168: Schedule 21, page 371, line 10, at end insert—
“12 A summary of the charges that the consumer may incur if they use the service during a cooling-off period but then cancel the contract.”Member’s explanatory statement
Alongside another amendment in the name of Lord Lucas, the purpose of this amendment is to focus discussion on how use of a subscription contract during a cooling-off period is charged for if the contract is cancelled within the cooling-off period, and the information that the trader must publish in that regard.
My Lords, in speaking to this amendment, I will also speak to Amendment 191, and in doing so declare my interest as the proprietor of the Good Schools Guide, an organisation that derives substantial income from subscription contracts, although we do not operate any automatic renewal of them.
The problem I am looking at, which certainly applies to us, is that within the cancellation period for a subscription such as ours, the purchaser can, if they so choose, get all the value they are ever going to get from a subscription. They can just go through the online service and print out everything that might possibly interest them, and then cancel. With other subscription services, the value is received more evenly through the contract, but ours can be focused at a particular time. Under those circumstances, a fair arrangement would be that if a consumer cancels and has received substantial value, they can be charged, on a basis set out beforehand, for the value they have actually had. I beg to move.
My Lords, I will speak to the stand part notices in my name on Clauses 262, 263 and 264. I am grateful to the noble Lord, Lord Clement- Jones, for adding his name to the stand part notices on Clauses 262 and 264. I will also speak to Amendments 221 and 224, in my name. As these and other amendments in the next group have a special relevance to media businesses, I remind noble Lords of my interest, declared at the start of Committee, as deputy chairman of the Telegraph Media Group, which is a member of the News Media Association.
I hope noble Lords will forgive me if I make just a few general remarks about the issue of subscriptions, to set my amendments in this group and the next in context. I applaud the aim of tackling the nuisance of subscription traps. It is imperative to make sure, however, that the day-to-day operations of reputable traders are not adversely impacted by the measures designed to achieve this. This is important for businesses in many industries that benefit from a degree of commercial certainty in their operations as a result of subscriptions. In the creative economy, it is especially so for hard-pressed publishers that are painstakingly building sustainable business models through subscriptions at a time of considerable economic challenge. Concern has been expressed across the creative sector and beyond, as demonstrated by the briefing documents I have received, and other noble Lords may have, from the News Media Association, techUK, the Federation of Small Businesses, the Online Dating and Discovery Association, the Professional Publishers Association, the Motion Picture Association, the Association for UK Interactive Entertainment and the Commercial On-Demand and Broadcasting Association.
All noble Lords will know that the impact of digital has brought about the destruction of the old print-based business model that for generations supported our free press at a national and local level. Publishers have had to reinvent themselves, and subscriptions are a key part of that new commercial reality. In a world of infinitely free content, it is remarkable that many publishers have begun to turn the tide on the notion that news provision, which is very expensive to create, should be free at the point of access. A business like the Telegraph, which I work for, now has over 1 million subscribers across print and digital. That is the key to the future, because the business of high-quality journalism is an expensive one. This Bill must help, not hinder.
I will briefly speak to my noble friend’s amendments. I declare an interest as a broadcaster on Times Radio, which is owned by News UK. The point is clear: the Government’s intentions are perfectly honourable. They seek to protect consumers and give them a simpler way to enter into a subscription contract and to cancel one.
However, as I hope my noble friend has made clear in his excellent and detailed speech, things are never quite that simple. From the 2013 consumer contracts regulations, it is clear that, 10 years ago, the Government recognised the changing nature of the services, particularly digital ones, that consumers are now using. It is also clear that the savvy consumer, dare I put it that way, will potentially be intelligent enough to work out that they could take out a contract with a subscription service —it could be a video service through which they want to watch a particular series, or a content service such as the Times if they want to read a particular article—take advantage of the cooling-off period and not pay for that content.
For service contracts such as these, it is important that Parliament support both sides of the equation. We do not take the contribution that content services make to our economy nearly seriously enough, and we still live in a climate where too many people believe that content should be free. As content providers have struggled with how to cope with delivering digital content, moving from free ad-supported models to subscription models, it is important that the Government take into account the pressures they face and reach a reasonable compromise in order to do so.
