§ Mr. Lansley
I beg to move amendment No. 48, in page 10, line 38, at end insert—'(2A) For the purposes of this section "market" means a market the whole or part of which is in the United Kingdom but in relation to the abuse of a dominant position in a market which extends beyond the United Kingdom the prohibition imposed by subsection (1) shall not be regarded as infringed unless that abuse occurs in the United Kingdom.'.Clause 18 outlines the chapter II prohibition on an abuse of dominant position in a market, which is one of the two key prohibitions contained in the Bill. In Committee, we did not debate an amendment that had the same purpose as amendment No. 48, but we discussed some of the related issues—indeed, I tabled the amendment in the light of some of our discussions.
In the execution of the prohibition, it is obviously necessary to define a market, but that is done neither in clause 18 nor elsewhere in the Bill. The draft guidance issued by the Director General of Fair Trading makes it clear, in paragraph 2.12, that a market definition comprises two dimensions: 1133"a product and a geographic area".It cites the example of the Commission's consideration of a complaint about ice cream cabinets in Ireland. The Commission defined as the relevant marketimpulse ice cream in Ireland"—that contains a product and a geographic definition.
In paragraph 4.9, the director general makes it clear that, where there are significant imports of a product, the relevant market is international. The contrary is not necessarily implied where there is a lack of imports; the example cited is that of the bus market in Germany, on which the Commission decided that, although imports were low, there were no significant barriers to entry to the market, so that one could substitute domestic German providers with imports. Again, the definition of the market was held to be international.
In paragraph 6.7, the director general states:If the market is international, market shares should be calculated to cover the whole geographic market.That makes it clear that he intends, under the Bill, to use a definition of a market that, if the evidence demanded, extended beyond the United Kingdom.
Similarly, in Committee, the Minister for Competition and Consumer Affairs, responding to some of my remarks, said:I entirely agree with the point made by the hon. Member for South Cambridgeshire that the relevant, geographic market should not be limited to the United Kingdom."—[Official Report, Standing Committee G, 4 June 1998; c. 235.]The intention, which seems to be shared by the Government and the Opposition, is that the relevant market should extend beyond the United Kingdom.
How will the market be defined under clause 18? I tabled the amendment not to provide a substitute for the Government's intentions, but to fulfil them. One of the problems of earlier competition legislation was that, from time to time, the market was construed too narrowly. A market that was considered for public interest purposes may have been a regional market inside the United Kingdom, even though that regional market was capable of substitution from beyond its boundaries. It is important to look beyond the boundaries not only of any region but of the United Kingdom itself.
Subsection (3) says that a dominant positionmeans a dominant position within the United Kingdom".That is the problem, because it is the only place in the clause where "market" is arguably defined. The director general and the Minister may believe that they can look beyond the United Kingdom to define the relevant market, but I am not sure that the clause allows that to happen. Taking account of such markets may be open to challenge.
It is possible that, on the question of dominance, the boundaries will move back within the United Kingdom, so that the director general's decision will be made in relation not to the relevant market but to some subsection of that market. It is important to avoid that.
The amendment would allow the definition of "market" to extend beyond the United Kingdom, when the evidence requires that, and would avoid the problem of extraterritoriality by showing straightforwardly that, 1134 for the prohibition to come into effect, the abuse of the dominance would have to occur within the United Kingdom. It would helpfully create a clear hierarchy.
For example, someone could be dominant in the market for ice cream cabinets in the whole of Ireland, but the dominance could occur only in the Republic, and not in Northern Ireland. The market would include Northern Ireland, but if the abuse occurred only in the Republic, it would not be subject to the prohibition.
I commend the amendment to the Minister as a positive attempt to give appropriate effect to the Government's intentions.
§ Mr. Redwood
The Opposition support the amendment. We have found many examples of poor, misleading or inadequate drafting in the Bill. In this case, we have produced a form of words to clarify the meaning for the sake of business. Our general worry about the Bill is that it is badly drafted and loose, and will be a lawyers' charter, enabling many lawyers to do well and many businesses to do badly, because of the enormous fees that will be demanded. The amendment would clarify the meaning and give business greater certainty.
We think—as did Ministers in Committee—that penalties should be limited to a fine on the turnover in the affected market in the United Kingdom in which the offence has occurred. That is part of our process of trying to refine the legislation and make it a bit more realistic.
§ The Minister of State, Department of Trade and Industry (Mr. Ian McCartney)
I agree with the hon. Member for South Cambridgeshire (Mr. Lansley) that the clause is an extremely important part of the Bill. I reject the view of the right hon. Member for Wokingham (Mr. Redwood), expressed in his usual manner, that our drafting has been poor and misleading. That is entirely without foundation.
We made it entirely clear in the other place and in Committee that our intention was that the Committee stage should be used to assess and improve the Bill. That is not an admission of poor or misleading drafting; it is evidence of a co-operative, partnership approach with those who will be directly affected by the provisions. The right hon. Gentleman's comment was entirely unacceptable and, inadvertently I assume, damaged the case of the hon. Member for South Cambridgeshire.
It is clear that, in the modern commercial world and, indeed, in the single market in the European Union, many economic markets will extend beyond the United Kingdom. That may be true for a wide range of goods and services, from banking and financial services to air transport, the sale of aeroplanes, computer software, engineering products—the list is almost endless.
We entirely agree that the relevant geographic market should not be limited to the UK under the Bill, but that is already the effect of the Bill as drafted, and we believe that the amendment is unnecessary. In fact, amendments designed to clarify the drafting of the clause on exactly this point were accepted in another place.
In moving those amendments, my noble Friend Lord Simon of Highbury stated clearly that their purpose was to ensure that subsection (3) would not be read as limiting the relevant geographic market for assessing dominance to the United Kingdom. Clearly, there will be many circumstances in which the relevant market includes, but 1135 is wider than, the United Kingdom. The drafting of the clause does not cut across that in any way. We see no reason to revise the drafting.
The issue is important, and I accept that the hon. Member for South Cambridgeshire raises it because he genuinely wants confirmation and clarification, so I should like to explain in a little more detail why we do not think that the amendment is needed.
Any analysis of whether there has been an abuse must start with an analysis of the relevant market in terms of both the relevant products and the relevant geographical area. Under the Bill, the relevant market will have to be determined according to the economic circumstances in the case concerned, as it would be in applying articles 85 and 86. The Director General of Fair Trading will issue advice and information to provide further guidance on that point. He has already published a draft of his guidance on market definition for consultation. I will ensure that the hon. Gentleman's remarks are sent to him so that they can become part of the consultation process.
Subsection (1) requires that there must be dominance in a market. Subsection (3) provides that that dominance must exist within the United Kingdom or any part of it. There is a two-stage process. Once the relevant market has been identified, it must be established whether the undertaking is dominant in the UK or a part of it. It is plainly right that both those elements should be present. We are not interested here in dominance that exists elsewhere, but does not extend to the United Kingdom. The clause does not require that the market that must be considered when the prohibition is being applied must be entirely contained within the United Kingdom.
Should the courts consider that the meaning of the clause is ambiguous or obscure in that respect, they will be entitled to consider the statements that Lord Simon made in another place, and those that I have made here. That follows the decision in the case of Pepper v. Hart that reference can be made to statements in Hansard in certain circumstances to clarify the meaning of legislation. However, we do not believe that there is any ambiguity in the current drafting or that the amendment would represent an improvement.
I hope that those detailed comments will assist the hon. Gentleman and that he will withdraw the amendment.
§ Mr. Lansley
I am grateful to the Minister for responding so positively and sympathetically to the amendment. I confess that I am still uncertain whether in practice when a court is asked, presumably by way of judicial review, to consider the phrase, "dominant position" in this context, meaning within the United Kingdom, it will look for the legislative means by which the director was empowered to consider the relevant market as subsisting beyond the United Kingdom or to consider dominance within the United Kingdom as a self-contained matter. I take the point that if such matters are not set out in the legislation, the courts can consider them on a Pepper v. Hart basis. On that basis, and given the Minister's comments, I am happy to beg to ask leave to withdraw the amendment.
§ Amendment, by leave, withdrawn.
§ Mr. Giles Radice (North Durham)
I beg to move amendment No. 1, in page 10, leave out lines 40 and 41 and insert 1136dominant position" means a position of economic strength which enables an undertaking to act independently of competition, customers and ultimately consumers within the United Kingdom; and'.
Mr. Deputy Speaker
With this, it will be convenient to discuss the following: amendment No. 8, in page 10, leave out lines 40 and 41 and insertdominant position" means—New clause 1—National newspapers—
- (a) in relation to the national newspaper market, a substantial degree of market power, and
- (b) in relation to all other markets, a dominant position within the United Kingdom; and'.'.—(1) This section shall apply if a monopoly situation exists, within the meaning of section 6 of the Fair Trading Act 1973, in relation to the supply of—
And where this section applies, it applies to any person or persons in favour of whom that monopoly situation exists, within the meaning of section 49 (2)(b) of the Fair Trading Act 1973.
- (a) national newspapers; or
- (b) national newspapers of any description(2) Any conduct on the part of any person to whom this section applies shall be prohibited if—
- (a) it constitutes an anti-competitive practice, and
- (b) it may reduce the diversity and independence of the national newspaper press in the United Kingdom.(3) For the purposes of this section, an anti-competitive practice is a course of conduct which has, or is intended to have, or is likely to have the effect of restricting, distorting or preventing competition.(4) The prohibition imposed by subsection (2) is referred to in this Act as the press diversity prohibition.'.
§ Mr. Radice
I must remind the Minister and hon. Members what was said on this subject on Second Reading. Many hon. Members, including myself, believe that there is a prima facie case showing predatory pricing by The Times in the broadsheet market. In the past five years, the newspaper has consistently been priced below cost—often considerably below. At the moment, one has to pay only 30p for a copy.
Apparently, that is a special offer for the world cup, or so we are told by the editor. That is not merely a marketing ploy, but a deliberate predatory pricing strategy, the purpose of which is not only to win extra readers but to put The Independent out of business and attract at least some of its readers, so that The Times can get closer to its objective of overhauling The Daily Telegraph.
I said that there was a prima facie case, because we cannot prove it until we have all the facts and figures. It is up to the Office of Fair Trading to prove it. At the moment, the pricing practices of The Times are being investigated by the OFT, although that is under the existing and not the new law.
I am not claiming that other newspapers do not employ some types of predatory pricing, although I would argue that, in most cases, it is a reaction to what The Times has done. Such predatory behaviour is dangerous for the newspaper market. If one paper is knocked out, the market will be less diverse. The practice has an impact on other newspapers in the broadsheet market as most feel the need to react to the actions of The Times, which takes money 1137 out of the market, which means that there is less profit and less money to spend on journalists and improving the quality of the newspaper.
§ Mr. Redwood
The hon. Gentleman said that the price of The Times was below cost. What are the costs of The Times?
§ Mr. Radice
If the right hon. Gentleman knows, he knows more than I do. There have been a number of estimates, but The Times has told us that it is making considerable losses, so I assume that the price is below cost. It is widely thought to be, and that is precisely the purpose of the investigation. I should have thought that the right hon. Gentleman would know that, and I am surprised at his intervention.
§ Dr. Ladyman
When The Times was previously investigated, the question upon which the case hinged was not whether it had a dominant position, which was being abused. It was understood that the newspaper could be investigated and that it had satisfied that criterion. It was let off the hook because it could not be proved that it was selling below cost. My hon. Friend's amendment would reduce the threshold at which it is necessary to prove dominance, but that was never the question. How will it help with the need to prove that The Times is selling below cost?
§ Mr. Radice
I will come to that. My hon. Friend is an expert on the matter, having been a member of the Standing Committee.
