§ The President of the Board of Trade and Secretary of State for Trade and Industry (Mrs. Margaret Beckett)
I beg to move, That the Bill be now read a Second Time.
I am proud to be able to stand before the House to move the Second Reading of the Competition Bill. This is yet another example of the Government's delivering quickly on their manifesto commitments. We are a Government who are clear about our aims, in contrast to the years of drift under the Conservative party.
It is par for the course for a Labour Government to act in the public interest and in the interests of consumers. The precursor to the Monopolies and Mergers Commission was established under the Attlee Government of 50 years ago, so it is fitting that it falls to this Government to modernise and update it. For close on 10 years under the previous Government, the need for and the content of such a Bill were discussed. Indeed, in the year before the last election a draft Bill was published and widely welcomed by, among others, the then Labour Opposition. However, absolutely nothing happened, and the right hon. Member for Wokingham (Mr. Redwood), in his search for any portmanteau criticism, has the cheek to accuse us of dithering.
The Bill will radically reform and strengthen our laws to deal with cartels and with abuses of a dominant position in the marketplace, such as when firms act together to limit choice for customers or to raise the price they face, or both. It is a Bill for consumers, for business and for jobs. It is another step in the creation of strong markets that will make Britain a more competitive economy.
Strong competition in our domestic markets makes for strong British companies that are able to compete and succeed in the global marketplace. It provides a spur to companies to innovate and invest, and builds up the competitiveness that safeguards and creates jobs. As my right hon. Friend the Chancellor of the Exchequer told the European Union in his employment action plan, competitive markets are crucial to creating sustainable jobs in the United Kingdom.
§ Mr. John Redwood (Wokingham)
I am grateful to the right hon. Lady for trying to make clear her intentions in the legislation. As she wants it to be tougher than the present law, will she tell us what current legal business practices she hopes and expects the Bill to make illegal?
§ Mrs. Beckett
The right hon. Gentleman has repeatedly asked me and the Director General of Fair Trading such vague and wandering questions. As the director general has told him in correspondence in answer to his many questions, the Bill sets the framework in which to inhibit 24 anti-competitive behaviour and the abuse of dominant market share. No one can be expected to give case-by-case definitions, especially not a Minister.
§ Mrs. Beckett
Because these are matters for the Director General of Fair Trading. That is the Bill's purpose. It is the way our system has always worked and, I hope, always will.
§ Mr. Chris Mullin (Sunderland, South)
Does my right hon. Friend accept that, for many of us, the Bill's acid test will be whether it addresses the sort of abuse that has been taking place in the national newspaper market, with which I am sure she is familiar? The present Office of Fair Trading seems powerless to deal with that. Can she say whether the Bill will make a difference to such abuses? If it does not, we shall have to go back to the drawing board to look for some means to make the Bill effective in dealing with what I think most people understand to be a clear and gross abuse.
§ Mrs. Beckett
I am grateful to my hon. Friend for his intervention. I intend to deal later and at greater length with that matter. My answer to my hon. Friend is entirely consistent with my response to the intervention by the right hon. Member for Wokingham. I can certainly say that the Bill strengthens competition law. I shall return to that. My hon. Friend asks whether it will deal with a specific case. It is impossible to give such an answer, and I shall give an analogy to explain why.
In its wisdom, Parliament has decided that it is illegal for one person to murder another. However, a Minister may have to respond at the Dispatch Box to an inquirer who asks, "Murder is illegal, and that man Jones is charged with murdering Mrs. Smith. I believe that he is guilty. Can the Minister assure me that, as a Bill has been passed and murder is illegal, Mr. Jones will be found guilty of the crime and sent to gaol?" Of course, a Minister can give no such assurance. It is for the court, judge and jury to decide. Similarly, under the Bill, decisions in specific cases are matters for the independent regulator. I shall return to that matter, and I hope that I shall be able to satisfy my hon. Friend.
§ Mrs. Beckett
Perhaps the hon. Gentleman will forgive me if I do not give way, as I intend to return to the matter later.
§ Mr. Dale Campbell-Savours (Workington)
I have heard my right hon. Friend's argument before. I heard it in 1980 from Ministers in Committee on the Bill that became the Competition Act 1980. If it was good enough for the Tories then, I cannot see why it is not good enough for them now.
§ Mrs. Beckett
I am grateful to my hon. Friend, as I am sure are Opposition Members, for his elucidation.
The Bill is a good measure, and not just for Britain's competitiveness, although that is of huge importance to us all. It benefits ordinary families, as customers and as taxpayers. Customers lose when firms rig the markets 25 against them. Competition is vital to ensure choice and value, and weak competition law means lower quality at higher prices. Anti-competitive behaviour hits ordinary people and imposes extra costs on family budgets. It hits families as taxpayers.
A secret cartel between laboratory equipment manufacturers was recently broken up by the Office of Fair Trading. As the Director General of Fair Trading said, in the end taxpayers and consumers had to foot the bill for that cartel, because it rigged the market against the hospitals and public bodies that it supplied, as well as against its other buyers. Business and consumers deserve better than that, and they will get a better deal from the Government and the Bill.
§ Mrs. Gwyneth Dunwoody (Crewe and Nantwich)
Will my right hon. Friend be kind enough to make it clear that the predatory pricing that was employed by some bus companies, which resulted in the immediate bankruptcy of responsible companies, would not be possible under the legislation, and that the Office of Fair Trading would have the right to take immediate action and would not have to wait until, unfortunately, the deed had been done?
§ Mrs. Beckett
My hon. Friend gives the excellent example that I had intended to quote. Under the present law, while investigation is being undertaken, the Director General of Fair Trading cannot take action. For precisely the reasons that my hon. Friend gives, that will not be the case under the Bill.
At present, our competition regime is often bureaucratic and ineffective, as my hon. Friend the Member for Crewe and Nantwich (Mrs. Dunwoody) has just pointed out. The powers to investigate and to uncover evidence even of seriously anti-competitive behaviour are weak. Even when the evidence has been obtained, lengthy and cumbersome procedures have to be followed before such behaviour can actually be stopped.
Nor are there any financial penalties for anti-competitive behaviour—only for breaching court orders once they are obtained—and therefore no real deterrent. Even the most blatant cartels can get away with little more than a slap on the wrist. The laboratory equipment companies to which I referred were not fined by the court because, under our present law, they could not be. They had to promise simply not to do it again. All that will change with the Bill.
Not only is our present law weak and ineffectual, but its methods and approach differ from those of European Union competition law, so UK companies that are large enough to be affected by the EU regime face differing laws, a differing approach and potentially differing judgments on the same competition issues. That means more bureaucracy as well as a sort of double jeopardy.
Therefore, as we promised in our manifesto, both because it is right in itself and because it will simplify the competition regime for British business, the Bill introduces a prohibition-based approach to competition law. That will not only modernise our law, but bring it more into line with the prohibition-based regimes that already operate in the EU and in much of the Organisation for Economic Co-operation and Development. That approach will itself be a far more effective deterrent against anti-competitive behaviour.
§ Mr. Bill O'Brien (Normanton)
Is my right hon. Friend aware of the concerns of people who have made progress 26 in innovation and design, and of the concerns of the Anti Copying in Design Company, which feels that the protection that it needs to ensure that its members can continue to bring forward new designs and innovations is being undermined because of the lack of support or protection under the Bill? Does she accept that we welcome the Bill, but that we believe that there are areas where further protection should be given to individuals who are trying to bring forward new design and innovation?
§ Mrs. Beckett
I understand my hon. Friend's point. Indeed, I share the concern that he and others have expressed about the effect of such behaviour. Obviously, that matter will be explored in Committee and in other discussions on the Bill. I say simply that we do keep the matter under review. We are in discussion with people who have those particular concerns. We are not, however, minded at present to put such a measure into the Bill, because it is very much a matter of the handling of intellectual property and, as such, its ramifications are much wider than the ambit of the Bill. Also, of course, there is other legislation, such as the trademarks legislation, which can deal with the issue, but we do keep the matter under review, and I am sure that my hon. Friend will ensure that it is discussed as the Bill continues through the House.
§ Mr. Paul Flynn (Newport, West)
My right hon. Friend has been exceptionally kind in giving way. Will she examine medicinal drugs as a special case, recalling that 10 times more people are addicted to medicinal drugs than to illegal drugs and that, every year, five times more people die from the use of medicinal drugs than from illegal drugs? Would she not regard it as an error if we allowed supermarkets to sell medicinal drugs to children at a lower price, which will increase the dangers of those drugs? Is this not a case where the need for open competition is secondary to the needs of public safety?
§ Mrs. Beckett
That, too, is an interesting, but, if my hon. Friend will forgive my saying so, slightly separate point, although I recognise that it arises under the issue of how we deal with over-the-counter medicines, to which I will also refer later. I say simply that the concerns that he raises are, properly, health and public policy concerns. Whether they should be dealt with during the handling of the Bill is another question. It is a matter of how the sale of medicines is controlled and how it is supervised, which arises wherever and at whatever price such medicines are sold.
§ Mr. Hughes
I appreciate the right hon. Lady's giving way.
On a point linked to that raised by the hon. Member for Newport, West (Mr. Flynn)—I heard what the right hon. Lady said—will she at least clarify the Government's present policy on independent community pharmacies? Given the amendment that was passed against the Government's wish in the House of Lords, can the Government say now that, irrespective of references by 27 directors to the restrictive practices court, it is the Government's policy that, irrespective of the main thrust of the Bill, provision will be made to protect community pharmacies against the rigour of a derestricted market? Is that the Government's policy or not?
§ Mrs. Beckett
If I had had fewer interventions, I might have got further into my speech, and the hon. Gentleman would have had the answer that he seeks. I shall return to the issue later in my speech. I hope that that is not too far away.
There are two principal prohibitions in the Bill. They are modelled closely on the competition rules contained in articles 85 and 86 of the treaty of Rome, which means they can be interpreted consistently with their EC models. The first prohibition introduced by the Bill will outlaw anti-competitive agreements or practices. The current restrictive trade practices legislation was passed in the 1950s and has become ineffective and outdated. Under that legislation, even the most serious cartels can carry on for years. In another recent case, a market-sharing and price-fixing cartel of ready-mixed concrete companies was finally dealt with in the courts more than nine years after first being investigated.
Of course, not everyone attaches the same high priority to protecting competition. We have heard a number of scare stories claiming that the Bill will interfere with perfectly harmless business practices; no doubt that will be explored as the Bill goes through the House. Of course, the new prohibition will not apply at all to harmless agreements; it is the present legislation which ties up many such agreements in legalistic knots. I am told that currently well over 10,000 agreements have had to be registered with the Office of Fair Trading, although they are not significant in competition terms. About 6,000 of those have been added to the register since 1989. All that is unnecessary work for the authorities and for business.
The prohibition will focus on agreements that actually damage competition. We recognise that some agreements that are restrictive can nevertheless have beneficial effects overall, so the Bill sets out the criteria on which such agreements may be exempted. Some categories of agreement will be exempted on a block basis; others may be exempted individually. Added to that, any agreement that is already exempted under article 85 will automatically be exempted from the new prohibition. That should keep regulatory burdens to a minimum, and it further demonstrates the value of a domestic prohibition operating consistently with EC rules.
The second prohibition will outlaw abuses of a dominant market position. The present laws for investigating abuses by monopolies will continue to be useful in some limited circumstances in the future, but they have serious weaknesses. They provide little or no deterrent against dominant companies that bully their competitors and exploit their customers. Serious anti-competitive behaviour by monopolists can go unchecked throughout often lengthy investigations, while competitors can be forced out of business.
My hon. Friend the Member for Crewe and Nantwich referred to Southdown Motor Services, which was driven out of business by the anti-competitive actions of a rival company, even while the OFT was investigating its 28 complaints. It was said at the time that the case illustrated the need for a power to grant interim relief during investigations, but, by then, the damage had already been done.
As there are no powers to impose penalties at the end of investigations, firms that are damaged by proven anti-competitive behaviour can get no recompense. The new prohibition will put right those shortcomings.
The Bill comes to this House with a third prohibition, added in the other place. It relates to the issue raised with me by my hon. Friend the Member for Sunderland, South (Mr. Mullin)—the prohibition of abuse of dominance specifically targeted at the newspaper sector. Much that has been written about this issue is just plain wrong. At the outset, the allegation was extensively made that the Bill weakened the law on competition—in particular, that it weakened the law as it would apply to newspapers owned by Mr. Rupert Murdoch, and that it did so because of the Government's desire to favour Mr. Murdoch. Understandably, that aroused great concern. Unfortunately for the merits of that argument, the Bill strengthens competition law across the board, not only for the newspapers, and it does not in any way, shape or form discriminate in favour of Mr. Murdoch or in favour of any other newspaper proprietor or group.
In strengthening competition law, the Bill strengthens the law against predatory pricing and other abuses of a dominant market position, whatever the market. Article 86, which the Bill follows closely, prohibits a dominant market position being abused by the use of predatory pricing—so, too, will the Bill. Clause 60 states explicitly that, in interpreting those terms in all markets covered in the Bill, our law must follow European jurisprudence and have regard to clarifying policy statements from the European Commission.
In previous court cases, for example—particularly that of Tetra Pak—the European Court of Justice ruled that predatory pricing should be presumed if prices were shown to be below the average variable cost of production. It would be a mechanistic test, without any requirement to prove intent—which, of course, contrasts with the current position, in which the director general has to seek to demonstrate intent if predation is to be proved.
Conduct is to be regarded as predatory even if prices are above average variable costs, but still below total average costs, if it can be established that the purpose of that conduct is to eliminate a competitor. That principle, too, will apply under the Bill, as will the principle that dominance exists when a company is shown to be able to act independently of its competitors.
Therefore, although those matters can and will be considered in Committee or on Report, I hope that the House will accept as mistaken the first underlying premise of the case that some have made—that the Bill weakens competition law.
§ Mr. Tam Dalyell (Linlithgow)
I understand that one really will have to brood over Hansard before understanding the matter fully. However, before we go any further, I should like to ask whether the links between the markets in which, for example, BSkyB operates and the market for daily broadsheet newspapers are sufficiently close to constitute special circumstances, 29 justifying the application of article 86 in relation to defendants holding dominant positions. I realise that it is a delicate question, but I wonder whether the Secretary of State will comment on an issue with which she is familiar.
§ Mrs. Beckett
As my hon. Friend is aware, I must be wary of being drawn into the issue of the merits of any specific case that is yet to be decided. However, I think that he also knows that it has been ruled in case law that an abuse existed when success or strong market share in one market was said to have put a particular company in a position to use its market strength in that market to undermine behaviour in a separate market. Some of the issues have therefore been considered, and there are examples in which such a position has been thought to create prima facie evidence of something that should be investigated.
§ Mr. Quentin Davies (Grantham and Stamford)
At the beginning of the debate, why was the right hon. Lady so coy and evasive in answering the question of my right hon. Friend the Member for Wokingham (Mr. Redwood), who asked whether the Bill will in any way specifically strengthen competition policy? She would not answer that question. Now, however—10 minutes later—she is telling the House that, in one sphere of predatory pricing, the Bill will strengthen competition policy compared with the previous regime. She cannot have it both ways. Will it or will it not?
§ Mrs. Beckett
With respect to the hon. Gentleman—he clearly was not hanging on every word of the right hon. Member for Wokingham in quite the way that I was—that was not what the right hon. Gentleman asked me. Undoubtedly and clearly, the Bill will strengthen competition law.
§ Mr. David Winnick (Walsall, North)
I notice that there is absolutely no mention of the position of Mr. Murdoch and The Times in the amendment tabled by the official Opposition, which is interesting.
Does my right hon. Friend agree that what is really required is effective legislation? From her comments, one hopes that the point will be taken that it is wholly undesirable that The Times should deliberately undercut other broadsheets, undoubtedly to drive them out of business. Although no action on the matter was taken by the Conservative Government—who never dreamed of taking such action—one hopes that action will now be taken by a Labour Government. If the situation continues, The Independent will go out of business—which would not be desirable if that happened purely and simply because of pricing mechanisms and undercutting by The Times.
§ Mrs. Beckett
Again, I must not be drawn on the merits of a specific case, especially one on which the Director General of Fair Trading has recently invited input from those who are complaining. The director general is currently considering whether, even under present legislation, some of the matters to which my hon. Friend referred should be investigated. The Bill certainly strengthens the director general's effectiveness in those and other matters.
§ Mr. David Chidgey (Eastleigh)
The President of the Board of Trade will accept that this is a complex area and 30 that I will have to study what she has said in Hansard in more detail, but is she not concerned that the former Director General of Fair Trading, who is universally recognised as a formidable legal expert in such matters, said that the amendment that she referred to was essential to prevent the predatory practices of which she spoke? Does it not occur to her that, even if the amendment proves to go further than necessary, having it in the Bill will give us the belt and braces that we may well need? Does it not concern her that Mr. Murdoch is apparently happy with the Bill without the amendment, but unhappy with it as amended?
§ Mrs. Beckett
I do not know what gives the hon. Gentleman that impression. I am afraid that I am not familiar with Mr. Murdoch's thoughts on the matter. Of course, I have the utmost respect for my noble Friend Lord Borrie—indeed, we have sought his advice, and taken it, on previous occasions—but, sad to say, it is not given to all of us in this vale of tears invariably to agree, and, on this occasion, we are not wholly persuaded that the amendment is appropriate, for reasons that I shall give later.
§ Mr. Giles Radice (North Durham)
Is my right hon. Friend saying that, if there is a case of predatory pricing in the newspaper industry, as in other industries, the combination of clause 18, which concerns the abuse of a dominant position, and clause 60, which brings British law into line with European case law, will be sufficient to deal with it? Will she confirm that, in accordance with Pepper v. Hart, her statement today would be taken into account in a court of law if there were any ambiguity about the legislation?
§ Mrs. Beckett
I can certainly confirm the latter point: Ministers' statements would indeed be taken into account by the courts. I can also confirm that the combination of clause 18, with its prohibition of abuse, and clause 60, which brings European jurisprudence into effect here, makes the Government believe that the Bill is already so strengthened that, even if there were no other defects in the amendment made in another place, it would not be necessary in order to make for sound and strong competition law.
