast sector are subject to the Advertising Standards Authority’s control. The ASA does not hesitate to ban irresponsible adverts, although I am not sure whether it does so regularly. The ASA has a strong track record of banning irresponsible adverts, including recent payday lending adverts. In addition to the ASA’s requirements, the Financial Conduct Authority has tough proposals on promotions and advertisements by payday lenders. All advertisements and other promotions must be clear, fair and not misleading. The FCA also requires clear risk warnings to be displayed on all payday loan adverts and promotions. Ultimately, the FCA will be able to ban adverts that breach those rules. In addition, the Broadcast Committee of Advertising Practice writes the broadcast advertising code and is considering the extent to which payday loan advertising may feature on children’s TV and whether there are any implications for the ASA’s regulation of the sector. There is already significant regulation in those areas.

The hon. Lady said that she was concerned about online adverts, which are also covered by the ASA’s code—the code covers online and broadcast adverts. Adverts for digital content must be suitable for the content of the product. Video games, including online games, are regulated by the ASA under the Committee of Advertising Practice code, which has a strong focus on protecting children both online and offline. The CAP code covers internet adverts as well as posters and magazine adverts. The Government feel that there is enough regulation to address the issues the hon. Lady mentioned. As such, the amendments are not necessary and I hope she will not press them.

Stella Creasy (Labour, Walthamstow)

I thank the Minister for her response. I have a couple of supplementary questions. The point we are trying to make is not particularly about the regulation of payday lending—as much as I could talk for hours on that subject—but that payday lenders are a good example of companies that use online content to test advertising rules and the rules on how they can market their products.

People interact and access products and content differently online. If someone watches a programme with their child, they are there with their child; but if they give their iPad to their child to play with, unless the child is closely supervised for the entire time, the child will probably come across splash pages and other such content. As we discussed on the previous clause, many games are free because of their advertising content. We see that as fitting into the clause and the question of content being as described because of how advertising interacts with the content that people might be seeking to download. I do not know any parent who has downloaded a game such as “Talking Ginger” or “Angry Birds” for their child to play with and expected also to download payday lending adverts. Our concern is that, because people interact with digital content differently from how they might interact with, say, offline broadcast material, the possibility for such content confusion becomes ever greater. The question is whether we have a regime that waits until parents spot that their child is seeing inappropriate advertising.

I draw the Minister’s attention to the grotesque example of “Nude Scanner 3D”—[Interruption.] The hon. Member for Wycombe has perked right up. Let me start by disappointing him because it is no longer available. It was a game that allowed people, in theory, to see somebody naked. They would hold their phone up to someone and it would show what that person would look like with no clothes on—[Interruption.] The Minister says that it did not really do that, but I still think it is a pretty degrading game for someone to create and advertise for children to download and play—[Interruption.] The hon. Member for Wycombe said “The mind boggles”—or I hope that he said that and not that he had got it. The acoustics in the room are bad.

Steven Baker (Conservative, Wycombe)

The hon. Lady has sought to misrepresent me on numerous occasions—I have almost had enough of it. “The mind boggles” is what I said. It is astonishing that such a degrading thing should have been marketed.

Stella Creasy (Labour, Walthamstow)

Marvellous. I hope that when I heard the hon. Gentleman decrying the work of Marx the other day, that was similarly a misheard moment owing to the acoustics in this room, which are not good. There is a question about content and I want to press the Minister a little more before she says, “Well, the existing ASA guidelines and specifics for particular industries are enough to deal with this.” As content and products develop, there will be this mishmash where games and other content can be provided on less-regulated platforms.

Sheila Gilmore (Labour, Edinburgh East)

Very often, the Advertising Standards Authority does its work—valuable though it is—some considerable time later. Things may have been advertised in various ways before any action is taken. Does my hon. Friend think that that is sufficient, or is more needed to stop that from the outset?

Stella Creasy (Labour, Walthamstow)

That is what the amendment is designed to tease out from the Government. We recognise that digital content is different from broadcast material, goods and services, so how can we respond to that developing world? We have all talked to parents who have been horrified by their children running up bills while playing games on their iPads because they did not realise that that was paid-for content. Similarly, people may not necessarily realise whether content is an advert or part of a game. When I play such games, I am not always sure—I am getting old—what is an advert or an additional premium programme; all I know is that I am not very good at any of them.

There is a question for us about ensuring that the well-established principles that protect our broadcasting freedoms are transferred over, or at least adapted to work with that digital content, because that is about the freedom to enjoy content as described. With this amendment, we are trying to tease out a little more detail. The Minister has talked about payday lending, but will she give some clarification on, for example, the advertising for tobacco, alcohol and gambling? People see many adverts for gambling. How does she envisage the adverts for paid-for content that exist within a game being taken into account when it comes to questions about content as described?

When someone buys a game, they do that to play and not necessarily to recoup costs. How can we ensure that consumers can have confidence that some of the techniques used by advertisers owing to the interactive nature of the technology are being addressed? As my hon. Friend the Member for Edinburgh East said, this is not about waiting for the ASA to be able to play catch-up. Indeed, it has guidelines that enable it to say, “This is an unacceptable way to sell content, because it breaches the idea that the content bought was as described.”

I appreciate the point that the Minister is making, but, for the record, I would like her to set out a little more clear detail not on individual regulatory regimes for individual products, but on the concept of digital content and how the Government see that developing. She talked earlier about the Bill having some future-proofing and that is one area in which I would expect that, because advertising is such a large part of the content. [Interruption.] I want to give her officials an opportunity to get that information—I know that they are writing furiously.

The hon. Member for Wycombe has perked up and looks lively. I do not know whether he wants to intervene and say that he is concerned that it would be a terrible regulatory burden on business to try to ensure that we do not sell payday loans or tobacco or gambling ads to two-year olds. Certainly, when I have given my niece an iPad to play with, I have seen that she is very competent with it. I would be happy to give way, but the hon. Gentleman seems mysteriously calm.

Stephen Doughty (Labour, Cardiff South and Penarth)

I wonder whether my hon. Friend has noticed the wide range of advertising. It is not just the little banner ads, but videos that pop up and suddenly become larger, often with sound and video in places we would not expect. Such means are pernicious and legislation needs to keep up with the diversity in the range of advertising.

Stella Creasy (Labour, Walthamstow)

I absolutely agree. The one piece of advice I always give every Member is to ensure that they have got their phone or iPad on “silent” when in the Chamber; otherwise, we will know what games they are playing. It is not about individual regimes, but the content in and of itself and the interactions with that. That is how we see that fit into the clause. I hope that the Minister now has a response on the point about content, as opposed to individual regulatory regimes and how they fit together. That would be very helpful.

