Contribution
My Lords, I am grateful to the noble Lord, Lord Fox, for Amendment 7 and thank him for it. I recognise that it was tabled in a constructive spirit, and I thank him once again for the engagement we have had on this matter, both in person and by correspondence. The Government share his aims of ensuring that suppliers are paid promptly, payment processes are clear and purchasers cannot use contractual mechanisms to delay payment unjustly. I entirely agree that, when a small business sells through a platform or marketplace, the money due to that business should not be held unnecessarily.
I want to be absolutely clear that the use of intermediaries does not affect a supplier’s right to be paid within 60 days. Chapter 1 of Part 1 ensures that, for business-to-business contracts for the supply of goods or services, the maximum payment time is 60 days. If payment is more than 60 days overdue, the purchaser is in breach of contract and liable to pay interest. The use of an intermediary does not alter this position.
I reassure all noble Lords that persistent attempts to circumvent the maximum payment terms through intermediaries constitute poor payment practice. Under Clause 19, this constitutes grounds for the Small Business Commissioner to investigate and potentially levy a financial penalty on larger businesses that persistently engage in this practice. Under Clause 18, the commissioner will also be able to adjudicate payment disputes where a larger business owes money to a small business, including where the debt arises from the use of an intermediary.
The Bill addresses late business-to-business payments. It is not intended to regulate broader business relationships such as those between retailers using agents to sell goods to consumers or between a platform or marketplace and others when the platform or marketplace is holding, processing or transmitting funds between them. Those are subject to separate regulation. The contracts through which the majority of small businesses trade on online marketplaces are either business-to-consumer or consumer-to-consumer contracts and are subject to consumer legislation. These contracts were outside the scope of our impact assessment and our public consultation.
As tabled, the amendment would therefore not address the issue raised by the noble Lord, Lord Fox. Tackling the issue of late payments outside a business-to-business context would move the Bill into a completely different area of regulation and would require the establishment of a new statutory regime for online marketplaces and payment intermediaries. This would cut across existing legislation, rather than maintaining the Bill’s core focus on commercial payment practices between suppliers and purchasers.
The amendment would also interfere with existing commercial models that operate in the interests of the relevant parties and serve legitimate purpose. For example, where most intermediaries operate a system in which payments are pooled in a small business account and are drawn down by the small business on a regular basis, the amendment would mean that each individual sale, however small, would have to be remitted directly to the small business, significantly increasing transaction numbers and costs and reducing the flexibility of the operating model. Another example is payment providers holding funds for more than seven days to allow for fraud checks or other compliance requirements. The amendment would increase small businesses’ exposure to fraud and undermine the regulatory and legal framework governing payment providers.
However, I understand and share the noble Lord’s concerns about withholding funds from small businesses. I am therefore happy to ask the Small Business Commissioner to review this issue with a view to developing guidance for small businesses so that they understand how the Bill applies to trading activity on online marketplaces. This can build on the guidance that the commissioner produced last year to help small businesses understand why their accounts may be frozen or funds withheld and how they can take action to avoid this. This included a 10-point pledge to online marketplaces and payment providers which was signed and promoted by several major companies. As the Minister for Small Business, I commit to examining how the Government can further support small businesses in addressing this issue faced by those who use online platforms, including engaging with other government departments and regulators where they have responsibility.
For those reasons, and given the commitments that I have made, I respectfully ask the noble Lord, Lord Fox, to withdraw Amendment 7.