I fully support the arguments put forward by my noble friend Lord Black. They have been well rehearsed by a coalition of people, ranging from the video games trade body to the technology trade body, the news trade body, the film trade body, the commercial broadcasters’ trade body and even the online dating app trade body, which has got in on the act as well. They are all perfectly reputable organisations whose case deserves to be heard by the Government. It is my understanding that the Government recognise the problem, and we hope that the Minister will come back on Report, as he was so co-operative in our last Committee, with a genuine solution to this conundrum.
My Lords, this is the starter before the main course on subscription contracts, but it is important none the less. I can reveal to the Committee that our Amendments 169 and 193 are mere probing amendments designed to test whether the Government have confidence in the Bill’s subscription provisions providing sufficient protection for digital platforms that host copyrighted content, mainly on-demand videos. A number of companies have raised this issue with us, arguing that they will be seriously out of pocket if they have fully to reimburse those who have accessed paid-for content during a cooling-off period. It is our feeling, and a view widely shared, that, although the Bill restates a lot of current consumer law on subscriptions, it does not restate many of the obvious and probably necessary exemptions that the noble Lord, Lord Black, clearly identified. We need to cover those.
At present, if I sign up to a streaming service, it is made apparent that, the moment I consume content, my statutory rights change. The Bill appears to restate some principles but not others, and it creates a lack of certainty for both sides. Some of the companies argue that they will have to pay out refunds in cases where they would not under current law. This runs the risk of creating unrealistic expectations for consumers.
The amendments in the name of the noble Lord, Lord Lucas, ask similar questions of the Minister and seek to explore how the subscription contract is paid for if it is used during the cooling-off period and then cancelled. They also seek to understand what information a trader must publish in those circumstances. The noble Lord made a good point about charging.
Turning to the amendments in the name of the noble Lord, Lord Black, he skilfully highlighted for the Committee the problems that will be caused by the way the legislation is phrased. Having heard the noble Lord, I am more on his side than I was at the outset. I am not a regular Daily Telegraph reader, nor a great fan, and this is the second time in a week I have had to plead on its behalf—this is becoming rather strange politically. I am a Guardian person, and I can see the problem replicated across the whole news world. I do not think the onerousness of the burden is justified in this case. It could be an endemic problem.
My Lords, this has been very interesting debate. There is a common theme—that these clauses are a very blunt instrument. At one end of the spectrum, we have the amendments in the name of the noble Baroness, Lady Jones, which attempt to get to grips with what this is all about and whether these clauses are fit for purpose; and at the other end we have had clear demonstrations that they are not. I am very grateful to the noble Lord, Lord Black, in particular, for his comprehensive and persuasive introduction. I started off fairly convinced of the case—I did not sign all his amendments, but I signed two clause stand part notices—but, like the noble Lord, Lord Bassam, I am now pretty convinced that the clauses are not quite fit for purpose. For the digital economy, we need to be much more wary about how the prescribed cooling- off period works.
I started off thinking that this is an issue that only the subscription and video-on-demand side should be concerned about, but having listened to the noble Lord, Lord Black, I realised that there is a much wider set of interests. The noble Lords, Lord Lucas, Lord Vaizey and Lord Bassam, described a much wider landscape that should be concerned.
I started by considering the disruption to subscription video-on-demand services—the so-called streamers. That is why I signed the notice from the noble Lord, Lord Black, opposing Clause 262 standing part. All the representations I received pointed out that this is really business-critical for UK operators such as Netflix and Disney+. I think the noble Lord, Lord Vaizey, used the expression binge-watch; if you can do that and get a refund, why bother keeping your subscription? We need to make sure that those services are safeguarded.
A number of noble Lords pointed out that Ministers in both the Commons and this place have expressed concern, saying that they understand the issue and are going to consult; but in the meantime, there is a huge amount of uncertainty. We potentially have it in black-letter law that the cooling-off periods are as set out in the Bill. We do not know what kind of consultation will take place, what kind of flexibility might be operated, and so on. In the meantime, we have a perfectly workable set of consumer contract regulations, which the parties would be happy to apply. That was very much the case the noble Lord, Lord Black, rightly made.