Jennifer Willott (Liberal Democrat, Cardiff Central)

I have part of the answer. I mentioned payday loans in my previous answer because it was the example that the hon. Lady gave and it is quite a good one. It is an issue that a lot of parents have been concerned about, and therefore quite a lot of action has been taken.

The Advertising Standards Authority has clear rules about the advertising of certain items on children’s television, for example, or about what is aimed at a particular audience. There are strict rules about when alcohol can be advertised and so on—we do not see adverts for alcohol on CBeebies and things such as that. There are strict rules that are well enforced and work. The ASA rules apply online as well as offline. For things that have Pan European Game Information—the PEGI age rating—those rules would apply, where specific, because clearly a market of a particular age is being targeted, such as advertising on children’s television or in a magazine, similar to the ones I used to buy as a teenage girl or whatever. If a particular audience is being targeted, clearly rules apply.

The amendments restrict ads by the people selling digital content, rather than the ads on the digital content. I completely understand the point being made by the hon. Lady, but it would not be tackled by the amendments, which talk about the promotional material when the trader is selling digital content that has restrictions—the

“promotional material… shall be required to reflect these restrictions”.

That would be the promotional material relating to the trader selling those goods, rather than the adverts. Under the amendment, therefore, advertising for a particular game would need to highlight the age restriction or whatever; it does not refer to the age rating of the adverts that would appear on that particular content.

Nevertheless, I understand what the hon. Lady is saying. My main response is that the ASA has a strict code, with a particular focus on children, to ensure that they are kept safe.

Sheila Gilmore (Labour, Edinburgh East)

I hear what the Minister is saying about the ASA having codes to ensure that, but such things keep happening, so clearly it is a very reactive way of responding. Does the Minister think that there might be a better way to eliminate it from the outset?

Jennifer Willott (Liberal Democrat, Cardiff Central)

This is clearly an issue that people feel strongly about, and it has been raised today. Regulations on advertising and so on fall within the remit of the Department for Culture, Media and Sport, and I know that Ministers from the Department regularly meet people from the advertising agencies and so on, as well as the regulators. I can take back the concerns expressed by hon. Members today and ensure that they are fed into the DCMS so as to get a better explanation for the hon. Member for Walthamstow. I am happy to write to her with fuller details.

Stella Creasy (Labour, Walthamstow)

I thank the Minister for her offer; it is welcome. We recognise that, because digital content is consumed differently and is evolving differently from broadcast media, it is right to look at different ways in which to handle some of the challenges. My hon. Friend the Member for Edinburgh East is right to say that waiting until problems are reported does not seem to be satisfactory, given the pernicious way in which some advertising and interactions—relationships that the companies are seeking to build with consumers—happen online. They are doing it with the content. I am happy to withdraw the amendments on the basis that the Minister will write to her colleagues in the DCMS and look at how the issue might be more accommodated in the Bill, because it fits into this type of legislation. It is about protecting young consumers. Labour Members are keen to do that.

I beg to ask leave to withdraw the amendment.

Stella Creasy (Labour, Walthamstow)

I beg to move amendment 32, in clause 36, page 24, line 9, at end insert—

‘(4A) The trader is required to provide full details of the total cost of digital content prior to sale including details of any additional service fees or charges that could be incurred by the buyer in purchasing the digital content.

(4B) The information set out in subsection (4A) should be portrayed prior to sale and the explicit consent to purchase digital content at this price sought prior to sale.’.

This is the other side of what we have been talking about in terms of “splash” pages and the prevalence of content that might be inappropriate. We were talking about some of the issues earlier: people being able to know the cost of what they are buying; and in particular some of the problems experienced by people when buying content online. Prices are not always clear and people may not realise the kinds of bills that they might run up. We touched briefly on parents who have come back to find that their child has run up a £5,000 bill playing a particular game online because they did not realise that the app would allow that. There is a well-established concern that online trading is not as clear about costs as other kinds of trading because of the way in which the sale takes place. Very often there are questions such as whether a cost is incurred through being online or whether it is the particular game being played or the specific app that has been downloaded.

The amendment would give the consumer more information about those kinds of things and therefore more choice about what purchases they might undertake, how they might purchase online content and what those choices would mean for the costs they would incur. The Office of Fair Trading has recently published principles for online gaming that are relevant here—we see the amendment as being in the spirit of those principles. We are trying to find a way of standardising those principles, and not just for games—we have all talked a lot about games this afternoon, but there are other services and content that consumers might want to purchase online. It is not just about games, but because the games industry is so large some of the questions we are discussing have become very pertinent for it.

The Office of Fair Trading argues that games should all be up-front about all costs, including the costs of downloads, costs that are unavoidable once the game is downloaded and optional extra costs. The principles also state that:

“All material information about a game should be provided…up-front”

before download or play begins. That should include what the game does, how it works, compatibility with hardware, whether the game contains advertising or marketing material and how personal data may be collected, stored or shared. Finally, the business involved should provide direct contact details in case a person has a query or complaint, or is seeking redress.

That is a simple and straightforward framework for the costs someone should expect to incur when they buy digital content online. It also makes it clear that in-game payments are not authorised and should not be taken unless the payment account holder—for example, a parent—has given his or her express informed consent. For many parents the principle that there has to be informed consent to the cost of a product will be important because of the problems that we have seen.

I am sure that some people will say, “Well, if you leave your child with an iPad you only have yourself to blame if they run up a £3,000 bill.” I would contend, however, that some of the ways in which such games are marketed and operate, and some of the ways in which digital content itself is provided, are not always completely clear even to the most informed consumer. It is therefore right to use the opportunity we have with the Bill to bring about what we all want and what I am sure the best developers intend, by making sure that costs are provided up-front so that people know what they should be expecting to pay, and ensuring that they have to consent to any cost before they continue to play a game.

I am disappointed that the hon. Member for Stevenage is not in his place, because I am sure that at this point he would say, “We all know the two-year-old who can get round that.” That is certainly the case, but we need to know that the information is being provided. The amendment would therefore require a total cost to be provided to a consumer.

Stephen Doughty (Labour, Cardiff South and Penarth)

My hon. Friend is absolutely right that there is a particular issue with digital content and the way that such costs and conditions are sometimes displayed. Unlike the whole wodge of additional information attached to a product in a shop, sometimes the additional costs for digital content are not clear without another couple of clicks through to the terms and conditions that a consumer is entering into. In the digital world those things are hidden from the consumer’s view.