§ Dr. Ladyman
I would hardly say that I am an expert. The right hon. Member for Wokingham (Mr. Redwood) was a member of the Committee, and I would not call him an expert.
§ Mr. Radice
It makes it more difficult.
I was about to point out that such below-cost pricing makes it more difficult for new newspapers to enter the market, because they have to pay the extra cost of pricing below their costs, which is bad for competition.
The question for us—it also relates to the other amendments in the group—is whether the Bill will enable the Office of Fair Trading to deal effectively with predatory pricing in the newspaper industry. The Lords did not believe that it would: hence clause 19, which was taken out of the Bill in Committee and which dealt with that industry. The Government's case, which they made on Second Reading—they did not make it strongly in the Lords, which is probably why there was such a special clause—was set out by the President of the Board of Trade. I have also read the excellent statement by the Minister of State in Committee. Their case was that the Bill would introduce a tough regime on predatory pricing.
Clause 18 sets out certain conducts, including predatory pricing, which would amount to an abuse of dominant position, and clause 60 sets out various ways in which the principles of European legislation—perhaps this is the point of the intervention by my hon. Friend the Member 1138 for South Thanet (Dr. Ladyman)—are to be introduced into British law. Those principles are laid down by treaty and by the European Court of Justice. Any decision of that court must be taken into account by the Office of Fair Trading and British courts, which also have to take into account any relevant decision or statement by the Commission. As I understand it, that means that we have to consider cases in Europe.
One famous case was that of Tetra Pak in 1994, which I am sure my hon. Friend the Member for South Thanet knows all about. It said that, if pricing by a dominant firm was below the average variable cost of production, predation should be presumed, and the proof of intent was not required. It also defined "dominant position". One problem is that The Times has only 28 per cent. of the market, and one could argue that that is not a dominant position. However, the Commissioners have made it clear that a dominant position is one in which a firm can act independently of competition, and that it does not specifically relate to market share, so that is a stronger position than we have at present.
§ Dr. Ladyman
The case to which my hon. Friend refers, which covers freedom to act independently, is that of United Brands v. the Commission, which includes almost identical language to that in his amendment, which makes it superfluous, because that language will be in the Competition Bill as it stands and as the Government propose it to be.
§ Mr. Radice
If my hon. Friend would listen to my argument before he knocks me down, I should be most grateful.
§ Mr. Radice
No, from a sitting position.
My hon. Friend argues that the Bill as it stands provides a powerful mechanism for dealing with predatory pricing. I said on Second Reading that I was impressed by that case, and that I would consider it seriously. I said that I would take the best legal advice. Having spoken to a considerable number of lawyers, I find that, like economists, they have different opinions. There has been some support for the Government's interpretation of the Bill, but also some dissent. The hon. Member for Eastleigh (Mr. Chidgey) is aware of the advice of Richard Fowler QC, the lawyer used by The Independent. Some may say that one can hire one's lawyer to suit the case, but I do not make that point.
§ Mr. Chidgey
I note the hon. Gentleman's feeling that The Independent has a particular line to pursue, but does he agree that an eminent QC's opinion is an independent opinion? There would be no other point in seeking it.
§ Mr. Radice
Let me cite Mr. Fowler. He said that it is unlikely to be possible to establish a relative dominant position as that concept is defined in Community 1139 jurisprudence. He is concerned that that will not do the job. Lord Borrie, a person respected by the whole House, shares that view.
I want to strengthen the Bill by adding to it the words of the President of the Board of Trade and the Minister of State. There are conflicting views of what the Bill will do, and my amendment would make the position more certain by saying that a'dominant position' means a position of economic strength which enables an undertaking to act independently of competition, customers and ultimately consumers within the United Kingdom".That is a good description of the dominant position of The Times, which is able to use the profits of the Sunday Times, and perhaps other undertakings owned by the Murdoch empire, to persist in a policy that it could not otherwise afford.
§ Mr. Andrew F. Bennett (Denton and Reddish)
I understand what my hon. Friend is getting at, but I do not understand why he did not go along with amendment No. 8, which is more specific to the newspaper industry. It makes the point that, in buying peas or Tetra Paks, one does not need much choice. However, buying ideas, which is what newspapers are about, is another matter.
§ Mr. Radice
I am sympathetic to amendment No. 8, but one would have to define "substantial", and that would lead to a circular argument, because there is no definition—certainly there is none in the Bill—of that word. Amendment No. 8 would throw us back to European legislation. I am sympathetic to my hon. Friend's idea, and I consider that we are trying to do the same thing, but I think that my way is perhaps better, despite the criticisms offered by my hon. Friend the Member for South Thanet.
§ Dr. Ladyman
My hon. Friend seems to minimise the impact of European legislation on the Bill. Clause 60 makes that legislation central to the Bill, so that all European jurisprudence can be used. As my hon. Friend's amendment contains the same wording as European case law, what is its purpose?
§ Mr. Radice
My purpose is to put the position beyond peradventure. I am interested in listening to the Minister, and to my hon. Friend, and I may well be persuaded by them, but I want to try to tease out a strong definition that can be used in the courts.
§ Mr. Robert Marshall-Andrews (Medway)
May I helpfully suggest an answer that my hon. Friend might have given? European case law as adumbrated in the Bill 1140 by clause 60 may change, and that is one reason for enshrining the principle in our own legislation, to set it in stone.
§ Mr. Radice
I am most grateful to my hon. and learned Friend. I sense another helpful intervention.
§ Mr. Winnick
If Mr. Murdoch had a vote tonight, he would certainly vote against the amendment and new clause 1. The Murdoch empire and the media do not want to see them carried.
§ Mr. Radice
I have covered my amendment, which is about predatory pricing and a dominant position in the national newspaper market. It is not about the Murdoch press, or about the fact that The Times is no longer a paper of record. It is not about the fact that The Sun is sometimes disgracefully xenophobic. Nor is it about the fact that News International has perhaps too big a share of the United Kingdom newspaper market. This is not the place in which to express my concern about how an unelected Australian-American media owner interferes, through The Sun, in British politics. [HON. MEMBERS: "Go on."] I am having a good try, but I might be ruled out of order.
Mr. Deputy Speaker
Order. The hon. Gentleman is not debating the amendment with his immediate circle of hon. Friends, but addressing the whole House. Let me say to some of his hon. Friends that they must be quiet, as they are being unfair to the rest of the House.
§ Mr. Radice
Lord Beaverbrook once said, "What I want is power: kiss 'em one day, kick 'em the next." Rudyard Kipling, whose words were later quoted by his cousin Stanley Baldwin, said:Power without responsibility—the prerogative of the harlot throughout the ages.Those words still apply. I shall not ask the Minister for his views on them or on their relevance today.
§ Mr. Ian McCartney
For the record, the last gentleman that tried to kiss me one day and kick me the next, spent 12 months at Her Majesty's pleasure.
§ Mr. Radice
I congratulate my hon. Friend on his robust attitude. I ask him either to accept my amendment, or to reassure me that the Bill will enable us to take tough action against predatory pricing wherever it occurs, including in the newspaper industry.
§ Mr. Chidgey
Most hon. Members know that, during the Bill's passage, we have had several opportunities to debate the issues before us. It stands out from our deliberations in Committee and on Second Reading that Ministers have been accused several times—not by me, I hasten to add—of altering course and changing their position. At times, they have argued that an action should be ruled out in the interests of avoiding putting undue burdens on business. At other times, they have said that action is unnecessary.
1141 The one thing in which the Government have been constant throughout our proceedings is opposing any additional safeguards on predatory behaviour in the national newspaper business. The Government's position is surprising, because, when Labour was in opposition, it was boisterous and vigorous in promising action. It is surprising that, in office, it appears less interested in that promise; some might say that it has betrayed it. The Government seem determined that no one should have the opportunity to help them with it. That is the nub of this debate.
I want to discuss some of the issues raised in Committee, and some of the objections that Ministers made to amendments in Committee, particularly in respect of new clause 1 and amendment No. 8, which was tabled by the hon. Member for Sunderland, South (Mr. Mullin) and which I have signed, which would take us some way forward.
There is a need for a clause specific to the newspaper press. I strongly believe that competition law should contain specific, and stricter, provisions on the press. Ministers have argued that it is wrong in principle to have different prohibitions in different sectors, but perhaps they forget that schedules 2 to 4 are devoted to excluding certain sectors from the Bill altogether. There is an inconsistency there.
With the press, diversity of provision, and hence of expression of comment, are necessities in their own right. That need goes beyond the need for competition in the supply of goods and services. Competition is a means to an economic end, but a diverse press is an end in itself. Where the diversity of the press is concerned, competition law must go further than it does for ordinary goods and services.
That need has always been recognised in mergers policy. I think that sections 57 and 62 of the Fair Trading Act 1973 are devoted entirely to establishing stricter criteria to apply to newspaper mergers alone. The Government should recognise that the same need exists in other areas of competition law—notably the control of anti-competitive conduct, which is the subject of the Bill. That is the gap that new clause 1 and amendment No. 8 seek to fill.
Is the chapter II prohibition sufficient in the case of predatory behaviour in the newspaper business? Ministers have argued that it is enough to rely on the Bill as it stands. They point to clause 18, which prohibits the abuse of a dominant position, to clause 60, which imports European jurisprudence into the interpretation of that prohibition, and to European case law on predatory pricing.
I agree with the hon. Member for North Durham (Mr. Radice) that those claims have been exploded by the recent opinion of leading counsel, in particular that of Mr. Richard Fowler, QC. He has shown that European jurisprudence sets a very high threshold before dominance can be established. That is unsustainable when the diversity of the press is at issue. Such diversity could easily be threatened by anti-competitive conduct long before a newspaper reached the point of dominance set out in the jurisprudence.
Ministers also argue that clause 18 will make predatory pricing easier to establish than it is under present competition legislation. They point again to European case law, which says that predation should be presumed 1142 whenever prices are below the average variable cost of production. Mr. Fowler has again made it clear that, for newspapers, with their reliance on advertising revenue, that precedent would not run. Another ministerial reassurance is thus undermined, if not negated.
§ Mr. Chidgey
I could see the hon. Gentleman's enthusiasm mounting. In a spirit of generosity, I am delighted to give way.
§ Dr. Ladyman
Far be it from me to suggest that the learned gentleman whom the hon. Gentleman quotes was talking poppycock, but he claims that in Europe there is a high threshold for establishing a dominant position. It is clear from what the Commissioners have said that, under some circumstances, they would regard a 20 per cent. market share as dominance. Does the hon. Gentleman seriously suggest that less than 20 per cent. should still be considered dominant?
§ Mr. Chidgey
I am somewhat confused by that question. I think that the hon. Gentleman referred to me as learned, or perhaps it was to someone else. He accused a leading counsel with an international reputation of talking poppycock. I cannot comment on that, but the opinion is on the record. It differs from the Government's legal opinion, but where there is conflicting legal opinion, there is a problem with legislation. If he contains his enthusiasm while I continue my remarks, I think that I shall be able to demonstrate why that is important.
§ Mr. Chidgey
We have a new face in the Chamber. What a pity the hon. Gentleman was not here for the opening remarks. Nevertheless, I shall be generous and allow him to contribute.
§ Mr. Chidgey
I am grateful for that point. I quickly withdraw any discourtesy. I was perhaps momentarily excited; it was meant merely as part of the usual cut and thrust of our friendly behaviour in the Chamber, particularly at this hour.
I contend that counsel's advice is clear. The comfort that Ministers have held out on the adequacy of clause 18 is illusory. It will leave untouched a range of anti-competitive practices that could threaten the diversity of the press. Those threats will remain unless the House enacts specific safeguards against them.