I thank noble Lords and noble Baronesses for their amendments and their interesting and informed contributions to the debate on this first group of amendments, on subscription contracts.
I will first address the amendments tabled by my noble friend Lord Lucas, which relate to the cooling-off period. Amendments 168 and 191 would create an additional requirement for businesses to inform consumers of the charges they may incur if they use a subscription but later cancel their contract during a cooling-off period. I agree that it is important for consumers to know what charges they could incur when they exercise a right to cancel during a cooling-off period. However, I assure my noble friend that the Bill already makes sufficient provision for this. The full pre-contract information listed in Schedule 21 provides information on the consequences of a consumer exercising their right to cancel during a cooling-off period. This includes information on any refund the consumer may be entitled to and any reason why that refund might be diminished. That information must be given or made available to consumers as close in time as is practicable to a consumer entering into the contract. Therefore, although I appreciate the intent behind my noble friend’s amendments, I hope he is reassured that sufficient provision is already made in the Bill.
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Amendment 192 would alter when the renewal cooling- off period ends. Instead of ending 14 days after the relevant renewal date, the end date would be 14 days after a consumer has acknowledged that their contract is due to renew. The renewal cooling-off period protects consumers who have signed up to a trial period that then rolls over into a higher-cost period. It also applies when contracts renew on to a period of 12 months or longer. Consumers must be informed about this right before they enter the contract via pre-contract information. The Bill also requires traders to send a cooling-off notice. This is designed to inform the consumer in simple terms of their renewal cooling-off cancellation right at the time it can be exercised.
While Amendment 192 would help to ensure that consumers know about this important right, having the renewal cooling-off period end only after a consumer acknowledges that their contract is up for renewal would make it difficult for businesses to plan and automate their operations. For example, what happens if a consumer does not acknowledge that their contract is due for renewal? The implication is that they could retain the right to cancel the contract and secure a refund indefinitely. That cannot be right. We believe that our approach strikes the right balance between ensuring that consumers have the information that they need to exercise their renewal cooling-off rights while also respecting the legitimate interests of businesses.
My Lords, I am sorry to interrupt the Minister, but it might give the Box a chance to answer the question before the end of his response. Do the current provisions in the Bill contain the principle that I mentioned, which was set out in Regulation 37 of the consumer contracts regulations, where consumers can request that the supply of digital content begins before the end of the 14-day cancellation period, acknowledging that they would then cease to have the right to cancel from that point of supply? If not, why not, as that would be the ultimate protector of these digital services?
I will come to that once I have some input from behind me. This is obviously a key part of the group.
Amendments 169 and 193, tabled by the noble Baroness, Lady Jones of Whitchurch, address the provision of information in relation to the consumption of digital content during the renewal cooling-off period. I understand that the noble Baroness wishes to ensure that the Bill provides sufficient protection for digital streaming platforms if a consumer has accessed digital content and then cancels their contract during the renewal cooling-off period. The Government will consult on the relevant return and refund rules that apply in this situation and other similar circumstances. This will ensure that rules are fair and practical for businesses and consumers. It will also enable consideration of any specific issues for particular industries or circumstances if needed—for example, digital content, perishable goods or bespoke products.
As part of that consultation, we will include a policy proposal of introducing an explicit waiver from refund rules for digital content, recognising the circumstances that the noble Baroness set out. We aim to consult before the end of the year. This is directly to avoid the scenario that these digital steaming firms fear. It is also important that those rules can be reviewed—
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We all feel passionately about the democratic importance of a thriving press—the noble Lord, Lord Clement-Jones, spoke about it movingly in Committee last week—but we have to give publishers the freedom to survive and grow. As it stands, the Bill endangers that because of the unintended consequences of the measures within it, which will introduce onerous and unnecessary new requirements on all types of subscriptions. This will drive up costs, stifle innovation and, paradoxically, reduce consumer choice. The Bill is supposed to be about helping consumers, but it does not achieve that. As I have observed in Committee on other areas, we are willing the ends but not the means.