Stella Creasy (Labour, Walthamstow)

My hon. Friend is absolutely right. To go back to “Candy Crush Saga”—perhaps I should show it to Members on my phone in the spirit of buyer beware—the buttons to press to get free content are in the same place as the buttons to press for paid content. If someone was as bad at the game as I am, and therefore kept going, it would be easy for them to click through and automatically run up a large cost unless they were watching carefully what they were pressing on the screen. That is how such games are designed.

The amendment would require that the game make it clear to a consumer what the costs would be prior to their getting into that sort of relationship with the game. The amendment would not stop someone doing that—if they want to pay more for a game they should absolutely be entitled to do so. Nobody is suggesting that we should close down that form of commerce or that line of revenue for those games. We are saying that parents especially should be able to know in advance the costs they could end up generating if their child is left alone with that game, and therefore the total price, not just the one-off price for downloading. The 69p people might pay to download a game is different from the 69p they might pay every time they upgrade on Candy Crush. Over a couple of weeks, they could be looking at a large bill.

Stephen Doughty (Labour, Cardiff South and Penarth)

Does my hon. Friend agree that we are trying to encourage vendors to use best practice? I am pleased with the way in which Apple and iTunes showed an example, so that if someone is accidentally about to purchase a song or an app that they have already bought, a little message is sent, clearly saying, “You have already purchased this item. Are you sure you want to do this again—yes or no?” Obviously, there are less forthcoming vendors, and we want to encourage them to meet those higher standards.

Stella Creasy (Labour, Walthamstow)

As I have tried to explain to my hon. Friend on many occasions, there are only so many times he can add to his Coldplay collection before it really damages his eardrums.

Some platforms certainly try to protect people from repeat purchasing, which is easy to do. I have benefited from that when I have tried to complete albums of obscure indie music and found that I already owned something. However, the principle that people should know what they are paying up front seems to us fairly simple—[Interruption.] I will not admit what the albums were or I am sure that I would be open to as much derision as the Coldplay fans here.

Total cost pricing is simple, and easy for consumers to understand. Given that there is clear evidence of consumer detriment when it comes to digital content, because of problems with people who are perhaps not confident with the technology and not aware of some of the ways in which selling is undertaken in the industry, it is right to provide for such protection.

As a starting point, it would be helpful to hear the Minister’s view of the level of detriment. Although we all might have spoken to individuals who have had problems, it would be helpful to know whether any studies have been conducted into the scale of the problem and the concerns and complaints of people who have run up huge bills because they did not know the true cost of digital content. If the Minister is not prepared to accept the amendment, will she say what the Government are doing to address those issues and ensure that consumers are not mis-sold, for example, a game as free or costing 69p when it will cost them hundreds of pounds to play it properly?

There is also a question about how content can be restricted and advertised. If a game is sold in such a way that it cannot be played unless the paid content is bought, there is a question about whether that is proper selling. It would be useful to know whether the Minister has done any work on that.

The amendment is about information prior to sale, which we believe is a fair point to raise.

Sheila Gilmore (Labour, Edinburgh East)

We approach buying things online differently, perhaps wrongly, because of the ease with which it can be done. In one sense, it is easier to sit there and spend money—much easier than physically going somewhere to shop. Therein lie some of the problems of people perhaps not being as fully aware as they might of exactly what they are letting themselves in for. That ease is an issue, not just for children or young people, but, I suspect, for us all.

I have confessed to my weakness for bookshops; it becomes an online weakness through my Kindle because it is easy to see that this week’s special offer is 99p. It is easy to think, “Well, what’s 99p? I’ll buy that, that and that”—and my Kindle is now almost full of exciting books that I have no time to read. While I would not describe myself as a big spender—I do not buy them when they are new and more or less full price—it all adds up. The ease of someone starting a transaction and becoming involved in something they do not initially know all the parameters of has to be taken into account in ensuring that information is clear and up front, so that people do not get themselves into difficulties.

The other side of that is the often apparently small-scale nature of payments. The effect is cumulative, because although it might seem that a relatively small payment will not be of great consequence or detriment to anybody, several such transactions could become so. We need to understand that the form of trading in question is rather different from traditional retail. The Government do recognise that, because they have included this part of the Bill, but it is exceptionally important that information be displayed clearly.

We cannot just have a message saying, “Tick here to confirm that you have read the terms and conditions”. When somebody buys a train ticket online, if they do not tick the box they cannot proceed, but there is nothing to make them look at the terms and conditions. They just have to tick the box, which takes away the trader’s liability and a person’s right to say, “I didn’t realise that the ticket I bought wasn’t valid for my journey.” When I bought a ticket online, I just ticked the box so that I could get on with the transaction. We need something a bit clearer to ensure that people know the full implications of what they are getting involved in.

Rob Flello (Labour, Stoke-on-Trent South)

My hon. Friend is absolutely correct. I suspect that almost everybody just ticks the box, because if they do not, they have no way of saying, “Well, I didn’t agree with you on paragraph 4, line 3, so how about you take that out, and then I will buy the ticket?” They have no choice.

Sheila Gilmore (Labour, Edinburgh East)

Indeed, and as I heard someone say during that intervention, people often run out of time for their transaction if they do not proceed with it. They do not have a lot of time, so they want to get on with it. That is certainly not a satisfactory way of doing things, and it is important that people know what they are letting themselves in for.

Jennifer Willott (Liberal Democrat, Cardiff Central)

First, I agree with the hon. Members for Edinburgh East and for Walthamstow that it is important that people know what they are getting themselves into when they sign up for something, particularly online. It can often feel like a slightly more obscure process than handing over money for goods in a shop.

The OFT principles that the hon. Member for Walthamstow highlighted are based on the current position under the consumer protection regulations and the consumer contract regulations, which we have mentioned a number of times. The latter will ensure that the trader has to provide information to the consumer about the total price, including taxes, before a sale is made. As I said, they will come into force in June and operate alongside the Bill. The name and address of the trader will have to be provided, and as she highlighted, the OFT clearly believes that is important. A person will also have to give express consent when they buy something —I will clarify that point later.

The hon. Lady asked about the need for a study on the matter. There is clearly a problem, which was one reason why the OFT looked into the matter. It investigated it thoroughly and found some malpractice by traders, which is why it believes that the new principles are important. The combination of the CPRs and consumer contract regulations will provide the protection that the OFT highlighted as being needed.

In the case of digital content, it is important that consumers know how much they will be paying. The hon. Lady mentioned cases of children racking up massive phone bills or app bills by playing games to which they did not realise charges would be attached. We have all heard stories of people downloading an app that they thought was free but discovering later that it cost an absolute fortune. We discussed the streaming of films and football matches last week. The hon. Member for Cardiff South and Penarth told us about the time he got stung, ending up paying significantly more for watching a football match than he expected. It is clear that such cases happen across the board. Under the consumer contract regulations, which will come into force in June, the total price will have to be clear and comprehensible to the consumer before they buy. The Bill makes it clear that that information becomes part of the contract and cannot be changed without the consumer’s express consent.

