PREVENTION OF ANTI-COMPETITIVE PRACTICES AND MONOPOLY SITUATIONS. (Hansard, 17 July 1985)

§ Mr. Cash
I beg to move, That the clause he read a Second time.
I am deeply worried that we may be moving towards concentrating economic power in the hands of lending institutions. The new clause relates to part II of the Bill, which to a certain extent anticipates the building societies legislation that we expect next year. To prevent anticompetitive practices and monopolies or their development in conveyancing services and services connected with such services by persons who would be involved in directing or controlling those services, the new clause provides that the Director General of Fair Trading and the Secretary of State shall be obliged from the date of the commencement of part II of the Act to keep the provision of those services under constant review in pursuance of their powers and duties under the Fair Trading Act 1973 and the Competition Act 1980.
I received a letter from my right hon. and learned Friend the Attorney-General, in which he states: We will have the opportunity to debate the economic power of the lending institutions, and its relevance to the question of whether they should be permitted to offer conveyancing services, when the provision enabling the Lord Chancellor to exempt `recognised' bodies corporate"— that is, bodies recognised in clause 31— from the restrictions on conveyancing for reward is brought forward next Session. I dare say the matter will also be touched upon on Wednesday. He continues As I said in Committee, we do not consider that any special provision is needed to protect against anti-competitive practices and monopoly situations in conveyancing when Part II of the Bill comes into force. We believe the existing legislation is sufficient. I am deeply worried that the provision of conveyancing services under part II of the Bill will be part of a new monopoly by lending institutions regarding land tenure. In future, on an inevitably progressive basis, building societies and banks will provide estate agency, insurance brokerage, jobbing, stockbrokerage and conveyancing services.
There are strong arguments for effective international competition for economic institutions so that they can compete effectively abroad. However, there are significant dangers in the path that we choose to tread, because its consequence is to concentrate a vast amount of economic power in the hands of relatively few lending institutions. As a consequence, we may regret having followed that path, unless—I believe that this is both a classically Liberal and a classically Tory position—we are sure that anti-competitive practices and monopolies will not develop.
My right hon. and learned. Friend said that he did not think that it was necessary to have any special provision to deal with the problem because the powers under the Fair Trading Act 1973 and the Competition Act 1980 are sufficient. My point is that we must deal with the problem of anti-competitive practices and monopolies before, not when, they have accumulated. That is what my new clause provides.
When I looked over my notes on the subject I was particularly interested to see a quotation from the Nationwide building society's general manager on 2 April 1984. He said: 383 Within ten years, the number of building societies in Britain is likely to have shrunk from 200 to no more than 10, and these 10 will be almost indistinguishable from retail banks in the range of services they offer to personal customers. Only four days ago, on Saturday 13 July, The Times announced that the Nationwide and Woolwich building societies were to merge, with £15 billion-worth of assets. Therefore, the trend is already being well established. Mr. Tim Melville-Ross, chief general manager of the Nationwide building society, is quoted in the The Times as having said: the main reason for the merger was to create a society better able to take advantage of the new powers coming to building societies under legislation to be passed in 1987. As we move into new areas of business it will be important for societies to have sheer size and financial strength … We will look to take advantage of most of the new powers under the coming legislation. He seems to have made my point quite well. I believe that the trend will be followed by other building societies.
I have argued consistently and vigorously for the position adopted by the Conservative party—it is a conviction which I hold strongly—in favour of fair and free competition. The aggregation and accumulation of power by the lending institutions will seriously divert us from a principle which otherwise I would thoroughly applaud, unless it is monitored carefully from the beginning of the acquisition of the powers.
I support the principle behind the Bill and the extension to licensed conveyancers, provided that they are fully competent to do the sort of work which hitherto has been done exclusively by solicitors. It is impossible to argue that there is no connection between the Bill and the proposed building societies Bill or the provision of conveyancing services by banks. I have already made clear my objection to the provision of these services. That is borne out in principle by the White Paper "Financial Services in the United Kingdom." The provision of conveyancing services under these new arrangements is likely to become yet another of the financial services provided by the lending institutions.
In Committee I quoted a statement made by my right hon. Friend the Secretary of State for Trade and Industry. Referring to the financial services, he said: The Secretary of State will have the power, to be exercised on the advice of the Director General of Fair Trading, to revoke or amend rules which have anti-competitive effects. The same point is made in chapter 8 of "Financial Service in the United Kingdom," which states:
"(i) to apply a consistent framework of competition law throughout the financial services sector; and