§ Mr. Bercow
The right hon. Lady is coming under fast and furious attack from Labour Members. I ask her to comment not on the merits but simply on the facts of the case. Will she confirm that the profits from the television interests of News International, including BSkyB, do not in any way subsidise any of its newspapers? That is the fact of the matter, for the confirmation of which, from the mouth of the President of the Board of Trade, I and the House would be immensely grateful.
§ Mrs. Beckett
I am afraid that I will have to disappoint the hon. Gentleman. Whether that is a fact is not a matter for me in the context of this debate. I specifically declined earlier to be drawn into a discussion of the structure of the companies owned by Mr. Murdoch, and I do not intend to be tempted into one now. I will simply say that the Bill strengthens competition law, and the possibility of action against predatory pricing in any market. European jurisprudence and case law also cast light on the way in 31 which these matters might be examined in different markets. Further than that I am not able or prepared to be drawn.
§ Mrs. Beckett
If the hon. Gentleman really thinks that, he has not the faintest understanding of the role of a Minister who is dealing with legislation of this kind—although that will probably never be of any consequence.
In some quarters, the question whether the Bill weakens competition law—the premise on which the original debate began—seems to have become less important. The debate became inflamed by suggestions that the Bill was being used specifically to advantage Mr. Murdoch. I hope that I have comprehensively knocked those allegations on the head. Some have moved on to suggest that the Bill should be a vehicle specifically to disadvantage him.
To all who may stray towards advocating that point of view—whether or not they are my right hon. and hon. Friends—I must say in all sincerity that that is not the purpose for which we were sent here. We were sent here to make good law, sound law and fair law, to the best of our ability and understanding. We were certainly not sent here to do special favours for any individual or group; but nor were we sent here to use the vehicle of law to single out any individual or group.
I am advised that the amendment made in another place is unworkable in law and practice, and there is a basic flaw in the case put by those who advance its merits. That flaw is simple and clear, but seems not to be addressed by the vast bulk of the arguments in favour of the amendment. It is this: in the end, these matters fall to the judgment of the independent competition authorities, such as the Director General of Fair Trading, and the Monopolies and Mergers Commission. Under the law as it stands, as we propose it and as the amendment that was carried in the other place proposes, what matters in the end is the judgment of the Director General of Fair Trading.
§ Mrs. Beckett
Let me make one more point.
I accept that some of those who have followed the matter closely recognise that that is the case. Consequently, attempts have been made—no doubt they will continue to be made as the matter is examined in detail in Committee—to redefine the law specifically relating to newspapers, in order almost to direct the judgment of the director general in the matters under discussion.
Again, that will be no easy task. Cross-subsidy, special promotions and special agreements are rife in the newspaper industry: they always have been, and probably always will be. There has seldom been a better example of the danger of throwing the baby out with the bath water. In fact, it is precisely because it is so difficult to define these matters in legislation that the ultimate test lies in the judgment of an independent regulator.
§ Mr. Chidgey
The right hon. Lady is absolutely right to say that these matters fall to be determined by the 32 Office of Fair Trading. However, does she accept that the two previous cases brought to the OFT—I am sorry to return yet again to News International, but it is a case in point—failed in the final analysis? I understand from the former director general that those cases failed not because there was no case to answer, but because legislation failed to give enough clear guidance to the director general. That is precisely why there is a call for the Bill to include specific and clear guidance. Does not the Secretary of State accept that the OFT must have guidance to allow it to perform its correct function?
§ Mrs. Beckett
With respect to the hon. Gentleman, let me remind him that some of those who wish to focus on that particular case argue that the behaviour to which objection has been taken is, in their judgment, proven to be predatory, because it has continued for a considerable time. They argue that that makes the matter different. If it makes the matter different, it makes the matter different; that does not necessarily substantiate the case that the law cannot deal with it in some way.
As I mentioned a moment ago—it is one of the reasons why I am being, I hope, sufficiently cautious in what I say—the director general has asked for information that may substantiate a complaint. While he is still considering the issues, it is too early to say that he is not able to deal with them under existing law. We do not argue that. All we argue is that, if the existing law is too weak in a variety of ways, the Bill strengthens it in a variety of ways. There is nothing in the argument that the Bill makes the position worse. There is substantial evidence to suggest that it strengthens the position.
As I said when the hon. Member for Eastleigh (Mr. Chidgey) intervened previously, there is a separate problem with the amendment carried in another place. Unlike the Bill's basic provisions, which seek to prohibit illegitimate behaviour by dominant players, the amendment applies to any conduct, legitimate or illegitimate, that may reduce the diversity of national newspapers by reducing competition. A strong newspaper that, by good journalism, establishes a good circulation and so prevents, or reduces the chance of, new entrants, or endangers the survival of failing papers, would fall foul of the amendment. That runs the risk of artificially freezing the newspaper industry as it stands.
As practically any established national newspaper will hold substantial market power—the test proposed in the amendment—the regulator would be given almost unlimited power to intervene to regulate the national newspaper market. The amendment ends up by being based not on anti-competitive behaviour but on giving the state the power to control how national newspapers behave. We believe that the amendment is either contrary, or not related, to the Bill's aims, so the Government must seek to remove it.
A second, much publicised issue will be thrashed out in Committee: the resale price maintenance of over-the-counter medicines.
§ Mr. Redwood
I am grateful to the President of the Board of Trade for giving way before she moves on from these interesting exchanges on the so-called Murdoch amendment. I was grateful to her for helpfully spelling out more of the thinking behind how the rules and the law would apply. Can she give us just one more piece of 33 guidance? I appreciate that she does not want to answer about whether a particular newspaper sold at a particular price on a particular day of the week is or is not predatory. However, if a newspaper, or any other company, decides to sell its product on one day at a much better discount than it sells it in the rest of the week, will her test on the relationship between price and cost apply to the average over the week or day by day? It is most important for newspapers to know that before the law comes into being.
§ Mrs. Beckett
That is a most interesting question, and I am sure that the director general is puzzling over it even as we speak. I do not intend to pronounce on it, because it is exactly the sort of question that he has to assess and is paid to judge, and which I am specifically paid not to try to judge but to pass to him, as I do.
§ Mrs. Beckett
I should be grateful if the hon. Gentleman would be brief, as this is about the 16th intervention.
§ Mr. Bruce
The right hon. Lady has been very generous. I have a general point that concerns a genuine request for information. The all-party European informatics market group has done several studies of regulation, particularly of telecommunications. We and industry keep coming to the conclusion that the Government should give regulators a general power. That coincides with what the European Union and the Government are trying to do. The Bill has more than 110 pages of complicated clauses, and is likely to catch the unwary. The more that is written, the more loopholes are created. That allows those who want to use predatory pricing to find loopholes. Surely it is better for the Government to give general rather than specific powers.
§ Mrs. Beckett
That is precisely what we have done. The Bill's length results from the range of issues with which it deals. Its whole purpose is to set the right framework of law within which an independent regulator can operate. The hon. Gentleman's strictures about the dangers of writing too much in detailed definitions should be applied to those seeking to amend the Bill; their amendment would create the dangers to which he referred. We do not believe that that is the case with the Bill as presented to the House.
On the issue of resale price maintenance of over-the-counter medicines, the purpose and effect of the amendments carried in the other place are to remove price fixing in the sector from competition scrutiny, either under the relevant existing law, or under the prohibition in the Bill, until 2004. I am aware of and sensitive to the fears that have been expressed by pharmacists for their future if resale price maintenance is abolished, and more than conscious that those anxieties are bound to find an echo in the House. However, I hope that hon. Members on both sides of the House know that the Director General of Fair Trading and bodies that have investigated the issues in some depth, such as the Consumers Association, do not agree or accept that all small pharmacies depend on the maintenance of such a price regime. They argue, first, that there are better ways of targeting any support that small pharmacies need and, secondly, that fixing prices for medicines is an extra charge on those who need them most.
34 The restrictive practices court exists precisely in order to examine such arguments and decide whether an exemption continues to be justified. In the amendments carried in another place, the House is being asked to accept that these businesses and they alone should be able to fix their prices without any possibility of review by the competition authorities for several years hence. The Government are not persuaded by those arguments.
§ Mr. William Cash (Stone)
Will the right hon. Lady be kind enough to comment on the problems of doctors' surgeries in rural areas? As she knows, there is a monopoly that prevents people from being able to practise within one mile of an existing pharmacy. Will she consider making an amendment to the Bill to deal with that long-standing and completely unnecessary monopoly?
§ Mrs. Beckett
With respect, no. The hon. Gentleman makes an interesting and important point about a matter that is much discussed—indeed, when I was shadow Secretary of State for Health, I was involved in discussing it—but it is not a matter for the Bill or for me. It is a matter of general health policy and how that should be decided.
§ Mr. Simon Hughes
The right hon. Lady was good enough to say that she would come to this matter, and she has given a clear answer. I realise that the matter is one which crosses Departments, involving not only the Department of Health, but the Scottish Office, the Welsh Office and the Northern Ireland Office, but will she at least give the House the Government view that retaining a network of community pharmacies is as much Government policy as retaining a network of community doctors and community dentists?
§ Mrs. Beckett
Yes. I am grateful to the hon. Gentleman because, in asking in that question, he has anticipated my speech by about one and a half paragraphs.
There is no doubt that the Government strongly support and care about community pharmacies. As I am sure the hon. Gentleman is aware—or perhaps, given his constituency, he is not—many small rural pharmacies already receive support under the Department of Health essential pharmacy scheme. My right hon. Friend the Secretary of State for Health has made it clear how important community pharmacies are to his vision of health in the next century.
There is no doubt that the Government support and are a strong defender of rural or community pharmacies. However, we are extremely mindful that, if critics of the present regime are correct, all families—especially many low-income families—are paying an artificially high price for their medicines. A recent Consumers Association survey of 2,000 people showed that 13 per cent. were unable to afford certain medicines. A report commissioned by the community pharmacy action group estimates the cost to the consumer of keeping resale price maintenance for over-the-counter medicines at between 6p and lop per week.
That does not sound like much, but I am advised that it amounts to £180 million a year; therefore, if the amendment were to stand, the cost to the consumer over the five years in which investigation of the matter was debarred would be more than £900 million. That is a 35 substantial sum in anybody's language. It is the argument that people should not be required to pay that sum which leads to the view the Government take on the matter.
By contrast with the current regime, the powers of investigation and enforcement in the Bill are unquestionably tough—and rightly so, if they are to provide an effective deterrent and to enable the worst offenders to be rooted out and dealt with. The vast majority of businesses work hard to be competitive, and they and their customers deserve effective protection from the few who cheat and bully.
Once the prohibitions are in place, anti-competitive agreements and abuses of dominance will be unlawful from the outset. There will be the possibility of financial penalties of up to 10 per cent. of UK turnover for the worst offenders, and the director general will be able to impose interim measures to bring to an immediate stop seriously anti-competitive behaviour while a full investigation is carried out.
While the director general will have primary responsibility for enforcing the new regime, as under the current monopoly laws, the utility regulators will have the same powers as the director general within their special areas so that they can bring their expertise to questions of competition law in the sectors that they regulate.
The director general will have rights to demand information. Where there are reasonable grounds, he may make unannounced visits to the premises of suspected infringers to seek evidence of cartels or other anti-competitive behaviour. In certain cases, he will be able to obtain a warrant allowing forcible entry. In normal circumstances, the director general will not need to use those powers to get the information that he needs, but cartels are, by nature, secretive and cautious, so strong powers are necessary to root out the worst offenders and to ensure that evidence can be obtained before the relevant documents can be hidden or destroyed.
While the director general will be the principal means of enforcement, the Bill also introduces important new rights for firms and customers who have been on the receiving end of anti-competitive behaviour. Companies and individuals who have been harmed by infringements of the prohibitions will be entitled to seek damages in the courts.
Obviously, such a tough regime must go hand in hand with fairness and transparency to command confidence, so it must go hand in hand with the safeguard of a full right of appeal. Appeals against the director's decisions will be made to an appeals tribunal established within a new body—the Competition Commission—and further appeal on points of law or the level of penalty can be made to the Court of Appeal. It is also important that consumers should have a clear voice under the new regime, so that they and organisations representing them will be able to appeal to the Competition Commission against decisions made by the director general.
It is vital that decisions made by the director and the tribunal are clearly explained, so they will have to publish reasoned decisions, which will serve to explain more widely the application of the prohibitions.
The director and the regulators are already working jointly on guidance and will publish guidelines for their own sectors to cover a wide range of issues, such as the 36 definition of relevant markets and the behaviour that is likely to infringe the prohibitions. The guidelines will be in place well before the prohibitions come into force, to give businesses the maximum opportunity to adapt to the new rules. We will also table amendments to the Bill to help businesses make the transition to the new regime.
§ Mr. Andrew Miller (Ellesmere Port and Neston)
I am grateful to my right hon. Friend for giving way. I have been listening carefully to her remarks. The factory outlet village in my constituency, which has attracted 3 million consumers in its first year of operation, has expressed the fear that the draft guidelines will impose constraints on its business. Will my right hon. Friend give assurances that, if it is clear that the consumer has expressed a choice by making purchases in certain venues, those institutions will be properly protected?
§ Mrs. Beckett
I know that my hon. Friend will understand that I cannot comment on the circumstances of a particular factory shop. It is clear in the Bill and the guidance that the measures are intended to prohibit anti-competitive behaviour, but corresponding offsetting benefits can be taken into account. The Bill allows for the exclusion of circumstances such as those mentioned by my hon. Friend.
§ Mrs. Beckett
No, I had better finish, Madam Speaker, or you will have me thrown out of the Chamber for taking too long.
Most agreements that would have to be registered under existing legislation, but are made after Royal Assent will no longer need to be notified to the Office of Fair Trading. Information on that will be made available soon.
Harmless behaviour will not be caught by the prohibitions in the first place, and smaller firms will benefit from the provisional immunity from penalties for minor agreements and practices.
The Bill's general approach of controlling behaviour only when it is anti-competitive is one which we intend also to apply—although with certain changes in procedure—to so-called vertical agreements, whereby firms make arrangements with others up and down the supply chain; for example, with suppliers in one direction and retailers in another. For example, a retailer agreeing to specialise in selling just one manufacturer's product would be a vertical agreement.
The majority of vertical agreements do not give rise to competition concerns, but the mechanism could in principle be used to rip off customers. Here, too, it is the practical effects of such agreements which matter. Elsewhere in Europe and in this country, these issues are under continuing study to see whether and, if so, to what degree block exemptions or other special treatment may simplify this area of the law—a matter on which we are still consulting. What matters is protecting the customer from exploitation while minimising the hassle for efficient businesses competing fairly in an open marketplace.
There has been widespread consultation about the Bill and a wide general welcome for its approach—from the business community, from competition lawyers and from bodies such as the National Consumer Council.
37 The view of Her Majesty's Opposition is still unclear, however. Not for the first time, some confusion reigns. The shadow President of the Board of Trade has tied himself and his party in knots. To be fair to him, aligning our law with EU law probably unhinges him a bit to begin with, but in the summer he was against the Bill, in the autumn he was against some of it—but not the bits that his party kept promising to do—and now: well, I am not at all sure where he stands now.
Where do the Tories stand on paralleling article 86 on abuse of a dominant market position or on predatory pricing? Some of his Front-Bench colleagues have said they will support Lord McNally's amendment, but the right hon. Member for Wokingham has opposed introducing the prohibition on which it is based, and the Conservative amendment says nothing about it. Although he is on record as opposing that part of the Bill, he is supposed to be in favour of unfettered competition—although he may or may not support the Bill in general.
Almost the entire Tory motion is about restricting competition—about keeping price controls for over-the-counter medicines—and it seems to be all about health policy, not about competition policy at all, yet the company that has most publicly challenged price fixing in OTC medicines is headed by a Tory Back Bencher and senior campaign adviser to the Leader of the Opposition, the hon. Member for Tunbridge Wells (Mr. Norman) What is also surprising about the right hon. Gentleman's approach is that, when the Tory party had responsibility for these matters, they proposed, in their draft competition Bill last year, exactly the same approach as this Government are advocating—allowing the present proceedings to continue, but giving the practice an extended transitional exclusion if the courts confirm that the practice is, after all, considered to be in the public interest.
I am afraid that there is no consistency and no policy behind the Opposition's approach to the Bill: there are only opportunism and irrelevance. The benefits of our proposals are clear, and they have been widely welcomed. They will deliver modern and effective competition law, which works in harmony with the European rules with which so many of our companies are already familiar.
We have carefully balanced stronger powers to investigate and crack down on anti-competitive behaviour, on the one hand, with proper safeguards and a full appeals procedure on the other. We have consulted widely and listened carefully to the comments that we have received. The net result is a Bill which will strengthen our competitiveness and bring major benefits to consumers and business alike.
Indeed, only last month the Director General of Fair Trading referred a suspected cartel on route sharing and fare fixing arrangements in bus transport in the north-west to the restrictive trade practices court for investigation. When doing so, he commented that the investigation could have been conducted far more quickly had he had the strengthened powers of investigation provided under the Bill, and that, under this legislation, not only would such agreements be prohibited but those party to them could be fined.
The changes that the Bill brings are important, and they are long overdue. I commend the Bill to the House.
§ Mr. John Redwood (Wokingham)
I beg to move, To leave out from "That" to the end of the Question, and to add instead thereof:this House declines to give a Second Reading to the Competition Bill [Lords] because the Government has failed to spell out the consequences for a whole range of business that will result from this legislation, and specifically has failed to tackle the problem of independent community pharmacies; expresses its concern at the decision of the Office of Fair Trading to commence legal proceedings to end retail price maintenance on over-the-counter medicines at a time when the Government is already seeking to review this agreement in the Bill; notes that the loss of retail price maintenance on over-the-counter medicines could lead to the closure of many independent community pharmacies, an outcome which would seriously undermine the Government's health strategy and increase the burden on GPs; and calls on the Government to ensure that a nationwide network of community pharmacies remains in place to serve the needs of the community, in particular the elderly, the infirm and mothers of young children, before proceeding with the Bill.I am grateful to the President of the Board of Trade for setting out what she thinks the Bill is about. It will be our task, now and in Committee, to try to help her thinking a little more, because the Bill is a muddle, a rag bag, a mess, a mint with a big hole in the middle, a Bill in search of a policy.