Furthermore, the regulations will make it clear that the consumer’s express consent must be given before any payments are made in addition to the main price. Additional charges cannot just be tacked on the end; the consumer must give express consent for them to be payable.

We have also made it clear that pre-ticked boxes are not enough to signify express consent—it cannot just be one of those boxes at the bottom that is already ticked and that people miss, not realising they have to un-tick it. My pet hate is all those boxes at the bottom asking whether people want to share their information with the entire world. Half of them say, “Tick here if you want to”, and half say, “Tick here if you don’t want to”, and people have to read them carefully to work out which is which way round. We are making it clear that pre-ticked boxes will not count as express consent, which will make matters much safer for consumers.

Andy McDonald (Labour, Middlesbrough)

On that subject, does the Minister think Ryanair deserves a particular award for burying, within the countries of destination, the option of not accepting its extra insurance package? The website buries that option within a menu of other items, and if people do not find it they will be charged for it.

Jennifer Willott (Liberal Democrat, Cardiff Central)

I can honestly say that I have not been caught out by Ryanair’s tactics. However, there clearly is an issue, and we need to ensure that companies are up front about all the charges people will have to pay. The consumer contract regulations will make it clear that the price and subsequent prices have to be made clear to consumers before they sign up, so they know what they are getting into.

Under the part of the Bill dealing with unfair terms, additional charges cannot be hidden—an issue raised by the hon. Member for Middlesbrough. Traders will not be able to hide extra charges in the small print. If they are hidden away, they will be assessable for fairness. If a company wants to charge a certain amount but not have it assessable for fairness by the courts, it will need to be up front, clear, transparent and prominent. Hiding things in the small print will breach the regulations.

For online sales, if the contract places the consumer under an obligation to pay, the trader must make the consumer aware in a clear and prominent manner, and before the consumer places the order, of information on the price and other issues. If placing an order and making payment online requires the consumer to click a button, the trader must ensure that that button—or whatever method processes the order—is clearly marked, so that people know they are going to be charged. The button must say “Order with obligation to pay” or words along those lines. It has to be clear that by clicking the button there is an obligation to pay money; it cannot be hidden away. It has to be clear to people that they are going to pay the trader.

The hon. Member for Walthamstow mentioned things being advertised as free when people have to pay to get beyond a very basic level. The consumer protection regulations make it clear that it is always unfair and illegal to describe a product as free or without charge if, in fact, people have to pay something other than the unavoidable costs of delivery or whatever. If a game was described as having 11 levels that could be progressed through for free but people actually had to pay to do so, that would be a breach of their rights. However, if there is a point at which people have to pay and it is clear that they know that that will happen, the consumer contract regulations kick in, and not only how much they will pay but all the information laid out in the regulations, which the hon. Lady highlighted, must be made clear.

I hope I have reassured members of the Committee that the important information the hon. Lady highlighted is already laid down in the two sets of regulations I have mentioned, and that she is prepared to withdraw the amendment.

Stella Creasy (Labour, Walthamstow)

I thank the Minister for her response and her willingness to engage in this subject, but I want to press her to be clear about one or two things. First and foremost, as she said, the problem has been recognised, but we do not know its full scale. Therefore, we do not know whether some of the remedies that she proposes in Bill will make the difference she thinks they will make, and whether such an amendment is obsolete.

I am happy to withdraw the amendment on the basis that the Minister has assured us that she is trying to deal with the problem, but I should like to press her to commit to do some research into it and for her Department to publish more evidence on the issue, because it is so serious. We have seen a number of people distressed about it and a growing number of people have experienced such problems. Whether we are talking about my hon. Friend the Member for Cardiff South and Penarth and the cost of his football matches, or games that children have downloaded and then run up bills playing, there is an issue about digital content and whether people fully understand the costs involved.

Where does the consumer detriment lie? Is it in the advertising, in the gameplay itself, or in the technology? It would be incredibly helpful today if the Minister committed her Department to go away and research this, so that we can be confident that we can fully understand where the detriment lies and that the proposals in the Bill will address it. We would certainly be happy to hear that commitment because this is such a serious issue for people that it is worth further investigation.

Jennifer Willott (Liberal Democrat, Cardiff Central)

We all recognise that there is a problem, which is one of the reasons why the OFT looked at it. As I said, it found some areas of malpractice. The consumer contract regulations will come into force in June, and we hope they will make a difference in the way that I have described. They will be reviewed after they have come into force—it would be slightly too early to do so now—when we can see whether they are having the impact we want and look at the issues the hon. Lady has raised. I hope she is satisfied that, as part of that process, we will consider whether the regulations are making a difference.

Stella Creasy (Labour, Walthamstow)

The point I am trying to make is that, although it is welcome that some of these methods are proposed, none of us can be completely clear whether they will address the root of the problem, partly because we do not have the research into the cost of digital content. We would like to see research into some of the consumer detriment that might come from digital content pricing strategies. Some of the Minister’s consumer regulation proposals are welcome, because they could well address what many of us think might be behind some of those problems, but the honest truth is that we do not know whether the detriment arises from how the games are played, from how the sales take place or, indeed, from the pricing strategies some of the companies use. It would be disappointing if follow-up work not was done, to look not just at online gaming, but at how digital content itself is sold to ensure that no consumer detriment is taking place. I urge the Minister to do that.

I am happy to withdraw the amendment, but I want to put it on record that we think that further Government investigation into the issue is needed, not in any one sector, but into the content itself, because there are enough examples across the different types of content to make this worthy of further examination. We all want to get this right, because we have all seen the problems that it causes. The worry for us is that we might not pick something up and therefore that the consumer regulations that the Minister talks about will not address it, so we could go for another year or 18 months with people experiencing the problems that we have seen. I beg to ask leave to withdraw the amendment.

Clause 40 - Quality, fitness and description of content supplied subject to modifications

Stella Creasy (Labour, Walthamstow)

I beg to move amendment 33, in clause 40, page 25, line 31, at end add—

‘(2A) If the trader becomes aware of digital content that is faulty it is the responsibility of the trader to take all reasonable steps to inform the consumer affected so that he may exercise their statutory rights.’.

