DPRR/14-15/15
Consumer Rights Bill
Memorandum by the Department for Business, Innovation and
Skills for the Delegated Powers and Regulatory Reform
Committee
Introduction
1.
This memorandum identifies the provisions for delegated legislation in the
Consumer Rights Bill, in order of appearance in the Bill (schedules are addressed
in order of the clauses giving effect to them).
2. In respect of each power sought the memorandum sets out:




The context and purpose of the power;
The Government’s justification for seeking the power;
The extent to which the power is novel, or draws on precedents;
The justification for the procedure proposed for the power sought.
3. The Department for Business, Innovation and Skills has considered the use of
powers in the Bill as set out below and is satisfied that they are necessary and
justified.
Background
4. The provisions in this Bill fall into three themes. These are:



5.
Consumer Contracts for Goods, Digital Content and Services
Unfair Terms in trader-to-consumer Contracts and Notices
Miscellaneous and General - including Investigatory Powers etc, Amendment
of the Weights and Measures (Packaged Goods) Regulations 2006, Enterprise
Act 2002: enhanced consumer measures and other enforcement, and Private
Actions in Competition Law, and Duty of Letting Agents to Publicise Fees.
This memorandum deals with the provisions for delegated legislation in each
of these policy themes in turn. The Delegated Powers and Regulatory Reform
Committee may wish to note that the Bill has been scrutinised in draft by the
Business, Innovation and Skill Committee, who made some recommendations in
their Sixth Report of Session 2013-141, which have affected the use of delegated
powers in this Bill (a draft Delegated Powers Memorandum was also provided to
and published by the Business, Innovation and Skill Committee). Where this is
the case, this is clearly set out in this memorandum. One power has also been
amended following debate in the House of Commons, again this is clearly
indicated in this memorandum. Finally the delegated powers that relate to the
1
http://www.parliament.uk/business/committees/committees-a-z/commons-select/business-innovationand-skills/publications/
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Duty of Letting Agents to Publicise Fees were added to the Bill during Report
Stage in the House of Commons and therefore previous drafts of this
memorandum did not include text on these powers.
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Part 1 – Consumer Contracts for Goods, Digital Content and Services
6.
The clauses on Consumer Contracts for Goods, Digital Content and Services
have the following purposes:



To set out the rights a consumer has when, under a contract, a trader
either:
o
supplies goods (Chapter 2); or
o
supplies digital content which is paid for with money or with a
facility that was originally purchased with money (such as virtual
currency), or which is associated with any paid-for goods, digital
content or services (e.g. free software given away with a paid-for
magazine) (Chapter 3); or
o
supplies services (Chapter 4);
To set out the statutory remedies to which the consumer is entitled if these
rights are breached;
To prevent a trader from limiting or excluding liability for breaches of the
above rights, in most cases – or, for services, to prevent the trader from
limiting liability to less than the price paid or value of other consideration
given by the consumer.
Power 1
Application of statutory rights and remedies to additional contracts for digital
content - Clause 33(5)
Power conferred on: Secretary of State
Power exercised by: Order
Parliamentary procedure: Affirmative Resolution Procedure
Context and purpose
7.
Part 1 Chapter 3 sets out the scope of consumer rights and remedies in relation
to contracts where a trader provides digital content to a consumer. Digital content
is defined in clause 2 (Chapter 1) as “data which are produced and supplied in
digital form” and covers products such as software, apps and e-books. As with all
the rights in Part 1 of the Bill, there has to be a contract for the rights to apply.
For there to be a contract, one of the requirements under the law of England and
Wales is for each party to give something of value to the other. Clause 33
provides that Part 1 Chapter 3 (with the exception of clause 462) applies only if
the consumer pays a price to the trader and therefore would exclude contracts
where consumers give something else of value in exchange for the digital content.
In the digital content market there is a model whereby consumers may give
something else of value in exchange for digital content – for example their
personal data.
2
Clause 46 entitles the consumer to remedies if digital content provided by a trader causes damage to a
device or other digital content, in certain circumstances.
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8.
The reason contracts where the consumer gives something else of value are
excluded is because the Government is not convinced that there is sufficient
consumer detriment caused by these types of contract. To include them may
therefore mean unnecessary regulation. The power in Clause 33(5) allows the
Secretary of State to provide by order that Chapter 3 can apply to other contracts
for the provision of digital content if the Secretary of State is satisfied that it is
appropriate to do so, because of significant detriment caused to consumers under
contracts of the kind to which the order relates. Clause 33(6) provides that such an
order can in particular amend the Bill and may contain transitional or transitory
provisions or savings. The power is subject to affirmative resolution of
Parliament.
Justification
9.
The digital content market is developing rapidly and at some future date the
consumer detriment caused by contracts where a trader provides digital content
which would be currently out of scope may be such that the rights provided for in
Chapter 3 should apply. The power can only be used where the Secretary of State
is satisfied that there is significant consumer detriment caused by the contracts
concerned.
Precedent
10.
There is no exact precedent for this power.
Procedure Justification
11.
The power is subject to an affirmative resolution of Parliament. This power
could be used to amend primary legislation to extend regulation and therefore the
Government considers the affirmative resolution procedure provides the
appropriate level of parliamentary scrutiny.
Power 2
Exclusion of specified services from provisions of Chapter 4 - Clause 48(5)
Powers conferred on: Secretary of State
Power exercised by: Order
Parliamentary procedure: Affirmative Resolution Procedure
Context and purpose
12.
3
4
Part 1 Chapter 4 sets out the scope of consumer rights and remedies in relation
to contracts where a trader agrees to supply a service to a consumer. It makes clear
that the Chapter is subject to any enactment3 that defines or restricts the rights,
duties or liabilities arising in connection with a service of any description 4. It also
“enactment” is defined in clause 59
See clause 53
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makes clear that where the rights under the Chapter apply, traders cannot exclude
or restrict their liability to less than the contract price.
13.
The power in clause 48(5) enables the Secretary of State to provide by order
that one or more of this Chapter’s provisions do not apply to specified services.
Clause 48(6) makes clear that such an order may contain transitional or transitory
provisions or savings.
14.