It has been argued that it is wrong to use legislation to target a particular case—an issue addressed several times in Committee. Ministers argued that legislation should provide a general framework, and should not be used to target individual abuses by individual companies or even 1143 against individual companies. That is clearly right. A vital aspect of press diversity is that the market should be open to newcomers.
The amendments are couched sufficiently generally not to prejudge the facts of any particular case. Findings of fact are for the relevant enforcement authorities, not the legislators. The purpose of the amendments is to establish a general safeguard for press diversity and make it a new and free-standing responsibility of the Director General of Fair Trading, and, as necessary, the new Competition Commission.
I am concerned about how the Minister may respond on new clause 1. I trust that the House will welcome its provisions. Its purpose is to stand in place of, and improve on, the clause 19 that was added to the Bill in another place before it reached Committee here and the Government were able to remove it through their votes there.
New clause 1 would prohibit any anti-competitive practice that threatens to reduce the diversity of the national newspaper press, but only if the author of that practice enjoys a monopoly situation. Both "anti-competitive practice" and "monopoly situation" have existing statutory definitions, in the Competition Act 1980 and the Fair Trading Act 1973 respectively. Therefore, their meaning will already be familiar to the business community affected by the Bill.
Let me deal with the question of dominant position and monopoly situations. On Second Reading and in Committee, Ministers criticised the original clause 19, because, it was claimed, it relied on a special definition of a dominant position, including anysubstantial degree of market power".Ministers claimed that the clause was too wide, because, they said, practically any established newspaper will hold substantial market power.
The new clause meets that criticism by confining its reach to monopoly situations as defined in the Fair Trading Act, which entails a market share of 25 per cent., which is common knowledge. The scope of the new clause is thus confined within existing strategy limits. Surely nobody would argue that practically any established national newspaper company will hold a market share of 25 per cent.
Turning to the definition of the abuse that will be prohibited, the old clause 19 was also criticised by Ministers because it prohibited any conduct, within certain limits, which might reduce the diversity of the national newspaper press. It was thought that the clause would throw the baby out with the bath water, because it applied, or could be seen to apply, to any conduct, legitimate or illegitimate, that might reduce the diversity of the national newspaper press; it could even condemn good journalism. However, in new clause 1, anti-competitive practices are defined in the same way as in section 2 of the Competition Act 1980, which I believes overcomes the problem.
Let me now turn to advertising revenues of newspapers. Much has been of the costs of producing The Times, and the accounting procedures of News International. In our 1144 debate on the old clause 19, we focused on its reference to "selling prices", which was thought to imply that a low cover price could be an abuse regardless of advertising revenues. Obviously, that argument on its own is unsustainable, because no one would be able to support a principle that prohibited the publication of free sheets. Therefore, the issue is not selling price, but overall costs.
The new clause meets that criticism by eliminating all reference to selling price; instead, it deals only with anti-competitive practices that threaten to reduce the diversity of the national newspaper press. It would be for the competition authorities—the Director General of Fair Trading and the new Competition Commission—to identify such anti-competitive practices, according to their practised judgment. If accepted, the new clause would leave them entirely free to consider advertising revenues in whatever way they thought right.
Ministers should recognise and acknowledge that all their objections have been heard, heeded and fully catered for in new clause 1. The new clause now applies only where there is a monopoly situation, and only to actions that constitute an anti-competitive practice. It prohibits such practices when they may reduce the diversity of the national newspaper press. Surely nobody could doubt the justification for that.
§ Mr. Chris Mullin (Sunderland, South)
I rise to speak to amendment No. 8, which stands in my name and those of several colleagues, including the hon. Member for Eastleigh (Mr. Chidgey).
Let me say out the outset that I welcome the Bill. It contains many desirable measures and I shall have no difficulty voting for it on Third Reading. However, the acid test is the one that I mentioned on Second Reading, during an intervention on the Secretary of State: whether the Bill deals with predatory pricing in the national newspaper market, which is the worst example of predatory pricing and abuse of the market and is all the more serious because, unlike predatory pricing in other sectors, it has implications for the democratic process. The Bill as drafted does not pass that test; therefore, the purpose of my amendment is to bring predatory pricing in the newspaper industry within its scope.
The issue is one in which my hon. Friend the Member for North Durham (Mr. Radice) and I have taken a serious interest. It will be evident from the signatures of seven Select Committee Chairmen to amendment No. 8 and that of the distinguished Chairman of the Liaison Committee to amendment No. 1 that our concern is widely shared. We have not tabled the amendments lightly. We have talked to the Secretary of State, who has listened courteously to our concerns, to Lord Borrie and to representatives of the industry—including the editor of The Times and the chairman of News International—and we have taken advice from experts.
I had an open mind on Second Reading, after the effect of clause 60 was belatedly explained to us, but I have been impressed by two things: first, that Lord Borrie, a former Director General of Fair Trading, is of the opinion that the Bill as drafted will not catch what is going on in the newspaper industry and, secondly, the opinion of Richard Fowler QC, who shares that view. They are both of the view that the Bill will be ineffective against the five-year war of attrition conducted by News International against its rivals, which is the fundamental reason why I tabled the amendment.
1145 The background to the problem has been outlined by my hon. Friend the Member for North Durham. For the past five years, News International has been selling The Times and occasionally The Sun for far less than the cost of production. That is not a temporary promotional activity; it has been going on for five years. It is dragging down other newspapers: for example, The Daily Telegraph and the Daily Mirror have felt obliged to respond in order to compete. It is having an extremely damaging effect on our national newspaper market, especially the broadsheet market.
Be under no illusions, The Times is making huge losses. When the chairman of News International came to see my hon. Friend the Member for North Durham and me, we asked him how much it had cost the company so far. Although he was the chairman, he did not appear to know the exact figure, but "under £75 million" was the figure he mentioned. It is unclear whether that comes from the profits of The Sunday Times or from other parts of the empire. Subsequent to our meeting, I wrote to the chairman asking whether the profits of The Sunday Times over the same period exceed the subsidy to The Times and, if so, by how much. Mr. Hinton replied:We do not break out the profit and loss of The Times and Sunday Times separatelyso there is no way of telling.
News International argues that the increase in advertising revenue resulting from the increase in sales of The Times should be taken into account, and I agree—that is a perfectly reasonable point—but I am assuming that the £75 million loss Mr. Hinton talked about already takes account of that. The figure is in addition to any increase in advertising revenue. Let us not be distracted: it is clear that News International's war of attrition could be sustained only by a corporation with huge resources.
Those are the facts so far as we are able to discover them. The result is that hundreds of millions of pounds, much of which might otherwise have been invested, has been drained out of the national newspaper industry. The Independent, which I accept has other problems, has been forced to the brink of extinction. It is bogus to describe what has been going on as normal promotional activity—it is not normal; no other national newspaper engages in such sustained price cutting. If the purpose was to make The Times the market leader, the strategy has not succeeded; nor has it succeeded, after five years, in making the newspaper profitable, even when advertising revenue is taken into account. However, it is no defence to say that the strategy has not worked. As to whether the strategy has worked and what was the goal of the strategy, the jury is still out. It could go on for years with consequences on which we can only speculate. Who knows where it will end?
There is another possibility—a different interpretation from the one that News International would like us to believe is the purpose of its activity—and that is to inflict damage on or to sink rivals. Mr. Murdoch has said in public that by the early part of the next century there will be only three national daily newspapers left—The Times, The Sun and the Daily Mail. He did not say whether that was a desirable target or an inevitable and regrettable fact of life. Whatever view one takes, were it to come to pass—I hope that it will not—it would mean that the British public would be left with a choice of lie machines, either the Harmsworth or the Murdoch lie machine. I do not want that day to arrive.
1146 Happily, there is no shortage of ex-Murdoch executives. A fax may arrive from Los Angeles or New York and they are here today and gone tomorrow. Who knows, that fate may yet overtake one or two of those who are giving us the lavish assurances about how this is just a normal promotional activity. If that fate does overtake them, perhaps they will be in a position to be more frank with us about what it is all about.
As I have said, even now there is no shortage of ex-Murdoch executives. One such person told me that he was in the presence of the man and heard him ask, "How do we sink The Daily Star?" As he said, Murdoch does not need to do that. It is almost an irrelevance to his interests, but he cannot resist the challenge. That is a little glimpse of his mind set.
Another former senior executive of News International has been overheard talking in similar terms about how to sink The Mirror. The strategy has certainly inflicted some damage on that paper over the years.
I do not want to get bogged down by arguing about the purpose of all this. If it is any help, for the purposes of argument, I am willing to assume that Mr. Murdoch's motives are purely honourable and commercial. I want to concentrate on the effect. It is deeply damaging to our democracy to limit or threaten to limit the diversity of our national press.
So far there have been three investigations by the Office of Fair Trading and a fourth is under way. As my hon. Friend the Member for North Durham said, since it is taking place under the existing competition regime, we should not have any high hopes of it. That is the background.
As my hon. Friend ably explained, amendment No. 1 makes explicit what is at present implicit. It is welcome, but, in my view, it is not sufficient to solve the problem. As the Bill stands, it is necessary to demonstrate that there is an abuse and that the abuser has a dominant position in the market. New clause 1, tabled by the Liberal Democrats, attempts to address both those points by lowering the test for national newspapers. I believe that it is not difficult to prove an abuse. After five years, it is surely no longer possible to argue that News International is engaged in a temporary promotional activity. I have concentrated on lowering the test of dominance in relation to national newspapers. That is the purpose of amendment No. 8.
European law is based on cases where a company such as Tetra Pak, having 80 or 90 per cent. of the market, seeks by means of artificially low pricing to squeeze rivals out of the remaining 10 or 20 per cent. It is true that the Commission has indicated that it might be willing to look at cases where the alleged abuser has a much lower percentage of the market, but, in those circumstances, market dominance is a hurdle which will prove difficult to cross in the national newspaper industry.
Depending on which definition one takes, News International has somewhere between 28 and 33 per cent. of the market. I was interested to hear the chairman of News International say on the "Today" programme that News International has only 19 per cent. of the market. That is evidence of how much reliance we can place on News International figures because, as I have said, the true figure is somewhere between 28 and 33 per cent.
1147 Lord Borrie and Mr. Fowler, an expert on competition law, take the view that market dominance is a hurdle which will prove difficult to cross in the national newspaper industry. In an opinion commissioned by The Independent, Mr. Fowler says:whether the relevant market is defined as broadsheet newspapers or national newspapers generally, it is unlikely in my opinion that the position of The Times, or of News International, would meet the European Court of Justice tests for dominance.So, we could sit back and say that nothing can be done about predatory pricing until one of the abusers—it is likely to be Murdoch—has, by fair means or foul, obtained a 50, 60 or 70 per cent. share of our national newspaper market.
What Government would dare to take on a corporation with that percentage of the market? Heaven knows, it is difficult enough to get anyone in high places to think sensibly about Murdoch when he has only one third of the market. Instead of waiting for a bad situation to get worse, I am seeking to rectify the matter now. My amendment does that by lowering the test for national newspapers from dominance toa substantial degree of market power".8.15 pm
The Government have two principal objections to my proposal. First, they say that they are not in the business of singling out Rupert Murdoch or any other proprietor. My amendment does not do that. It seeks to outlaw predatory pricing among national newspapers regardless of the identity of the proprietor. As we have seen, The Daily Telegraph and The Mirror would also be affected. Any newspaper corporation that attempts to subvert the market by predatory pricing would be caught by my amendment. Mr. Murdoch's name crops up more than most because he is the greatest living practitioner of predatory pricing. I am sorry about that, but it is an unavoidable fact of life. My amendment makes no mention of Mr. Murdoch or News International. It would apply across the market.