The issue is that the Bill treats all subscriptions as though they were an endemic problem and unwanted by consumers, but that is not the case. By the Government’s analysis, four out of five adults in the UK have at least one subscription, often many more, providing them with convenience, consistency and choice. Only 5% of subscriptions are unwanted. There is a danger that we are creating a sledgehammer to crack a nut and are doing so in a way that significantly undermines all the good done by the rest of the Bill, in ushering payment for content and more equitable terms by the dominant tech platforms. It is about giving with one hand and taking away with the other.
The Government’s own impact assessment suggests that the package of measures will cost businesses £1.2 billion in the first year alone, with SMEs the hardest hit. The Government are supposed to be committed to reducing regulatory burdens on business, using regulation only as a last resort. Here, it seems to be the first resort and it has not been thought through, with no proper consultation.
The problems with subscriptions fall into four areas. This group covers cooling-off periods and the implementation period for the legislation. We will come to reminder notices and cancellation rights in the next group. The amendments that I have tabled tackle the issues brought about by the Bill’s well-intended but overly prescriptive subscription provisions. I hope that the Government will support them and bring forward their own amendments on Report.
I will deal first with cooling-off periods in Clauses 262 to 264. The Bill as it stands retains the 14-day cooling-off period under the Consumer Contracts (Information, Cancellation and Additional Charges) Regulations 2013, referred to as the CCRs. It starts once a contract is entered into or the consumer has taken physical possession of goods. However, the Bill amplifies the CCRs by introducing the concept of a renewal cooling-off period, which would apply at the point that a consumer transitions from a free trial or discounted introductory offer period to a contract charged at full price and each time a contract renews on to a term of 12 months or more.
While I have no problem with the existing 14-day cooling-off period under the CCRs, the renewal cooling-off period is a deeply harmful expansion of regulation, based on burdensome, EU-derived consumer law. I thought, perhaps mistakenly, that we were supposed to be making the most of the so-called Brexit freedoms rather than, ironically, gold-plating restrictions that have been manufactured in Brussels.
This is particularly true when viewed alongside the other provisions on subscriptions that the Bill introduces. For example, the new and detailed pre-contract information will ensure awareness of the product costs and renewals. Reminder notices will then reinforce awareness of a consumer’s ongoing contract. Furthermore, when transitioning from a free trial or discount period to a full-price-paid contract, or when renewing a subscription, a sufficient opportunity to establish the nature, characteristics and functioning of the product will already have been made available to the customers, which frankly makes these provisions redundant, creating harm and doing no good.
We should seek to retain the concept of a cooling-off period, as a grace period, applicable where a contract has been taken out erroneously—but not apply it at each and every renewal point. Consumers will be very aware that they have a subscription, given that they will be inundated with reminder notifications and will therefore have plenty of notice to cancel a subscription before it renews. Although they will do nothing to tackle the problem of subscription traps, which are at the heart of this Bill, the terms of this Bill will undermine a legitimate commercial strategy of discounted prices and trial periods, from which consumers can exit, in a way that puts unnecessary and burdensome constraints on businesses to grow and acquire new customers. Those discounted offers are important for consumers, especially at the time of a cost-of-living crisis.
Think what this would mean for a digital broadcaster or video-on-demand provider. Each time a customer entered into a subscription contract, they would receive a cooling-off period. This would allow them, for example, to binge on a specific series—as I am sure we have all done—or watch a sports event, and then withdraw immediately and receive a refund. The Bill does not put any limit on how many times a customer can enter into a contract and then exit using the cooling-off period. In effect, therefore, it will make trial periods redundant because it would make little commercial sense to provide customers with a trial period and a cooling-off period.
The point is that CCRs already tackle this issue by allowing consumers to request immediate access to digital content by acknowledging that the 14-day cooling-off period would no longer apply upon the supply of that content. It seems quite wrong to me that this Bill does not expressly retain this principle. I am sure that the Minister will tell us that the Government have said that they will consult on how the new cooling-off period in this Bill will work in practice, including whether a waiver of the rights should apply to certain types of subscription contracts.