Currently, the general rights in relation to provision of services for all types of
contract (e.g. business to business and business to consumer) are set out in Part II
of the Supply of Goods and Services Act 1982 (sections 12-16). Currently, traders
are able to exclude or limit liability in certain circumstances as set out in section
16 of that Act. Section 12 of the 1982 Act provides a power for the Secretary of
State to exclude services from the scope of sections 13-15, which set out implied
terms in contracts for the supply of services. This power has been used 3 times to
exclude from the scope of section 13 (the implied term to take reasonable care and
skill): the services of an advocate in a court or tribunal and the services rendered
to a company by a director of the company5; the services rendered to a building
society by a director of that building society and the services rendered to a
provident society by any member of the committee of management 6; and finally
services rendered by an arbitrator (including an umpire)7.
15.
The power in the 1982 Act is subject to the negative resolution procedure.
When first introduced to the House of Commons on 23 January 2014 the power in
the Bill was similarly subject to the negative resolution procedure. Having
considered the debates on the power in the Bill in Committee, the Government
tabled an amendment in Report stage to clause 48 to provide that the power should
be subject to the affirmative procedure.
Justification
16.
The scope of the Bill should be consistent where appropriate with the scope of
Part II of the 1982 Act as it applies to services. Whilst specific services could be
excluded on the face of the Bill, a power such as that available in the 1982 Act is
more appropriate to avoid lengthy and potentially technical exclusions on the face
of the Bill. Furthermore, the power is necessary because the scope of the services
sector is very wide and may develop in ways unanticipated, giving rise to the need
for more specific regulation or indeed less regulation for particular types of
service, which may be inconsistent with or make redundant the provisions of this
Chapter in relation to particular services.
17.
It is likely that the Government will use this power to draft an order for the
purposes of ensuring the Bill does not affect the rights of consumers using
scheduled services on the National Rail Network with regard to compensation for
delays and cancellations. The National Rail Conditions of Carriage8 (“NRCOC”)
set out the train companies’ and passengers’ rights and obligations when using
these services. It is intended to represent the whole liability of the relevant train
companies and exclude liability under Part II of the 1982 Act. This is because the
NRCOC provide an equivalent if not greater level of consumer access to redress
5
See SI 1982/1771
See SI 1983/902
7
See SI 1985/1
8
http://www.nationalrail.co.uk/static/documents/content/NRCOC.pdf
6
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than that Act would. The Government is concerned that if this status quo is not
maintained, it will result in higher costs to rail passengers and complexity to
operate two, overlapping redress systems without enhancing consumer rights.
Precedent
18.
As explained above, section 12 of the Supply of Goods and Services Act 1982
provides a power for the Secretary of State to exclude services from sections 1315 of that Act, which set out implied terms in contracts for the supply of services.
This power has been used 3 times to exclude certain services from the scope of
section 13 (the implied term to take reasonable care and skill). The power in the
Bill draws on the power in section 12 of the Supply of Goods and Services Act as
a precedent.
Procedure Justification
19.
The power is now, following amendment in the House of Commons, subject to
the affirmative resolution procedure. Whilst the negative resolution procedure was
considered appropriate because the power is to remove regulation for specific
types of service, Members of the Committee of the House of Commons expressed
a desire to change the level of scrutiny of the use of this power to the affirmative
resolution procedure. The Government agrees that this is an appropriate level of
scrutiny and therefore put forward amendment to this effect during House of
Commons Report stage of the Bill.
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Part 2 – Unfair Terms
20.
The clauses on Unfair Terms have the following purposes:

To consolidate the law on unfair terms in consumer contracts currently
found in two separate pieces of legislation: the Unfair Terms in Consumer
Contracts Regulations 1999 (which implement the Unfair Terms Directive
1993) and the Unfair Contract Terms Act 1977;

To provide that most terms in consumer contracts and consumer notices
can be assessed for fairness and will only be binding if they are fair (as
defined by the “fairness test”);

To clarify a number of provisions, most notably the exemption from the
fairness assessment of terms which are transparent and prominent, and which
relate to the essential bargain of the contract (that is to the subject matter or
the amount of the price); and

To provide that a list of regulators (including the Competition and Markets
Authority (“CMA”) and the Financial Conduct Authority) will be able to take
action to enforce this Part of the Bill.
Power 3
Power to amend Schedule 2 – the list of terms which may be unfair - Clause 63(3)
Power conferred on: Secretary of State
Power exercised by: Order
Parliamentary procedure: Affirmative Resolution Procedure
Context and purpose
21.
Part 1 of Schedule 2 contains an indicative and non-exhaustive list of terms of
consumer contracts that may be regarded as unfair. Part 2 of that Schedule limits
the scope of Part 1. Both Parts of the Schedule are, in the main, copied out from
the Unfair Terms Directive 1993. Together, they are a form of guidance for the
courts when applying the fairness test in clause 62 of the Bill, as they provide
examples of some terms which may be unfair.
22.
Clause 63 of the Bill gives effect to that Schedule, and clause 63(3) gives the
Secretary of State the power by order to add, modify or remove entries in Part 1
and Part 2 of the Schedule. The order may contain transitional or transitory
provisions or savings. The purpose of this power is to enable the Secretary of
State to make appropriate modifications in order to, for example, keep the list up
to date, reflecting prevalent examples of unfair terms as new practices and sectors
in the market develop. It may also be found necessary to amend the list with the
experience of application in practice.
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Justification
23.
The objectives of enabling the law on unfair terms to keep pace with market
developments in consumer contracts and preventing it from becoming outdated,
could not be achieved by a provision on the face of the Bill.
Precedent
24.
There is no exact precedent for this power in unfair terms legislation.
Procedure Justification
25.
In its Report, the Business, Skills and Innovation Committee recommended
that the affirmative procedure should apply to this power, because it would allow
for primary legislation to be amended. The Government has considered the
Committee’s view and we agree with the Committee’s conclusion that the
affirmative procedure would provide the right level of parliamentary scrutiny.
There is no exact precedent for this power, and whilst Schedule 2 is only an
indicative list, in practice, it forms a central part of the regime to protect
consumers from unfair terms; both traders and consumers need to be able to use
the Schedule with confidence. It is therefore right that any changes to the
Schedule should be subject to an appropriate level of scrutiny to ensure adequate
protection for consumers and traders alike.