I remind the House that I have declared two interests to the Registrar of Members' Interests: first, I am married to a senior executive of British Airways; and, secondly, I write an occasional column for The Financial Mail on Sunday. In view of the exchanges during the speech by the President of the Board of Trade, I am relieved that it is not an occasional column for The Times or The Daily Telegraph. I assure the House that of course that will not influence my decisions on the Bill, which will be motivated by the general public interest.
The President of the Board of Trade provides good evidence of a Government out of control of their policies. That is topical, because we see a Foreign Secretary who does not know what is going on in Sierra Leone and a President of the Board of Trade who probably had some papers on the Sierra Leone issue but who would doubtless tell us that she, too, knew nothing about it. Now here the right hon. Lady is, in charge of a piece of legislation that simply does not answer the most elementary of questions about the impact that it would have were it to complete its passage through Parliament.
The President of the Board of Trade is unable to tell us whether the Bill would make some practices in the newspaper industry legal or illegal. She is unable to tell us whether many industries and their practices will be exempted. She is unable to tell us how the Bill would be applied, were it to become law, and she tries to delegate everything to the Director General of Fair Trading.
It is not the task of the House to enact very general rules and to pass them all to quangos or to Brussels for their implementation. It is the task of the House to consider the issues, to consider whether the law is adequate or needs improving, and to spell out to businesses and individuals in this country the impact of any proposed changes to the legislation.
The President of the Board of Trade began by congratulating herself on the speed with which she was moving to implement the manifesto pledge. I am surprised that she should draw attention to the timetable issue; in fact, the Bill has been considerably delayed. On three 39 separate occasions we were alerted to the return of the Bill to the House for its Second Reading, and each time we were disappointed. It has eventually emerged today. The right hon. Lady might like to tell us whether that was the result of pressure of other business; I suspect the reason was that she and her colleagues were finding it extremely difficult to come up with any answers to the many questions that I—and industry and commerce—have laid before her.
Those questions are perfectly reasonable. Is the practice that we are following reasonable? Could it continue? Will the existing relationships between pubs and brewers continue or be changed? Are the existing arrangements for newspaper distribution reasonable, or will they be disrupted or changed by the Bill? If the right hon. Lady cannot answer those simple, legitimate concerns of all those businesses, why is she returning the Bill to the House in this state now? Why does she not spend a little more time reconsidering the matter and trying to answer some of those fundamental points before bringing legislation before the House?
§ Mr. Mullin
Will the right hon. Gentleman answer one simple, legitimate concern? Does he think that the Bill should outlaw the practice of predatory pricing in the national newspaper industry—and if he thinks it should, does it?
§ Mr. Redwood
I think that the current legislation makes predatory pricing—in the newspaper industry or any other industry—illegal, and I think the Bill, amended or unamended, would also make it illegal. In the Opposition's view, the issue is not whether the law makes predatory pricing illegal, but whether a case of predatory pricing can be brought and sustained under any version of the law—old or new.
That is why the exchanges with the President of the Board of Trade were both important and unsatisfactory. As I said to her, I was genuinely delighted that she went some way to clarifying how predatory pricing would be judged in that very sensitive case, but she did not deal with the most important question: is it reasonable to sell a newspaper at a very attractive price on one day of the week and at a higher price on other days of the week—will she average out the price or consider it day by day? Unless she can answer that question, we must assume that she is trying to duck the question which most interests many of her Back Benchers and which will most interest many people outside the House as they read their daily newspapers tomorrow.
§ Mr. Redwood
I have already answered the question. I do not believe that a case of predatory pricing has been proven, and I am not proposing a change in the law. Her Majesty's Opposition are happy with the law as it stands, before the President of the Board of Trade blunders in with her new legislation. We made our own statement of what the law should be when we were in government. We left a mechanism for deciding predatory pricing cases. Cases were brought. No predatory pricing was found. 40 If there is now new evidence suggesting that there is predatory pricing, the case should be brought to the competition authorities and properly investigated.
My answer to the hon. Gentleman is clear: we would keep the law as it stood. We think that, in regard to newspapers, the issue concerns proof, evidence and opinion about the nature of such practices, rather than the adequacy of the legislation. For that reason, my hon. Friends and I will not support the amendment in the Bill as it stands: we will leave it to the Government to try to sort out the mess that they have created by trying to change the law.
§ Mr. Ian Bruce
As my right hon. Friend said earlier, the Government must have a shopping list of the practices that they hope would be outlawed under the Bill, but we have not been given it. The Minister for Competition and Consumer Affairs told us before the general election that, when he became Minister, he would slash the prices of white goods and brown goods in the shops by Christmas, because terrible things were happening that did not allow a competitive market. We have not heard even that from the Minister recently.
§ Mr. Redwood
My hon. Friend is right. Many people were disappointed that the Minister did not keep his word on so crucial an issue. The Bill will be another example of Labour Ministers saying one thing and delivering something entirely different.
§ Mr. Bercow
Can my right hon. Friend name a single Government Back Bencher who has this afternoon supported the position taken by the President of the Board of Trade on predatory pricing? If he cannot, does he agree that the debate provides further confirmation of the fact—to which the hon. Members for Walsall, North (Mr. Winnick) and for Linlithgow (Mr. Dalyell) bear witness—that the Labour Benches are still peppered with the representatives of old Labour who loathe anyone who is entrepreneurial enough to make a profit in a free market?
§ Mr. Redwood
With the single amendment that I did not hear any Labour Member support the Government on predatory pricing in the newspaper industry, I would agree with my hon. Friend, who makes his own point.
§ Mr. Winnick
Do I take it that the right hon. Gentleman is satisfied with the way in which The Times undercuts other broadsheets? If so, he should spell that out. There is great dissatisfaction among Labour Members and in the country about what is happening. Is the right hon. Gentleman indifferent to the way in which The Times is undermining and undercutting its rivals?
§ Mr. Redwood
In due course I shall make a positive suggestion about what the Government could do. It is not the job of the Opposition to settle such matters. It is the job of the President of the Board of Trade. I am unhappy to discover today that it is yet another piece of her job that she does not want to do. She finds it too difficult, so she is trying to put up smokescreens and delegate the matter to a new authority.
§ Mrs. Beckett
I do not know whether the right hon. Gentleman was not listening to his own words, but I noticed 41 that, in answer to my hon. Friend the Member for Sunderland, South (Mr. Mullin), he said that he had an opinion but that the matter was one for the competition authorities. That is precisely what I said. It is the responsibility of the Secretary of State and the director general respectively.
§ Mr. Redwood
It is incumbent on a Government who propose a new law and a new set of rules to set out the rules that they want implemented. The previous Government did set out the rules under which such cases would be judged. For that reason I was quite in order to say what I did, which is entirely different from the proposition that the right hon. Lady is putting to the House for her new legislation.
§ Mr. Mullin
Further to the comments of the hon. Member for Buckingham (Mr. Bercow), does the right hon. Gentleman accept that what interests us is not people making a profit in a free market, but people making a loss in a free market, for five years? Although the accounts of News International are not particularly transparent, the chairman of News International told me that the loss so far from the company's involvement is approaching £75 million.
§ Mr. Redwood
The hon. Gentleman has made his own point. He clearly has his own disagreement with the Government, of which we shall hear more later.
The right hon. Lady and her colleagues have claimed that the legislation is necessary in order to create symmetry with European law. It has been said that the Government believe that there is a great practical advantage in ensuring that the United Kingdom domestic provisions are interpreted so as to avoid inconsistency and potential conflict with the Europe-wide prohibition.
At first, I thought that that was the Government's main intention. However, when I read the Bill, I discovered that it, and the proposed British law, will differ from European law in three important respects. That was confirmed by the Minister of State in another place. The Government have issued all sorts of conflicting statements about whether our law will be subsumed by European law, whether they will adopt European law here, or whether there will be two parallel—and perhaps conflicting—systems.
I shall trouble the House with several quotes from the Government on this subject. On one occasion, we heard:We are not importing the EC system 'lock, stock and barrel'".That implies that there will be two bodies of law and the potential for conflict and disagreement will remain. In another statement, we heard:Business can look to EC jurisprudence as a guide to how the UK prohibitions will be interpreted".That suggests that the laws will not be exactly the same, but, if we get one right, we will probably get the other right also. In a more detailed statement, a Minister said:The language in subsection (2) of the governing principles clause"—of this legislation—is very tight and does not enable those applying the prohibitions any discretion to depart from EC jurisprudence".42 That means that the laws are exactly the same and that the purpose of the legislation has been met. In a fourth statement, a Minister said:Those applying the prohibitions will therefore be under a `continuing' obligation to seek no inconsistency with EC jurisprudence in the process of making such extractions. It will simply not be possible to make an unqualified transposition in all cases.Those are four very different statements from the same Government. We could perhaps understand Ministers becoming muddled about such a complicated matter and making slightly different statements. However, the extraordinary thing about these statements is that they come from the pen or the lips of the same Minister: the Minister for Trade and Competitiveness in Europe, Lord Simon of Highbury. It is even more stunning that those four conflicting views about how the two types of legislation and jurisprudence will work are advanced in the same letter from Lord Simon of Highbury.
The Bill was meant to sort out that problem. Ministers warned of tension or conflict between European jurisprudence and British competition law, so they advocated introducing a British law based on European models, in order to alleviate such conflict. We have now learnt from the Minister that the two jurisprudences are deliberately different in three areas, and that, in the other areas, the Government may not import the European system lock, stock and barrel or they may frame the legislation very tightly. The Government may follow the EC jurisprudence, or they may say that that is not possible in all cases.
What a complete muddle. It is a charter for lawyers and for chaos and confusion throughout British industry. Pity the poor business man who is trying to sell in a very competitive market, with sterling too high, interest rates run by the Government's monetary committee and manufacturing in recession. He must now face another massive complication in the form of this muddled legislation. If the Bill is passed unamended, he will not know whether he is operating under European or British law on any occasion.
In Committee, we shall want to know what the Government's policy is. How much overlap will there be? When will European law apply and when will the new British law apply? Can businesses have a guarantee that, if they meet the British requirements, they cannot violate the European requirements? Will Ministers give businesses an indemnity so that, if they meet the British requirements, they will be free of the consequences of any action in Brussels? Surely Ministers owe businesses that reassurance at least if they must go through the hassle of trying to comply with this very complicated new legislation.
The Government seem to take delight in plunging business into uncertainty. Not happy with imposing £25,000 million in extra taxes over the lifetime of the Parliament and not happy with creating boom and bust at the same time—boom for services and bust for manufacturing, with manufacturing in recession—[Interruption.] Labour Members think that it is funny that manufacturing is in recession. Many manufacturers in this country not only want the Opposition to speak on their behalf but want the Government to do something for them, because the Government's policies have led to misery. The hon. Member for Hemel Hempstead (Mr. McWalter) still thinks that that is a source of fun, and I hope that it is noted in Hansard.
43 This legislation will create uncertainty, but the terms of our amendment are very clear. We have much sympathy with the 184 hon. Members—mainly Labour and Liberal Members—who are concerned about the Bill's impact on retail pharmacies. The right hon. Lady said that I must be in a muddle as I—a strong and committed supporter of competition—am saying that, on this occasion, I support the current practices in the pharmaceutical industry regarding the retail distribution of over-the-counter medicines. I see no conflict in that position. The Government whom I used to support were happy to strengthen competition in all sorts of ways using existing legislation, while at the same time sustaining the over-the-counter medicine arrangements. I think that that is the right approach.
§ Mrs. Beckett
The right hon. Gentleman overlooks the fact that, when the Conservative party considered competition legislation, it proposed precisely the approach that the Government have adopted: allowing the proceedings in court to continue. The director general first announced that he was planning to examine the matter in 1995, and the case has been running since October 1996. The Government of which the right hon. Gentleman was occasionally a supporter thought that that was the correct course of action—and it is the same course that we are now pursuing.
§ Mr. Redwood
We did not introduce legislation that would clearly make that practice illegal, and cancel it by virtue of primary legislation. I never supported the proposals to rebase our competition law in such a fundamental manner. Officials proposed this sort of Bill when I was competition Minister, and I shall tell the right hon. Lady why I turned it down. I refused to introduce it to the House of Commons because no one could answer adequately what impact it would have on all sorts of businesses, such as retail pharmacies. I thought that it was much better to examine competition issues, case by case, through a proper inquiry by the established authorities, so that they could be considered at a measured rate and people could have a chance to adjust to any changes.
§ Mr. Bercow
Will my right hon. Friend take this opportunity to abandon self-effacement for a moment and confirm that the difference between the right hon. Lady and him is simply stated? As a Secretary of State and as a junior Minister, he was in charge of his officials, whereas the right hon. Lady is told what to do by hers—that is the difference.
§ Mr. Redwood
The other problem is that, when they are told what to do, Ministers do not always heed those words because they have not read the documents. That is a great problem.
§ Mrs. Beckett
Speaking of reading documents, will the right hon. Gentleman be kind enough to explain to the hon. Member for Buckingham (Mr. Bercow) and to the House why they both fought the last election on a manifesto that said that a Conservative Government would introduce legislation of the kind that we are discussing?
§ Mr. Redwood
If the right hon. Lady checks the manifesto that I issued in the constituency of Wokingham, 44 she will find no such reference. I also reassure the right hon. Lady that no Conservative Minister would have introduced legislation that was in the same appalling state as this Bill. No Conservative Minister would have come to the House without knowing the answers to fundamental questions about the impact that such legislation will have on brewers, petrol filling stations and other businesses that we believe will be damaged by the Bill.
§ Mr. Letwin
Does my right hon. Friend agree that the President of the Board of Trade gave an important answer when she said that she estimated that the effect on pharmacists would be about £900 million? Does he agree that the right hon. Lady owes the House a further explanation regarding whether she believes that that is the super-profit currently being made by pharmacists or whether the legislation will have a severe impact on their sustainability?
§ Mr. Redwood
My hon. Friend listened acutely to the remarks of the President of the Board of Trade. She implied that the Government intend to damage gravely the cash flow and profitability of retail pharmacies. That is confirmed by the Minister in another place who has admitted on the record that pharmacies will close if the legislation is passed unamended. That is why the Opposition will vote tonight in support of a reasoned amendment.
§ Mr. Redwood
I should like to finish my point, if I may.
If Labour Members examine carefully the terms of the early-day motion—which many of them signed—they will see that I have used the same language in the Opposition amendment. We would be delighted to welcome all 184 of those Labour and Liberal Members into the Opposition Lobby in support of a motion that they have already signed up to. I can reassure them that my right hon. and hon. Friends will be in the Opposition Lobby in large numbers to add their votes and voices to those of the 184 Members who have already signed the early-day motion.
I am a realist, and I would be extremely surprised if all 184 Members decided to vote again for something that they have already signed up to in an early-day motion. However, I ask the press and the public carefully to read the record. If they do so, they will see that there is a majority in the House in favour of treating retail pharmacies rather better than the President of the Board of Trade is suggesting. If we add the votes of the Conservative Opposition to the 184 names—allowing for any double counting—on the early-day motion, there is a majority in the House against the Government's proposals for retail pharmacies.
I see the Government Whip at last becoming interested in my remarks. The hon. Gentleman knows the arithmetic as well as I do. I trust that, before the debate ends, the President of the Board of Trade will ask one of her junior Ministers to give the House some hope that the plight of retail pharmacies will be recognised before the Bill completes its progress through Parliament.
§ Dr. Stephen Ladyman (South Thanet)
The hon. Member for West Dorset (Mr. Letwin) referred in an intervention to the £900 million extra charge to the 45 consumer—something to which my right hon. Friend the President of the Board of Trade also referred. Is it not true that the majority of that £900 million goes into the pockets of large retailers and supermarkets, which benefit also from retail price maintenance? What would the right hon. Gentleman intend to do about that? Does he think that that is a correct use of the public's money?
§ Mr. Redwood
I have explained that the Opposition are very worried about smaller and rural pharmacies, and quite a lot of that £900 million goes to them. It is up to the hon. Gentleman and his party to explain what they will do if they put unamended legislation on the statute book and many pharmacists go out of business or change the nature of their business, thereby removing an important service in each of the communities affected. If we have a truly listening Government, and if they are still spending money on focus groups, I am sure that those groups will tell them that such a service in each community is valued and that it would be a foolish Government who went ahead pig-headedly and decided to eliminate such an important service in many communities.
§ Mrs. Beckett
It seems that the right hon. Gentleman has entirely lost track of his argument. The Government are not outlawing retail price maintenance. We are merely saying that the matter should continue to be considered and discussed by the proper authorities—as opposed to the amendment that the right hon. Gentleman is defending, which would not allow the matter even to be considered for the next six or seven years. We are talking not of abolition but about allowing the matter to go to the proper authorities for them to judge. Why is the right hon. Gentleman against that? He is supposed to be in favour of competition.
§ Mr. Redwood
It seems that the right hon. Lady does not understand her proposed legislation. If the Bill is enacted unamended, the sort of pricing behaviour that we are discussing will be illegal, in a way that—[Interruption.] The Minister says that there is an exemption, but it is made clear that that will be temporary. The words of the exemption do not even guarantee the position of the retail pharmacist. I have specifically asked the Director General of Fair Trading for reassurance. He has replied in ambiguous and opaque language, implying that there is no intention to guarantee five years for retail pharmacists.
§ Mr. Ian Bruce
It is clear that my right hon. Friend has a grasp of the Bill that Labour Members do not. The President of the Board of Trade was clear that a dominant company—for example, British Steel—if it were running at a loss, would automatically be acting in an anti-competitive way. Surely that means that, when the Government allow the pound to become uncompetitive, and British Steel, which is exporting, has to operate at a loss and sell its products at a loss, the company will have to make employees redundant because of losses and long—
§ Mr. Redwood
I accept your wisdom, Mr. Deputy Speaker. However, I think that my hon. Friend was 46 making a cracking good point. He is saying that it is possible for a company to be dominant in the United Kingdom market only to be driven into massive losses because of the Government's economic policy, and then having inspectors calling, jemmying open the door, and saying, "You are guilty of anti-competitive practice." That would be most unfair, and I hope that Ministers will consider the matter.