(ii) enable the Secretary of State to require the Boards to amend or withdraw either of their own rules of those of organisations recognised by them if he is persuaded that such rules are detrimental to competition and not justified in the interests of investor protection."
A similar point is made on page 42 of the White Paper, which refers to the desirability of obtaining the advice of the Director General of Fair Trading. If what is good enough for the White Paper on financial services is to be applied to competition, the same provisions should be applied to conveyancing services.
Professor Payne of Alabama, a Warner professor of law emeritus, has made his position clear on the experience that the United States has gained from seeing conveyancing services fall into the hands of the lending institutions. I am not advancing an argument to support the 384 solicitors. My concern is to protect the consumer, not solicitors. We must ensure at the same time that we honour our commitment to competition. Professor Payne said: In most parts of the United States conveyancing costs are higher than in England. In recent years they have become so outrageous as to incite prolonged hearings in the Congress and an investigation by the Department of Housing and Urban Development. For the high price the buyer pays he receives only a fraction of the services and protection taken as a matter of course on the other side of the Atlantic … Every unbiased observer admits that the American system works badly for everyone except the mortgagee. Chronic criticism of the system is voiced but gets nowhere because the lending institutions do not want change. 8.15 pm
Sir Gordon Borne has suggested that there should be a number of caveats on the provision of conveyancing by the lending institutions. He has said that these will be needed if the public are to benefit and continue to benefit from the new competition. He contends that competition will operate effectively only so long as the customer knows precisely what services are available to him. He believes that where the building societies provide a range of services to a single client, the services should be priced transparently. He considers it essential that there should be a "dose of official weed killer" to ensure proper and full competition in the provision of these services.
The new clause would effectively provide the sort of weed killer which the Director General of Fair Trading is proposing should be applied. It would ensure that we live up to the principles of competition to which we adhere. I hope that my right hon. and learned Friend the Attorney-General will be able to give me some specific assurances that we shall not engage in anti-competitive practices and monopolies when part II comes into force.

§ The Attorney-General
I well understand the anxieties of my hon. Friend the Member for Stafford (Mr. Cash), but I must limit my reply to the purpose of this part of the Bill, which deals with licensed conveyancers. Many of my hon. Friend's anxieties will be more appropriately expressed when we come to consider the building societies Bill next year.
I explained in Committee that the provision of conveyancing services is already within the scope of the Competition Act 1980. Investigations through the normal machinery—a a reference from the Director General of Fair Trading to the Monopolies and Mergers Commission, which in turn reports to the Secretary of State—are available. The new clause is really not necessary to enable us to deal with anti-competitive or monopolistic practices when part II comes into force.
It has been suggested that it would be preferable to prevent such practices arising in the first place by requiring the Director General of Fair Trading and the Secretary of State for Trade and Industry to vet rules drawn up by the bodies connected with conveyancing. Let us consider what is proposed in the Bill. The Lord Chancellor will not approve rules that allow anti-competitive practics to operate. He will, of course, consult the Secretary of State for Trade and Industry, who will no doubt take advice from the Director General of Fair Trading, before concurring with rules drawn up by the council to ensure that the sort of situation of which my hon. Friend is fearful does not arise. Thereafter, the Director General will keep under review the operation of licensed conveyancers as part of his general statutory duties to ensure that no 385 undesirable practices subsequently develop. In our view, that is entirely adequate, and there is no need for the special provision which the new clause promotes.

§ Mr. Cash
I am grateful to my right hon. and learned Friend for the clarity of his reply. I am glad to note the assurance that he has given. Therefore, I beg to ask leave to withdraw the motion.