Power 4
Advice and information regarding unfair terms - Schedule 3, paragraph 7(5)
Conferred on: The CMA
Exercised by: Guidance
Parliamentary procedure: None
Context and purpose
26.
Paragraph 7(5) of Schedule 3 to the Bill confers a power on the CMA to
arrange the publication of advice and information about the unfair terms
provisions, which would take the form of guidance.
Justification
27.
This power will enable the CMA to provide advice and information to traders
and consumers about the practical application of the unfair terms provisions in the
Bill. As the CMA has a duty (at Schedule 3, paragraph 7) to arrange for the
publication of details of applications it makes for injunctions, and injunctions and
undertakings made under Schedule 3, the Government considers that the CMA
may be best placed to produce advice and information.
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28.
The Government considers this advice and information would meet its
objectives of improving understanding and application of the provisions.
Precedent
29.
Similar guidance is already issued under Regulation 15(3) of the Unfair Terms
in Consumer Contracts Regulations 1999.
Procedure justification
30.
The Government considers that the power to publish advice and information
need not be subject to any Parliamentary procedure, as the advice and information
will relate back to the unfair terms provisions of the Bill which will be debated
during the passage of the Bill.
Power 5
Power to amend the list of enforcers of the law on unfair terms - Schedule 3,
paragraph 8
Power conferred on: Secretary of State
Power exercised by: Order
Parliamentary procedure: Negative Procedure
Context and purpose
31.
Schedule 3 confers functions on the CMA and other regulators in relation to
the enforcement of Part 2 of the Bill. Paragraph 8 of Schedule 3 includes a list of
regulators that can enforce Part 2. It provides that the Secretary of State may by
order amend the list to add, modify or remove an entry. An order may amend the
list to add a body that is not a public authority only if the Secretary of State
considers that the body represents the interests of consumers. An order may make
consequential amendments to Schedule 3, including with the effect that any of its
provisions apply differently or do not apply to the body added. The order may also
contain transitional or transitory provisions or savings.
32.
Paragraph 8 also provides that the Secretary of State must publish other
criteria to be applied by the Secretary of State in deciding whether to add an entry
to, or remove an entry from, the list.
33.
The purpose of this power is to enable the Secretary of State to keep the list of
regulators up to date, over the course of time and as the market develops, and to
reflect any changes in the regulatory landscape as necessary.
Justification
34.
The objective of ensuring that the regulators tasked with enforcing the law on
unfair terms in consumer contracts remain appropriate in light of market
developments and regulatory changes, could not be achieved by a provision on the
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face of the Bill. The effectiveness of the Bill’s provisions on unfair terms depends
on appropriate enforcement.
Precedent
35.
There is no exact precedent for this power in unfair terms legislation.
However, Section 213(3) of the Enterprise Act 2002 contains a power, under the
negative procedure, enabling the Secretary of State to provide that any body or
person is a designated enforcer for the purposes of Part 8 of that Act (Enforcement
of Certain Consumer Legislation) if certain conditions are met, for example that
the Secretary of State thinks the person or body has as one of its purposes the
protection of the collective interests of consumers.
Procedure Justification
36.
The negative procedure is considered appropriate because, it is considered
that, amendment of the list of regulators is an administrative and procedural
matter, not a substantive issue; as such the negative procedure allows for the
appropriate level of parliamentary scrutiny. As explained above, the power
contains a safeguard, in that it only allows an addition of a body that is not a
public authority if the Secretary of State considers that the body represents the
interests of consumers.
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Part 3 – Miscellaneous and General
Investigatory powers etc
Power 6
Investigatory powers etc. - Schedule 5, paragraph 12
Power conferred on: Secretary of State
Power exercised by: Order
Parliamentary procedure: Affirmative where the order changes primary
legislation, otherwise negative
Context and purpose
37.
This Schedule (which is given effect by clause 77(1)) makes provision for the
investigatory powers of consumer law enforcers. It aims to modernise existing
consumer law investigatory powers by consolidating them into a single generic
set, thereby removing the often unclear, inconsistent and overlapping
investigatory powers currently found in over sixty different pieces of legislation.
38.
Paragraph 10 and the table in paragraph 11 of Schedule 5 set out the
legislation that can be enforced using the Bill’s new generic set of investigatory
powers. The existing investigatory powers contained in the legislation listed
within these paragraphs will either be repealed or curtailed so that they are no
longer available to the enforcers listed in Schedule 5 paragraphs 2 to 6, who will
instead use the new powers contained within Schedule 5.
39.
Paragraph 12(1)(a) of Schedule 5 gives the Secretary of State the power to
amend by order paragraph 10 or the table in paragraph 11 by adding, modifying or
removing any entry in it. In consequence of utilising this power, paragraph
12(1)(b) confers a power on the Secretary of State to amend, repeal or revoke any
other legislation (including the Bill) whenever passed or made. The order may
also contain transitional or transitory provisions or savings.
40.
The power under paragraph 12(1)(b) includes a power, where relevant, to
amend Acts of the Scottish Parliament, Acts or Measures of the National
Assembly for Wales, and Northern Ireland legislation (under sub-paragraph
12(8)).
Justification
41.
The effectiveness of Schedule 5 in delivering a single generic set of
investigatory powers and a transparent enforcement framework depends on it
being flexible enough to accommodate future changes in legislation. Its status
would be gradually eroded over time if it were unable to accept new legislation or
remove that which had been repealed or revoked. Furthermore, additional existing
legislation with investigatory powers might also be suitable to be brought within
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Schedule 5 but are not at this time listed because they were outside the scope of
the consultation exercise for this part of the Bill, which only covered legislation
for which the Department is responsible.
42.
Schedule 5 will also fail to deliver on its aim of producing a clearer and more
transparent enforcement framework if any existing investigatory powers (whether
they be in primary or secondary legislation) cannot be repealed, revoked or
amended once legislation has been brought within its scope.
43.
For these reasons it is necessary to confer a power to amend paragraph 10 or
the table in paragraph 11 of Schedule 5 as well as a power to amend any other
legislation in consequence of such amendments being made to Schedule 5.
Additionally, paragraphs 12(2) – (3) of Schedule 5 restrict the use of these powers
by providing that the safeguards on the use of a power of entry or associated
power under Schedule 5 that replaces those powers being repealed must be greater
than the safeguards that existed before.