§ Mr. Redwood
I must make a little more progress.
The purpose behind the Opposition's amendment is clear: it is to allow all those who signed the EDM a further opportunity to vote for their principles and beliefs. It provides all Labour Members with an opportunity to join in the debate, as it will be fully in order for them to make the case for their local pharmacies. Moreover, it provides us with an opportunity to highlight the problems that such businesses will face.
Pharmacies are not the only businesses that are likely to be badly affected by the Bill. The Government are still in a great muddle over vertical agreements—for example, the sort of agreements that exist between brewers and pubs, between oil refiners and filling stations and between car manufacturers and car distributors, to name but three important industries.
The Government imply that they wish to exempt such vertical agreements, but they still have not been able to produce clear language in the Bill to that effect. There is something in general terms in schedule 13, but industry wishes to see these matters dealt with case by case in the Bill so that it does not have to live in legal uncertainty about business practices.
It was disappointing that the President of the Board of Trade was unwilling to specify, in response to my opening question, one existing business practice that she would like changed as a result of the Bill. That is what business is asking about. Car manufacturers need to know whether their existing distribution arrangements are legal and satisfactory. So do brewers and the publicans. It is no good the right hon. Lady saying that it has all been settled in Brussels, because, as she knows, in the case of the publicans and the brewers, there have been various cases in Brussels. One of the most recent judgments made it clear that there must be an investigation case by case, brewing business by brewing business. That means that the brewing industry continues to live in great uncertainty.
Why are the Government unable to make up their mind on any of these things? Why cannot they say that they think that the pubs are getting a bad deal and that they want legislation that hits the brewers? Equally, why cannot they say that existing arrangements have been arrived at fairly, that they will be endorsed and that security will be written into the Bill? We shall be giving Ministers further opportunities in Committee to try to put these matters right.
§ Mr. Cash
As for the possibility of amendments in Committee, my right hon. Friend may have heard my earlier altercation with the President of the Board of Trade about doctors' surgeries that supply prescriptions and the nonsensical and indefensible one-mile monopoly rule, which prevents fair competition in rural areas where there 47 are pharmacies on the one hand and doctors' surgeries on the other. Would my hon. Friend—unlike the President of the Board of Trade—be good enough at least to consider proposing the abolition of that indefensible monopoly?
§ Mr. Redwood
We shall certainly be probing in Committee, as my hon. Friend would wish, to ascertain the Government's intentions on all these matters. However, our immediate worry is about the plight of existing retail rural pharmacies. Any changes in the current arrangements would need to be based on our being reassured that a proper service could be applied in each rural area, and that there would be sensible transitional arrangements of the sort that my hon. Friend would no doubt wish to see.
The House has already had some substantial exchanges on the Murdoch amendment, but, as the President of the Board of Trade still does not seem to know exactly what the Opposition's position is, I shall set it out briefly again and offer a proposal. Our view is that the Bill did not need the amendment that was passed in another place to make predatory pricing in the newspaper industry an offence. We believe that both old legislation and proposed legislation, unamended, do the job. However, we see that there are considerable tensions and worries in the newspaper industry, which have been voiced by hon. Members on both sides of the House.
We know that The Daily Telegraph does not wish to see the amendment that was passed in another place remain in the Bill. There is a good article about that in today's edition. However, it is worried about the pricing behaviour of its principal rival, The Times. We know that the position of The Times is that it is not cross-subsidised in any way from BSkyB, as some people allege. Those at The Times say that they are offering decent price promotions, which represent good sense for their business as well as being good for those who buy The Times. We know that The Independent is worried about the pricing behaviour of at least one and perhaps both of those other national newspapers, as it, too, fights for a share of that prestigious but competitive market.
Before we get into more deep discussions on those matters in Committee, the President of the Board of Trade should invite in representatives of those three newspapers—and, indeed, of any other legitimate interest that might want to talk to her—and ask them for their views on how competition law in this area should be carried forward. She should explain what the Bill will achieve and what the consequences will be.
The right hon. Lady looks shocked at the thought that she might do some work for a change, but it would be most valuable if she invited those people in and listened to their views.
§ Mrs. Beckett
The right hon. Gentleman does not have the faintest idea of the role of a potential Secretary of State for Trade and Industry. The Director General of Fair Trading is already consulting those interests, inquiring into their position and seeking information from them. It is not my job to do the director general's job, as the right hon. Gentleman seems desperate to do.
§ Mr. Redwood
If the right hon. Lady were not proposing to change the law, I would accept that answer; 48 indeed, I would not urge her to meet parties to a competition dispute under existing law in such a way, unless there were special circumstances. This issue is different. She is comprehensively and radically legislating on competition matters when there is a big row in the newspaper industry, in the House of Commons and among the wider public on those newspaper issues. It is incumbent on her to listen to the views of the participants in the dispute and to explain what she intends under the Bill.
I repeat that it was most welcome that the right hon. Lady told us a little more about how she wanted the Bill, should it go through the House, to be interpreted on the crucial issue of predatory pricing. She has given us half the story; surely she can give us the rest. She must tell us exactly how the formula will apply, and I advise her to listen to at least three of the newspapers and any others with a strong view before she finalises arrangements. She cannot wash her hands of the matter: she wants to legislate; she says that the current law is wrong; she could meet the requirements of Labour Members on those and other matters, if she wanted to do so. I hope that she will think again after the debate in the privacy of her office, because I have offered her a sensible proposal for carrying the matter forward and for avoiding too much heat, but not much light, in Committee.
I pass briefly to a few remaining matters, the first of which is the Bill's establishment of the Competition Commission to replace the Monopolies and Mergers Commission. We have several worries about that body. First, we want to know, from the right hon. Lady's winding-up speech or in Committee, more about whether the Government intend to keep the many good and talented staff at the MMC and to transfer them en bloc, or to sack them and start again with a new team of officials.
Why does the right hon. Lady need 50 more officials to run the new regime than ran the old? We were told that the old regime was muddled, fussy and too complicated and that the new regime would represent a great simplification. We shall probe why the new body will have the traditional mergers function of the MMC and an appeal function. We suggest that there is something difficult in having the appeal function and the normal review function vested in the same body, and we want satisfaction on that important matter.
In Committee, we shall also probe Ministers on concurrent powers between the Director General of Fair Trading and the utility regulators. Ministers might agree that there is still a lot of muddle and confusion over who will do what and when under the new legislation, and we shall offer opportunities through probing amendments to clarify their thinking and to reassure the various regulators that at least the Government know what they should and should not do.
We are concerned about proposed powers of enforcement and fines. I am pleased that the Government have clarified that the 10 per cent. of turnover will apply only to United Kingdom turnover, not to global turnover. That is progress, but such a fine would be large for a retrospective infringement where a business was doing something that was legal under the old regime. The Government should look again at the transitional period, because people may inadvertently fall foul of what the right hon. Lady now says is designed to be a stronger competition regime than the old one. The retrospective element in the Bill is invidious and damaging to British 49 business and, given that it has been allied to such a high fine—typically, annual profits in a good year—Parliament should think again.
Powers of entry are draconian. They would be reasonable for chasing serious criminals or drug barons, but the Government should think again about having such severe powers in respect of people who are running businesses and trying to do their best in what they take to be the business and the public interest. I remind hon. Members that clause 62(6) states:Any person entering premises by virtue of a warrant under this section, may take with him such equipment as appears to him to be necessary.It is not difficult to conjure up all sorts of unfortunate images of what might be necessary to break open doors, safes and filing cabinets to get to the necessary paper.
We are worried about the impact on public and private sector costs, and want more information on how much the new regime will cost the Government to run. A bigger and more expensive quango will replace the existing body. I fear that it will be much more complicated than the right hon. Lady has given us to believe, and may need many more staff than she has forecast. With a prohibition regime, all sorts of people will seek guidance and advice: they will be worried sick that their premises may be broken into or that they may be subject to a large fine.
More important, the compliance costs on the private sector have been grossly understated in the compliance cost assessment that accompanies the Bill. We are told that the non-recurring compliance cost for British business and commerce is between £2.6 million and £4.4 million. Does the right hon. Lady accept that practically every British business of reasonable size will have to seek a great deal of expensive legal advice? Each business will have to go through corporate agreements and many contracts and ask whether they comply with the new legislation. For each complicated and sophisticated business, that work could run into thousands of documents, and many will have to turn to expensive competition lawyers for the reassurance that they seek or to be told how to amend those agreements. Ministers have no idea of the amount of work that they are giving people.
§ Mr. Bercow
My right hon. Friend has put his finger on a matter of the greatest importance to business, with whose interests, after all, the Bill is supposed to be concerned. Does he agree that we have further cause for concern in the light of the dramatic upward revision of the estimated costs since the right hon. Lady's original statement on the matter last August?
§ Mr. Redwood
My hon. Friend is right to say that the Government are trying to make their estimates more realistic, but they are still out by a big margin. I have spoken to many businesses over recent weeks about this and other matters. They told me that they are already embarking on an extremely expensive exercise. Those businesses are not trying to be anti-competitive; they have negotiated complex arrangements with partners, counter-parties and other companies, and they now find that they need a great deal of legal advice.
I hope that hon. Members will agree in Committee that it would be welcome if more rapid progress could be made on problems through the competition machinery. It would be progress if businesses could be reassured that they would be told much more quickly than under the old regime whether what they were doing was reasonable and 50 whether it met the requirements of the Bill. Swifter justice would go a long way to dealing with the sense of injustice felt by various companies.
The cable industry, for example, has concerns about current competition matters. I put it to the industry that many of them would be best dealt with by quick answers rather than by different laws. The industry agreed: it would like changes to the Bill, and I said that I would urge swifter justice, which would undoubtedly help. I hope that that will be built into the Bill.
In this Second Reading debate, my hon. Friends and I are asking what all this is for and what it will do. The President of the Board of Trade says that we need a more competitive market. Why cannot we create one under existing powers? She could review more industries and practices with a view to making the market more competitive. Will the Bill make the water industry competitive, for example? That industry has very little competition at the moment. Will it open up more public sector activities to market tests? That would be a good way to develop more competition, but not one that the Government are currently planning to follow.
Does the right hon. Lady wish to break the current arrangement for car distribution, petrol retailing, newsagents and newspaper distribution, pubs and brewing? She will not tell us. We need to know before the passage of the Bill is completed. We need to know exactly how the Bill could make our markets more competitive, and who will be affected.
We have had one piece of legislation from the DTI team proposing a minimum wage without saying at what level the wage will be set or who it will affect—a piece of legislation with no heart. We now have another piece of legislation with nothing of substance behind it. We are told that it will make the world more competitive, but the Government cannot say how or why. We have a lot of work to do in Committee.
§ Mr. Clive Soley (Ealing, Acton and Shepherd's Bush)
I support the Bill, which is a positive step forward. It provides a framework for competition to be decided; it is not, as the Opposition seem to think, an opportunity simply to list everything that can be ruled out as anti-competitive. It is a framework by which the Office of Fair Trading and the new Competition Commission can decide policy in terms of competition law. That is precisely what we should be discussing, rather than a long list of shopping expeditions, which the shadow Secretary of State seemed to want to discuss.
I want mainly to discuss clause 19, which was added in the House of Lords by Lord McNally, clauses 18 and 60, and, to a lesser extent, clause 46, which has some bearing on the issue.
The issue relates to the fact that Rupert Murdoch has cut the price of The Times on Mondays with the apparent intention of driving The Independent out of business. I have little doubt that Rupert Murdoch would like to get rid of The Independent, and that he has The Daily Telegraph in his sights. However, it is one thing to believe that, but quite another to prove it. The House of Commons has a duty to structure the law in such a way that, where there is a serious challenge to competitive behaviour in the newspaper industry, it allows all newspapers to be judged on the same basis.
51 Much as I dislike Mr. Murdoch and his practices, and what he has done to the newspaper industry, not least to the free and diverse nature of the news service in this country, I do not believe for a moment that he is the only threat to press freedom in this country or the world. Hon. Members who remember my Freedom and Responsibility of the Press Bill five years ago will know that I have argued before that, by the early part of next century, most of our national and international news production and distribution will be concentrated in the hands of about half a dozen owners. That should seriously concern us all.
The issue in this Bill is twofold: first, whether clause 18, as adjudged by clause 60, will deal effectively with the price cutting of The Times on Mondays—
§ Mr. Soley
Yes, and Saturdays—secondly, whether there is a better way to deal with the media.
As I have been saying for weeks, excited as I was at first by the possibility of stopping Rupert Murdoch cutting the price of The Times in order to get to The Independent—I thought that the Bill might achieve that—I must conclude that, with or without clause 19, the Bill will not have that effect unless the Director of Fair Trading judges that the practice of cutting the price of The Times will lead to the demise of another newspaper—in this case, The Independent. That will be hard to prove. Indeed, it will be harder to prove now that The Independent has been bought by Mr. O'Reilly.
I also doubt whether, if the provision is to be used effectively, it could catch a number of other newspapers that do something similar. For example, The Daily Telegraph provides free copies in hotels, and the Daily Mail and other newspapers of that type provide free copies on airlines. Thus, the four big newspaper owners in Britain already use price-cutting techniques to take over their competitors' market share. If they already do that within existing competition law, it follows that Rupert Murdoch will probably succeed in continuing his price-cutting practice unless we have additional evidence.
One or two of my hon. Friends have told me that Rupert Murdoch has said in the past that he would like to knock The Independent and The Daily Telegraph out of business. However, saying that is different from having it in writing and being able to prove it in a court of law. I am therefore not convinced that clause 19 will change Mr. Murdoch's ability to cut the price of The Times on Mondays and Saturdays.
Perhaps the strongest argument in favour of the Bill is that News International seems worried about it and about clause 19. It has been worried for some months now, partly because of the Chris Patten affair and partly because of the growing concern of newspapers generally that Rupert Murdoch is getting too powerful. Some of his activities have been very dubious, not least his support of the Chinese communists. He has not hesitated to knock the BBC off Star Television, or to stop the publication of a book by his company in order to please the Chinese communists.
I am reminded that, in his university days, Rupert Murdoch was a communist and had a bust of Lenin in his room. In my experience, most young authoritarian 52 communists end up as old conservatives. It is a traditional pattern, and I have seen it happen many times in my political life. That definition fits one or two Opposition Members.
Having made one or two strong criticisms of Rupert Murdoch, I reiterate that it should be no part of our agenda to target particular individuals or companies. Let no one get the idea that, if we stop Rupert Murdoch's price-cutting activities, some other newspaper groups would not do exactly the same if they thought that they could get away with it. We must not lose sight of the fact that the ownership of national and international news production and distribution is becoming increasingly concentrated. I am pleased to say that some News International senior executives agree with me that that is a danger.
The issue is whether we can have a competition law that deals with the newspaper industry.
§ Mr. Ian Bruce
The hon. Gentleman is making a powerful argument, in his own terms, about control of the printed media. However, has not Rupert Murdoch shown that, in the three competitive fields of satellite, digital terrestrial broadcasting, which has just been introduced, and cable, he has been able to get a virtual monopoly, while being fully regulated by the ITC and others?
§ Mr. Soley
He is not regulated in the newspaper industry. The whole of the News International board, including Rupert Murdoch, turned up at a recent Press Complaints Commission annual jamboree a few days ago at the London Aquarium. The main item of discussion was whether there were more sharks in the aquarium or watching from the outside. The general view was that there were probably more sharks watching the sharks.
The serious question is how we should regulate the media. I mentioned clause 46 earlier because it sets up the new Competition Commission, which takes over the powers of the old Monopolies and Mergers Commission. Those who argue that the newspaper industry should be included in the Bill note that paragraph 22 of schedule 7 sets up a panel of persons to look at newspaper ownership. That is taken on board by the Monopolies and Mergers Commission. The powerful point is that that has not worked either. A small number of people have greater control not just of the printing of news but of production and distribution: it involves the Reuters of this world as well as the newspapers.
The Tetra Pak judgment has interesting implications for newspapers and other organisations that use price-cutting mechanisms. I thought at first that it would stop the price cutting that has gone on for five years, which, as my hon. Friend the Member for Sunderland, South (Mr. Mullin) rightly pointed out, is the strength of the case against Rupert Murdoch's practice of cutting the price of The Times. That judgment examines the average variable cost, and, over a five-year period, that practice has clearly resulted in a loss. The problem is whether it is a loss leader within the existing company.
If that practice is to be stopped by an amendment, it would have to be more specific than new clause 19, and would have to name not only an industry but a particular practice, which would mean going down the road that the shadow Secretary of State suggests, of a shopping list of offences that we want to stop. Competition legislation cannot be framed in that way. New clause 19 does not add anything to the Bill, so it is redundant.
53 Although I appreciate that it is not an area of responsibility for the Secretary of State, we should concentrate on how we regulate the media. Whether it is through a communications Bill or a media Bill is a matter of choice, but I have no doubt that we need to take tougher action when predatory pricing in newspapers or in other areas of the media reduces the amount of variation in the news market. If we allow ownership to continue to be concentrated in the hands of a few people, as it has been in the past 20 or 30 years, we shall damage and endanger our democracy.
As I said in an article a few days ago, I believe that such a Bill should deal with ownership, and should make a clear statement about media freedom. Clause 1 of such a Bill should provide a defence of press freedom: privacy, harassment, accuracy and ownership could be dealt with in subsequent clauses. Our competition law enables the Monopolies and Mergers Commission, soon to be the Competition Commission, to deal with mergers, but it does not provide for a variety of ownership of the press beyond what it is now. That is where we are stuck at the moment. Allowing a particular owner to change the price of one of his products will not make a significant difference to the freedom of the press.
The solution to this problem is a separate Bill dealing with press freedom, ownership and other regulatory mechanisms. The media are a dramatically growing new industry that affects the quality of our democracy and the political life here and in other countries. I am increasingly concerned about the proposal to attach clauses or amendments to competition law to achieve another end: that of media freedom.
If we believe that media freedom is important—I certainly do, and have been arguing it for many years—we need a Bill designed to achieve that end. We do not need a shopping list of practices that should be against the law. We should not devise a law that provides such a list and then be surprised when we find that we have not caught everything we should have caught, or that practices we had not thought of have got through.