Secondly, the Government object to singling out national newspapers. That is the key issue—it is the core difference between us. It is a difference of principle and we should not shy away from it. I am grateful to Ministers for not arguing that my amendment is technically defective—it is not. We are discussing a straight issue of principle and my argument is simple.
The free flow of information is the life blood of democracy. A diverse media is a precondition of democracy. Any practice that, by accident or design, is likely seriously to limit newspaper diversity therefore threatens democracy. That is why newspapers are a special case. As the hon. Member for Eastleigh said, previous Governments have accepted that in relation to merger policy and other aspects of competition law. Clauses 57 to 62 of the Fair Trading Act 1973 are devoted to establishing stricter criteria for newspaper mergers. That Act was passed by a Conservative Government.
1148 It is disappointing to see so few Conservative Members today. I saw a poll which suggested that 95 per cent. of Conservative Members thought that the Government were too close to Murdoch. If they really thought that and were concerned about it—
§ Mr. Mullin
My hon. Friend is right; it is jealousy. I had hoped that one or two Conservative Members would come to the House to express their concern on this issue. Alas, that is not the case.
In case anybody thinks that the Government have changed their mind, I can say that that is not so. In the consultation document that preceded the Bill, the President of the Board of Trade said:We do not propose to use the Bill to amend the Fair Trading Act newspaper merger provisions. The original rationale for these provisions was that increasing concentration of newspaper ownership could threaten freedom and variety of expression in the press. We consider this rationale remains valid.Those are the words of the President of the Board of Trade within the past 12 months. In other words, when it suits them, the Government accept that newspapers are a special case.
I could not put it better myself. However hard I try, I am unable to distinguish between a threat to newspaper diversity caused when a large corporation seeks to take over its rivals and a threat to diversity caused by a corporation that already has an enormous share of the market seeking to expand its share by a practice so blatantly unfair as predatory pricing. In any case, it is not strictly true that the Bill applies across the market. As the hon. Member for Eastleigh pointed out, schedules 2, 3 and 4—no doubt for good reasons, which I do not dispute—list all sorts of areas to which the new competition regime will not apply. It would be a simple matter to make an exception for newspapers. The Fair Trading Act is a healthy precedent. All that is required is the political will, which is the purpose of my amendment. In the absence of a miracle, I intend later to put the amendment to the vote.
§ Mr. Marshall-Andrews
I support the amendment, which is not specifically anti-Murdoch or anti-News International. I declare an interest: I write reasonably regularly for The Sunday Times, which is, of course, part of News International. In the past few weeks, I have written about the potential catastrophic effects of the third way, the vulgarity and vast waste of the millennium dome and the abolition of the Lord Chancellor. I very much hope that I shall in future be given the opportunity to write other articles that are helpful to the Government. I do not attack News International or Rupert Murdoch and I am very happy to write for his newspapers and take his shilling.
The point needs to be made that this is a commercial Bill, the purpose of which is to regulate commercial dealings and promote the purifying oxygen of competition. It is a perfect Bill. It is strong and good in every respect except one: it fails to address the unique commercial position of the newspaper industry, which is worth £700 million a year and, notwithstanding that, succeeds in making an aggregate net loss of £50 million. Why is it unique? That question is essentially the argument that the Government have against the amendment. Why single out the newspaper industry? 1149 I shall attempt to answer that in one sentence. No other major commercial undertaking is owned for the express and specific purpose of obtaining and using political power and influence. That is the difference between the newspaper industry and any other. Protestations to the contrary are not worth even considering.
The Sun did not run a banner headline, "It Was The Sun Wot Won It" because of mere vulgar braggadocio, but because it believed that it was true. The Prodi incident caused consternation not because it was an unedifying example of politicians operating at the behest of business men, but because the business man was Rupert Murdoch, who is, in effect, a strong and established politician.
What is the effect of that single difference between the newspaper industry and every other? I suggest that it has two effects. First, we have a legitimate interest in debating the industry in the House because it affects politics and democracy. The second effect, which is far more important in the context of the amendment, is that the political power that is wielded within the industry, which it conceals, distorts the commercial strategies of the market. The Bill deals with those commercial strategies and is predicated on commercial reality.
In normal commercial considerations, no commercial entity can or does afford, for a long period, to trade at a loss. It can do so only for a limited period to drive its competitors to the wall. That does not apply in the newspaper industry. The normal capitalist impulse to destroy one's competition is based always on the desire to obtain a monopoly position to manipulate price. That is not the motive in the newspaper industry, where the impulse is to destroy one's competitors to obtain a monopoly of power. That imports into the industry completely different commercial realities. One has only to test that against what has recently happened in the industry to realise that it is true.
Nobody but a commercial lunatic would have purchased The Independent for commercial reasons. It was purchased not because it is a commercial concern but because it is a newspaper and is likely, let us face it, to make a loss for a considerable period. Precisely the same may be said—topically—of the New Statesman. Nobody but a commercial lunatic would have purchased that, but it was purchased by a gentlemen of enormous commercial acuity, not because it would make a profit but because it is a newspaper.
The difference in the commercial considerations imported into the industry by the reason people use, purchase and run newspapers is extremely important for the purposes of clause 18. As we know, one must break two separate rules to transgress clause 18. The first relates to predatory pricing, which is set by Tetra Pak because of the European provisions of clause 60. There is no problem in the House with the conditions that Tetra Pak lays down. If one applies those rules there is a near certainty that Rupert Murdoch has been predatorily pricing with News International and, in particular, with The Times. I cannot tell the House that that is true because I am not privy to the inner workings of News International, but every objective test suggests that Rupert Murdoch has transgressed the Tetra Pak principle. That is not the problem, which is why amendment No. 8, which bears my name, does not even contemplate examining predatory pricing.
1150 The single issue here is what is domination in the market, and, on that issue, the newspaper industry is different from others. The reason the Bill and European legislation and jurisprudence apply only to dominance in the marketplace is that that is the only place where it matters. No one who is not dominant in the marketplace will predatorily price. If they do, it will not be for long because if they do not hold a dominant position in the marketplace, predatory pricing is commercial suicide. Ultimately, if such a war is started, the person who holds the dominant position will always win on the well-known General Haig principle that there will always be one man left standing at the end. That is why legislation, in commercial terms, applies itself to the dominant position in the marketplace.
That does not apply to newspapers because the reasons for using and owning them mean that those with a substantial share in the marketplace will sustain losses for years, as News International has done, to break their competitors not commercially but politically and to gain a greater political share. The implicit danger is commercial. News International holds 33 per cent. of the market. I have to say to my hon. Friend the Member for North Durham (Mr. Radice) that, under any test, 33 per cent. will not be enough to guarantee that a court or the Office of Fair Trading will find that a company holds a dominant position in the marketplace.
A little law that I know proves that that is the case. The United Brands or Michelin test, which began its life in the ninth or 10th version of the Commission's report on competition, is that dominance exists if the nature and structure of the market enable a company to act independently of competition. I shall not bore hon. Members to tears with the reasons, but my view, which coincides with those of other silks who have been quoted, is that that test will not guarantee a finding of a dominant market position for Murdoch's empire or any other newspaper empire in this country.
If the House is to safeguard the principles that my hon. Friend the Member for Sunderland, South (Mr. Mullin) articulated so well—the democracy of the House and the continuation of a healthy, democratic newspaper industry to support it—the only way for it to do so is for the House, united, one hopes, without party, to vote for the amendment.
§ Mr. Winnick
It has been said that amendments Nos. 1 and 8 and new clause 1 do not refer to Mr. Murdoch, but we all know that we are debating the Murdoch clauses, and there is no doubt whom we have in mind.
I do not regard Mr. Murdoch as being responsible for all, or necessarily most, of the ills of the media world. If, for example, we looked at The Independent, we would probably conclude that it had been an excellent newspaper and that, unfortunately, a decline took place. The Independent started as a very good newspaper—it was highly welcome—but, in the past two or three years, it was undoubtedly the author of its own decline. I am pleased that, as a result of a change of editor, there now seems to be a good prospect that The Independent will be the type of newspaper that one wants to see, and will provide honest competition for the other broadsheets. One need only compare The Independent with what it was under some previous editors and my point is made.
1151 8.30 pm
I might be accused of making a wrong point, but I do not believe so, when I say that some of the anti-Murdoch sentiments come from those who dislike the political line that he—or at least his newspapers—is advancing on the single currency and against economic and monetary union. I support amendment No. 1, despite the question that I shall now pose. If the Murdoch newspapers—The Times and The Sun—were very pro economic and monetary union, and were in favour of Britain joining the single currency at the first opportunity, would there be the same amount of criticism? Undoubtedly, my hon. Friend the Member for Sunderland, South (Mr. Mullin) would not change his opinion—he would be making the speech that he has just made, and doing very well indeed—but I wonder whether some of the critics are motivated by the line on the European Union that Mr. Murdoch or at least his newspapers are advancing.
The other broadsheets, The Guardian and The Daily Telegraph which have also been mentioned, are excellent newspapers, well able to look after their own, and one hopes that that continues to be the position, even if I would not tend to support the politics of those newspapers—especially, of course, of The Daily Telegraph.
There are three main reasons why I believe that new clause 1 and amendments Nos. 1 and 8 are necessary. First, the point has been made, and cannot be reiterated too often in the debate, that the pricing of The Times is unfair—that the purpose of such pricing arrangements is to drive competitors out of business. When recently I had a meeting—with one other colleague—with the editor of The Times, the fact that such pricing arrangements would drive competitors, especially The Independent, out of business was hotly denied, as though the thought had never come into the mind of those who control the Murdoch newspapers in this country.
We know that that is nonsense. We know that the sole purpose—perhaps it is unfair to say that, but one of the main purposes—of the pricing of The Times as it is at the moment in comparison to its broadsheet rivals is to drive at least one, perhaps two, of those rivals out of business. We also know—the point was made by my hon. Friend the Member for North Durham (Mr. Radice) when he moved amendment No. 1—that if The Times was not so heavily subsidised by all the other Murdoch outlets, it would simply not be possible to have such a pricing arrangement. That is the first reason why I am, and have been for some time, very critical of what is happening. If The Independent were forced out of business, that would undoubtedly be a serious blow to the broadsheet market, to British politics and to British democracy.
The letter that we have received from the executives of The Daily Telegraph and The Guardian, containing the views of the lawyer, Mr. Fowler, has been mentioned. I agree that the executives have an interest, but Mr. Fowler's views should be noted.
The second reason why I am opposed to the present situation regarding the Murdoch media empire is that far too much media power is undoubtedly concentrated in the ownership of Mr. Murdoch—in Britain, as has been stated, in Australia and in the United States. I do not believe that that is desirable, or that it is healthy in a democracy. The danger is that if other broadsheets went out of business—certainly if The Independent did so— 1152 that would give the Murdoch press empire even more power than it has. That is why I say that that concentration of media outlets in the hands of Mr. Murdoch, not only in the press, but very much in television, is undesirable. One would hope that the Government would recognise that and act accordingly.
My third reason is somewhat different. In my view, Mr. Murdoch believes that he has any Government in Britain in his pocket and that his power—that word is very appropriate in this context—is such that no one in the main stream of British politics or, to put it more clearly, the two main parties, whether in government or not, is likely to take any position that will endanger his press empire. Although I appreciate what the Liberal Democrats have done in another place and here, I nevertheless have to say that, if they stood a realistic chance of forming the next Government, it is not likely, although I may be wrong, that they would be pushing new clause 1 with as much enthusiasm as they have been, and it is more than likely that they would be adopting the same position as the Conservative Opposition.
§ Mr. Chidgey
I am grateful to the hon. Gentleman for giving way; he realises that he has offered me a bait that I cannot refuse. I was not aware that he had some magical orb in his hand with which he could predict the future electoral success of any political party in this country. Perhaps he would reveal the secret.