Precedent
44.
Section 210(9) of the Enterprise Act 2002 contains a power enabling the
Secretary of State to amend a list of legislation by the negative procedure, so that
protections for consumers under that Act apply to consumers covered by
appropriate (EU) legislation as it is introduced.
Procedure Justification
45.
Given the constraints imposed on the exercise of this power described above, the
negative procedure is considered to give the appropriate level of scrutiny when the
power is used to amend secondary legislation. However where the power is used to
amend primary legislation (which is defined in Schedule 5 to include Acts of
Parliament and Acts, measures or legislation of the devolved administrations) the
affirmative procedure allows for appropriate parliamentary scrutiny.
Enhanced Consumer Measures
Power 7
Availability of the use of enhanced consumer measures to private designated
enforcers – Schedule 7, paragraph 8
Power conferred on: Secretary of State
Power exercised by: Order
Parliamentary procedure: Negative Procedure
Context and purpose
46.
This Schedule (which is given effect by clause 79(1)) amends Part 8 of the
Enterprise Act 2002 to give enforcers of consumer law more flexibility in how
they enforce breaches of consumer law. In particular by enabling them to seek
enforcement orders and undertakings that include enhanced consumer measures.
Enhanced consumer measures are measures that:
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


provide compensation or other redress to consumers who have suffered
loss as a result of a breach of consumer law;
increase business compliance with the law; and/or
provide consumers with more information in order to choose more
effectively between persons supplying or seeking to supply goods or services.
47.
There are a number of enforcers under Part 8 of the Enterprise Act 2002.
Some enforcers are specialist, within a particular market, for example the Civil
Aviation Authority; whereas others, for example local weights and measures
authorities (known as Trading Standards Services) have a broader remit. Most are
public bodies, but section 213 of the Enterprise Act 2002 allows the Secretary of
State to designate private bodies as enforcers, as long as they have the collective
interests of consumers as one of their purposes and meet the other criteria
specified by the Secretary of State by order.
48.
The amendments made by Schedule 7 permit only public enforcers to seek
enforcement orders and undertakings with enhanced consumer measures. The
Business Innovation and Skills Committee recommended that the enhanced
consumer measures were extended to private enforcers, subject to the appropriate
safeguards. The Government is of the view that since no consultation or impact
assessment has been carried out and the scope of the enhanced consumer measures
is very wide ranging, their use should, at least initially, be limited to public
enforcers.
49.
The power in paragraph 8 of Schedule 7 allows the Secretary of State to
specify by order that a private enforcer can seek enforcement orders and
undertakings with enhanced consumer measures. The order may also contain
transitional or transitory provisions or savings. It includes a power to make
incidental, supplementary, consequential, transitional, transitory or saving
provision. In order to exercise the power the Secretary of State must be satisfied
that doing so would lead to: more redress being paid to consumers, more
information being provided to consumers and/or more compliance by business
with the law. The functions of the enforcer must also have been specified under
section 24 of the Legislative and Regulatory Reform Act 2006 (requiring the
enforcer to comply with the Regulators Code and the principles of good regulation
in section 21 of that Act).
50.
Once specified the Schedule provides additional safeguards: a private
designated enforcer is prohibited from seeking enhanced consumer measures that
directly benefit them or an associated undertaking (for example, measures which
require someone to participate in a scheme such as a trusted trader scheme
administered by the private designated enforcer). Further, if a trader disagrees
with any measure proposed by the enforcer, then the enforcer will have to take the
matter to court and the court will decide if a measure is appropriate.
Justification
51.
This power would enable the Government to extend the use of enhanced
consumer measures if evidence is obtained that allowing private enforcers to seek
enforcement orders and undertakings with enhanced consumer measures will lead
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to more redress for consumers, more compliance by business with the law and/or
more information being provided to consumers. The Government does not think
it is appropriate to allow these measures to be used by private designated
enforcers initially, neither does it think it appropriate to extend such measures
without a robust evidence base. Since it had not been the intention to allow private
designated enforcers to use such measures, the Government does not have robust
evidence as to what impact such an extension would have. However, we agree
with the Committee that there may come a time where it would be appropriate for
private enforcers to be able to use these measures, subject to the safeguards set
out.
Precedent
52.
There is no exact precedent for this power. However, the power to designate
private enforcers in section 213 of the Enterprise Act 2002 is subject to the
negative resolution procedure.
Procedure Justification
53.
Given the initial constraints on designating a private enforcer under Part 8 of
the Enterprise Act 2002 (see paragraph 47 above), the constraints on the use of
the power and the safeguards that exist after a private enforcer has been given
access to enhanced consumer measures, described above, the negative resolution
procedure is considered to give the appropriate level of scrutiny.
Power 8
Advice and information regarding investigatory powers - Schedule 7, paragraph
10
Conferred on: The CMA
Exercised by: Guidance
Parliamentary procedure: None
Context and purpose
54.
Paragraph 10 of Schedule 7 to the Bill inserts a new s.229(1A) into the
Enterprise Act 2002. This new section confers a duty on the CMA to prepare and
publish advice and information with a view to explaining to those likely to be
affected by them the provisions of Schedule 5 to this Bill, so far as they relate to
the exercise of enforcement functions for certain identified purposes. The advice
and information will also indicate how the CMA expects such provisions to
operate.
Justification
55.
This duty will help in achieving consistent application of the provisions and
minimising confusion or the possible disagreements between enforcers and
business that can arise with any new legislation.
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56.
As the CMA will be exercising many of the investigatory powers in Schedule
5, the Government considers the CMA would be best placed to produce the advice
and information, in order for this advice and information to meet its objectives of
improving understanding and application of the provisions.
Precedent
57.
Similar guidance is already issued under s.229(1) Enterprise Act 2002.
Procedure justification
58.
The Government considers that the duty to prepare and publish advice and
information need not be subject to any Parliamentary procedure, as the advice and
information will relate back to the provision of the Bill (Schedule 5) which will be
debated during the passage of the Bill.
Private actions in competition law
59.