My right hon. Friend was right to make that point. The essence of the Bill is to provide a framework in which any individual or organisation can refer a practice to the Director General of Fair Trading, who will make a judgment on whether that practice should be stopped.
Clause 18, read in conjunction with clause 60, in effect brings in the Tetra Pak judgment, because it relates to European law. News International may decide that the risk of prosecution under clause 18 is too great, and will stop the price cutting. New clause 19 would not alter that. All the lawyers I have asked about this matter put it in the balance, and said that it might go one way or the other. The board of any company, such as News International, would have to decide whether to go to court to fight the case or to change its practice. I hope that News International will change its practice.
Although I want a media Bill such as I have described to protect and enhance press and media freedom in this country, the four big press groups could also come up with their own code, and state clearly that they will adhere to it. Such a code should contain a provision on the importance of diversity in the press. It is naive to expect News International to knock on my door offering to produce such a code, although I have had an exchange of letters recently in which I put it to them yet again that they should consider doing so.
54 Last week was typical. Four papers were in gross breach of the Press Complaints Commission code by their coverage of the Mary Bell case, their story about Joanna Lumley, and, perhaps worst of all, the story in the Daily Mail on Wednesday accompanied by a picture of a four-year-old girl with her name underneath it. The story was about her grandmother having her mother sent to prison. A four-year-old girl should not have to go to nursery school with that on the front page of a national tabloid. If the Press Complaints Commission does nothing about such gross breaches, we still do not have the right balance between press freedom and press responsibility.
The Bill is essentially about competition. It tries to establish a level playing field in the newspaper industry and elsewhere. It should not be a battle against one particular newspaper owner, even though he has done a great deal of damage. When I read the Daily Mail, I realise that there is not an awful lot to choose between that group of newspapers and News International: it is just as inconsiderate about the effect of its behaviour on others, not least on that four-year-old child. We should consider introducing a communications or media Bill that protects and enhances press freedom, and imposes a certain level of responsibility.
Under this Bill, News International will have to decide whether to fight it out in the courts with the Director General of Fair Trading if he challenges the price cut on Mondays and Saturdays, as I hope he does. That decision will have to be made, whether or not new clause 19 is included in the Bill.
§ Mr. David Chidgey (Eastleigh)
I congratulate the hon. Member for Ealing, Acton and Shepherd's Bush (Mr. Soley) on a thoughtful and wide-ranging speech. I support and understand some of the sentiments that he expressed, particularly about a media Bill, but our major problem is that the Government show no sign of making time in their business programme to debate that issue.
I welcome the intentions behind the Competition Bill. I support the prohibition approach and the strength and powers of investigation for competition authorities. It is a sound step forward. The Bill provides the opportunity for fundamental reform of competition policy, which is well overdue. It provides the means to set down the same set of rules on competition throughout the nation states of Europe. A single set of rules operating across Europe is an essential ingredient of a fair and efficient single market.
I also welcome the incorporation of articles 85 and 86 of the treaty of Rome into United Kingdom competition law. Direct prohibition of restrictive agreements and cartels, and the prohibition of abuse of a dominant position, are two key ingredients of modern competition law.
When it comes to the detail of the Bill, my welcome starts to fall a little flat. The Government's proposals for reforming competition policy have some fundamental weaknesses and flaws.
People seem unsure, there is even dithering, about whether the Bill should prohibit vertical agreements, and if so which ones. The Bill does not seem to take account of the fact that, if such agreements were excluded en bloc, the legislation would immediately be at variance with that in the rest of the European Union. In addition, such an 55 exclusion of vertical agreements could undermine a key principle of the single market—the freedom of trade across state borders.
There are proposals to exclude en bloc from prohibition organisations with professional rules, but there has been no proper consideration of restrictive practices. The extension of investigative powers goes well beyond those contained in articles 85 and 86 of the treaty of Rome, and that poses some threat to civil rights. Those are just some of the Bill's flaws, and they need to be probed and clarified. I shall return to those issues in detail.
The Government take pride in believing that they consult. That is for them to say and for us to hear. They say that they have had about 150 responses to date on their consultation paper on the Bill. That is welcome. However, the key question is what impact the wisdom and experience of industry and commerce has had on the framing of the Bill. The reforms in competition policy that it will introduce are likely to be in place for at least 20 years, and industry and commerce will have to live with the results. It is vital that their views are heeded as the Bill progresses.
The Bill started life in the other place, which is a common practice for technical, complex Bills. The fact that it started life there is not encouraging because it may demonstrate the ability of this House. It has been subjected to intense scrutiny before coming here, and amendments have been incorporated with all-party support. They include those that deal with retail price maintenance of over-the-counter medicines and with predatory pricing in the newsprint media.
I emphasise that those amendments had all-party support. Some Labour Members voted against the Government Whips' instructions. It is reported that, when one such Labour Member was asked on Radio 4 why he voted in favour of the famous new clause 19 on predatory pricing, he said, "I listened to the argument." That could be something new. Perhaps if the House subscribed to that idea, it would make our debates more interesting, although perhaps not as lengthy.
I shall later go through some of the arguments and build on the comments by the President of the Board of Trade to try to take us further on the question of the prohibition of anti-competitive practices in the print media. For the moment, I shall examine in detail some of the proposals that will be presented in Committee, especially on vertical agreements.
Two or three areas need to be examined, because they illustrate the problems that we shall face in examining the Bill's detail. Agreements between manufacturers and retailers for after-sales services or the extension of warranties have obvious benefits for the consumer. However, agreements that deny consumer choice or which artificially maintain high prices are clearly against consumer interests, and the Bill must deal closely and directly with such anti-competitive agreements. They should not be excluded en bloc.
§ Mr. Tim Boswell (Daventry)
Does the hon. Gentleman agree that an examination of the Liberal Democrat amendment on this matter makes it clear that Liberal Democrats deplore the absence of an explicit prohibition of vertical agreements? It is not clear from the 56 context that there is to be some kind of saving in the cases to which he refers, including those that he regards as beneficial to consumer choice. Is the position of the hon. Gentleman's party at all clear on this matter?
§ Mr. Chidgey
I am fairly confident that my party's position is clear, but I am rather doubtful about the Government's position. I should like to tease that out, and perhaps my following comments will convince the hon. Gentleman.
In the Sunday papers, the continuing scandal of the over-pricing of family saloon cars in the United Kingdom compared with other European countries was writ large. According to European Commission figures—not to any newspaper editor, whether with News International, as in this case, or with any other group—Ford, BMW, Peugeot, Fiat and Nissan all charge British consumers up to 40 per cent. more for family cars than they would pay in other European countries. The trick seems to be to restrict the production of right-hand drive vehicles for the United Kingdom market, and to argue that the difference in price is due to the extra cost of making a limited number of such vehicles compared with the left-hand drive European standard.
I am sure that no hon. Member or anybody else would believe for a second that the production of a right-hand drive version of a family saloon adds 40 per cent. to the price, or that it costs up to £4,000 more to produce a right-hand-drive vehicle which is sold not just in the United Kingdom but in many other markets. The simple truth is that European manufacturers are selling in the UK at the highest prices that the market will stand. Those prices are controlled by a vertical agreement through a network of dealerships and franchise holders who are contracted to deal in the products of only one manufacturer.
That is a classic case of vertical agreements acting against consumer interests. No wonder that one manufacturer was alleged to report, "It's wonderful. We are making more out of England than ever." In the £200-billion-a-year European motor industry, British customers are being ripped off on a massive scale. An anti-competitive vertical agreement that allows that to happen must be covered by the Bill's prohibitions.
We have already debated the issue of manufacturers supplying retailers with their products as long as they sign up to conditions. It cannot be right for the Bill, through omission, to allow some manufacturers and suppliers of designer clothes and accessories to prevent retailers, and especially supermarkets, from offering those goods at a discount. To their credit, some supermarkets have found alternative supplies of well known branded designer clothes, which they offer at a discount; but they should not be forced to take such measures to get around anti-competitive agreements. Similar problems arise with brewers' chains, petrol stations and particular oil companies.
§ Dr. Nick Palmer (Broxtowe)
Is there not some confusion between the terms "anti-competitive behaviour" and "anti-competitive agreements"? In many of the cases that the hon. Gentleman mentions—for instance, car manufacturers—it is not clear that the manufacturers have made formal or informal agreements among themselves to behave in a certain way. They do not have to do that: 57 a manufacturer can be sufficiently anti-competitive on his own. There is a problem with legislation of the type that we are debating. Ideally, we should give the regulator the power to attack anti-competitive behaviour, even if the practice has not been agreed with anybody else.
§ Mr. Chidgey
The hon. Gentleman makes an interesting point, and I accept much of what he says. I reinforce his comments by saying that I think that Volkswagen was fined some £60 million recently by the EU for prohibiting its dealers from selling cars in, I think, Italy, and possibly Austria, at prices that were much lower than in Germany.
There is a powerful anti-competitive network, and we should be able to deal with it by way of competition policy. It is important that the uncovering of such practices should not be left to the chance of an investigation instigated by a complaint to the Office of Fair Trading. Our policy should make it clear that such anti-competitive practices are prohibited by law.
I want to deal briefly with professional rules. A number of organisations have shown concern about the way in which those are dealt with under the Bill. I should perhaps declare an interest, as I am a fellow of several engineering institutions, although I receive no particular financial gain from that; in fact, it costs me quite a lot in subscriptions. Nevertheless, in case anyone should be in any doubt about my advocacy on this, I declare my paid-up membership to several well-known engineering institutions. They are concerned, as are a number of other professions.
The rule books for accountants, lawyers, engineers and other professions are made by their professional bodies, using powers under legislation. Some of those rules, such as the separation of clients' money, the need for qualifications and the commitment to good practice, are essential to protect the public. I do not think that anyone would argue that they were not in the consumer's interests. However, other rules, which restrict advertising or the display of prices, or which set minimum fees, regardless of the service level provided, are clearly anti-competitive.
The manner in which the Bill deals with professional rules will require close scrutiny in Committee. At present, the definition of the professions are prescriptive, and do not take account of all the bodies that are affiliated to a particular profession. The professional bodies in, for example, optometry and optics have voiced strong misgivings about the Bill, as has the engineering profession. It is a particular problem that the Engineering Council, which is recognised by Government as the voice of engineering, and which maintains a national register of about 30,000 professional engineers, finds that many of the members on the register would not be covered by the Bill's current definitions.
The engineering profession has, through the council, established three grades of professional engineer: chartered or incorporated engineers, and engineering technicians. The Government have a memorandum of understanding with the Engineering Council. They recognise its authority to represent the whole profession, so it is only logical that the definitions that the council uses for engineers and that are already recognised by Government should be those in the Bill. I cannot understand why the Government seek to find new definitions for something that is already agreed at that level.
58 I move on to the issues to do with predatory pricing in industry, because I fear that other hon. Members will want to contribute—at length, I am sure. So far, there has been much debate on predatory pricing. We need to examine more closely the Government's approach to the issue and their rejection so far of clause 19, which aims to ensure that we maintain a high-quality newspaper print industry. It seems that clause 19, as amended in the other place, specifically prohibits predatory pricing by national newspapers.
The Government, today and at other times, have made it clear that they intend to remove the clause, on the basis that it is unnecessary and unworkable. For some months, they have insisted that the Bill is up to the task without a specific prohibition. The UK is fortunate in the breadth and scale of its national newspapers. No other country in the western world can boast some 10 national newspapers available on breakfast tables everywhere, every morning.
The diversity of our newspapers and the range of opinions they hold have created and supported burgeoning journalistic skills, attracting the best in that profession. We are very lucky. We should consider the sector sacrosanct from monopolistic tendencies, as the hon. Member for Acton and Shepherd's Bush said.
Not so long ago, the chairman of News International said that, within the next 10 years, the UK newspaper industry could support only three national titles: The Sun, The Times and the Daily Mail. It will not escape hon. Members' notice that two of those titles are already owned by that gentleman, which does not say much for competition 10 years hence.
How is it that an industry with an annual revenue of about £700 million could support only three major titles? Perhaps the gentleman concerned meant that he wanted to have three titles to maximise profits in the industry, and that he would prefer it if those three titles were in some way owned or controlled by himself.
Just think for a moment what the impact would be of having just three national papers for hon. Members to fight over in the Tea Room every morning. Just think what it would be like to have just one third of the newspaper journalists sitting in the Press Gallery every day—I do not think that we would notice the difference today—all under the control of one or two organisations, and all under pressure to spout forth just one or two opinions.
Without effective competition laws, that could be the state of our newspaper industry within a few years. I understand that the total revenue from national newspapers is about £700 million a year, yet the cost of production and distribution is put at some £750 million a year.
§ Mr. Chidgey
I confirm what the hon. Gentleman says—for broadsheets. By comparison, industry sources estimate that the revenue of The Times is £80 million per year, but it costs £140 million a produce it—an annual loss of £60 million.
As a further graphic example, The Times on Saturday is sold for 40p, yet the industry reckons—
§ Mr. Chidgey
Is that not interesting: it has suddenly gone up to 50p? Could this debate have motivated that price rise?
§ Dr. Ladyman
The hon. Gentleman mentions predatory pricing, as have other hon. Members, but clause 19(2)(b) restrictsother action which may reduce the diversity and independence of the national newspaper press".Does he share my concern that that is a catch-all that could prevent newspapers from introducing features that might increase their diversity and allow them to establish themselves in the marketplace differently?
§ Mr. Chidgey
I am grateful to the hon. Gentleman. The whole point is to allow the Office of Fair Trading to examine the action by an individual newspaper, to find out whether the intent behind that action is predatory. This is where we look to the Director General of Fair Trading to have available to him a broad scale of options, to ensure that he can properly examine attempts to introduce predation within the business.
It seems that the Government's argument is that there is no case to answer on predatory pricing, and that the inclusion of specific prohibitions are politically motivated. How can the Government argue that, under current legislation, the OFT has failed to bring a successful case against News International on the basis that there was no case to answer?
Surely it must be true, as Lord Borrie, a former Director General of Fair Trading and a learned colleague in the other place of the Minister for Competition and Consumer Affairs, has said, cases brought to the OFT have failed not because there was no case to answer, but because the legislation was not adequate for the OFT to pursue the case. That is precisely why we need something as specific as clause 19: to demonstrate the clear will of Parliament, and to give the director general the guidance that he needs.
It is a bit rich to say that clause 19 is politically motivated. If people are going to say that, let us remind ourselves how undignified it is to see successive Prime Ministers anxiously beating a path to Mr. Murdoch's door, seeking his endorsement before elections. That is a bit more like political motivation. Let us remember the headline the day after the 1992 general election in The Sun: "It Was The Sun Wot Won It." Is that how we want our newspapers to be run? Is that how we want our policies to be made in this place, and our general elections to be decided—as a result of the voice, power and opinion of one or two newspaper owners, whether they own News International or any other company?
The Government argue that clauses 18 and 60, together with European jurisprudence, provide all the protections that are needed in the Bill, but other legal advice argues that they do not. In particular, European judgments concern predatory pricing by firms already in a dominant position. Look at the detail. Look at the wisdom of other advocates who have considered this matter in detail. The Government also argue that clause 19 is unworkable and will prevent newspapers from competing, but surely 60 the essence of competition between newspapers should be their quality and diversity, not the cover price regardless of the cost of production.
Clause 19 takes nothing away from other parts of the Bill—indeed, it may serve as belt and braces should the need arise. If there is any doubt about the need for it, I ask hon. Members to take account of the point I made in an intervention—Mr. Murdoch is happy with the Bill without clause 19, but, we are reliably told, most unhappy about the Bill with it.
At the very least, the Government should recognise that the weight of different legal opinion proves the uncertainty of their case. There is a clear need for guidance in the Bill to prohibit predatory pricing. As it stands, clause 19 is that guidance. If the Government are not convinced, and are genuinely concerned about prohibiting predatory pricing, they must propose something better.
§ Mrs. Gwyneth Dunwoody (Crewe and Nantwich)
My right hon. Friend the President of the Board of Trade said that our function is to create good legislation. I hope that that definition will not do her too much harm with some of her colleagues, because it is fundamental to the job of the House of Commons.
I listened with great care to the points made by my hon. Friends and other hon. Members about the freedom of the press. I wholly agree that it is quite wrong that predatory pricing, in any form, should be used to drive out an opponent. I do not care whether we are talking about buses, newspapers or sweet manufacturers: I am angry at the idea that someone can use unfair and dishonest means to drive a competitor out of business simply because the law does not give sufficient power to control such behaviour either to Parliament or to the institutions that act on its behalf. I found that unacceptable when it involved bus companies, and I find it equally unacceptable with newspapers. Therefore, my instinct is that clause 19 should stay in the Bill as a belt-and-braces measure.
I have a different concern—that the Bill does not go far enough in another way. Motor car companies have already been mentioned this afternoon, and I want to refer urgently to the problem facing Rolls-Royce in my constituency. We talk happily about the way in which we at least try to ensure open competition between one company and another, but we do not seem to take a view, as a Parliament, on concentration of the powers of certain large industries in the hands of one or two companies.
Two German motor car manufacturers are fighting over the body of Rolls-Royce like jackals over a fallen buck. It is offensive to me that the work force have no clear view what their future will be. They do not know which of the two companies will be responsible for them. The very management that have special responsibility for controlling the company and for putting it on the market in such a manner are not only not giving a clear statement to the work force; they are not taking a clear position that reflects the interests either of the British people or of their own shareholders. It is extraordinary that a major manufacturer such as Vickers is happy to make two different recommendations, within a short period, to its shareholders about the sale of a major company such as Rolls-Royce. Apparently no one can intervene.
61 I want to ask my right hon. Friend a series of simple and straightforward questions. Will she bring into her Department those directors of Vickers who seem incapable of behaving in a responsible and respectable manner and ask them precisely what they intend for the future of this last remaining British motor car manufacturer? Will she ask them how they can reconcile a position in which two large German manufacturers will have total control over a very high-class industry—the top echelon of the motor car industry—without any attempt to discuss what that means for competition and for jobs in the United Kingdom?