§ Mr. Winnick
I am merely saying that it is interesting to note the attitudes of political parties. The Conservative Opposition, for example, are staying silent. They certainly will not vote for the amendments; that was made clear at a previous stage of the Bill's passage. The reason is pretty obvious: they do not want to give Mr. Murdoch the impression that they will act, or vote, in any way that will cause him offence.
That is the sort of power that Mr. Murdoch has. His feeling is that, with all the media power that he already possesses, he has the Government in his pocket. I do not believe that my Government are in his pocket at all, but I do believe that there is a feeling—I am speaking as frankly as I can on the Floor of the House—that, in order to be re-elected, we should not do anything by way of legislation that will give offence to the person who owns so much of the media in this country.
I think that that feeling is highly undesirable, and that it is not—I hope that it is not—the purpose of British democracy for one person virtually to decide who should be the Government of the day. It is not for one person, be it through The Sun or The Times—but especially the tabloid Sun—to say, in effect, that if the Government displease Mr. Murdoch, he will campaign to get them out of office. At the moment—I am being as frank as I can—both the Government, whom I enthusiastically support, and the main alternative Government give the impression that they do not want to take any action that would offend Mr. Murdoch.
I conclude by saying that in a democracy, there are bound to be—there always have been in this country, I suppose—powerful people in the media world, such as the late Lord Beaverbrook who was mentioned, who hold a good deal of power. I suppose that, by the very nature of capitalism, that is bound to be the case. Mr. Murdoch is somewhat exceptional in that he has more power than 1153 previous media tycoons. He would like to concentrate even more power in his empire and the time has come for the Government, and certainly for Parliament, to say that enough is enough. The most effective way in which to do that is to accept the amendments and the new clause.
§ Mr. Austin Mitchell (Great Grimsby)
Unusually, I want to support the Government's line and oppose the amendments. I cannot support the amendments because the Government's definition of predatory pricing in the Bill is perfectly adequate to deal with the situation. What has been added to that is an explosion of impotent anger against Rupert Murdoch, and the reasons for that are many and varied. My hon. Friend the Member for North Durham (Mr. Radice) is obviously upset because Rupert Murdoch is voicing the views of British people on the euro. Others do not like The Sun on taste grounds and some, particularly on the left, do not like Rupert Murdoch's politics. As we spent more than 20 years attacking the politics of The Sun and have now come to accept so many of them, that is a rather curious ground on which to attack Mr. Murdoch.
Some hon. Members, such as my hon. Friend the Member for Walsall, North (Mr. Winnick) and the Liberal Democrats, do not like the fact that Rupert Murdoch is so close to the Government. The Liberal Democrats would rather that the right hon. Member for Yeovil (Mr. Ashdown) was close to the Government. I do not agree with any of those notions because they do not seem to do anybody any credit. I certainly do not come to praise Rupert Murdoch, but I certainly do not intend to bury him. I admire him as a stirrer and a brilliant newspaper man, many of whose actions have been good for the newspaper industry. I also admire him as a risk-taker and innovator who successfully gave us Sky television. When I say that I admire him, I do so with no implication of vested interests.
§ Mr. Mitchell
As my hon. Friend reminds us, I used to do a television programme for Rupert Murdoch but, thanks to one of his many commercial mistakes, my programme was dropped. That shows that even Rupert Murdoch is capable of bad judgment. The Sky television management have gone flabby because they took off the best current affairs programme on the network. I am trying to look at the matter in the light of the arguments, decide on the facts, and do myself a little credit with the Government. A reshuffle is coming and my hopes are strong. I have not yet received any word from Downing street, although I sit at home every night waiting for the phone not to ring. I hope that my speech will encourage the process. I want the Newcastle Brown award for meritorious conduct in this matter.
§ Mr. Ian McCartney
On the grounds of clarification and job insecurity, may I ask my hon. Friend whether he is after my job?
§ Mr. Mitchell
Certainly not. I could not do it anything like as well as my hon. Friend after all those conversations we had.
We should oppose the amendments for a number of reasons, the first of which is that it is wrong to use a Bill that deals with competition to reduce competition and 1154 increase prices. What on earth will we achieve by increasing prices? That is a distortion of the Bill's role. If there is a problem about Murdoch's share of the market, let us have the guts to tackle it directly rather than in a back-door, covert way.
§ Mr. Mitchell
No. We can all whinge about Rupert Murdoch. I am slightly embarrassed because I differ from my hon. Friend the Member for Sunderland, South (Mr. Mullin). Like him, I am on the extreme left of the party. I am there because the party has moved so far to the right behind me. My hon. Friend and I are all that is left and I am a Gaitskellite.
Murdoch has been successful: The Sun is a success. He kept it alive and boosted it to a mass circulation newspaper. He kept Today alive far longer than would have been the case under any other management. The Times and The Sunday Times have been built up into successful papers. It is true that there is a threat to The Independent, but that is The Independent's fault, not Rupert Murdoch's. If The Independent has gone off, it is because it is no longer independent, has lost its way and has been a wandering, bad paper. It has pulled itself together and enormously improved, but the fault lies with The Independent, not with the attack on it by predatory pricing.
I did not notice The Independent being particularly squeamish, when it set up The Independent On Sunday, about deliberately smashing The Sunday Correspondent, which it duly did; The Sunday Correspondent sank. We did not get this concern and desire for protection then.
I do not notice The Daily Telegraph avoiding predatory pricing. About a quarter of its circulation is sold on much-reduced subscription rates and it gives away 33,000 copies. I love it, but I much prefer reading it for free and I am happy to be deluged with free copies wherever I go. However, that is another form of unfair, unreasonable competition. Why is the paper whingeing about predatory pricing when it gives copies away on that scale?
Competition is endemic in the newspaper industry. My hon. and learned Friend the Member for Medway (Mr. Marshall-Andrews) is wrong to say that we are talking about a lust for power. We are talking about someone's pride in their product—in their newspaper. Does my hon. Friend not want his articles to be read by the maximum number of readers? Is that not what journalism is all about—competition? If we suppress competition in terms of pricing, will it not come back in all sorts of other ways?
I grew up in a home that was weighed down with encyclopaedias because predatory-pricing newspapers had been going from door to door, giving encyclopaedias away with a subscription to this and that newspaper. We never read any of them. We never read the papers, but we were festooned with encyclopaedias.
§ Mr. Mitchell
I know that my hon. and learned Friend is going to say that I should have read the newspapers and encyclopaedias, and that I would not be making this speech if I had done so. I am not going to give way.
1155 In any case, what has predatory pricing done for Rupert Murdoch? He has the same proportion of sales now that he had in 1988. The only newspaper that has gone under in the intervening period is his own paper, Today, so what has predatory pricing done for him? Is it such a powerful threat?
To go on in this fashion about predatory pricing assumes that people are stupid. Price is only a marginal factor in buying newspapers. Most people buy a newspaper because they identify with it. They feel that it expresses their character.
§ Dr. Lynne Jones (Birmingham, Selly Oak)
My hon. Friend has just said that he got The Daily Telegraph for free.
§ Mr. Mitchell
In my case, I hope to buy more newspapers than that. My point is that getting them for free does not kill newspapers. It widens the circulation of quality newspapers. However, in the main, people buy a newspaper because they feel comfortable with it and it expresses their personality. They have an empathy and bond with it; that is what it is all about. It is not about the price being reduced one day a week. People look for quality.
A symptom is that red-top newspapers are all losing circulation while that of the quality papers is increasing, a helpful and hopeful sign. However, the Daily Express lost circulation when it lost its way. Fortunately, it has pulled itself together recently, but it is the fault of newspapers when they lose circulation. They cannot establish that empathy with their readers any longer because they do not have a personality with which readers can identify.
That point is what we need to emphasise, not predatory pricing, which is a marginal factor in such decisions. My hon. Friend the Member for Sunderland, South says that he wants diversity. So do I, but I do not want it at the expense of closing other newspapers. The enemy is bad newspapers and newspapers without character or identity, not predatory pricing. That is a failure of the newspapers. Therefore, I cannot support the amendments. They are mostly an expression of anger at Rupert Murdoch—an impotent and somewhat pathetic rage against the man—which does not become us.
I say loyally that the amendments are not a critique of our leader, who is on close terms with Rupert Murdoch. I am not going to put myself in the position of criticising our leader in any way, but, more importantly for practical purposes, what is proposed will not work. I do not think that my hon. Friend the Member for North Durham will even vote for his amendment because he will not want to rebel against the Government, so why are we wasting our time with this futility?
§ Ms Diane Abbott (Hackney, North and Stoke Newington)
This is an excellent Bill, which will be even further improved if the Government find it in their heart to accept the amendments. I want to deal with the particular point that the Government have made: they see no case for creating a special clause to deal with circumstances in the newspaper industry.
1156 It has been put to the House this afternoon that the newspaper industry is a special case, for a number of reasons. The first is that newspapers are, above all else, a means of circulation of information—a free, unfettered and generally competitive circulation of information, which is vital to a healthy civil society. The Government are committed to recasting civil society—we want more people to be volunteers, to be aware of their rights, to be involved in local authorities and so on. We cannot shape a healthy civil society without the freest possible flow of information. A monopoly in newspapers, predatory pricing by newspapers, or an unhealthy dominance by any individual newspaper proprietor fatally hinders the free flow of information. That is the first reason why the newspaper industry is different and why specific measures are needed to deal with undue dominance and monopoly.
The second reason, which has been touched on by my hon. Friends, is the relationship between newspapers and politics. It is nonsense to argue, as some of my hon. Friends have done, that people go into newspapers because they want to make a profit. Beaverbrook, the archetypal proprietor, said it clearest and said it best—as he said so many things—when he said that he owned his newspapers to make propaganda. People become newspaper proprietors not because of profit—there are easier ways to make a return on their money—but for political and social influence and power. It must be unhealthy in politics for there to be undue dominance and monopoly in political and social power and influence.
Because of the importance of freedom of information and the free flow of information, and because of the relationship between newspapers and politics, it is all too easy to make a special case for dealing with monopoly and undue dominance in the newspaper industry. I declare an interest as one of the few remaining members of the parliamentary Labour party who will admit to having picketed Wapping by candlelight at the beginning of the 1980s.
My point is not an ad hominem point about Murdoch—it is that twice in recent times the Murdoch empire has driven a coach and horses through the clear intentions of monopoly legislation. The first time was when Murdoch acquired The Times. Anyone who doubts me needs only to read Harold Evans's book about that acquisition. Harold Evans is one of the legion of ex-Murdoch executives. He makes it perfectly clear in his very carefully documented book—as one might expect from one of the leading journalists of our generation—that the way Murdoch acquired The Times was wrong, was in breach of the legislation, and was based on a phoney presentation of statistics and undue pressure on the politicians of the time. Murdoch drove a coach and horses through the clear intentions of politicians when he acquired The Times.
The second time was Murdoch's acquisition of Sky, on top of his control of the newspaper and magazine market. I served on the Committee that shaped the regulations covering Sky and other outlets. It was clear to me that, for a second time, Murdoch was being allowed to get away with it—through his power, through politicians' fear of him and through the need not to be seen to cross Rupert Murdoch.
Now, at the beginning of this Administration, we have a Competition Bill and an opportunity to deal with the issue of undue dominance and monopoly in the media. Many people outside the House will not understand if we 1157 do not do something. We do not need to look in the crystal ball; we can read the book. Time after time, in Britain, Australia and America, Murdoch has driven his way through the intentions of the people and the legislators on the issue of monopolies. We have an opportunity, which will not come again, to deal with the issue. I urge my hon. Friend the Minister to consider accepting the amendment, even at this late hour.