This is the final element of our debates on problems with digital content and who has responsibility for addressing them. Let me be clear that, as I said at the beginning of the sitting, we fully accept that people will buy digital content knowing that it will need to upgraded, that it is a beta version, and that there might well be problems that need to be fixed. They will know that there might be compatibility issues with the software they might use. Nevertheless, there is a question to be asked: under the legislation, when a developer becomes aware of a problem with digital content, what responsibility do they have to address it?

Rob Flello (Labour, Stoke-on-Trent South)

My hon. Friend touches on a bugbear of mine. When people upgrade software, a pop-up on their iPad or whatever tells them they have downloaded version 10.1.364 or whatever it might be. In good faith, people download the version and get the bug fix, but the next thing they know, it has introduced more bugs into the system. They think, “Why didn’t the software developer say, ‘Here is a bug fix, but it may in turn create other problems’?” That is a personal bugbear of mine. [ Interruption. ] No pun intended.

Stella Creasy (Labour, Walthamstow)

I can tell that my hon. Friend is bugged by that. It is helpful to see the amendment as a precursor of new clause 2, tabled by my hon. Friend the Member for Foyle, on faulty products and recall. In a way, the amendment deals with a concept of recall of digital content. My hon. Friend the Member for Cardiff South and Penarth mentioned Google Maps. I am afraid that I was one of those people who mistakenly upgraded and downloaded Google Maps. I found myself lost on many occasions as a result. I went old school: I had to read street signs and ask people for directions. I had not done that in years because I had had Google Maps to use. That is a good example. There was a general outcry, with people saying, “This piece of digital content isn’t acceptable. It’s causing problems. It’s not fit for purpose.” There was a considerable delay in addressing those problems. The concern originally was whether the problems were with Apple, and therefore with the iPhone 5 software, or whether the problem was with Google.

Either way, if manufacturers put out faulty goods—we will debate this under new clause 2—and knows they are faulty, they should take steps to remove them from public sale, as we would expect, because of the problems they will cause. They know they will cause consumer detriment. The amendment says that there should be a parallel process for dealing with faulty content online. That responsibility should lie with the trader, and not with consumers. We should not have to ask people about the difficulties, as we did with Google Maps. We should not have to ask people what to download and whether to reconfigure our iPhones to deal with the problem.

Stephen Doughty (Labour, Cardiff South and Penarth)

To clarify, the problem was with Apple Maps, which replaced Google Maps on the systems. I would not want to besmirch Google’s reputation. I am no spokesperson for Google, but its product was good and was replaced by one that was not good.

Stella Creasy (Labour, Walthamstow)

My hon. Friend makes the fair point that the problem was with Apple, but it needed to be resolved. It caused detriment for a large number of consumers who had used both forms of technology and did not know what the challenge was. If someone produces a faulty hoover and they know it is faulty, we would expect them to recall it from the market. Traders would take reasonable steps to try to ensure that nobody is inconvenienced by the fault of which they are aware, as we would expect. The amendment would apply the same principle to digital content. If a trader knows that there is a problem that people cannot fix using a bug repair, and that it will cause more problems, they have a responsibility to do something about it and ensure that people will not have to seek individual redress.

Amendment 33 would require the trader, if they became aware of the problem, to take all reasonable steps to inform the consumer affected so that they may exercise their statutory rights. The consumer may choose not to download the upgrade. A number of people did not with the iPhone 5; they felt that it was not an appropriate upgrade, so they chose not to. However, if the consumer does not know what the problems are, they cannot make that informed decision. The consumer may choose to use a different type of technology altogether. Although I am not besmirching Google Maps, there are number of other good map applications, all well known. Being able to make informed choices comes from having information provided. If a developer knows that their good is faulty, surely they have an obligation to tell the person who has downloaded that application in good faith that there is a problem with it.

Mark Durkan (Social Democratic and Labour Party, Foyle)

Should that not be particularly so if the provider is continuing to claim intellectual property over the product?

Stella Creasy (Labour, Walthamstow)

Absolutely, and one would hope that they would want to, because their brand name and the confidence that people have in it is paramount. I hope that the Minister will welcome the amendment and the principle it is trying to set out. It would also be helpful if she set out how she sees the provision working in tandem with the point made in clause 34 about something being free from minor defects. Here, we are talking about the distinction between someone knowing that their beta version has problems and what we saw with Google Maps, which was that they released something that they thought was a perfectly good product, but it turned out not to be. I got lost in Manchester, for example—it was a total nightmare, looking at a Google map, completely going down the wrong set of streets. That is not a bug in the system or a minor defect; it is a substantial fault with the product. Once they were made aware of all those substantial faults, what did they do to correct it? That should have been their responsibility, and it should have been their responsibility to communicate to me, as somebody who had bought that product, that there was a problem, so that I did not rely on their maps. I laugh about it now, but actually it was quite serious for me, being stuck late at night in a part of Manchester I did not know, because I had a faulty map.

Andy McDonald (Labour, Middlesbrough)

I am sorry to hear that my hon. Friend was lost in a part of Manchester that she did not know. Will it not be eminently easy to resolve the problem and communicate with people, because the trader already has the electronic communication details of the very people that they are dealing with? It is not as though communicating with someone who has discovered a problem with their product will be an onerous task.

Stella Creasy (Labour, Walthamstow)

My hon. Friend is right; it is certainly much easier when it comes to digital content to be in contact with somebody whose download might be faulty. I know that the Minister will want to make him aware that when the Bill mentions digital content, it is not purely about downloads, so it will involve some digital content that people might get on a physical good. However, if the digital content is causing problems and the manufacturer is aware of that, as a general principle, they should have a responsibility to address it.

I know that we will come on to that point more generally in new clause 2, about the right of recall, and I am very sympathetic to the amendment tabled by my hon. Friend the Member for Foyle. In this instance, with digital content, this amendment is trying to match into that debate and ensure that we do not have a loophole. My hon. Friend the Member for Middlesbrough is absolutely right that in terms of the cost to business and the ability to communicate with consumers, doing so is much easier, because by the nature of most digital content relationships, there will be a possibility to resurrect the relationship, whereas if someone had gone in and bought a cash-purchase kettle, it would probably be much harder to track them down. Digital content is, on the whole, easier to track, although I accept that the Minister would say that some elements of digital content perhaps would not be covered.

In a nutshell, that is the amendment we seek to make. If the Minister is not prepared to accept it, it would be very welcome if she set out, in particular, the concept of something being free from minor defects. At what point does it become a major defect, and at what point does she believe that traders have a responsibility to consumers if they are selling faulty digital content? How does she see that being operated in the legislation? We have not seen anything in the legislation that would attest to there being such a proviso, but if she would like to point out where she feels there is adequate protection, we would be very interested in her argument on that point.