Will my right hon. Friend find out from those other companies that are making obvious threats—for example, a Financial Times headline on 10 May said, "BMW repeats threat to disrupt R-R Motors"— precisely what they are talking about and how they intend to use their industrial muscle to modify, in any way, the sale of Rolls-Royce? How can it be right that this one high-quality product is put in such a position that something as basic as the supply of its engines can be in doubt? How can one company say that, because of an argument taking place in the European Court over the ownership of the name, it would be prepared to withdraw the supply of engines and, presumably, allow the factory to close until an alternative supply was found? Why is it that no British Minister has so far considered that issue to be of any interest?
On 7 April 1998, the Department informed me, in answer to a parliamentary question, that it had paid more than £6 million to a German company, £1.5 million to an American company and more than £1 million, £400,000 and £300,000 respectively to other foreign motor car companies to come to the United Kingdom to set up a manufacturing operation, while standing calmly aside and watching the destruction of what was originally one of the most remarkable types of motor car, synonymous as it was with luxury and craftsmanship? If the Bill is to be as effective as we have been told this afternoon it will be, and if it is capable of protecting the legitimate industrial interests of manufacturing industry, why have we heard nothing so far from the Department about this thorny and difficult question? I find that unacceptable and deeply worrying.
We are talking not about two particular companies, but about such a concentration of power in German hands that it will give them complete control of whole sections of the motor car industry. The point made earlier about the 40 per cent. price difference between cars bought in the UK and the same cars bought in other European Union countries will be as nothing in the future, when one or two large motor car manufacturers will be able to decide not only the type of model, but where it is made, how many jobs it will generate and what sort of future, if any, the motor car industry will have in Britain.
I ask my right hon. Friend to use her powers to call in the people I have mentioned and teach them responsibility, some sort of commitment to their own work force and the need to protect those jobs now.
§ Mr. Martin Bell (Tatton)
I am grateful for the opportunity to speak in this debate. I shall be brief. I was once a journalist, for quite a long time; I am now a lapsed journalist, but I want to talk a little about matters that I know about.
62 The issue is important. We are not debating protectionism; nor are we trying to defend the weak against the strong, or The Independent against The Times. Newspapers can and must take care of themselves in the open market. The Bill is about fair competition; the McNally amendment is about fair competition. The Bill is surely about preventing one individual—a pre-eminent, even dominant, player in the market—from becoming a monopolist in that market.
We should give the mogul his due. He revolutionised newspapers in the United Kingdom. He made possible The Independent, which he is now apparently trying to kill. He has done the state some service. Yet he has now mounted a five-year campaign to drive other newspapers out of the market—not only the threatened The Independent, but The Guardian, The Daily Telegraph, and all the rest. Only the Daily Mail is perhaps beyond his reach. To accomplish his goal, he has had the power of profits generated in another market—satellite television, in which, in some areas, he enjoys a type of monopoly position—and has had special privileges. Favours were sought; favours were given; favours were exchanged; telephone calls were made.
On both sides of the House, a myth grew up that a United Kingdom general election cannot be won without the party winning it having the favour of one of Mr. Murdoch's newspapers—The Sun. I think that that is manifestly false. Labour would have won the general election, and the Conservatives would have lost it, whether The Sun had supported the Labour party, the Conservative party, the Liberal Democrats or the flat earth party.
Mr. Murdoch—the McNally amendment is very much about Mr. Murdoch—is not a British citizen and does not run a British company. He has great power. It is the independent view—if there may be such a view—that Mr. Murdoch's power has increased, is increasing, and should be diminished. We have a chance through the amendment to diminish it, or at least to rein it in.
There surely is and has been in this country such a thing as a culture of greed. There was a culture of greed in our body politic, and the electorate dealt with that at the general election. If they had not, I would not be here, quite by chance.
There is also surely a culture of greed in our newspaper industry, in which nothing matters but the bottom line, and in which the front page is adjusted to accommodate one man's commercial interests. The acquisitions of his publishing house are adjusted to accommodate his commercial interests.
The answer lies with us. We can do something about it. There is such a thing as an overriding public interest. Hon. Members can defend it, and I think that the people who sent us here demand that we should.
§ 6.1 pm
§ Mr. Giles Radice (North Durham)
I am glad to be called to speak after the hon. Member for Tatton (Mr. Bell).
I support the Bill, which is a good one and will improve competition. I understand the problem faced by Conservative Members—who, before the general election, proposed a draft Bill, on which this Bill builds. They committed themselves in their general election manifesto to such a Bill. Therefore, the arguments that we have heard today from them are mostly specious.
63 The hon. Member for Tatton has just raised the predatory pricing issue. I do not believe that the Bill's passage is the occasion on which to deal with the wider Murdoch issue—the fact that News International has too large a share of the United Kingdom newspaper market, and that that gives Murdoch too much political power—although I certainly agree with the hon. Gentleman's comments on that issue. We will have to consider also wider issues of press freedom—about which my hon. Friend the Member for Ealing, Acton and Shepherd's Bush (Mr. Soley) has been such a notable advocate.
The Bill's passage is also not the occasion on which to comment on The Times, or the fact that—although it has some good writers—it is no longer a paper of record. Nor is it the occasion on which to say that The Sun occasionally has a malign, xenophobic influence. I always find it an irony that a newspaper owned by an Australian-American should be so consistently unpleasant about Germans, French, Italians and Spaniards. However, the Bill's passage is not the occasion to discuss that.
We are dealing with a specific issue—predatory pricing. I believe that there is a prima facie issue of predatory pricing in the broadsheet market. Over five years, The Times has consistently priced below cost, and often considerably below cost. Currently, it cuts prices only on Monday and Saturday—although, as it has been raising prices on those days, the campaign against such pricing has had some effect. Nevertheless, such pricing has meant that The Times runs consistently at a loss.
The Times's pricing is not only a marketing mechanism but a deliberate strategy of predatory pricing. The purpose of the pricing seems to be to undermine The Independent, to put it out of business, and then to attract some of its readers so that The Times might be able to overtake The Daily Telegraph. Certainly there is a prima facie case. I agree that that must be proved—which is the purpose of the Office of Fair Trading. It has not been proved so far, but, of course, the matter has not been examined since 1994, which was quite a long time ago. As has been said in this debate, it may be that some of the predatory practices are used not just by News International.
Let us be clear about it: there is danger in such predatory behaviour. If one newspaper is knocked out, the market will be less diverse than it was. Moreover, such behaviour will have an effect on all newspapers in the broadsheet sector, as each of them must react to action of The Times, thereby taking money out of the broadsheet market. Consequently, there will be not only less profit but less money to spend on journalists and on improving the product's quality.
Predatory behaviour also makes it more difficult for new newspapers to enter the market, as they will have to pay the extra costs of below-cost pricing. That is what makes it so bad for competition.
§ Mr. Ian Bruce
Hon. Members seem to be concentrating on a very narrow issue. Nevertheless, will the hon. Gentleman help me with an issue that I find difficult to understand? On several occasions, The Times has almost gone out of business. Is the hon. Gentleman saying that a newspaper that may go out of business if it does not take competitive action—thereby pushing someone else out of business, so that there is room in the 64 market—should always be attacked by the Government? Surely the great difficulty for any competition regulator will always be in deciding whom he should back in such battles.
§ Mr. Radice
I agree that the issue is complex, which is why I said that there is only a prima facie case of predatory pricing. As I do not have all the figures—I do not think that anyone has them all, because News International is not at all keen to provide them, although we have asked—I cannot prove the case. The matter will therefore have to be examined by the Office of Fair Trading.
§ Mr. Radice
No. I should like to develop my argument, as my speech will be very short.
The question for Labour Members—for all hon. Members—is whether the Bill will deal with the predatory pricing issue. The Lords made their amendment—which is now clause 19—because the majority of those voting there did not believe that the Bill did the business. Lord Borrie—who is a distinguished member of the other place, a Labour party member and, as a former Director General of Fair Trading, a great expert in such matters—took the view that the existing powers had to be strengthened. Given earlier decisions on predatory pricing, that may very well have been so.
I asked Lord Borrie whether he thought that this Bill did the work. He was uncertain about that, but he did not believe that it would. He thought that there should be a special clause dealing specifically with the newspaper industry.
I am sympathetic to clause 19, and certainly to the idea behind it. It is difficult to argue that we cannot deal specifically with the press when the mergers legislation has specific provisions for the press. The argument therefore does not stand.
Perhaps the Bill is too broadly drafted, and gives too much power. As my hon. Friend the Member for South Thanet (Dr. Ladyman) said in his intervention, the Bill gives very wide powers, which will have to be examined. We will have to examine also the Government's argument on the matter, which was made clearly for the first time only today. In the House of Lords, the Government did not set out their position.
§ Mr. Radice
Yes, all right, but I thought that Conservative Members were not particularly interested in this argument, which is largely among Labour Members.
§ Mr. Letwin
I am grateful to the hon. Gentleman, who is making a considered speech of great interest. If, as he said, Lord Borrie was right, and the Bill without clause 19 did not do the business in the newspaper industry, is he maintaining that it does the business in other industries; and, if so, what is the salient difference?
§ Mr. Radice
No; I think that the hon. Gentleman misunderstood me. I said that existing legislation did not 65 do the business. We must consider whether the Bill would enable the Office of Fair Trading to deal with predatory pricing in the newspaper industry.
The position was first properly set out this afternoon, and I congratulate my right hon. Friend the President of the Board of Trade on that. As I understood her, she said that clause 18 set out certain conduct, including predatory pricing, that would amount to an abuse of a dominant position. She went on to link that to clause 60—I do not suppose that the right hon. Member for Wokingham (Mr. Redwood) is too keen on that clause—which sets out various ways in which the principles of European legislation are to be brought into British law.
The principles are laid down by treaty and by the European Court of Justice, and any decision of that court must be taken into account, not only in British courts but by the Office of Fair Trading. The court must also have regard to any relevant decision or statement of the Commission.
I am not a lawyer, but it seems to me that the Tetra Pak case set a tough legal test for predatory pricing. The ruling was:Where an undertaking fixes its prices at a level below average variable cost, it is to be conclusively presumed that the undertaking's purpose was to harm its competitors.That would catch News International.
A Library research paper tells us that one legal test in the Commission definition of what constitutes a dominant position iswhether the company enjoys economic strength which enables it to prevent effective competition through its power to behave independently to an appreciable extent of its competitors, customers and consumers.That is precisely what News International has done. It has been able to act independently by using its profits from elsewhere, including perhaps satellite television, to subsidise and cut the cost of The Times, in order, over a long period, to knock out one of its competitors and overtake The Daily Telegraph, presumably knocking that out in turn at a later stage.
For the first time, I have understood that the legislation contains what could be a powerful mechanism for dealing with predatory pricing, if such pricing is proved. It is good that the Government have set out their case, because they certainly had not done so before, and people, including me, were going around saying that the Government had not done enough on the issue.
The case that has been set out can be quoted in a court of law and used by the Office of Fair Trading, following the Pepper v. Hart case; that may not have the strength that I attribute to it, but it certainly shows that what Ministers say about legislation can be taken into account in the courts if there is any ambiguity about the law.
We should consider my right hon. Friend's statement very carefully. I certainly intend to get the best possible legal advice on the matter, although I hasten to say that I do not intend to pay for it: I hope to get some free advice. I want to consider carefully what happens in Committee and then to decide what action, if any, to take on Report. In the meantime, I shall take great pleasure in supporting the Bill in the Lobby.
§ Mr. Alan Clark (Kensington and Chelsea)
I am sure that we all have much sympathy with the President of the Board of Trade. She is faced with an extraordinarily muddled Bill, and many of the large body of supporters behind her do not like many of its provisions; they have given vent to that feeling in many interventions, to which she responded most graciously. I do not even blame her for running away from the Chamber—she has been absent for some time—so as not to have to put up with any more comment on this peculiar Bill.
The right hon. Lady is in such a muddle because the Bill, particularly clause 19, embodies a paradox. A monopoly is considered undesirable because it overcharges its customers; but now, all of a sudden, we are being told that a monopoly is dangerous and undesirable because it may undercharge its customers.
Labour Members, greatly assisted by their allies in the press, spent a great deal of time in the previous Parliament holding up to opprobrium the syndrome of fat cats and the way in which the privatised industries kept putting up their margins and overcharging. Now, all of a sudden, many of them appear to be protesting about undercharging. It is small wonder that the President of the Board of Trade, when questioned in any detail, takes refuge in delegation to the Director General of Fair Trading. She says that she seeks endorsement for the principle only, and that all the little detailed questions will be settled by the director general.
The hon. Member for Sunderland, South (Mr. Mullin) asked my right hon. Friend the Member for Wokingham (Mr. Redwood) what he would say to the fact that The Times has lost/spent £75 million on undercharging. My answer to that question would be, "Thank you very much," because undercharging, as the hon. Gentleman calls it, is a transfer of wealth from the supplier to the consumer; so what do we have to complain about?
§ Mr. Mullin
It is a question of motive. If Mr. Murdoch is donating £75 million to the consumer out of the goodness of his heart, we can all celebrate and hope that the largesse will continue indefinitely; but if, by any chance, his intention is to put his rivals out of business and then increase his prices in order to get back all that he has lost and a great deal more, that is not so desirable from the consumer's point of view.
§ Dr. Ladyman
To judge from his comments, I can only assume that the right hon. Gentleman intends to support the Bill, because it takes out the subjective questioning of people's intent and replaces it with a mechanistic system for determining whether predatory pricing is occurring.
§ Mr. Clark
I am grateful to the hon. Gentleman for enlightening me about an aspect of the Bill that I had not yet observed, but, in the time-honoured phrase that I always use when my constituents ask me whether I intend to support or to oppose any measure, let me say that I intend to listen to the debate.
§ Mr. Letwin
Does my right hon. Friend agree that, if the defence put forward by the hon. Member for South 67 Thanet (Dr. Ladyman) were correct, the Bill would mechanistically outlaw all firms that were making a loss, and would therefore outlaw a great part of British manufacturing industry?
§ Mr. Clark
That might be the case, and that is the great vulnerability of the argument.
The hon. Member for Sunderland, South is by no means a sinister individual—he is most gifted, sensible and creative—but he has introduced the sinister concept of motive, which is entirely subjective. The hon. Member for Cheshire, wherever it is—[HON. MEMBERS: "Tatton."] The hon. Member for Tatton (Mr. Bell) was hot on it too, but we do not want to bring motive into our debate or our judgment.
I draw the House's attention to clause 19, which is the kernel of the Bill. It refers toAny conduct on the part of one or more national newspaper".The President of the Board of Trade demolished that concept quite effectively. However, in subsection (2), it continues:Conduct may, in particular, constitute such an abuse if it consists inWhat on earth would the House be doing if we decided to interfere in the diversity and independence of the national newspaper press? We do not interfere much in the diversity and independence of the defence industry, or the automobile industry. In fact, we encourage standardisation, mergers and a diminution in the number of individual trading elements.
- (a) any of the forms of conduct specified in section 18(2);
- (b) other action which may reduce the diversity and independence of the national newspaper press".
All of a sudden, we have been asked to decide that we must take great care of thediversity and independence of the national newspaper press".That is a function of the peculiar relationship that most of us have with journalists, to which I shall turn in a couple of minutes. First, however, let me discuss the issue of underpricing. We have talked about how deplorable it is that existing newspapers should be underpriced, but what about a new newspaper? That would certainly increase diversity and independence.
Let us suppose that Mr. Murdoch—I am afraid I cannot avoid mentioning his name—decided to introduce a new newspaper, and to make it as much like The Sun as possible, which would not be difficult, as the ingredients of luddism, class war and soft porn are not hard to replicate. He could present his new tabloid to the public at just 5p. What would we do about that? Would that be caught by the Bill? Surely not, for he would be increasing the "diversity and independence" of the national newspaper industry.
I cite that example simply to illustrate the idiocy of trying to tamper with the market system. Labour Members are trying to tamper because, for some reason, they suspect the motives involved and want to impose their own subjective judgments.
§ Mr. Radice
I think—at least, I hope—that the two main parties share the view that predatory pricing, if it can be proved, is not a good thing. Indeed, it was 68 outlawed, as far as I know, by the Competition Act 1980, which was introduced by the Government of which the right hon. Gentleman was such a distinguished member.
§ Mr. Clark
The House will note the vehemence of the hon. Gentleman's rejection of the profession to which I have been proud to attach myself since passing the Bar finals in the late 1950s.
I do not think that there is much case law on predatory pricing and what cases there have been have proved exceedingly difficult. Quite honestly, I think that there is no such thing, and I reject the concept. I know that it may have been embodied in some statute at some point, but nothing much has happened as a result. If predatory pricing means discounting, I am in favour of it, and so must be almost any consumer.
I return to the peculiar motivation that affects us because of our relationship with journalists. We know that all newspapers—even such high-minded organs as The Independent, whose imminent death must owe as much to the extraordinary boredom it generates in its readers as to the price differential between it and The Times on Saturdays, and even such pretentious organs as The Guardian—in their different ways, use deception, short cuts and censorship of their staff.
We in this place stand in great awe of journalists, but are they not often victims of their squalid and unfulfilling life styles and their dependence on alcohol and narcotics? They should be objects of our sympathy, and we should commiserate with them. I do not say that we should feel particularly friendly towards them but, equally, I deplore the idea that we should regard them with suspicion or hostility, because many of them are objects of pity who have to trade constantly in a commodity that they must distort. They have to exclude the truth, and even their own words are constantly tortured, riddled and excised by sub-editors.
§ Mr. Keith Simpson (Mid-Norfolk)
Are my right hon. Friend's comments about the ladies and gentlemen of the press based partly on his own experience of writing a column for a Sunday newspaper? Is this the applied side of his political experience?
§ Mr. Clark
All hon. Members have multi-faceted characters. One of our advantages, or so we are often told, is our ability to inform our comments in the House from our personal experience. If my hon. Friend chooses to interpret my behaviour in that way, far be it from me to correct him.
I revert, finally, to Mr. Murdoch, and the extraordinary way in which the House—and practically everyone in politics—is obsessed with him. At any given moment in history a particular villain in the media—a press lord or tycoon—has been subject to excessive attention from the House. It may have been Lord Harmsworth, Lord Northcliffe or Lord Kemsley; it certainly was Lord Beaverbrook, who was an object of great opprobrium in the House for many years.
