Examination of Witness (Questions 1020
WEDNESDAY 7 JUNE 2000
1020. What about China and places like that?
A. I am afraid we have not yet
1021. The States have started raising their
horizons, looking at possibilities there.
A. In the area that is under David Byrne's responsibilities,
in terms of A officials, officials who do policy work, we have
got 30 covering the whole area of consumer protection.
A. At this time it is very much prioritisation
in terms of what they are going to do. The area of e-commerce
was our priority when we came in and that is what we have put
more effort into but there is a huge range of other areas that
we are not really touching in this whole area of e-commerce basically
because there are so few people we can devote to that task.
Chairman: Shall we go to Lord Paul with his
last question on the Global Business Dialogue?
1023. I understand that you are planning to
provide an expert group looking at the political dialogue with
global business. Is there any agreement on reflecting consumer
A. Absolutely. In this stakeholder group that
we have built up there are a couple of people who are from the
GBD involved in this and we have the main consumer organisations
involved in this group. So far as our area is concerned, there
is not any problem there about consumer participation. Where there
tends to be more difficulty is about the selection of that consumer
participation. We have the European Bureau here in Brussels and
there are other national agencies like the Consumer Association
of the United Kingdom that is big and the Dutch agency that is
big. You start getting into more problems with some of the other
Member States like Italy, Spain and France. In France it is very
much divided along old trade union lines because that is where
the consumer protection background comes from. You do not have
strong national organisations. It is a problem in that sense because
you cannot invite everybody around the table at that stage. To
ensure that is representative in some way there is always a certain
amount of cut-off. There are problems at the edges. For us though,
in terms of getting an input from the consumer side, that is not
a problem. As I said earlier, how the consumers feel that their
voice is heard, if they are in another forum in dealing with other
DG, they may feel "they are not paying enough attention",
but when it comes to the political discussion, as I said, between
Byrne and Liikanen things have been surprisingly smooth in this
Chairman: Can we just keep on this for a minute
because somebody has to accept responsibility somewhere if consumer
groups and representatives in different places do not feel that
they are being heard. Lord Faulkner has a question.
Lord Faulkner of Worcester
1024. We have had witnesses telling us that
the Commission does not have proper consumer representation in
a number of very important areas like e-commerce, telecoms, broadcasting
and financial services. Are you looking at that and do you think
that there is room for improvement?
A. Sure. If I can say that consumers are our
"clients", so I would be very concerned if consumers
felt that in our area they were not receiving a hearing, that
would be of concern, that there would be something missing in
that sense. We have various fora for dialogue with consumers some
of which, I have to say, frankly are not very effective. We have
this Consumer Consultative Committee and part of the problem with
this is there are so many competing interests among consumers
that it is very hard to use this as a vehicle for ensuring effective
consumer participation. In our limited time being responsible
for this area, what we have found is that if you are subject orientated
it is much more effective, like on e-commerce or on the area of
financial services. You can say "here is an issue we want
to address, let us get you who are interested to come in, let
us sit down and talk about it", rather than using a formal
consultative process. If we use a formal consultative process
it just does not move forward with the speed that you want. In
the area of financial services, if you ask consumers to list their
worries or concerns financial services are always very high. The
difficulty about the financial services area up to now is that
it has been quite diverse and with the arrival of the euro you
can see the national approach is breaking down and now you are
getting services offered across frontiers. The Anglo system has
always been a bit different but in the rest of Europe, between
Germany and France, you have suddenly got this opening up and
you now have enormous competition building up. Why? Because banks
want to be able to offer mortgages across the place, banks want
to be able to sell insurance policies, they want to do things
on a pan-European level. This is raising important issues now,
let us say, in the mortgage area where for two years there has
been a dialogue going on between consumer associations and the
banks trying to work out a code in terms of conditions to be made
available to consumers who buy mortgage policies. This thing has
been fraught with enormous difficulties. It is fraught with difficulty
on the side of the banks because of rivalries between the banks.