§ Mr. Beard
It must make bad legislation first to find a villain and then to find the legislation by which to condemn him. We are in danger of doing just that if we follow some of the arguments that have been deployed in this debate. The real issue is whether the rules that apply in a vast range of industries to abuse of a dominant position—or anti-competitive behaviour—apply also to the newspaper industry, or whether that industry requires special treatment.
The Standing Committee considered the clause that had been included by the other place—which deemed that special treatment was required—and removed it from the Bill for very good reasons. The first reason was that the clause did not meet certain of the Bill's principles—such as that it should be universally applicable right across industry, thereby giving it greater clarity. The second was that the Bill should be consistent with European legislation, so that the two legislative regimes could evolve in harmony. The third was that the clause introduced absurdities. The fourth was that the clause introduced a test for predatory pricing that was completely inappropriate and at odds with European precedent.
Each of the proposals in this group falls for one or more of those reasons. New clause 1—taking the proposals in reverse order—like the clause from the other place, speaks of any activity that reduces diversity. Applying that definition produces some absurd examples. Is a newspaper that recruits many gifted writers and attracts readers towards it and away from another newspaper, thereby endangering that other newspaper's existence, to stop recruiting talented writers? Of course not. Many other examples can be concocted to demonstrate the absurdity of the definition.
Amendment No. 8 would reduce the threshold in distinguishing whether there is a dominant position. However, when the matter is analysed and considered within the European context, it is doubtful whether there is such a distinction to be made. The European regime introduces a definition of dominant position that can catch abuse of dominant position in the newspaper industry if there is such a dominant position. In many of the examples cited in this debate, there seems to be an assumption that there is a dominant position for The Times, although very few facts and figures have been quoted to demonstrate it.
Currently, a dominant position will be interpreted as one in which anyone can operate without regard to competition or customers. That definition may very well apply to someone who is using cross-subsidisation from another business to operate predatory pricing. The solution for such practice is for the Director General of Fair Trading to investigate the matter according to the precepts that are already included in clause 18, to reach a conclusion and to operate accordingly. There is no evident reason why newspapers require a special definition of dominant position that is any different from that applying to any other part of industry.
1158 Amendment No. 1 is very close to the likely definition in European legislation of dominant position. The weakness of including that specific definition in the Bill is that we would freeze the definition at the time when the legislation is passed, whereas European definition of dominant position might evolve and diverge from the Bill's definition. There is therefore a weakness that we will end up with two divergent pieces of legislation, whereas the intention was to have them in close harmony.
I do not think that any of the cases that have been cited in this debate justify a belief that clause 18 cannot deal with abuses and anti-competitive behaviour in the newspaper industry. The amendments are also in danger of introducing absurdities and breaking from some of the Bill's very basic principles—such as its universality and consistency with Europe.
I do not believe that the situation has changed since the Committee considered the Bill. I therefore believe that all three proposals in this group should be rejected, and that the principles applying in the newspaper world should be those stated in clause 18.
§ Dr. Ladyman
Some of my hon. Friends have railed against Mr. Murdoch and that is fine by me. I hold no candle for Mr. Murdoch and—short of my growing mammaries—I doubt whether he will ever say anything nice about me. I certainly hold no brief to defend his position. Nevertheless, I do not believe that my hon. Friends have shown that the Bill does not deal unamended with the position as they perceive it.
Let me reiterate how the Bill works. Clause 18 defines what cannot be done and who cannot do it. Clause 60 pulls in all European case law in order to define what is not allowed and who cannot do it. As a result of clause 60, anything that we can scrape out of European case law can be used. The provision is not optional. It does not say, "You may," or "You can if you want to." There is no choice in the matter. The Bill provides that European case law must be used in interpreting the Bill.
As my hon. and learned Friend the Member for Medway (Mr. Marshall-Andrews) said earlier, that includes the Tetra Pak judgment, which provides a mechanistic definition of what predatory pricing involves. Under a mechanistic definition it is not necessary to prove intent. Previous investigations into what Mr. Murdoch and The Times have been doing failed because at the moment it is necessary to prove intent. When that is no longer necessary, as my hon. and learned Friend said, given what everyone is alleging about Mr. Murdoch's predatory pricing activity, if the figures can be demonstrated to prove that, he will be found guilty and prevented from predatory pricing. I do not know whether the figures will prove that or whether the arguments used by The Times are true and the newspaper is not selling below cost. If it is selling below cost, it will be dead meat.
The only question arises in respect of dominant position. As I said earlier, European case law in United Brands v. the Commission says that organisations or individuals may be acting from a dominant position if they can influence the market and have the power from other sources to act independently. It uses almost identical language to amendment No. 1, so in my view amendment No.1 is superfluous. If that is the case and my hon. Friend 1159 the Minister confirms my interpretation when he replies to the debate, I assume that my hon. Friend the Member for North Durham (Mr. Radice) will not find it necessary to press the amendment to a vote as the provision is already in the Bill.
Amendment No.8 seeks to introduce a new definition of dominant position in respect of newspapers, including the word "substantial". Under European case law, it is not necessary to have 80 per cent. of a holding in a marketplace to be dominant. European case law specifically says that a holding of 40 to 45 per cent. is almost certainly dominant and that a holding of as little as 20 per cent. might be dominant given the right circumstances. If we interpret "substantial" as being different from "dominant" and representing a lower threshold—otherwise the amendment would have no purpose—the amendment is saying that a holding of less than 20 per cent. of the market might represent a "substantial" position and could therefore result in anti-competitive practice. I am sorry to say that that would bring in not only The Times but all the other broadsheet newspapers that would be in a "substantial" position.
§ Mr. Mullin
My hon. Friend makes my point for me. The amendment is not an anti-Murdoch amendment, as it would apply to anyone—including The Daily Telegraph or the Daily Mirror—who attempted to engage in predatory pricing.
§ Dr. Ladyman
My hon. Friend is certainly right, but if the definition of predatory pricing according to the Tetra Pak judgment is selling below the cost of production and making a loss on a consistent basis, that is doubly the definition of The Independent. The day we knock on Mr. Murdoch's door and say, "You must stop doing this because you are breaking the law," he will say, "If you bring me to court, I want The Independent taken to court with me because it is also making a loss. It has a substantial holding in the marketplace and is every bit as covered by amendment No.8 as I am." That is why amendment No.8 is dangerous as well as unnecessary.
My hon. Friend the Member for Bexleyheath and Crayford (Mr. Beard) described the absurdities that the new clause would introduce. Under new clause 1, an attempt by The Independent or The Guardian to hire new and better journalists to improve their newspapers could be defined as acting to try to close down competitors. That makes a nonsense of the Bill. The Bill, as the Government have defined it, is strong enough to deal with Murdoch and The Times if it can be shown that Murdoch is selling below the cost of production. If my hon. Friends who fear that that is what he is doing are right, the Bill as it stands is already perfectly adequate to deal with such behaviour. I call on my hon. Friends to reject the amendments and the new clause.
§ Mr. Boswell
I rise with some diffidence on behalf of Her Majesty's Opposition to intrude on what is clearly the Labour party's private grief. This has certainly been an interesting and illuminating debate, perhaps characterised more by heat than light. It has been characterised more precisely by hon. Members' vain attempts to distil their dislike of a particular individual—Rupert Murdoch—and his empire into a series of penal measures that would be imposed on that empire.
1160 I should make it clear from the start that the Conservative party is not against competition. Indeed, we Conservatives favour vigorous competition. Our reservations about the Bill more generally reflect the fact that it does not always achieve the objectives that it claims to seek. As a party, we are not in favour of predatory pricing or the abuse of a dominant position. As the hon. Member for South Thanet (Dr. Ladyman) made fairly clear, the issue is whether the measures proposed in the clutch of amendments are appropriate to the ills that are seen.
I should like to make it clear, as my right hon. Friend the Member for Wokingham (Mr. Redwood) did in Committee, that we accept that, in certain specific cases, competition legislation, as it has operated in this country over the years under different Governments, may be required to address some specific problems concerning the newspaper industry. It is clearly appropriate to legislation on mergers and the allocation of titles.
Although I do not have a detailed knowledge of the genesis of legislation, it is fair to say that one of the major concerns was that titles might disappear or be bought for the purpose of closing them down. Regardless of whether that is the intention of any individual in the present scene, we have clearly not failed to secure vigorous competition among broadsheets and tabloids—as well as, increasingly, dare I say, between them—and a wide range of differing titles. That may change. One reason for such a change, to pick up a point made earlier, may be the falling away of the propensity of persons to buy titles that are making losses, in order to advocate a particular position. At the moment, however, we have a very lively newspaper scene and must therefore identify what specific ill the amendments address.
We look forward to the Minister's remarks. I agree with recent comments that a case has not yet been made that any problem can be tackled in the way that is suggested. I apologise to the hon. Member for North Durham (Mr. Radice) for picking up only a few of his latter remarks. I turn particularly to the remarks of the hon. Member for Sunderland, South (Mr. Mullin), who clearly dislikes Murdoch—an opinion to which he is entitled. He moved round several different ways in which the Murdoch problem, as he sees it, could be addressed. It could be predatory pricing, the abuse of a dominant position, something done in the past, motive or effect. It was difficult to pin down how it was to be tackled.
I wish to refer to the most likely of the candidates—the predatory pricing test. As my right hon. Friend the Member for Wokingham pointed out in Committee, it is very difficult in practice to differentiate that consideration from ordinary commercial pricing and keen marketing. As has been mentioned—I declare an interest in this—many of us benefit from subscription arrangements, either to daily newspapers or periodicals which are priced at a considerably lower figure than would apply if we were to buy them day-by-day at the newsagents. Other people may be able to intercept a copy given away on their way to work. There is a wide variety of effective pricing arrangements.
How on earth can we find what is predatory and what is not? That is still not clear to me. It is clear that if one seeks a remedy along those lines, it could be encompassed by the Bill as drafted and it should be possible to do so by generality, rather than by a specific case.
1161 Another possibility would be to look at predatory pricing in terms of cost, and that was addressed. However, it is clear that most national newspapers, by definition, price themselves at below the cost of production or at an uneconomic level. They make that up by advertising, or they may run at a loss from time to time. One should look at another test, which is that of a formerly dominant position, I was interested in the exchanges that have just taken place, because it is possible to synthesise the situation in which—to take the case of the argument by the hon. Member for South Thanet—a newspaper might have a substantial position in the market; shall we say The Times. However, The Daily Telegraph, which sells many more copies, might have, within the terms of the Bill, a dominant position—so those two newspapers could be subsisting. However, it is not clear whether they would be subjected to the same or different tests.
I mention those examples because I feel that it is difficult to pick our way through to a fungible solution to what I am far from convinced is an actual problem, given the strength and diversity of the press and the weapons that the Bill will give the Government as part of their general approach to competition legislation. This is essentially an argument between the soul and the head of the Labour party as to the way forward. We shall look forward to the Minister of State's effort to wrestle with what are, in the words of the preacher, "doots" among his colleagues.
In conclusion—this is in no sense an attempt to subvert Government Back Benchers, or to discourage them from supporting the Minister; that is a matter for them—in declining to oppose the Government's position, as I anticipate it to be, I would commend the Government on a strange phenomenon. Their characteristic phenomenon is to find a public ill—or, if they cannot find one, to invent one or make a fuss about one—and then to tackle it with a great flourish. People are named and shamed, and action is taken, or threatened to be taken. Something is done about it, particularly if the focus groups say that something should be done.