69 Beaverbrook made Governments, undermined Governments, entered the Cabinet in the coalition Government, fancied himself displacing Churchill as Prime Minister at one point, and shamelessly used his papers as a political organ to advance his ambition. And what happened to Lord Beaverbrook? He has disappeared; his family has disintegrated. One of the few remaining scions is the constant subject of pointless pursuit by an hon. Member who sits over there in glasses and whose name I cannot remember—[HON. MEMBERS: "Pendle."] It is indeed the hon. Member for Pendle (Mr. Prentice), who is always telling us that Jonathan Aitken, Lord Beaverbrook's sole remaining descendent in public life, should go to prison.
What has happened to the rest of the Beaverbrook empire? What has happened to The Express and The Sunday Express and the whole of the Beaverbrook structure? It has all disappeared. If hon. Members are patient enough, they may well find that the same thing happens to our present bogey man.
Clause 19 is absurd. It is inconsistent and contradictory, and it is little more than an attempt at censorship by the back door.
§ Mr. Chris Mullin (Sunderland, South)
It is always a pleasure to follow the right hon. Member for Kensington and Chelsea (Mr. Clark). I do not think that he knows it, but he is on the Government's side, because they take the same position on clause 19, which they did not put into the Bill and which they will take out. I accept the argument that it is not wholly logical. I think that I caught him saying that we should not interfere with the free market. We are talking not about that but about the subversion of the free market.
I and most Labour Members believe in a regulated free market, while the right hon. Gentleman believes in a rather freer version of it than do most of us. That may be a fundamental philosophical difference between us, but in this case we are in favour of the free market and do not think that one exists. We are anxious for the Bill to rectify the situation.
I support the broad aims of the Bill. There may again be a fundamental philosophical difference between most Labour Members and most Opposition Members, but it is wholly desirable that United Kingdom competition law be brought broadly into line with European competition law. I listened carefully to my hon. Friend the Member for Ealing, Acton and Shepherd's Bush (Mr. Soley) but, with the greatest respect, although there may be a place for a media Bill one day, we do not have one; we have only this Competition Bill. We must take our chances where we can get them, and that is here. We must not allow ourselves to be diverted.
The acid test of the Bill, as I said in an intervention on the President of the Board of Trade, is whether it will stop the practices in which the Murdoch press and others—I accept that others have behaved in the same way—have engaged fairly systematically—in the case of the Murdoch press, absolutely systematically—since September 1993. From the fact that the Office of Fair Trading has examined 70 the matter three times, it is clear that existing law is hopelessly inadequate. As my hon. Friend the Member for Chester-le-Street remarked—
§ Mr. Mullin
I beg my hon. Friend's pardon; time moves on. The effect of predatory pricing so far has been to remove £100 million from the broadsheet market and threaten its diversity. It has also had some impact on the tabloid market, which has not been much mentioned.
On whether the Bill will achieve the effect that I and many others want it to achieve, I have an open mind. I could be persuaded. As the right hon. Member for Kensington and Chelsea said, proving motive is a hopeless way of going about things unless one is fortunate, as with the case of Tetra Pak and one or two other key European judgments, in finding documents that demonstrate motives. I do not think that we will find the smoking gun in this case. However, the world is not short of ex-Murdoch executives. I have had the benefit of speaking to one or two of them. Some have told me that they heard the man himself talk about sinking rivals; they heard the words from his own lips. I accept, however, that no one is going to put his thumbprint to an affidavit confirming that.
It is not very constructive to dwell on motive, but we should be under no illusions about how the Murdoch empire operates. I agree there have been similar media moguls in the past. Lord Beaverbrook was mentioned. He was a monster, and I like to think that most of us who are unhappy about how the Murdoch empire operates would have held a similar view on Beaverbrook if we had been around.
§ Mr. Bercow
Does the hon. Gentleman agree that, if it is Mr. Rupert Murdoch's intention to destroy all his competitors, he has singularly failed to do so, given that there has been a 14 per cent. expansion of the broadsheet market in the past six years? Does that not suggest either that his interpretation of Mr. Murdoch's motives is wrong or that Mr. Murdoch has been unsuccessful?
§ Mr. Mullin
I can say only that Mr. Murdoch is working on it. It may well be that he will allow one or two to live. It gives me no comfort that the one that he has mentioned might live is the Daily Mail. I am not all that bothered about his motives, even if they are as pure as the driven snow; it is their effect that interests me.
The right hon. Member for Kensington and Chelsea asked what we were doing interfering in the world of newspapers. We have to interfere to a limited extent to ensure diversity, which is the lifeblood of democracy. There is an obligation on Parliament to do that. It is not for us to interfere in which individual owns a particular newspaper or which editorial opinions he or she advances, but to lay down general ground rules that ensure that we have diversity, which is a precondition for democracy, is a perfectly honourable ambition. That is the extent of our legitimate interest in this debate.
A number of red herrings have been raised. Perhaps Mr. Murdoch's name has been mentioned too much. Someone in high places told me the other day that, if the intention of those who are sceptical about the Bill is to get Murdoch, this was not the place to do it. It is not my 71 intention to do that. I do not flatter myself or my colleagues with the power to do so even if we thought it desirable. If we were introducing a Bill to deal with him, predatory pricing would be ninth or 10th on the list of possible measures. I can think of many other things to consider if the glorious day ever dawned when we had a serious conversation with Mr. Murdoch about his modus operandi.
Let us disregard the idea that it is all about Murdoch; it is not. Any company that engages in such practices—as some others have, though mainly in response to the newspaper price war triggered by News International—should be affected by the Bill. When one company has 33 per cent. of the national newspaper market and 28 per cent. of the broadsheet market, it is inevitable that its name will crop up more than that of anyone else, but this is not about singling out, or getting vengeance on, any individual or company.
It is sometimes said that this is all about saving The Independent, but it is not. If The Independent were to go down the plughole—I hope that it will not—there would be a variety of reasons, one of which might be the price regime introduced by the price war. This is not the right place to go into the other reasons. It is not about saving The Independent. My hon. Friend the Member for North Durham (Mr. Radice) and I have taken a close interest in the matter and we have talked to representatives of most of the interested parties, including News International. News International put to us a couple of arguments that it is only fair to address. First, it says that what it has engaged in for the past five years is a reasonable commercial strategy whose object is to make it a market leader. It did not give a precise figure, and I am not sure that it necessarily knew one, but when I asked how much the strategy had cost so far, the chairman of the company replied that he had read reports that it had cost around £150 million but that something less than half that was the amount. That is where I get my figure of £75 million for the pursuit of this reasonable commercial strategy.
Unfortunately, News International's accounts are not sufficiently transparent for us to be able to tell whether the sum is £75 million or a much larger one. If it has cost only £75 million so far, it had better produce some figures that can be independently verified. However, as I said, such is the nature of News International's financial arrangements that that is quite difficult to do.
The second argument that News International advances is that others do it. I quite agree, and where others do it, they should be stopped, too—we should have a level playing field.
The third argument is that any consideration of the cost to News International should take into account the fact that increased circulation has enabled the company to increase advertising revenue and that therefore the losses are not as great as some have alleged. I accept that, and it is a reasonable argument; however, News International representatives told us that losses were about £75 million, which I assume takes into account any gains in advertising revenue, so, although I do not necessarily accept the figure given by News International representatives, it provides a good starting point and makes it clear that the strategy is being subsidised—funded from god knows which part of the empire.
72 There are several remedies to the problem that most people agree exists. I welcome the provisions that give the director general, or whoever is in charge of investigating, interim powers to stop the practice of predatory pricing. One of the difficulties is that any court case arising from the Bill could last three or four years and the companies under threat might disappear before the case was resolved, so interim powers are needed. I also welcome the fact that there are serious penalties.
I accept that clause 19, regrettably, is defective, but we should be grateful to Lord McNally and his allies, because, by inserting that amendment in the Bill, they have forced the Government and the House to think seriously about predatory pricing. To that extent, we should not be churlish, but be grateful to the other place for highlighting an extremely important issue.
There are two potential remedies. One is to amend clause 18, inserting the terms of the Tetra Pak judgment, which is the standard European case on this issue. The Government say that doing that would narrow, rather than widen, the scope of the Bill. As my hon. Friend the Member for North Durham says, the Government draw our attention to clause 60, which, they say, taken with clause 18, would resolve the problem. I wish the Government had drawn our attention to clause 60 a little earlier in our proceedings, but I am grateful that they have done so. I am attracted by their argument and will think seriously about it and take independent advice. I agree that it is perfectly possible that it provides a solution to the problem.
The second potential remedy is to include in the Bill a specific reference to newspapers. My right hon. Friend the President of the Board of Trade said that she is not keen on doing that, but there is a precedent—the Fair Trading Act 1973 does exactly that. The answer to the question, "Why newspapers?" is as I said when responding to points made by the right hon. Member for Kensington and Chelsea: with all due respect to the present owners of The Independent, newspapers are not cans of baked beans, or packing cartons, which were the subject of the Tetra Pak judgment; newspapers are the lifeblood of democracy, and that is the case for including specific reference to newspapers in the Bill.
§ Dr. Ladyman
Clause 19(3) already contains a reference to newspapers. Is it not possible that that might limit the scope of the Bill, because it would not be possible to take into account the fact that the person doing the predatory pricing might own other media interests, as indeed does the gentleman most often mentioned in our debate?
§ Mr. Mullin
Yes, that is perfectly possible, and it is another matter on which I intend to take advice, which is why I shall not come to any firm conclusion this evening. We are in no great hurry: there is at least a month to go before Report is concluded, and, by that time, it will have been possible to take advice from people more expert than me and to ensure that one does not have to be wholly dependent on the advice offered—with, I am sure, great good will—by Her Majesty's Government.
The other reason given for there being no specific reference to newspapers is that that is not done in other countries—the law with which we are seeking to align ourselves does not make such reference. I acknowledge the truth of that, but we have Murdoch and they have not.
73 I want to be convinced. The Bill is basically good and it contains many good things, but I am absolutely clear in my mind that we have to be convinced that it will put a stop to what is currently going on in the national newspaper industry—not only in the broadsheet market, but in the tabloid market as well—because it is dragging the whole industry down, sucking out profits and the capacity for investment. That will have serious consequences in the end, so, before giving approval to the Bill in its present form, the House must be convinced that the problem will be addressed.
I listened carefully to what my right hon. Friend the Secretary of State said, and I know that she does not want to get involved in particular cases, but I believe that we could hear something firmer than we have heard from the Dispatch Box today and I shall be on the lookout for such sentiments as the Bill wends its way through its Committee and Report stages.
§ Mr. Ian Bruce (South Dorset)
I am grateful to be called so early in the debate, and to follow the hon. Member for Sunderland, South (Mr. Mullin). It was interesting to hear him say that, at least on this occasion, he is in favour of free markets—
§ Mr. Bruce
I am sorry—I am sure that we will all read Hansard to find the exact words he used. I was certainly touched by what I thought he said.
I am not sure whether I need to declare an interest. I have no interest in newspapers, but, as I intend to speak later about regulation of the electronics industry, I shall declare that I am a paid adviser of the Telecommunications Managers Association, although I have not been briefed by the association on this Bill; nor am I speaking on its behalf in any way.
It is strange to sit listening to what the Government appear to be saying about the Bill. When they were in opposition, it was clear that they perceived certain evils in the free market which, when they were in government, a competition Bill would be brought in to address, yet, however much we have tried to tease it from the Government, we have not heard a word about the list of evils with which they are planning to deal. We have heard hon. Members on the Liberal Benches and on the Government Benches—the two may be one and the same—speak about a particular evil they perceive within the newspaper industry, but they are all of one view that the Bill does not deal with that evil. That is strange. We need from the Government a list of what they are trying to do.
I spent this weekend in Romania, speaking to the people there about democracy and how democratic institutions can help to ensure that the people and the Government stay in touch with one another. On those occasions, one is always keen to tell people that a democratic institution is not a magic bullet that cures all the problems of the world.
However, listening to hon. Gentlemen so far and, I am sure, hon. Ladies later—I am sorry; hon. Ladies and Gentlemen so far, as we have already had an hon. Lady speak—one has to conclude that they believe that the Government can intervene effectively to regulate the 74 markets to some public good. They are muddled in their thinking and need to define what they are trying to achieve and what the problems are. In that way, we can have a sensible debate in Committee and determine whether the Bill as drafted will allow a regulator to do what the Government intend it to do. Conservative Members may support some of the Bill's proposals.
In the summer, the refrigerator in my flat in London broke down. Many of my constituents voted Labour in the general election and no doubt they had heard, as I had, the hon. Member for Edinburgh, South (Mr. Griffiths), now the Minister for Competition and Consumer Affairs—whom I am glad to see in his place—making loud claims for a reduction in the price of electrical goods, particularly white goods. Colleagues told me that there would be a 30 per cent. reduction. The Minister should listen to me, as I am referring to his claims, but he is clearly being briefed about what he should have said.
I was disappointed because I had to buy a new refrigerator, and, when I went to the shops, I found that I had to pay a price that, because of inflation, was a little higher than it had been under the previous Conservative Government. I thought, "If only I had been able to wait until Christmas, I could have got the 30 per cent. reduction." I checked the price of the refrigerator after Christmas, and it was in fact higher. Inflation was continuing to rise and there was no magic bullet to reduce prices, which the Minister for Competition and Consumer Affairs had promised consumers, who want measures to reduce prices, not to support a newspaper that nobody wants to read. The great reduction in prices promised by the Minister—I am grateful that he is no longer chatting—to the country and to the House did not occur.
When Ministers were members of the Opposition, they had to buy their own refrigerators, but one of the perks of government is that free fridges are installed in Ministers' rooms in the House and in their Government offices. I am not impugning their characters, because that perk was enjoyed by Ministers in previous Governments, but often refrigerators provided by the Government are installed in Ministers' homes.
§ Mr. Bercow
I am listening with rapt attention to my hon. Friend's contribution, but, to avoid doubt, will he clarify that he is not for one moment suggesting that the Minister for Competition and Consumer Affairs is planning to share the contents of his fridge with those dissident Labour Members who are threatening to vote against the Bill?
§ Mr. Bruce
I am sure that my hon. Friend knows that Ministers are always generous to Opposition and Government Members who visit them in their rooms. I would not impugn the Minister's reputation by suggesting that he would be doing anything other than providing normal hospitality. I understand that the Government put aside money for that purpose. None of us would suggest that that was a problem.
§ Mr. Mullin
When I last visited a Minister at the Department of Trade and Industry—which was not long ago—I was offered a glass of red wine from a bottle labelled "Redwood".
§ Mr. Deputy Speaker (Sir Alan Haselhurst)
Order. If the debate continues along this line, we will all begin to feel thirsty.
§ Mr. Bruce
I am already feeling thirsty, and I was about to say that, if we continued along this line, I would be called to order because the debate was going wide of the mark.
75 Competition is an important subject, and we have heard almost nothing about it today. I was somewhat surprised that no hon. Member mentioned the costs that are imposed on the Government, because their buying mechanisms are not subject to competition.
I was planning to decorate my flat, which is in a block where I believe the President of the Board of Trade owns a flat, which she does not occupy at present, and where my right hon. Friend the Member for Wokingham (Mr. Redwood) also used to have a flat. I was able to find out in the marketplace what it would cost to have my flat decorated—about £1,300. My wife, who is very canny, said that that was too much, and asked me to decorate it myself. I found that I was able to save about £450 a day by doing my own decorating, so perhaps I was efficient. That, as I am sure the House already knows, compares with the £76,000 that the President of the Board of Trade had to pay. It is important that we consider how to achieve value for money and competition.
I am worried that the Government have not tried to analyse the problems. I have often suggested that the Government should learn from the mistakes that Conservatives made in office. Why should this Government make the same mistakes? One of our mistakes was that we responded to reports about how pubs and breweries operated in the marketplace by deciding to intervene. We told the breweries that it was anti-competitive to own so many pubs and to have tied agreements, and so on. Our intervention was intended to help pubs, small breweries and consumers—everybody except large breweries was supposed to benefit—but everybody complained about the results. Complaints were made, in particular, by the owners of small pubs and people who were thrown out of work because they were the tenants of large brewery chains. The intervention had many bad effects.
The Government should go through the list of measures that are under consideration, and examine which industries will be caught by the Bill. In Committee, we should discuss in detail how the Bill will operate. It is no good our introducing a law and saying that somebody else will decide how to operate it. We can decide how a sensible regulator should operate that law. Of course, the Minister cannot say exactly what will result from having an independent regulator, but we ought to analyse what we are trying to achieve.
§ Dr. Ladyman
I hope that the Government will turn their attention to brewers and public houses in the not-too-distant future. The problem was not the previous Government's intentions when you started to reform competition in that industry, but that you lost your bottle halfway through and cobbled measures together, which was when things went wrong.
§ Mr. Bruce
You, Mr. Deputy Speaker, never lost your bottle, and the previous Government did not. They ameliorated some of the worst aspects of that business. This Government should analyse that and try to come to a sensible view. We are the servants of the people and this is a people's Government. We are trying to achieve what the people want. However, we must be certain what the Bill's effects will be.
76 People want cheaper prices. We are not trying to stop someone giving people a deal on a horrible newspaper. Frankly, all the newspapers that are currently being produced are a load of rubbish, and that industry is going electronic anyway. People want cheaper newspapers, and perhaps competition would force up quality because people would be willing to pay more for a high-quality product. If somebody is foolish enough to want to subsidise a product for five years, we must be careful that the Bill will not affect that.
The Bill is complex, and if the Committee of Selection wants me to sit on the Standing Committee, I shall have many more opportunities to examine it in detail. I am worried that any dominant company—which could be one that is dominant in a small marketplace such as a village—that takes any action that is part of its normal marketing strategy could be caught under the Bill. I am worried that companies will stop implementing such strategies because they will be over-cautious. They may well be able to go to the competition regulator and ask whether their actions are allowed, but if that costs money, they will not want to do so.
The Bill may prevent the cautious from taking action, and will certainly catch the unwary. That is so often the problem with legislation. Companies do what they think is a good deal for their customers and try to undercut the market, but find later that they have breached regulations. There is a danger of retrospective charging, so we shall need to look at the problem in great detail.