Steven Baker (Conservative, Wycombe)

The hon. Lady asked some very reasonable questions, but I do not think the amendment is adequate to the task at hand. All software has bugs, and I say that as a software engineer. Any software of any seriousness will have bugs in it. In some senses, therefore, all software of any significance will be faulty. The amendment would result in anyone who ever bought an application being signed up to the software producer’s bug tracking system in order to meet the requirement to let people know that there was a fault in the software. I do not want my inbox cluttered up with bug reports for every piece of software that I have ever installed, or even just the software that I have currently. Following it all would be a complete waste of my time. Contrary to what the hon. Member for Stoke-on-Trent South has said, I do not think it would be doing the consumer any favours to require that they receive all those notifications.

Rob Flello (Labour, Stoke-on-Trent South)

If the developer has some inkling that a bug fix may cause another problem, they should tell the consumer when they receive it.

Steven Baker (Conservative, Wycombe)

There is an important distinction between fixing a bug, patching it and putting it into a development piece of software, and releasing something to consumers in a fully tested form that developers believe is fit. Speaking, again, as a software engineer, no one wants to put out to their customers software that has faults. They want to believe it is fully fit for purpose. It is embarrassing for a software engineer if customers are dissatisfied with a piece of software, particularly in the era of Twitter and Facebook when people can quickly tell one another that it is inadequate.

Rob Flello (Labour, Stoke-on-Trent South)

My point is that sometimes a bug fix has to be released quickly because something serious has gone wrong with the software. At that point, a customer is not given any warning that that is a fairly hasty remedy to a problem that may cause other problems. I often find that if a fix is version 0.05, a 0.06 and a 0.07 will be issued in quick succession to remedy the bugs that were introduced by the 0.05.

Steven Baker (Conservative, Wycombe)

The hon. Gentleman makes a reasonable point. I repeat my assertion that there are a reasonable set of questions here, but they are not adequately addressed by the amendment, which simply says:

“If the trader becomes aware of digital content that is faulty”

without defining what faulty means. There is probably a book to be written about what faulty means and at what point people want to know that there is a bug fix.

That brings me to my point on awareness. These days, with a major piece of software such as the maps product that has been mentioned, people will quickly become aware if it is faulty. I am sorry that the hon. Member for Walthamstow got lost in a place that may have been dangerous. That is highly undesirable. The reality is that when such a piece of software becomes faulty, in today’s world that knowledge will quickly go around and people will find alternatives very fast. With such pieces of software, a spontaneous process is going on by which standards are driven up. It is in the interests of all software engineers to develop their reputation. Many thousands of people give their time for free in the open-source software world deliberately to establish a reputation for producing high-quality software.

There is a book to be written on that. The amendment is not adequate to the task at hand, and I hope the hon. Lady withdraws it.

Jennifer Willott (Liberal Democrat, Cardiff Central)

It has been an interesting debate, and the perspective of the hon. Member for Wycombe, who is clearly extremely experienced in this area, has been useful. The purpose of the amendment is to require traders to inform their customers when they become aware that a bug has been identified so that the customers can, presumably, exercise their statutory rights. I am not convinced of the need for that step in the process. If a consumer is affected by a fault in digital content, they will already be aware of the fact that there is a fault. As the hon. Gentleman has said, the problem with Apple Maps was all over the papers. Anyone who had the software on their phone or iPad was perfectly well aware that there was a problem with it, not least because they probably ended up in totally the wrong city when they were trying to get somewhere. Such problems are often very apparent to the consumer.

The Bill is designed to clarify and simplify the law so that consumers understand better and can enforce their rights to quality content. One way in which digital content can be faulty is by not being of satisfactory quality. As we have discussed, whether something is of satisfactory quality will depend on many factors, such as the price paid for the digital content and the description, and it is subject to the expectations of a reasonable person.

The hon. Member for Walthamstow asked about being free of minor defects. The paid-for updates should still meet the quality rights because they are paid-for items. Free updates under the contract cannot reduce the quality. Whether a fault is a major defect will depend on the context and the reasonable expectations of a consumer. If it is a major defect, the consumer would be entitled to a repair, which could be delivered through an update.

Chris Warner from Which? gave evidence to the Business, Innovation and Skills Committee when it was carrying out pre-legislative scrutiny. He said that most consumers know whether something is a minor bug or a major fault. A consumer would tend to be able to tell. The satisfactory quality is judged by what a reasonable person would expect. As the hon. Member for Wycombe said, reasonable consumers do not expect complex forms of digital content such as software or games to be completely bug-free. If there were a minor defect, if it were reasonable, it would not detract from the rights.

It is standard industry practice that, when bugs are identified in such forms of digital content, an update is developed and released to consumers to fix the problem. As was said, traders want their consumers to enjoy their products and they want to fix the bugs when they can.

Consumers have the right to request a repair for faulty digital content. That repair may be provided by way of an update. The amendment would simply require traders to make consumers aware that there is a bug before they provide an update. That would introduce an unnecessary step in the process for consumers who had not already noticed the bug. It could also add significant burdens to traders. For example, the notification of a fault might encourage large numbers of consumers to contact the trader to claim a remedy when the trader is already working on a remedy that will be provided a couple of days later through an update. Handling all those complaints could generate significant costs and waste a huge amount of time for that trader.

I am not discouraging consumers from complaining to traders when their rights have been breached—quite the opposite. The Bill aims to empower consumers to assert their rights, but encouraging consumers to claim a remedy where they might otherwise not have noticed there was a fault, and where the trader was already producing a repair, seems unnecessary.

Let us say that there is a new release of a software package that contains a fault, whereby it does not work on an older version of an operating system, even though the description of the software said it would. I am sure I am not the only person who has experienced that. The developers become aware of the problem and are working on a fix. However, the fault is really only relevant to consumers who are using the older version of the operating system. That will be a minority of consumers because most will have upgraded to the newer version. The trader has no way of knowing which consumers are affected by the fault, so the update is provided to all consumers to fix the problem.

Will the trader be required to inform all consumers of the software of the fault, even though in reality it affects only a minority of them? From a consumer perspective that could be quite confusing. If someone has not been affected by the fault and receives a notification from the trader that the product is faulty, at the very least it could be irritating, as was said. They could worry about the impact of the fault or they may decide to see if they can get some money back, when in fact it would not affect them in the first place.

Stephen Doughty (Labour, Cardiff South and Penarth)

I understand the point the Minister is making, but does that not happen already? When updates are made available, it is made clear in bullet points that they are intended to fix the bug for users on such an operating system, or in the given context. I do not see why it would cause particular worry. A lot of traders and others are already clear about who the updates are for and why they are necessary.