Quite exceptionally, unusually and, in this case, sensibly, the Government have not bowed to the pressure to produce a specific remedy for a specific ill. They are relying, wisely, on principles of general application. We shall listen to the Minister of State with interest, and I am sure that, his hon. Friends will be listening with even greater interest. We shall—as they say in the history books—then await events.
§ Mr. Ian McCartney
My hon. Friend the Member for Hackney, North and Stoke Newington (Ms Abbott) asked me to find it in my heart to support the amendments. No one can accuse me of being anything but a big-hearted person, but tonight I am not going to let my heart rule my head. We want intelligent decision making.
The Bill is not about ownership; it is about dealing with abuses of dominance and other anti-competitive behaviour. It will provide much stronger powers to deal with such behaviour. The media industry will continue to be subject to the existing merger control and newspaper merger regimes under the Fair Trading Act 1973 and to media ownership regulations under the Broadcasting Act 1990.
The Government have made clear their belief in the importance of a strong, diverse and independent press. That is why we are keeping the special merger provisions 1162 for newspapers in the Fair Trading Act, which protect plurality of ownership and diversity of content. The Bill deals with anti-competitive practices, which are wrong wherever they occur. The Government believe that abuses of dominance, such as predatory pricing, should be stamped out whatever the market. Clause 18 clearly covers firms that abuse their dominance by predatory pricing, which is vital.
The principles established in European case law will apply under the Bill by virtue of clause 60(2) which makes it clear that there must be no inconsistency between the principles applied by courts in applying a domestic prohibition and those laid down bythe European Court, and any relevant decision of that Court".The principles on predatory pricing established in AKZO and Tetra Pak will apply under the Bill.
Hon. Members have referred to briefings sent to them by executives of The Independent and The Daily Telegraph newspapers and to the opinion of the Queen's counsel that those briefings quote. It is important to distinguish between allegations about The Times and questions of principle about the interpretation of the Bill, but The Independent and The Daily Telegraph executives mix them together to suit themselves. The briefings entirely wrongly imply that what the Government have said about the European Court case law is dubious. I do not accept the assertion thatmany lawyers disagree with this interpretation".I have seen nothing to back up that assertion, and no hon. Member has said anything tonight to persuade me that it is right. On the contrary, even those who have tabled the amendments have, in their arguments, accepted that the European Court case law is very clear on the relevant points.
The suggestion in the briefings that Rupert Murdoch can operate with immunity from competition law should be treated with the disdain that it deserves. I take exception to the fact that hon. Members have said that the Government are in the pocket of Rupert Murdoch. The socialist Member for Makerfield in Rupert Murdoch's pocket? No one can say that I have ever worn a Sun lover's T-shirt.
Hon. Members should consider what the Government have done in the past few weeks: we have introduced automatic recognition, removing Wilson and Palmer—which allowed the newspaper industry to discriminate against employees on the ground of their trade union membership—and permitting those sacked for taking part in lawful industrial action to claim unfair dismissal. Moreover, we have introduced a national minimum wage, against which The Times has campaigned, and continues to campaign, vigorously.
This is a Government of fairness, not favours. No one can suggest that a Government in the pocket of Rupert Murdoch could introduce such workers' rights legislation. It is nonsense, and Labour Members should not claim that the Government are in the pocket of a vested interest. The Government are in the pocket of no vested interest. We were elected to tackle vested interests, which is precisely what we are doing in the Bill.
§ Mr. Winnick
I did not say that the Government were in the pocket of Murdoch. I said the opposite: that 1163 Murdoch believes that he has in his pocket the Government and the Conservative party, which is a highly undesirable state of affairs. That does not in any way mean that the Government, whom I support, are in Murdoch's pocket. Will my hon. Friend say whether he believes that the Murdoch empire has too much power and, if so, what steps should be taken to deal with that?
§ Mr. McCartney
I thank my hon. Friend for that clarification. I think that I made the Government's position on dealing with vested interests absolutely clear. I accept what I believe was an attempted apology, but it is invidious to give the impression, inside or outside the House, that the Government are treating anyone differently. That is not the case. We are a Government of fairness, not favours.
Much has been said about the actions of News International and The Times. It would be wrong of me to comment on whether the actions of an individual undertaking are or are not anti-competitive, as that is a matter for the competition authorities, both under the Bill and under existing legislation. The House should note, however, that the director general has asked News International to provide detailed information about The Times, to enable him to assess the impact on its competitors of its trading strategy.
I am surprised that that was not mentioned in the debate, especially by those who spoke in favour of new clause 1. This is the proper way forward. I do not accept the arguments of those who are out to get The Times and who say that, if its actions are not caught by the legislation, we must alter it to catch them.
That is not the purpose of the Bill or of the legislative programme. If someone has a case against Murdoch or any other individual, he can pursue that case, but we cannot distort the Bill as has been suggested. That would undermine the concept of the Bill, and our ability to prevent abusive and anti-competitive behaviour in the marketplace. Let us remember that, when such abuse takes place, small, medium and large enterprises suffer, and it is the responsibility of the House to improve legislation to prevent that from happening and to ensure that, if it does happen, we have the capacity to stop it and to take action to ensure that any loss is recognised.
§ Mr. Clive Efford (Eltham)
Does my hon. Friend accept that there is a problem in the newspaper industry that should be dealt with in the Bill? If the Bill were to fail to deal with the problem, what action would he take to remedy it?
§ Mr. McCartney
I thought that I made it clear that such matters are for the competition authorities. We are responsible for providing a legislative framework, and we have not only done that but improved on the existing framework. We oppose the amendments and the new clause because we do not believe that the framework is inadequate; we believe that it is rigorous and that it is constituted in the context of European jurisprudence, taking account of articles 85 and 86. It has been recognised from the outset as the only way of ensuring that we have an effective regime to deal with anti-competitive behaviour, including predatory pricing.
1164 I want to make it clear from the outset that I sympathise with the thinking behind amendment No. 1. I entirely appreciate the fact that the object is to clarify what is meant by dominance under the Bill, drawing on the relevant EC jurisprudence. I and other Ministers have defined dominance in similar terms in debates in Parliament. We have no quarrel with the definition itself. I have no objection to the description of dominance set out in the amendment, as far as it goes. It is consistent with the explanations that I and other Ministers have given.
I am grateful to my hon. Friend the Member for North Durham (Mr. Radice) for highlighting these important principles of interpretation. There is common ground between us on the substance, but the amendment itself is unacceptable. It could inadvertently do serious damage to the central policy of the Bill, which is to align the domestic prohibition of abuse with that of article 86.
European jurisprudence is clear that dominance means a position of economic strength that enables an undertaking to hinder the maintenance of effective competition on the relevant market by allowing it to behave to an appreciable extent independently of its competitors, of its customers and, ultimately, of the consumer. That test is laid down in case law, for example in the Michelin case.
Those EC principles of interpretation will apply under the Bill, by virtue of clause 60. Subsection (2) makes it clear that there must be no inconsistency between the principles applied by the courts in applying the domestic prohibition, and those laid down by the European Court, and any relevant decision of that Court.
Market share is not determinative of dominance, but it is an important factor. The Commission has expressed the view that while, in general, companies with market shares below 40 per cent. are unlikely to be regarded as dominant, undertakings with market shares as low as 20 per cent. may none the less be dominant if the nature and structure of the market enable them to act independently of competition.
Clause 60(3) requires our courts to have regard to relevant statements of the Commission, such as this one, in applying the domestic prohibition. Therefore, the assessment of dominance under the Bill will need to have regard to the Commission's statements. In short, the principles of interpretation on dominance, which are established in EC case law, will apply under the Bill.
Either the words of the amendment correctly define what is a dominant position under Community law, in which case they are unnecessary because that definition is already supplied through clause 60, or the words do not set out the test correctly and fully, in which case they should not be included. Where unnecessary provisions are inserted in legislation, they tend to go septic—that is to say that the courts look for some meaning to give them, rather than accept that they were not intended to have any effect of substance. In that way, in time they are likely to have effects that were entirely unintended. That uncertainty could cause business a major problem. If the latter interpretation were to prevail, it could lead to a UK prohibition being interpreted significantly differently to article 86.
The amendment would freeze the position in domestic legislation. That would carry the risk of the application of the domestic law diverging from that of EC law in an 1165 important area. As we stressed many times in Committee, we should not seek to specify or alter how the prohibitions themselves apply, but should rely on the governing principles clause. So, while I sympathise with the thinking behind the amendment, I hope that my hon. Friend will accept that it would be seriously counterproductive in practice. Having heard my assurances on the meaning of dominance under the Bill, and the principles of EC jurisprudence on the matter, I hope that he will be prepared to withdraw the amendment.
Amendment No. 8 tackles the issue by lowering the threshold of what is "dominant" in the national newspaper market. I see no justification for treating newspapers differently in that respect. Frankly, it smacks of fixing the legislation to catch The Times regardless of the proper merits of the case.
I have explained carefully what is meant by dominance in the Bill. That is a soundly based test drawing on established European jurisprudence. It would be wrong to replace that with a different test which would in any case be highly uncertain.
§ Mr. Redwood
Is the Minister saying that under the definition that he prefers The Times clearly is not dominant?
§ Mr. McCartney
The right hon. Gentleman is trying to be far too clever by half, as is his nature. I set out clearly what the Bill does, which is to provide a legal framework to deal with abuse of dominance in the marketplace, including predatory pricing. Whether someone is abusing the marketplace through predatory pricing is a matter for evidence, which should be taken properly by the competition authorities.
If the right hon. Gentleman has any bottle and if he thinks that the Government's policy is correct, he should go through the Lobby and support us on that basis. I assume that he will not do so, not because he wants to curry favour with News International, but because he believes that the Government's policies in that area are far too tough. He wants to be weak on competition policy and to allow abuses of dominance on occasions. Throughout the passage of the Bill, he has been at great pains to find ways out of dealing with those types of abuses in the marketplace. It is no surprise to me, even at this late hour, that he is still attempting in a few weasel words to place the Government in an unfavourable position. Once again, he has failed spectacularly—well, that got that out of the way.
New clause 1 introduces a press diversity prohibition and is similar to the clause that was thrown out in Committee. The earlier clause was wholly unworkable. I am glad to say that the supporters of new clause 1 have half met the criticisms that I made in Committee. They could have met my criticisms fully by withdrawing the proposed clause altogether. They have replaced the earlier threshold of a substantial degree of market power with the Fair Trading Act 1973 threshold, broadly at 25 per cent. of market share. I have already explained that there is no justification for a lower threshold to apply solely in the newspaper sector.
We said that the previous clause was too wide ranging and that any conduct—legitimate or illegitimate—may reduce the diversity of national newspapers by reducing competition. Now it is suggested that the concept of 1166 anti-competitive behaviour should be built in. That might be an improvement, but I have yet to hear a proper justification for applying tests to the newspaper market that are different from the tests in the economy at large. If conduct is anti-competitive and constitutes an abuse, it should be dealt with, whatever the sector. That is what the Bill does, and I urge the House to reject the amendments.
§ Amendment, by leave, withdrawn.