From talking to various financial institutions in the United Kingdom
I know that at this stage they are saying "to hell with it,
there is a market out there, we can go and do it, we are going
to do our own thing. For the larger institutions, their approach
is that we are trading on our name, we are going to go out there
and we are going to give the consumer this. We will set up our
own networks in the individual Member States because we are big
enough to be able to do it". That is fine so far as the individual
companies are concerned but from a consumer's point of view you
want to say, "fine, a consumer is going out to buy a product
in the market, is he being told about what the terms and conditions
are, is he being told about the real rates of interest?"
You have had enormous problems in the United Kingdom on this form
of selling financial services, so you know well the kind of problem.
At the end of the day what we have to do, and where we are less
well equipped in terms of being able to do it, is to identify
value added at Community level of this type of thing, but it will
come very much in the financial services area because the sheer
force of the market is going to be there and there will be calls
to have certain common guidelines in place. David Byrne has said
this to the people concerned, "unless you come up with something
on mortgage credit by the end of the year, I am coming in with
hard legislation". So the gun is against their head, if you
1025. We were just having a little side chat
here about financial services supervision and regulation and how
things operate in the United Kingdom. You say things are now changing
here with the euro and there is a break down?
A. Yes. For example, if you look now at the
traditional domestic market, if you look at the big German and
French markets, all these complaints have been you can never get
access to the markets, that has gone. Big public banks in France
have all been privatised. Now you can buy your way into the market
much more easily. In Germany, Deutsche bank is starting to be
very aggressive. This whole breaking down of the role of the landers
bank is starting to take place. All of this is now increasing
competitiveness. As a consumer, as an informed consumer today,
I have no currency risk in the Euro-zone any more. I can go to
France, I can go to a bank in France, I can go to a bank in Italy
and I can shop around and say "Who is providing me? What
is the rate of interest?" That is there now, it is a new
possibility. That is what is going to happen. Once it is all clearly
in euros the customer will buy wherever he wants to. What you
are going to have is you are going to basically have presences
on the high street which will sell a range of products.
1026. If you are Dutch and have problems with
a product you buy from somewhere in Germany, how will you resolve
A. This is where you come back to your various
dispute resolution mechanisms. For the big banks, I have heard
this more from the United Kingdom than from others, they are saying
"We are setting up our own business in the various countries".
1027. They have the FSA regulating it as well
in the United Kingdom.
A. Yes, but that is controlled already under
the internal market legislation in terms of the provision of services,
how it is controlled. The responsibility goes back to the home
country financial supervisor. At the end of the day if you are
doing business, if I want to buy a product, for example, from
Barclays or from wherever, normally I will want to see for a big
transaction a presence, the market has not yet totally evolved
in that way that they are prepared to do it over a screen. Therefore,
you are probably going to have to have a presence in the market.
Whether that is a local agent or whether it is their own national
or individual presence you will have to judge that, but for big
companies that is not a problem. They know how to do it, they
are doing it already. That is where I think the smaller companies
are going to find themselves in difficulties unless they can get
part of some kind of a grouping because the big players are there
and they will be able to get the high ground much more quickly.
1028. Within the new structure that you now
have, do you have dealings always with the regulators for businesses
such as financial services? We had Howard Davies in to see us
and one of the views he expressed was that he could see a case
for better co-operation between regulators across Europe and that
in turn then means there is implied a role for you.
1029. But it does not happen now?
A. It does not happen now, but
1030. Should it?
A. If you look at the Commission as a whole
it does happen through the Directorate-General for the Internal
Market who are the ones responsible for the regulation of financial
services within the EU. They have regular contacts with the various
financial supervisors. I do not know any more if there has been
a separation but there used to be groups where the controllers
of the stock exchanges used to meet, there used to be groups which
would bring together the bankers and things like that so that
network exists. That is in so far as the regulation of the market
for financial services. All we can do from a consumer side is
to try to have some input into that debate with our colleagues.
1031. What would you like to see happen? We
are here this morning speaking on behalf of the millions of consumers
in this particular meeting and saying that the arrangements are
not adequate in this area.