Clause 80 and Schedule 8 contain the Bill’s provisions on private actions in
relation to competition law. Private actions are legal actions which do not solely
involve or involve at all a competition authority such as the Competition and
Markets Authority (“CMA”). The provisions have the following purposes:

To enable the Competition Appeal Tribunal (“CAT”) to hear a wider
range of private actions. At present, the CAT may only hear “follow-on”
private actions, these are actions for damages after a competition authority has
found an infringement of competition law. The clauses will enable the CAT to
also hear stand-alone private actions, i.e. where the competition authority has
not investigated the matter;

To provide for opt-out collective actions and settlements. Collective
actions are actions which involve more than one claimant seeking damages
based on the same or similar underlying facts, i.e. resulting from a particular
breach of competition law by a company. There is currently an “opt-in”
regime under section 47B of Competition Act 1998, to allow both businesses
and consumers collectively to bring actions to obtain redress for infringement
of competition law. In contrast, “opt-out” collective actions involve all
underlying claimants who fall within the definition of a represented class (for
example, all those who bought product X between dates Y and Z) being bound
by the outcome of the case unless they actively opted out of the action at a
specified period. In addition, there is a provision to allow opt-out collective
actions to be settled, the settlement would be binding on all the parties to the
settlement. This provision requires the CAT to determine that the settlement
terms are just and reasonable;

To enable the CMA to approve voluntary redress schemes so as to
encourage alternative dispute resolution. These are schemes voluntarily put
forward by a company which has been found to have infringed competition
law. The schemes are designed to provide redress to those who suffered from
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the infringement, for example consumers who bought the relevant product.
By enabling the CMA to approve the schemes, consumers and other affected
parties may choose to receive compensation from the schemes, rather than
bring separate legal actions.
Power 9
Unclaimed damages to be paid to a charity prescribed by order - Schedule 8,
paragraph 6
Power conferred on: Secretary of State
Power exercised by: Order
Parliamentary procedure: Negative Procedure
Context and purpose
60.
This power relates to unclaimed damages in opt-out collective proceedings. In
such proceedings, damages may be awarded. As this relates to opt-out
proceedings, i.e. where parties automatically became part of the action as they did
not actively opt-out, there may on occasion be unclaimed damages. This is
because parties may be unaware (despite publicity) of their entitlement to
damages. In such cases, the Government would like those damages to go to an
appropriate charity or, alternatively at the discretion of the CAT, the
representative of the claimants. Paragraph 6 of Schedule 8 to the Bill allows the
unclaimed damages to go to a charity which is prescribed by order made by the
Lord Chancellor under section 194(8) of the Legal Services Act 2007. At present,
the sole body which is prescribed is the Access for Justice foundation, an
organization which works to increase access to justice. In addition, sub-paragraph
6(7) of Schedule 8 to the Bill contains a power for the Secretary of State to amend
the provision of the Competition Act 1998 which (as amended by Schedule 8 to
the Bill) would provide that damages must go to a charity prescribed by the Lord
Chancellor.
Justification
61.
The Government considers that there is a need for flexibility as to which body
constitutes an appropriate charity. This is because over time, it may be that other
bodies are also appropriate or that the current prescribed body becomes
inappropriate. Accordingly, the Government does not want to name the body in
primary legislation. As the Lord Chancellor may decide not to prescribe other
bodies under the Legal Services Act 2007 (which does not solely apply to opt-out
collective proceedings), the Government considers it is necessary to provide for
the flexibility to provide for other bodies for the purpose of unclaimed opt-out
collective damages. Accordingly, there is a power to amend the provision which
provides unclaimed damages may only go to a charity prescribed by the Lord
Chancellor.
Precedent
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62.
Paragraph 6 of Schedule 8 inserts a new section 47C in to the Competition Act
1998. This new section47(5) refers to the pre-existing power in section 194(8) of
Legal Services Act 2007, which provides for the Lord Chancellor to prescribe a
body. It does not modify that power.
63.
The new section 47C(7) inserted into the Competition Act 1998 by paragraph
6 of Schedule 8 to the Bill also includes a power to amend the provision that
provides that the clause which requires unclaimed damages to go to a body
prescribed by the Lord Chancellor may be amended by an order made by the
Secretary of State. This has been included so as to avoid the need for primary
legislation to modify this particular provision of the Bill. The power is similar to
that provided for in Section 194(8) of the Legal Services Act 2007.
Procedure justification
64.
Whilst this is a power to amend primary legislation, given its extremely
limited application to a single provision of primary legislation (as amended by the
Bill), the negative procedure is considered to give sufficient parliamentary
scrutiny. This is essentially a technical provision, designed to afford some
flexibility to the Secretary of State in respect of damages in respect of a limited
type of action (opt-out collective actions).
Power 10
Approval of voluntary redress schemes - Schedule 8, paragraph 12
Power conferred on: Secretary of State
Power exercised by: Regulations (plus approval of guidance by the Secretary of
State)
Parliamentary procedure: Negative Procedure
Context and purpose
65.
The purpose of the power, under paragraph 12 of Schedule 8 to the Bill
(inserting a new provision (section 49C) into the Competition Act 1998), is to
enable the Secretary of State to set out in secondary legislation, the detail of
procedural matters relating to the CMA’s power to approve voluntary redress
schemes. The purpose of the schemes is to enable businesses to provide voluntary
redress to those (e.g. consumers) who have been affected by an infringement by
the business of competition law. This should encourage affected parties to receive
compensation more quickly than if they commenced legal action. The
involvement of the CMA is designed to provide confidence to the affected parties
that the scheme has been developed in accordance with appropriate procedures.
66.
In addition, there is a requirement for the CMA to issue guidance about the
approval of voluntary redress schemes. Such guidance must be approved by the
Secretary of State, under paragraph 12 of Schedule 8 to the Bill, before it is
published.
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Justification
67.
The Bill sets out the key aspects of the approval process for redress schemes,
for example that approval is discretionary and the CMA may take into account the
amount of compensation offered. The Government considers it is appropriate for
more detailed procedural requirements to be set out in secondary legislation. This
will also afford the Secretary of State the flexibility to amend procedural
requirements without needing primary legislation to make amendments for such.
68.
It is considered that legal practitioners and businesses will benefit from CMA
guidance about the voluntary redress scheme approval process. As the CMA will
be exercising a discretionary power in approving redress schemes, the
Government considers the CMA should be responsible for producing the guidance
about its process. However, the Government considers it is necessary for the
Secretary of State to approve the guidance so as to ensure the guidance properly
fulfils the policy aim.