Jennifer Willott (Liberal Democrat, Cardiff Central)

That is not what the amendment proposes. It proposes that the trader should contact everybody to tell them there is a fault before they issue the update. It would insert a step whereby the trader should tell everybody there is a fault and then, presumably when they have developed a fix, do the update to ensure the fault is fixed. It could introduce a wholly unnecessary step to notify people there is a problem, even if the fault would be fixed a couple of days later by an update. That seems overly bureaucratic.

Stella Creasy (Labour, Walthamstow)

Does the Minister think that if a software developer creates an update that fixes a problem, they should tell people to download it? For example, Google developed a fix for the Google Maps issue, but people had to be aware that there was an update that could be downloaded. If, like me, the person had given up on Google Maps because they had got lost and therefore did not trust its information, how would they know how to fix it unless they were told? If the Minister does not think that companies should tell people when there is a solution, why should they tell people there is a problem they should be aware of?

Jennifer Willott (Liberal Democrat, Cardiff Central)

But that is not what the amendment would do. It does not say that when a trader has provided a fix they should tell consumers about it. It says that if a trader becomes aware of a fault

“it is the responsibility of the trader to take all reasonable steps to inform the consumer affected so that he may exercise their statutory rights.”

It does not say that they need to tell people when a fix is available.

Steven Baker (Conservative, Wycombe)

Many of the applications that have been used as examples are free, so the consumer will not have paid for them. Most of us do not unlock our phones and use source code to install updates; we use the app store, or whatever is appropriate to the device, which simply tells us when there is an update. We could be overcomplicating something that for most people is as simple as spotting that there is a little number on the app store and pressing the appropriate button.

Jennifer Willott (Liberal Democrat, Cardiff Central)

My hon. Friend is right. My concern is that the amendment would add a step that could be incredibly burdensome for businesses and confusing for consumers. As my hon. Friend said, the solution is simple. He made the important point that a lot of applications are free. Therefore, they would not be subject to the quality rights because there would be no contract.

The hon. Lady highlighted the fact that digital content does not include only things that are downloaded on a computer. A person may buy a good that has digital content, such as a DVD or a digital camera, from a store, but those traders are unlikely to know who the consumers are. If someone buys a camera from a high street store, the trader will not necessarily have a record of that person. Therefore, it may be difficult or impossible for high street stores to inform consumers. The amendment would create a new requirement for such products. The current law, the Sale of Goods Act 1979, does not require traders to inform consumers.

It is not clear what a “reasonable” step to inform consumers is. How would a shopkeeper be expected to contact consumers? Would they have to put a notice on their website? Would they have to run a national advertising campaign? It is not clear. Nor is it clear what the benefit of introducing the requirement would be. We should bear in mind that it would be a burden on traders, and additional costs to traders are always passed on to consumers. Therefore, it could have an impact on consumers.

The requirement would be particularly burdensome for small business because of the records they would need to maintain, the number of consumers they would need to contact, the number of unnecessary complaints they would need to deal with and the extra effort that would be required. The consumers may not even be inconvenienced by the fault; they may not notice it.

I hope I have answered Members’ questions, and I call on the hon. Lady to withdraw the amendment.

Stella Creasy (Labour, Walthamstow)

I thank the Minister for her response, but I am a bit disappointed by it. Her criticisms would have been fair had the amendment not included the word “reasonable”. It is about taking a reasonable and proportionate approach when something goes wrong.

I am disappointed, because we are going to have a debate about the question of recall more generally. If the Government do not see a role for consumer protection, how will we help consumers when something is faulty? If something does not work and does not meet the “fit for purpose” or “satisfactory for purpose” tests, and the trader knows that it does not work, what responsibilities and obligations do the traders have to do something about it?

The Minister read the amendment, but she ignored the word “reasonable”, which would be the test. Nobody wants to create huge burdens for business. However, good traders already inform consumers. For example, when there were problems with Google Maps, Google put out adverts to say that there was a problem. That did not help me, because by then I had already experienced the fault and therefore got lost in a city late at night because I was reading an incorrect map. Nevertheless, there was an attempt—a reasonable step—to put it right.

The amendment does not preclude any type of reasonable step. It does not say that a company must contact every single consumer via e-mail, hunt them down and check that they have looked at the app store and downloaded something. It simply says that a company must take reasonable steps to inform people that they have something faulty and that something must be done. Leaving the concept of reasonableness out of the Bill does not do justice to some of the concerns people have about faulty products and how things are put right. It is a reasonable part of consumer protection law to ask what the responsibilities are, and it is quite telling that the Minister has not pointed to other parts of the Bill that would offer such protections.

Stephen Doughty (Labour, Cardiff South and Penarth)

I am interested in what my hon. Friend is saying, but also in what the hon. Member for Wycombe said about the ease with which the “update all” function works on an iPhone. One issue is that sometimes a person does not know whether they are getting a bug fix—or repeated bug fixes—for a piece of software they have purchased, or whether it is an improvement. A person could buy a product and have to download six or seven different fixes because it is repeatedly faulty, and there is no option to go back and say, “Actually, I don’t want this thing after all. I want it recalled or refunded, or whatever you choose to do.”

Stella Creasy (Labour, Walthamstow)

As someone who has downloaded far too many apps on to my phone, I do not necessarily see the app box because it is several screens back. I therefore do not always see when updates are available. In fact, I am grateful to the hon. Member for Wycombe for pointing that out, because when we have finished in Committee I should check—there probably are updates for my phone that I need to download. I hope they are not for Candy Crush, because I realise that I must stop playing it.

I mention Candy Crush because my second point relates to the concerns we raised about freemium software in the debate on clause 33. The hon. Member for Wycombe said that if people do not have to pay for it, what is the problem? However, there is confusion about freemium software, in that the substantive game is free to download but people might be paying for elements of it. If that software causes problems, what are the responsibilities? Where does the relationship end? That is what we wanted to tease out in the debate on that clause, precisely because of, for example, things going wrong that might affect someone’s iPhone or their quality and enjoyment of a game. Where does everything then fit together? Whose responsibility is it to address the issues?

The Minister has not been fair about the importance of a simple process of recall. I am happy to withdraw the amendment because I think we will discuss the issues more substantively when we debate new clause 2. However, I want to give the Minister notice of the fact that we do sympathise with the idea that recall is an important part of consumer protection. It is about holding traders to account for their responsibility when they are aware of a substantial fault. That is why I wanted to say clearly to the Minister that we draw the distinction between a minor defect—we recognise the fact that digital content will have problems and might need upgrading—and a substantial defect.