Although that is encouraging and I am grateful for it, it still leaves the additional unnecessary cooling-off provisions on the statute book, meaning huge uncertainty for subscription-based businesses. Also, we have yet to see any detail on the scope of the promised consultation on a potential waiver for this provision, which gives little comfort. Far better to remove these provisions entirely—that is the point of these amendments—especially as their aims are already achieved elsewhere, in Part 4 of the Bill, and enshrined in the existing CCRs. This would still protect customers but would allow digital businesses, which are the future of the creative economy, the opportunity to expand and flourish.
I will speak briefly on Amendments 221 and 224 to Clause 334. The changes proposed in this legislation are very significant, even if the amendments in this group and the next are accepted, and will have many implications for British businesses. However, the Bill currently makes no explicit provision setting out how long businesses will have to implement these changes, which will be very onerous for many traders to implement. The Government will introduce a commencement order in due course, but there is obviously a clear benefit to giving the businesses that will be impacted—particularly SMEs, as the Federation of Small Businesses has pointed out—time to implement the changes effectively.
For legislation that brought in changes of a similar scope, such as that implementing the GDPR requirements, businesses were given more than two years to prepare for substantial change. The Government have delayed the implementation of the Health and Care Act’s advertising restrictions for two and a half years, until October 2025, in order to allow the sector to prepare for them. One business I spoke to estimated that it will take at least 10 months of development work to ready its systems for compliance with the Bill as it stands.
Amendments 221 and 224 would introduce a two-year implementation period after the passage of the Bill and a start date broadly in line with similar precedents. This period would allow businesses sufficient time to adapt their practices and systems in order to comply with the new regulations, reducing the burden of immediate changes and facilitating a smoother transition. I look forward to hearing what my noble friend the Minister has to say on these points.
I want to hear what the Minister has to say because we need some light and dark, some nuanced thinking, about the way subscriptions work. This is not the way to bear down on the subscription trap, which I think we are all keen to deal with. This does not help us at all in that regard.
I was originally going to say of the last two amendments in the name of the noble Lord, Lord Black, which seek to create a two-year implementation period, that I was not particularly convinced, but having heard the argument, I have reversed my view. If we do not have a solution, I suspect those two amendments could be very helpful in trying to resolve some of the problems this is creating. There is merit in those amendments.
We need to approach this issue in more forensic detail. I want to hear what the Minister has to say, because I do not want us to further undermine the news market. We live in a time when there is less ability and facility to report than we are used to. Moving from broadsheets to online content is changing the way in which the news world operates. My son works in the news world, and he understands these things far better than I do. We need solutions, and the way the legislation is currently phrased does not provide us with one that protects the value and importance of news in an open democracy such as ours.
Important principles are set out in the CCRs, such as that consumers can request that the supply of digital content begins before the end of the 14-day cancellation period. So it is perfectly possible to have a provision that safeguards both the service provider and the consumer in these circumstances, but that principle is not imported into the Bill. I do not know why. On Monday, I asked the Minister what consultation had taken place. I have used the expression “blunt instrument”, but these are really important new provisions. The noble Lord, Lord Bassam, was absolutely right: they are based on the best of intentions, but they are so blunt that they will be a real problem for some of our digital services.
I hope the Minister will not regard our proposals as “not invented here”, and that the Government will not motor on with these provisions without taking a long, hard look at them. This is one of those circumstances where we would all be a lot happier if we reverted to a regulation-making power, got rid of some of these clauses and had a proper super-affirmative provision in the Bill, for example, enabling a discussion about all these aspects of subscription contracts. We heard about the absolute unhappiness with the impact on charities and gift aid when discussing the previous group; that demonstrates the total bluntness of these provisions. I do not think anybody will be very happy with them —the charities, the streaming businesses, the subscription media services or the dating services. There is a huge amount of unhappiness, which I hope the Minister will respond to.