Precedent
69.
The power to make rules in secondary legislation about procedural matters
concerning competition law can be found in Section 51 of the Competition Act
1998. Accordingly, providing for a power to make procedural provisions for a
particular aspect of competition law (approval of voluntary redress schemes)
draws upon this precedent.
70.
Section 31D of the Competition Act 1998 provides for guidance to be made
by the CMA in respect of a competition matter, and for the guidance to be subject
to approval by the Secretary of State.
Procedure justification
71.
The Government considers the negative procedure is justified in respect of
setting out details about procedural aspects of the approval process. This draws on
the precedent in Section 51 of the Competition Act 1998.
72.
The Government considers no parliamentary procedure is necessary for
approving guidance issued by the CMA given that it will only be guidance, with
the details of procedural requirements set out in primary and secondary
legislation. As above, the Government considers it is necessary for the Secretary
of State to approve the guidance so as to ensure the guidance properly fulfils the
policy aim. This draws on the precedent in section 31D of the Competition Act
1998.
Power 11
Power to make CAT rules - Schedule 8, paragraphs 20, 30, 31, 32, 33, 34, 35 and
36
Power conferred on: Secretary of State
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Power exercised by: Statutory instrument (following consultation)
Parliamentary procedure: Negative Procedure
Context and purpose
73.
The purpose of these provisions is to enable the Secretary of State to make
rules in secondary legislation about various procedural aspects of the operation of
the CAT. These include ensuring that rules can be made about the following
procedural matters:








the approval of collective settlements (paragraph 20)
rejecting claims (paragraph 30)
fast-track claims procedure, collective proceedings and collective
settlements (paragraph 31)
cost orders in where a party is represented on a pro-bono (i.e. free) basis
(paragraph 32)
the staying or sist of proceedings (paragraph 33)
injunctions (paragraph 34)
the appropriate legal jurisdiction for a collective action (paragraph 35)
the transfer of a case to a more appropriate court (paragraph 36)
Justification
74.
The power is necessary to enable the CAT rules to be made to reflect various
changes proposed to be introduced by the Bill, for example collective settlements
and so as to ensure appropriate rules are in place to govern CAT procedure.
Precedent
75.
This power simply builds upon a pre-existing power in Section 15 of, and
Schedule 4 to, the Enterprise Act 2002, which enables CAT rules to be made.
Procedure justification
76.
These clauses simply extend the range of matters which the CAT rules can
cover and the Parliamentary procedure remains that provided for in Section 15 of
the Enterprise Act 2002. The Secretary of State must consult the President of the
CAT and other persons considered appropriate and thereafter make rules in a
statutory instrument subject to the negative procedure. The Business, Innovation
and Skills Committee recommended that this power be subject to the affirmative
resolution procedure. The Government has published a draft of these rules which
prior to publication were subject to scrutiny and discussion with a group of expert
stakeholders. These rules will be available for discussion in Parliament during
consideration of the Bill. Overall therefore the Government believes that this will
be an appropriate level of scrutiny and does not agree that it would add
significantly to the scrutiny it intends to undertake by amending the order making
power to the affirmative procedure. The negative resolution procedure is also
consistent with the Secretary of State’s existing power to make Tribunal rules and
their technical nature as well as the procedure for other tribunal rules such as the
Employment Tribunal rules.
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Duty of letting agents to publicise fees
77.
This Chapter imposes a duty on letting agents to publish details of the fees
they charge to landlords and tenants and makes provision for enforcement of that
duty. Its purpose is to enable landlords and tenants in the private rented sector to
know what fees each agent will charge, giving consumers the information they
need to make an informed choice about which agent to choose, and encouraging
competition between letting agents, with the aim of reducing the fees charged.
Power 12
Power to specify ways in which a letting agent must publicise fees and what
details must be published in that way – clause 81(5)
Power conferred on: Secretary of State
Power exercised by: Regulations
Parliamentary procedure: Negative Procedure
Context and purpose
78.
This clause imposes a duty on letting agents to publish details of the fees they
charge in relation to letting agency work, property management work or other
work done in connection with an assured tenancy of a dwelling-house in England.
It provides that letting agents must display a list of fees in any premises in which
they deal face-to-face with landlords and tenants. If the agent has a website, the
fees must also be published on that site. This power enables the Secretary of State
to provide in regulations other ways in which fees may be published and what
details must be published in that way.
Justification
79.
The power is required to enable the Secretary of State to ensure that all
relevant fees are published at all appropriate places and to ensure that the duty will
keep pace with future changes in the way that rented properties are advertised. In
the past, contact with landlord and tenants would have been face-to-face;
however, properties are increasingly advertised on-line. Whilst provision has been
made for fees to be published on agents’ websites, it may be appropriate at some
future point for fees to be published in other places, such as third party websites.
Where the information is published may affect what it is possible to publish and
the power enables the Secretary of State to make provision for this, for example, if
the Secretary of State were to require information about fees to be made available
in an advertisement, it would not be realistic to require the agent to publish a full
list of fees.
Precedent
80. There is no exact precedent for this power.
Procedure Justification
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81. As the power does not impose a new duty but simply enables the Secretary of State to
provide that the information that letting agents will already be required to publish
(that is, details of their fees) will be available in other places, the negative resolution
procedure provides the appropriate level of parliamentary scrutiny.
Power 13
Power to exclude certain persons or persons who engage in certain types of work
from the requirement to publish fees – clause 82(3)
Power conferred on: Secretary of State
Power exercised by: Regulations
Parliamentary procedure: Negative Procedure
Context and purpose
82. Clause 82(3) defines ‘letting agent’ for the purposes of the duty, as a person who
engages in letting agency work. Letting agency work is defined in clause 84(1)-(3)
as things done in the course of a business in response to instructions from a
private sector landlord who wants to find a tenant or a tenant who wants to find a
property in the private rented sector. Letting agency work does not include
publishing advertisements, enabling landlords and tenants to communicate
directly with one another, or anything done by a local authority.
83. Clause 82(2) provides that an employee is not a ‘letting agent’ for the purposes of
the duty to publicise fees. The power in clause 82(3) enables the Secretary of State
to exclude other persons or persons who do other types of work from the
definition of ‘letting agent’.