Amendment proposed: No. 8, in page 10, leave out lines 40 and 41 and insert
'"dominant position" means—
§ Question put, That the amendment be made:—
§ The House divided: Ayes 68, Noes 301.1168
|Division No. 331]||[9.29 pm|
|Abbott, Ms Diane||Jones, Dr Lynne (Selly Oak)|
|Allan, Richard||Jones, Nigel (Cheltenham)|
|Austin, John||Keetch, Paul|
|Baker, Norman||Kirkwood, Archy|
|Beggs, Roy||Lewis, Terry (Worsley)|
|Beith, Rt Hon A J||Livingstone, Ken|
|Benn, Rt Hon Tony||Livsey, Richard|
|Best, Harold||Llwyd, Elfyn|
|Brake, Tom||McAllion, John|
|Brand, Dr Peter||McDonnell, John|
|Breed, Colin||Marshall-Andrews, Robert|
|Bruce, Malcolm (Gordon)||Michie, Mrs Ray (Argyll & Bute)|
|Burnett, John||Moore, Michael|
|Burstow, Paul||Mullin, Chris|
|Campbell, Menzies (NE Fife)||Oaten, Mark|
|Canavan, Dennis||Öpik, Lembit|
|Chidgey, David||Rendel, David|
|Clwyd, Ann||Robinson, Peter (Belfast E)|
|Cohen, Harry||Russell, Bob (Colchester)|
|Corbyn, Jeremy||Sanders, Adrian|
|Cotter, Brian||Smith, Sir Robert (W Ab'd'ns)|
|Davey, Edward (Kingston)||Swinney, John|
|Donaldson, Jeffrey||Taylor, Matthew (Truro)|
|Dunwoody, Mrs Gwyneth||Tyler, Paul|
|Ewing, Mrs Margaret||Wallace, James|
|Fearn, Ronnie||Webb, Steve|
|Flynn, Paul||Wigley, Rt Hon Dafydd|
|Foster, Don (Bath)||Willis, Phil|
|George, Andrew (St Ives)||Winnick, David|
|Godman, Dr Norman A||Wise, Audrey|
|Gorrie, Donald||Wood, Mike|
|Hancock, Mike||Wyatt, Derek|
|Harris, Dr Evan|
|Harvey, Nick||Tellers for the Ayes:|
|Hopkins, Kelvin||Mr. Andrew F. Bennett and|
|Hughes, Simon (Southwark N)||Mr. Neil Gerrard.|
|Ainger, Nick||Banks, Tony|
|Ainsworth, Robert (Cov'try NE)||Barron, Kevin|
|Alexander, Douglas||Battle, John|
|Allen, Graham||Bayley, Hugh|
|Anderson, Janet (Rossendale)||Beard, Nigel|
|Armstrong, Ms Hilary||Beckett, Rt Hon Mrs Margaret|
|Ashton, Joe||Begg, Miss Anne|
|Atherton, Ms Candy||Bell, Stuart (Middlesbrough)|
|Atkins, Charlotte||Benton, Joe|
|Bermingham, Gerald||Foulkes, George|
|Betts, Clive||Galbraith, Sam|
|Blackman, Liz||Gapes, Mike|
|Blizzard, Bob||Gardiner, Barry|
|Blunkett, Rt Hon David||Gibson, Dr Ian|
|Boateng, Paul||Gilroy, Mrs Linda|
|Borrow, David||Godsiff, Roger|
|Bradley, Keith (Withington)||Goggins, Paul|
|Brinton, Mrs Helen||Golding, Mrs Llin|
|Brown, Rt Hon Nick (Newcastle E)||Gordon, Mrs Eileen|
|Brown, Russell (Dumfries)||Griffiths, Jane (Reading E)|
|Browne, Desmond||Griffiths, Nigel (Edinburgh S)|
|Burden, Richard||Griffiths, Win (Bridgend)|
|Burgon, Colin||Grocott, Bruce|
|Butler, Mrs Christine||Grogan, John|
|Byers, Stephen||Gunnell, John|
|Campbell, Mrs Anne (C'bridge)||Hain, Peter|
|Campbell-Savours, Dale||Hall, Mike (Weaver Vale)|
|Caplin, Ivor||Hall, Patrick (Bedford)|
|Casale, Roger||Hamilton, Fabian (Leeds NE)|
|Caton, Martin||Hanson, David|
|Chapman, Ben (Wirral S)||Heal, Mrs Sylvia|
|Chaytor, David||Healey, John|
|Chisholm, Malcolm||Henderson, Ivan (Harwich)|
|Church, Ms Judith||Hepburn, Stephen|
|Clark, Rt Hon Dr David (S Shields)||Heppell, John|
|Clark, Paul (Gillingham)||Hesford, Stephen|
|Clarke, Charles (Norwich S)||Hewitt, Ms Patricia|
|Clarke, Rt Hon Tom (Coatbridge)||Hill, Keith|
|Clarke, Tony (Northampton S)||Hodge, Ms Margaret|
|Clelland, David||Hoey, Kate|
|Coaker, Vernon||Home Robertson, John|
|Coffey, Ms Ann||Hoon, Geoffrey|
|Colman, Tony||Hope, Phil|
|Cooper, Yvette||Howarth, Alan (Newport E)|
|Corbett, Robin||Howarth, George (Knowsley N)|
|Corston, Ms Jean||Howells, Dr Kim|
|Cousins, Jim||Hughes, Ms Beverley (Stretford)|
|Cranston, Ross||Hughes, Kevin (Doncaster N)|
|Crausby, David||Humble, Mrs Joan|
|Cryer, John (Hornchurch)||Hurst, Alan|
|Cunliffe, Lawrence||Hutton, John|
|Cunningham, Rt Hon Dr John (Copeland)||Iddon, Dr Brian|
|Cunningham, Jim (Cov'try S)||Jackson, Ms Glenda (Hampstead)|
|Curtis-Thomas, Mrs Claire||Jackson, Helen (Hillsborough)|
|Darling, Rt Hon Alistair||Jenkins, Brian|
|Davey, Valerie (Bristol W)||Johnson, Alan (Hull W & Hessle)|
|Davidson, Ian||Johnson, Miss Melanie (Welwyn Hatfield)|
|Davies, Rt Hon Denzil(Llanelli)|
|Davies, Geraint (Croydon C)||Jones, Barry (Alyn & Deeside)|
|Davies, Rt Hon Ron (Caerphilly)||Jones, Mrs Fiona (Newark)|
|Dawson, Hilton||Jones, Helen (Warrington N)|
|Dean, Mrs Janet||Jones, Ms Jenny (Wolverh'ton SW)|
|Dewar, Rt Hon Donald||Jones, Jon Owen (Cardiff C)|
|Dismore, Andrew||Jones, Martyn (Clwyd S)|
|Dobson, Rt Hon Frank||Jowell, Ms Tessa|
|Donohoe, Brian H||Kaufman, Rt Hon Gerald|
|Doran, Frank||Keeble, Ms Sally|
|Dowd, Jim||Kemp, Fraser|
|Drew, David||Kidney, David|
|Eagle, Angela (Wallasey)||Kilfoyle, Peter|
|Eagle, Maria (L'pool Garston)||King, Andy (Rugby & Kenilworth)|
|Edwards, Huw||King, Ms Oona (Bethnal Green)|
|Ennis, Jeff||Kumar, Dr Ashok|
|Etherington, Bill||Ladyman, Dr Stephen|
|Fatchett, Derek||Lepper, David|
|Field, Rt Hon Frank||Leslie, Christopher|
|Fisher, Mark||Levitt, Tom|
|Fitzpatrick, Jim||Lewis, Ivan (Bury S)|
|Fitzsimons, Lorna||Linton, Martin|
|Flint, Caroline||Lloyd, Tony (Manchester C)|
|Follett, Barbara||Lock, David|
|Foster, Michael Jabez (Hastings)||Love, Andrew|
|Foster, Michael J (Worcester)||McAvoy, Thomas|
|McCabe, Steve||Rooker, Jeff|
|McCafferty, Ms Chris||Rooney, Terry|
|McCartney, Ian (Makerfield)||Ross, Ernie (Dundee W)|
|McDonagh, Siobhain||Rowlands, Ted|
|Macdonald, Calum||Roy, Frank|
|McFall, John||Ruane, Chris|
|McGuire, Mrs Anne||Ruddock, Ms Joan|
|McIsaac, Shona||Ryan, Ms Joan|
|McKenna, Mrs Rosemary||Salter, Martin|
|McNulty, Tony||Savidge, Malcolm|
|McWalter, Tony||Sedgemore, Brian|
|McWilliam, John||Shaw, Jonathan|
|Mahon, Mrs Alice||Sheerman, Barry|
|Mallaber, Judy||Skinner, Dennis|
|Mandelson, Peter||Smith, Rt Hon Andrew (Oxford E)|
|Marsden, Paul (Shrewsbury)||Smith, Angela (Basildon)|
|Marshall, David (Shettleston)||Smith, Rt Hon Chris (Islington S)|
|Marshall, Jim (Leicester S)||Smith, Miss Geraldine (Morecambe & Lunesdale)|
|Meacher, Rt Hon Michael||Smith, John (Glamorgan)|
|Merron, Gillian||Smith, Llew (Blaenau Gwent)|
|Michael, Alun||Snape, Peter|
|Michie, Bill (Shef'ld Heeley)||Soley, Clive|
|Milburn, Alan||Southworth, Ms Helen|
|Miller, Andrew||Spellar, John|
|Mitchell, Austin||Squire, Ms Rachel|
|Moffatt, Laura||Starkey, Dr Phyllis|
|Moran, Ms Margaret||Stevenson, George|
|Morgan, Rhodri (Cardiff W)||Stewart, David (Inverness E)|
|Morley, Elliot||Stewart, Ian (Eccles)|
|Morris, Ms Estelle (B'ham Yardley)||Stinchcombe, Paul|
|Morris, Rt Hon John (Aberavon)||Stoate, Dr Howard|
|Mudie, George||Stott, Roger|
|Murphy, Jim (Eastwood)||Strang, Rt Hon Dr Gavin|
|Murphy, Paul (Torfaen)||Straw, Rt Hon Jack|
|Naysmith, Dr Doug||Stuart, Ms Gisela|
|Norris, Dan||Sutcliffe, Gerry|
|O'Brien, Bill (Normanton)||Taylor, Rt Hon Mrs Ann (Dewsbury)|
|O'Brien, Mike (N Warks)|
|O'Hara, Eddie||Taylor, Ms Dari (Stockton S)|
|Olner, Bill||Taylor, David (NW Leics)|
|Organ, Mrs Diana||Temple-Morris, Peter|
|Osborne, Ms Sandra||Thomas, Gareth R (Harrow W)|
|Palmer, Dr Nick||Timms, Stephen|
|Pearson, Ian||Tipping, Paddy|
|Pendry, Tom||Todd, Mark|
|Perham, Ms Linda||Touhig, Don|
|Pickthall, Colin||Trickett, Jon|
|Pike, Peter L||Turner, Dennis (Wolverh'ton SE)|
|Plaskitt, James||Turner, Dr Desmond (Kemptown)|
|Pollard, Kerry||Turner, Dr George (NW Norfolk)|
|Pond, Chris||Twigg, Derek (Halton)|
|Pope, Greg||Twigg, Stephen (Enfield)|
|Pound, Stephen||Vaz, Keith|
|Powell, Sir Raymond||Vis, Dr Rudi|
|Prentice, Ms Bridget (Lewisham E)||Walley, Ms Joan|
|Prentice, Gordon (Pendle)||Ward, Ms Claire|
|Primarolo, Dawn||Watts, David|
|Prosser, Gwyn||White, Brian|
|Purchase, Ken||Whitehead, Dr Alan|
|Quin, Ms Joyce||Wicks, Malcolm|
|Quinn, Lawrie||Williams, Alan W (E Carmarthen)|
|Radice, Giles||Wilson, Brian|
|Rapson, Syd||Winterton, Ms Rosie (Doncaster C)|
|Raynsford, Nick||Worthington, Tony|
|Reed, Andrew (Loughborough)||Wright, Anthony D (Gt Yarmouth)|
|Robertson, Rt Hon George (Hamilton S)||Wright, Dr Tony (Cannock)|
|Roche, Mrs Barbara||Tellers for the Noes:|
|Rogers, Allan||Jane Kennedy and|
|Mr. David Jamieson.|
§ Question accordingly negatived.