Let me be clear: the defect with Google Maps was that the maps were completely wrong. It was not a minor defect. It was not one or two roads in the wrong place; the map of Manchester was completely out of whack. That is why, as a consumer fit for purpose, I got completely lost. That is a pretty obvious example of digital content not meeting the tests set by the Bill. The app was faulty. I do not think that in such circumstances it should have been up to me to clock the adverts, or that we should hope someone would have made me aware of it, or that I might have heard someone talking about it or seen a tweet about it—goodness knows, I follow too many people on Twitter as it is. I was not aware of the problem at the time and got lost as a result. I do not think I am alone in having been unaware of problems with digital content that needed to be fixed, and caught out as a result.

Jenny Willott rose—

Stella Creasy (Labour, Walthamstow)

I will happily give way to the Minister, although I was withdrawing the amendment.

Jennifer Willott (Liberal Democrat, Cardiff Central)

I just wanted to say that there will clearly be circumstances in which companies wish to inform their consumers, advertise, or do whatever else. The Bill does not preclude them from doing that. However, the amendment requires basically all traders of all digital content to inform people when there is a fault. I note that the hon. Lady just referred to a substantial fault, but that is not what the amendment says; it just refers to

“digital content that is faulty”.

That could be any fault in any digital content relating to any trader. That is a very broad requirement. I appreciate what she says about reasonable steps, but it is unclear what “reasonable steps” are. It is a very broad measure.

Stella Creasy (Labour, Walthamstow)

Given that the Minister has set great store by the concept of reasonableness in the Bill, and that it is a legal concept, I do not think it is fair to suggest that the term “reasonable” makes the amendment a broad measure. It is a defined legal measure.

I take the Minister’s point about the word “faulty”. If she feels that that is not clear enough, I would be happy for her to table her own amendments and to look at whether we could support them. However, I draw to her attention the fact that there are some faults in games that are about money. The trader might not immediately seek to update such a fix if it was generating funds for them. We have seen instances where games are charging people money as a result of a fault in the game. I caution the Minister on her complacency on recall. Addressing something that it is not in the trader’s interest to deal with because they are enjoying commercial advantage, and that is generating consumer detriment—my hon. Friend the Member for Foyle will want to talk about risks of loss of life and limb in that context—is part of consumer protection.

It is a right for consumers to have a Government who think about how consumers can be protected, and the amendments are about those issues. If the Minister wants to come back with an amendment that is tighter on the concept of whether something is not fit for purpose or not satisfactory as distinct from something that is free from minor defects, we would be happy to support that. She is being unfair on herself if she wants to suggest that “reasonable” is not a defined term, given that it is so much an intrinsic part of other parts of the legislation. I caution her against being quite so dismissive of the issue. I beg to ask leave to withdraw the amendment.

Sandra Osborne (Labour, Ayr, Carrick and Cumnock)

If it is the wish of the Committee, I will take clauses 41 to 47 in a single question.

Stella Creasy (Labour, Walthamstow)

We have some minor questions about some of them.

Clause 44 - Right to price reduction

Stella Creasy (Labour, Walthamstow)

I just wanted to get feedback from the Minister on price reductions. Earlier today, we debated how we might determine what reduction in price there would be when someone sought their money back on a good. We had particular concerns about how that might be influenced by the second-hand market. How does she see a calculation of price reduction being made for digital goods? How will that be arbitrated, especially given that there would not be a direct physical interaction between the customer and the trader in a large number of the cases?

The Minister will be aware from earlier that we are concerned about some of the caveats that the Government are putting in the Bill. Given that there is a point in the Bill about digital content being free from minor defects—there is already a presumption that some minor defect is acceptable—we have questions about how cases will be arbitrated when a consumer feels that it is a major defect. How will it be resolved if they do not want the good repaired, but want to get their money back? How will questions of use be dealt with? Those questions are important. We recognise the point about not being able to be confident that someone had fully rejected a piece of technology. There is not a right to reject in this instance.

I will give examples of the sorts of things that need teasing out, because it is helpful to have that on the record. Say, for example, someone buys a game outright, but they find a minor defect, such as a character who floats rather than runs when the description said that it ran. Does that affect the gameplay too much? Is that a minor defect? Is it a major defect if the game is unplayable as a result and therefore not satisfactory? Would they be entitled to a full refund? At what point would they be able to require a price reduction in the subscription? Would they be able to get a price reduction in the subscription if they find that an update to the software is causing them to have not as much enjoyment of the game? If so, what would that concept of use look like? Would that affect the value? With digital content especially, because there are already caveats on minor defects, it is worth setting out how the description of a price reduction will be defined and what consumers can expect from the legislation in resolving those issues. It would be helpful if the Minister set that out.

Jennifer Willott (Liberal Democrat, Cardiff Central)

The right to a price reduction gives the right to an “appropriate amount”, according to the wording in the Bill. Where digital content is fundamentally faulty and completely unusable, an appropriate amount would clearly be a full refund. That is clear in the Bill. A full refund might also be appropriate if only part of the digital content is faulty, but the fault affects a fundamental function of the digital content. For example, if a parent had bought a specific web browser for its enhanced parental controls, but the controls alone did not work, then because it had been purchased for that purpose, a full refund would be appropriate.

In some cases, a full refund might not be appropriate. For example, if a single movie fails to stream as part of a subscription package, or a minor feature at a high level in a game does not work, a full refund would not be appropriate, because the consumer has been able to enjoy the rest of the digital content under the terms of the contract. An appropriate amount might be a corresponding portion of the price paid.

We have deliberately avoided specifying in the Bill how an appropriate amount is calculated, because we want the legislation to remain principles-based, to take into account future-proofing. “Appropriate amount”, however, has been used for goods for several years without evidence of a significant problem in calculating what such an amount is. In the vast majority of cases, consumers and traders will be able to agree an appropriate amount—that seems to be what happens already. I hope that has clarified the point made by the hon. Lady.

Stella Creasy (Labour, Walthamstow)

I thank the Minister. This is one of those areas where contract law will have to evolve, because it will be about what it means to get a price reduction on a subscription service, for example. She mentioned one movie, but if my Netflix account will download some things but not others, at what point would I be entitled to a price reduction? At what point is something a minor defect if I can only get two or three of a series of films, rather than the entire series? That is a fair point, and it will be a moot point, because the concept of minor defects is probably open to interpretation. I encourage her to keep a watching brief on the matter because, especially with digital content, people will feel strongly that they are entitled to an entire series of “House of Cards” or whatever, and if they only get two thirds of it, they will feel that to be a major defect. Missing one episode can mean missing out on quite a lot of the content, which is very different from a game with a floating character. The issue will have to be returned to at a later date. I am happy with her answer otherwise.