Justification
84. The definition of ‘letting agent’ encompasses a wide range of activities.The power
to make further exemptions by way of secondary legislation will ensure that the
duty will be appropriately applied and can change over time.
Precedent
85. Section 83(9) of the Enterprise and Regulatory Reform Act 2013, which is subject
to the negative resolution procedure, enables the Secretary of State to exclude
certain persons or persons who engage in certain types of work from a
requirement to belong to a scheme that deals with complaints about lettings
agency work.
Procedure Justification
86. As the power excludes persons from the requirement to publicise fees, the negative
resolution procedure applies the appropriate level of parliamentary scrutiny.
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Power 14
Power to prescribe fees, charges or penalties that do not need to be published –
clause 83 (2)(d)
Power conferred on: Secretary of State
Power exercised by: Regulations
Parliamentary procedure: Negative Procedure
Context and purpose
87. Letting agents will be required to publish details of ‘relevant fees’. These are
defined in clause 83(1) as fees, charges or penalties payable by the landlord or
tenant to the agent in respect of letting agency work, property management work
or otherwise in connection with an assured tenancy of a dwelling-house in
England.
88. Clause 83(2) provides that not all payments are ‘relevant fees’: rent, tenancy
deposits and payments made that the agent receives from the landlord on behalf of
another person (such as a builder) are excluded. This power enables the Secretary
of State to exclude other fees, charges or penalties from the definition of ‘relevant
fees’.
Justification
89. The definition of ‘relevant fee’ is very broad. This is intentional to ensure that as
much information as is appropriate is provided to landlords and tenants. However,
it may prove that too much information is provided, undermining the primary
aims of this Chapter which is to enable landlords and tenants to make informed
choices about which agent to choose, and encouraging competition between
letting agents. Providing that other fees may be excluded in secondary legislation
enables the definition to be more tightly drawn, should this prove necessary in the
future.
Precedent
90. There is no exact precedent for this power.
Procedure Justification
91. As the power can only be used to remove regulation by providing that certain
payments are not ‘relevant fees’, the negative resolution procedure provides the
appropriate level of parliamentary scrutiny.
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Power 15
Power to impose functions on a local authority in connection with enforcement –
clause 85(1)(a)
Power conferred on: Secretary of State
Power exercised by: Regulations
Parliamentary procedure: Negative Procedure
Context and purpose
92. Clause 85 enables the Secretary of State to make regulations about the
enforcement of the duty. This power provides that the Secretary of State may
impose functions on local authorities in relation to enforcement.
Justification
93. For these purposes, the definition of local authority includes those authorities that
are local weights and measures authorities9, with responsibility for enforcing other
consumer protection measures, and the local housing authorities, who have
responsibility for housing standards under the Housing Act 200410. The power
enables the Secretary of State to consider which is the most appropriate
enforcement body between local weights and measures authorities and local
housing authorities and allows that decision to be altered should circumstances
change in the future.
Precedent
94. There is no exact precedent for this power but section 85(4) of the Enterprise and
Regulatory Reform Act 2013, which is subject to the negative resolution
procedure, enables the Secretary of State to confer enforcement functions on a
person that exercises functions of a public nature. Section 85 of that Act concerns
the enforcement of the duty of letting agents and property managers to belong to
redress schemes that have been approved by the Secretary of State.
Procedure Justification
95. As the power simply enables the Secretary of State to confer functions on local
authorities, who already have duties in relation to the enforcement of measures that
protect consumers and tenants, the negative resolution procedure provides the
appropriate level of parliamentary scrutiny. It should be noted that clause 85(11)(b)
requires local authorities, when exercising their enforcement powers, to have regard
to any guidance issued by the Secretary of State.
9
Section 69 Weights and Measures Act 1985
10
Section 261 Housing Act 2004
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Power 16
Power to make provision for a civil penalty to be imposed in respect of breach of
the duty to publicise fees – clause 85(1)(b)
Power conferred on: Secretary of State
Power exercised by: Regulations
Parliamentary procedure: Affirmative the first time the Regulations are made,
negative subsequently
Context and purpose
96. This power enables the Secretary of State to make provision through regulations
for civil penalties to be imposed in respect of a breach of the duty to publicise
fees. The clause provides that those regulations must contain certain provisions.
The regulations must require the person imposing a penalty to give a written
notice stating the amount of the penalty, the reasons for imposing it and the date
by which it is to be paid. The person on whom a penalty is imposed must be given
the right of appeal to the First-tier Tribunal11. The grounds on which an appeal
may be made must be prescribed in the regulations, which must make provision
for an appeal on these grounds: that there was an error of fact, that the decision
was wrong in law, or that the decision (including the amount of the penalty) was
unreasonable.
Justification
97. The clause establishes a clear framework for the enforcement procedure that is to
apply where a letting agent does not comply with the duty to publicise fees. The
power enables the Secretary of State to provide the exact detail in secondary
legislation. This will enable the Secretary of State to thoroughly examine how best
to ensure that any penalty imposed is effective but does not have a
disproportionate effect on letting agents.
Precedent
98. This power follows the precedent established by section 77 of and Schedule 6 to
the Climate Change Act 2008. Schedule 6 enables the Secretary of State to make
regulations in England about charges for single use carrier bags, including a
power to make provision for civil sanctions. Section 77(4) of that Act provides
that (amongst other matters) the first regulations made under that Schedule and
any regulations imposing or providing for the imposition of a new civil sanction
will be subject to the affirmative procedure. Otherwise, regulations under
Schedule 6 are subject to negative resolution procedure.
Procedure Justification
99. As the first use of the power will establish the procedure for imposing a civil penalty,
the affirmative procedure provides the appropriate level of parliamentary scrutiny.
However, following the precedent in the Climate Change Act 2008, the negative
resolution procedure will provide the appropriate level of scrutiny for subsequent
11
See Section 3 Tribunal, Courts and Enforcement Act 2007
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uses of the power, as this clause provides clear parameters on the exercise of the
power to impose civil sanctions.
100. In these provisions, the reason for the imposition of a civil sanction (that is,
failure to comply with the duty to publicise fees) is established in the primary
legislation. This is in contrast to paragraph 9 of Schedule 6 to the Climate Change
Act 2008, which provides that the regulations themselves may impose requirements,
the breach of which will be subject to a civil sanction. In other words, there is no new
civil sanction that may be imposed by regulations made under this power, so no
provision needs to be made for this.