A. Right. Well, I would probably have to agree
with you that they could be improved. One of the things again,
and I do not want to be saying things have changed, is this Commission
as such is working in a different type of way. The people who
are responsible now in the various areas, if you look at Fritz
Bolkestein who is responsible for the internal market area and
Liikanen in the enterprise area and Byrne in the consumer product
area, the three of them get on quite well.
1032. But we are talking about other areas of
activity beyond there.
A. That is very important because what has been
happening up to now, there have been very entrenched positions.
There has been a basic feeling that industry and consumers cannot
mix. What we have been trying to do is to show there is a mutual
interest in all this. There was a difficult discussion in the
Commission last week on the liberalisation of postal services
which has certain interest in a lot of Member States. Yet the
three Commissioners concernedBolkestein for the internal
market, Likanen for enterprise and Byrne for the consumerentered
into an agreement beforehand in terms of how this should go forward.
You have areas, like in the financial services, which I have to
admit from a consumer point of view within our DG were not as
actively involved but we have to bring some kind of value added
for ourselves. We cannot just be saying "look, things are
not great for the consumers", we have to say "look,
what is it that we can now address to bring about some change?
What are the issues where consumers at a European level ..."and
do not forget we are more concerned than anybody else not to get
into this subsidiarity debate and there is a fine line here about
where you can justify things"...where are the areas
at a European level which we need to address for consumers in
the financial services?" It is now because of this whole
increased cross-border provision of services that you see there
has to be more particularly adequate clear common information
made available to consumers, that is understandable, that is clear.
The second aspect then is you have control of things like the
regulation of the market, how effective is it for preventing fraud,
misleading advertising, misleading representation? All these kinds
of factors then start coming into play on this. You have a very
well defined set of laws in the United Kingdom. You have seen
the problems over misselling of all kinds of financial services.
There is not an easy solution, if you like, to that kind of thing.
You are into an area, for example, of contract law. There is absolutely
no harmonisation of contract law at a European level. We have
started a ball which will slowly roll down the hill on this whole
aspect of contract law. This will take three or four years to
bring to any fruition but we are starting to bring together a
group of universities working with some Member States who have
expertise in the area, trying to see is there any basis for some
type of commonality in terms of contract law. Look at it from
a company's point of view, have you ever followed the debate on
a single European company, Susetec, this seemed a great idea in
the 1970s. Gosh, if we are setting up an EU why do we not have
possibilities for companies to set themselves up with a common
European Statute. Terrific idea. 25 years down the line we still
do not have that. Why? Because Member States have stayed entrenched
about the supremacy of their own law and particularly for taxation
1033. I am going to conclude now. We have come
to the end of the meeting, but just one last question. You have
on one side the internal market and business, as it were, focused
on the home country principle. On the other side you have consumers
and financial services regulators focused on country of reception.
How do you think this antithesis will be resolved?
A. It is an antithesis. I go back to the basic
premise again, consumers must always have access to the courts
in their own Member States. They cannot be denied that, okay,
that is your bottom line. We are prepared to go with home country
control if it is shown to be sufficient and that is what is important,
the web of other measures which are in place to be able to solve
the consumer problems.
1034. Martin, that has been excellent. We are
very grateful indeed to you. I am sure it is going to be very
helpful for us in this area in writing our report. I hope we might
be able to say some things which might be of assistance to you.
We will endeavour to do that. We would like to wish you the best
of luck with the energy and enthusiasm you bring to the topic.
A. Thank you very much. If I could just say
to you as well I am very struck by what you have picked up in
the States and things like that on this credit card issue. I hope
this will be something which will figure largely in your report.
Secondly, since you are also picking up a lot of things about
what consumers feel, if there is anything that you feel it would
be useful to let us have, say "Look, the consumers feel in
this particular area they are not getting something" and
particularly if there is anything we are involved in, I would
feel more than anxious we are aware of that as well. Thank you
all for your attention. I am sure Olli, in terms of the great
co-ordination that exists between us, will repeat everything that
I have said.
Chairman: Thank you very much indeed for your