Power 17
Power to amend the maximum penalty that applies to breach of the duty to
publicise fees - clause 85(4)
Power conferred on: Secretary of State
Power exercised by: Regulations
Parliamentary procedure: Affirmative Resolution Procedure
Context and purpose
101. Clause 85(3) provides that £5,000 is the maximum civil penalty that may be
imposed on a letting agent for non-compliance with the duty to publicise fees.
This power enables the Secretary of State to amend the maximum penalty that
applies.
Justification
102. The penalty has been set at a level which is intended to provide a
proportionate and effective deterrent against breach of the duty to publicise fees.
The effect of the penalty will need to be kept under review once the scheme is in
operation. It is therefore considered appropriate to have a power to amend the
maximum sum in order to allow the Government to respond should the amount
prove to be disproportionate in its impact on letting agents, or an ineffective
deterrent.
Precedent
103. This power follows the precedent in sections 23 and 25 of the Immigration Act
2014. These sections enable the Secretary of State to impose a penalty of up to
£3,000 on landlords and agents who authorise the occupation of premises by
disqualified persons under a residential tenancy agreement. Sections 23(6) and
25(5) enable the Secretary of State to amend the maximum penalty that may be
imposed.
Procedure Justification
104. As this power amends an amount prescribed in primary legislation, the
affirmative procedure is appropriate.
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General
Power 18
Clause 87: Power to make consequential provision
Power conferred on: Secretary of State
Power exercised by: Order
Parliamentary procedure: Affirmative where the order changes primary
legislation, otherwise negative
Context and purpose
105. Clause 87(1) confers a power on the Secretary of State to make consequential
amendments. Clause 87(2) makes clear that this power includes power to make
such transitional and transitory provisions and savings considered necessary or
expedient in consequence of any provision made by the Bill.
106. Clause 87(2) also makes clear that this power includes the power to amend
repeal, revoke or modify any enactment considered necessary or expedient in
consequence of any provision made by or under this Bill.
107. The clause includes a power, where relevant, to amend Acts of the Scottish
Parliament, Acts or Measures of the National Assembly for Wales, and Northern
Ireland legislation.
Justification
108. The power in clause 87 is required to enable the Secretary of State to ensure a
smooth transition between legislative provisions.
109. The power in clause 87 to make amendments is provided in order to ensure
that any consequential amendment which has not yet been identified as being
required or which is difficult to include within the Bill may be made as necessary.
This power is confined to amendments that are consequential on provisions in the
Bill.
110. Certain necessary consequential amendments have already been identified and
are included, for example, in Schedules 1 and 4 to the Bill under which existing
legislation addressing various contract types is amended to exclude trader-toconsumer contracts covered by the Bill; in Schedule 6 under which consequential
amendments removing the existing investigatory powers in primary legislation
that are to be replaced by those in Schedule 5 have been made; in Schedule 7 to
the Bill which amends the Enterprise Act 2002 so as to introduce provisions
relevant to enhanced consumer measures; and Schedule 8 to the Bill which
amends the Competition Act 1998 and the Enterprise Act 2002 in respect of the
Bill’s competition reforms. There will, however, be other such amendments that
become necessary following the passing of the Bill, not least to amend, repeal or
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revoke the many existing investigatory powers provisions in secondary
legislation.
Precedent
111. There are numerous examples of a power in this form. A recent example
would be the Enterprise and Regulatory Reform Act 2013 (section 99) which
makes provision for a power to make transitory provisions and consequential
amendments where, amongst other things, a transfer of functions occurs.
Procedure justification
112. The Parliamentary procedure to be followed depends on the content of the
order. If the order amends or repeals any provision of primary legislation
(including an Act of the Scottish Parliament, a Measure or Act of the National
Assembly for Wales or Northern Ireland legislation), it may not be made unless a
draft has been laid before and approved by each House of Parliament, as is fitting
for such a power. If the order does not amend or repeal primary legislation, the
negative resolution procedure applies, which is considered appropriate given that
such an order would be giving effect to the detailed consequences of
organisational changes expressly provided for in primary legislation.
Power 19
Clause 88: transitional, transitory and saving provision
Powers conferred on: Secretary of State
Power exercisable by: Order
Parliamentary procedure: none
Context and purpose
113. Clause 88 provides that the Secretary of State may by order made by statutory
instrument make necessary transitional, transitory or saving provision in
connection with the coming into force of any provision of the Bill.
Justification
114. Clause 88 makes sure that the Secretary of State can provide a smooth
transition between existing legislation and the Bill without creating any undue
difficulty or unfairness in making these changes.
Precedent
115. There are numerous precedents for such a power, for example section 276 of
the Enterprise Act 2002 and (again, as a recent example) section 100 of the
Enterprise and Regulatory Reform Act 2013.
Procedure justification
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116. The Government considers that the power to make transitional orders need not
be subject to any Parliamentary procedure as the power is just to ensure a smooth
transition between existing law and the Bill. This is consistent with the precedents
in section 276 of the Enterprise Act 2002 and section 100 of the Enterprise and
Regulatory Reform Act 2013. The substance of the provisions will be considered
during the passage of the Bill through Parliament.
Power 20
Clause 91: Commencement
Powers conferred on: Secretary of State
Power exercised by: Order
Parliamentary procedure: None
Context and purpose
117. Clause 91 lists the provisions which come into force on Royal Assent, and
provides that all the other provisions come into force on whatever day the
Secretary of State by order appoints.
Justification
118. The commencement power will enable the Secretary of State to commence the
principal provisions of the Bill at an appropriate time: taking into account, for
example, the period of time between Royal Assent and the next common
commencement date and whether this would provide sufficient time for
businesses to prepare for the Bill’s commencement.
Precedent
119. There are numerous examples of powers to make commencement orders for
the substantive provisions of a Bill, without a Parliamentary procedure applying.
A recent example is the Groceries Code Adjudicator Act 2013 (section 25).
Procedure justification
120. The Government considers that the power to make commencement orders
need not be subject to any Parliamentary procedure as the power sets the date of
when the new provisions will come into force. The substance of the provisions
will be considered during the passage of the Bill.
Department for Business, Innovation and Skills
17 June 2014
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