We have heard complaints about people charging too much and charging too little. Many manufacturers deliberately impose a high price on their products. I was in Japan with a parliamentary delegation. We took with us some whisky miniatures—
§ Mr. Bruce
I hasten to add that it was 10 years ago. I believe that the miniatures were supplied by a Government Whip. Everywhere we went during our 10-day stay we gave away these small bottles of whisky to the people we met, and we told them that we could not sell more whisky—one of our most successful exports—to Japan because it was too highly taxed there.
A retired Japanese diplomat accompanied us throughout our trip. He was very polite, as the Japanese always are, and at the end of our stay, when we had got to know him well, he said that he had listened to us making our pitch to Japanese politicians and business men about the price of whisky being too high in Japan. Not true, he said. "You sell so much whisky in Japan," he said, "because it is the most expensive drink people can buy here." It seems that the Japanese do not buy whisky just because they like it; when they give a glass of Scotch to a customer or friend, they are in effect telling them that they like them so much that they are willing to buy them the most expensive drink on the market. If the price were cut to the level of Suntory whisky, people might buy something else instead.
§ Mr. Alasdair Morgan (Galloway and Upper Nithsdale)
While the hon. Gentleman is discussing whisky, a subject close to my heart, can he explain why, 77 in the past year, when the Japanese have reduced the duty on Scotch whisky, exports of it to Japan have increased substantially?
§ Mr. Bruce
The hon. Gentleman ruins my story—but that was the impression given us by the diplomat. Perhaps he was wrong, but the point that I was trying to make in my long—and I hope amusing—story was that people often decide to sell a product by putting its price up.
A vehicle produced in France which may be regarded there as a very ordinary one may be sold as a premium product in the United Kingdom, where people will buy cars because they know that they will impress their neighbours by owning, say, an Audi, a Renault or some other continental car. It would be wrong if the Bill caught such activity; it would be wrong if the Competition Commission were able to declare that that was wrong pricing.
I do not suggest for a moment that we should ignore our duty to consumers to ensure the best deals and prices for everything. Indeed, keeping prices down is more important to me and my constituents than keeping them up. Hence the need to examine this area of the Bill in Committee with extreme care.
There is a tendency in the House to believe that regulation could sort out the newspaper industry and the so-called predatory activities of Rupert Murdoch. There is already a great deal of regulation of the broadcast media. No one can start broadcasting, by satellite, cable or digital interactive, without first putting in a bid to someone who will examine its quantitative and qualitative aspects.
Rupert Murdoch does not own the companies associated with him 100 per cent. When he first entered the market, however, the Conservative Government set up clear competition between Sky and British Satellite Broadcasting. I assume that it is now called British Sky Broadcasting so as to avoid changing the letters on the side of vans. Neither company made any money at the outset, and everyone suspected that they would go out of business.
In the end, Murdoch took over his rival, the squarial disappeared, and British Sky Broadcasting was born. He managed to tie up the contents of his programmes, in the sense that he broadcast movies and sports which he knew the market wanted. He was very clever, and he ended up with the dominant position in satellite broadcasting.
When cable television entered the market, the Government again set up competition. Operators had to put in bids; we ensured competition with the telecommunications companies. Cleverly, Rupert Murdoch went to the cable industry and said, "I have this product; I can give it to you at a competitive price." He thereby achieved a virtual monopoly of the premium channels going into cable.
When it came to digital terrestrial, Sky observed another company offering a new product. Somehow Murdoch persuaded the ITC—despite the fact that his licences gave him no such rights—to broadcast his programmes on terrestrial. He convinced the ITC that his bid would succeed because the others lacked a product. Strangely, the ITC decided that he should not be a shareholder, but guaranteed that his products would be used by the successful bidder.
Therefore, although regulations may be imposed in an attempt to create competition, they can have exactly the opposite effect. They failed in the case of digital terrestrial 78 broadcasting, where healthy competition was intended. Some have suggested that it was all to do with Murdoch's support for the Labour party, but the ITC says that that is nonsense: it acted independently. I have no wish to throw around accusations, but it does make one wonder about Government involvement in such matters.
I end on the problem of double jeopardy and the regulators. We are to have a Competition Commission, but we already have many regulators—the ITC, the BBC and Oftel are all involved in telecommunications, and a whole string of regulators can be involved in the content of programmes. We must be careful to ensure that someone who believes that he has permission to do something does not discover that, while satisfying the competition conditions, he has fallen foul of one of the other regulators.
The Government were elected after suggesting that they would reduce the number of regulators in this area to one—yet here is yet another one. They keep setting up more and more regulators, or more powers for regulators, while doing nothing to reduce their numbers.
We shall have an enjoyable—and unfortunately rather long—time in Committee to discuss these difficulties. It will be interesting to see whether Labour Back Benchers who have appeared today say a word, or whether the bleepers will have done their work. I note a little smile on the face of the Government Whip, who always works charmingly to ensure that these things run smoothly. In any event, we would certainly enjoy any contributions that Labour Back Benchers might care to make in Committee.
§ 7.9 pm
§ Mrs. Linda Gilroy (Plymouth, Sutton)
It is a pleasure to follow the hon. Member for South Dorset (Mr. Bruce). I am one of the 101 female Labour Members, and the second female Back Bencher to speak tonight—perhaps the hon. Gentleman was not present when my hon. Friend the Member for Crewe and Nantwich (Mrs. Dunwoody) spoke.
A robust competition policy, which the Bill seeks to bring about, is in the interests of consumers, business and the economy generally. It is good for the consumer because it tackles abuses of market power, cartel and other anti-competitive practices that act directly against the consumer interest—especially the interest of poor consumers. By introducing a single competition law and shifting the emphasis to a prohibition-based approach, the Bill should ensure that consumers have the benefit of the lowest possible prices, wider choice and the information on which to base that choice as well as to obtain value for money.
The Bill is good for business because, in moving to a prohibition-based system, it brings the United Kingdom provisions in line with the treaty of Rome, which has provisions dealing with anti-competitive or restrictive agreements which affect inter-state trade. Those existing European Union provisions already apply to some United Kingdom companies, and they will benefit from a reduced compliance burden. The Bill should also help to avoid inconsistency and potential conflict for them.
The Bill will be good for the economy, for if we are to be competitive abroad, we must begin with competition at home. Ministers have done a great deal by other measures to tackle the underlying problems that have caused our slide down the Organisation for Economic 79 Co-operation and Development league tables. The Bill is a key part of the programme to halt that decline and put it into reverse. I believe that consumers, business and those who understand the importance of competition to a thriving economy and our quality of life have good reason to welcome the Bill.
I shall focus on an important aspect of the way in which the Bill will especially help consumers of utility services. In particular clause 54 and schedule 10, give concurrent powers to the sector regulators who are responsible for our utilities.
As head of the south-west office of the Gas Consumers Council for 17 years before entering the House, I spent the latter years ensuring that the consumer voice was represented strongly in the passage of the legislation to introduce competition in the supply of gas to domestic customers. Competition has delivered significant price reductions to gas customers. The introduction of competition in the supply of electricity to domestic customers will soon achieve reductions for electricity consumers.
The Bill will give sectoral regulators and the Office of Fair Trading tougher powers to ensure that competition develops and delivers rewards fairly for domestic energy consumers. For the first time, there will be really stiff penalties for companies found guilty of anti-competitive behaviour. Those powers will be balanced by the right of appeal to the new Competition Commission, both for the companies concerned and for individual consumers, and I especially welcome the fact that individual consumers and those who represent them will have access to that process.
The Bill will continue the present system of so-called concurrency. Under general competition law, the Office of Fair Trading and the individual sectoral regulators already have the power to tackle anti-competitive behaviour. Such powers are not new, but the Bill will add significantly to their effectiveness.
I am aware that, in another place—and outside this Chamber—some concerns were expressed about those concurrent powers. To those who voice such concerns, I say that it is important to understand the deeply entrenched monopoly practices and legacies that the regulators must overcome to ensure, in particular, that the benefits of competition are brought to the provision of our energy supplies. Of course, we can do much to achieve that through the powers and duties of the sectoral regulators, as outlined in the utilities Green Paper, which is currently out to consultation, but we also need to toughen the role of general competition regulation, to ensure that the full benefits of competition can be brought to consumers.
The sectoral regulators need all the tools available to them to ensure that we move as quickly as possible from the rather artificial markets that exist at the early stages of introducing competition to the monopoly utility markets, to a position which, as nearly as possible, mirrors true competition. By allowing the sectoral regulators to choose the most appropriate regime—sector-specific legislation or competition legislation—with which to tackle a problem, we can ensure that decisions under the two regimes are consistent, not contradictory.
If sectoral regulators had to rely on only their specific regulatory rules and licences to tackle the problems of the utility industries, a brake could be placed on competition, 80 with serious implications for innovation. Indeed, the regulated companies could then face double jeopardy: sectoral regulators investigating specific aspects while the Office of Fair Trading investigates the same behaviour under general competition law. If those powers are given concurrently to the sectoral regulators, they can bring their in-depth knowledge and experience to bear on the different sectors with their special characteristics.
I believe that special features of the utility markets mean that there will be an on-going role for sectoral regulators—increasingly as specialist competition authorities. Many predicted that liberalisation of the utility markets would lead to a competitive position that would achieve the best outcomes in its own right, and that, as time went by, there would be no need for sectoral regulation.
Several factors differentiate the energy markets from other markets, and will continue to do so for the foreseeable future. In the case of most products we buy, there is a wide choice to suit personal preferences, often involving choices of colour, size, taste and smell, as well as income. By contrast, for domestic energy customers there are, to all intents and purposes, no substitutes for electricity and gas, and very little in the way of product differentiation. That fact raises important equity and economic issues.
The equity concern that arises from lack of substitutes is that, in order to heat their home, a poor household needs to use broadly the same amount of electricity and/or gas as a richer household that lives in a comparable property and has a comparable heating system.
§ Mr. Redwood
I wonder whether the hon. Lady would like to comment on the Government's decision to place a moratorium on new gas-fired power stations. Does she believe that is anti-competitive, and is she urging Ministers to remove it in the interests of increasing competition in the electricity market?
§ Mrs. Gilroy
No. That is a matter for the Minister for Science, Energy and Industry, and I think that it is in good hands.
A poor household needs to use broadly the same amount of electricity to heat their home as does a richer household. Some less well-off households must pay up to nine times as much as richer households to obtain comparable warmth if, as is often the case, they live in housing that has less insulation. Because of those factors, energy expenditure generally forms a significantly larger share of the budgets of the poor—typically in the region of 15 per cent., although I have seen budgets in part of my constituency where as much as £1 in every £4 goes on fuel.
For better-off households, fuel typically represents 5 per cent. or less of household expenditure. In fact, less well-off households have—as is so often the case with competition, but arguably to a greater extent with fuel—more to gain from competition than better-off households. I am very pleased to note that, on Thursday this week, a conference is being organised by the Right to Fuel campaign, which will consider innovative ideas for ensuring that competition benefits as many fuel-poor households as possible.
Sometimes, however, competition needs a helping hand—or something stronger—to break down the barriers of old entrenched ways, and the Bill will help to ensure that, when a barrier gets in the way, it can be removed.
81 The economic concern arising from the lack of substitutes is the possibility that sellers of electricity and gas may be able to exercise monopoly power over all customers. In respect of gas, which is the fuel I know best, about 40 per cent. of the price is represented by the cost of transporting the raw material. Transportation is likely to continue to be a monopoly, except perhaps at the margins, and therefore subject to regulation.
Nevertheless, we must ensure that we come as close as possible to competitive conditions in our energy markets. Firms that thrive more than others must do so because they are more efficient, and prices must send the correct signals for firms to enter and exit the market. With some 40 per cent. of product cost accounted for by a charge for transportation, which is predominantly provided by a regulated monopoly, and the bulk of the remainder of the price being accounted for by a product for which there is little scope for differentiation other than on price, there are significant challenges in ensuring that competition is delivered to gas customers generally.
Central Government must take responsibility for creating a framework to deal with the distributional effects of market-led policies in our utilities. Although the benefits system may have some role to play, the sectoral regulators also have a role, using appropriate powers to ensure that the most vulnerable customers are protected, while bringing about a reasonably level playing field for new entrants. Similar challenges arise from environmental considerations. A range of regulatory interventions to promote energy efficiency and cleaner energy generation will be needed.
It is extremely important that the protection of vulnerable customers and the environment is combined with powers that ensure a level playing field for competitors entering and exiting the market. By giving the sector-specific regulators strengthened concurrent powers, the Bill gives them more effective tools to achieve that.
There must be consistency in concurrency. It will be essential to develop a single set of rules for all the enforcement bodies on how to proceed with competition cases, and to require the regulators to confer about further guidelines on how the prohibitions will be enforced.
§ Mrs. Gilroy
No. I am almost at an end; if the hon. Gentleman does not mind, I shall finish.
I understand that a concurrency working group has already been set up, with the Office of Fair Trading and all the sectoral regulators meeting regularly to produce a consistent approach to rules on enforcement and procedure. Such close co-operation bodes well for the future when the Bill is enacted, although I believe that a strong case is advanced for discussion in the Green Paper about merging the offices of gas and electricity regulation.
As well as co-operation between regulators, all decisions made under the Bill will have to reflect European case law, so that companies will face a similar set of rules whether they operate in the UK alone or across Europe. Provisions for appeal to the proposed Competition Commission add a further safeguard that regulation will be applied consistently.
The Bill is vital to ensure that the encouragement of competition in our utilities continues. For customers to have an effective range of choice of suppliers and related services in the utility sector, we need companies that can 82 enter the market and compete on a fair basis. That requires an effective regime to deal with anti-competitive behaviour so that the old monopolists cannot force new competitors out of the market by unfair practices such as predatory pricing.
Utilities are an important sector of our economy. In 1995, they accounted for 4.3 per cent. of our gross domestic product. Britain has led the way in recent years in introducing competition to domestic customers in the sector. Competition has already delivered many benefits.
§ Mrs. Gilroy
Indeed, and we supported it.
To continue the process and to meet the challenges of tomorrow, we must ensure that we develop a framework that is an imaginative blend of competition law and sector-specific regulation.
The Bill is an essential part of bringing that about, through a formula that will allow us to be tough on regulation but determined in the encouragement of competition. I congratulate my right hon. Friend the President of the Board of Trade and her ministerial team on introducing the measure, and I shall take a keen interest in its progress.
§ Mr. Oliver Letwin (West Dorset)
In a rather long debate, we have heard a series of interesting exchanges about predatory pricing—which is described in the Bill as unfair pricing—including a bravura performance from my right hon. Friend the Member for Kensington and Chelsea (Mr. Clark). The debate has illustrated the extreme difficulty of discussing predatory pricing in an assembly such as this, and has shown beyond doubt that the Bill takes us no further forward in the definition of that perplexed term, or in the enforcement of provisions against it—if we are in favour of such enforcement.
I shall deal with a subject that has been mentioned by Labour Members and is touted by the President of the Board of Trade as one of the great advantages of the Bill, but which has received relatively little attention in the debate so far: the convergence between the proposals in the Bill and the provisions of European Union competition law.
Many hon. Members have examined Bill in depth, as have those in another place. Detailed inspection of the Bill, for which further opportunity will arise in Committee, reveals that it makes almost no intellectual advance in that complex area—except the purported advance of bringing UK law into harmony with European law. We must investigate whether the Bill achieves a useful purpose by the moves that it makes to bring our competition law into ostensible conformity with articles 85 and 86. I shall concentrate particularly on the provisions on prohibition arising from article 85 and chapter I of the Bill.
I apologise to the President of the Board of Trade, to the Minister for Competition and Consumer Affairs and to officials if I travesty their actions, but I imagine that, one fine morning shortly after 1 May, the right hon. Lady came into her new Department and told officials that it was essential that all Departments fulfilled their manifesto promises, because the Prime Minister had told her that 83 that must be done by a people's Government. She explained that competition provisions needed total revision because the previous Government had done nothing for competition. I do not believe that there is the remotest truth in that assertion, but it was widely made before the election.
The new Competition Bill was to transform the situation. The President of the Board of Trade said that it must make the whole of our competition law harmonious with European competition law, because the Prime Minister—or was it the Chancellor of the Exchequer?—had told her the previous day that it was essential that everything should be made harmonious with Europe.
At that point, I think, the President of the Board of Trade retired to consider other matters, such as how to defend her various Ministers who were under attack from my right hon. Friends and others, and to do other things of greater immediate moment, leaving vast armies of intelligent and learned officials to concoct a Bill that fulfilled the remit of bringing our law into conformity with European law. The chapter I prohibition appears to do exactly that.
Detailed inspection of the Bill reveals an exemption in respect of what would be described in the old language as restrictive trade practices or, in the new language, as agreements operating against the public interest, if they are conducive to mergers or consolidations. That is extremely interesting. It suggests that, if I am in a particular competitive field, and I want to sign an agreement with my nearest rival—lower down the chain in a vertical agreement, or directly opposite me in a horizontal agreement—I must go through a complex process of obtaining guidance or rulings. I admit to being perplexed about the difference between guidance and rulings, but the Bill provides for that distinction, and I must seek one or the other, or perhaps both, possibly not just from one regulator but from many, because, as the hon. Member for Plymouth, Sutton (Mrs. Gilroy) pointed out, there are concurrent regulators.
I may spend several years obtaining guidance and rulings from various bodies, to find out whether the agreement or web of agreements that I want to sign would be legitimate. However, I have an alternative. I can avoid all that if I simply agree with my nearest competitor that he and I should join forces by swapping equity, in a purely continental fashion. If he does not like that idea, I can walk into the open market—we still have a free market in our stock markets, until the Government take it into their head to change that—and take over his business. In that way, I miraculously liberate myself from the need for reference to any regulator regarding questions of agreement.
How does that arise? It arises because, under European legislation—which is not unintelligent in this domain—a presumption was made which, unfortunately, all those learned and clever people who framed this Bill in a United Kingdom context clearly missed. The presumption in European terms is broadly true: if any business object, any industry or firm, that qualifies for attention by the European Commission—DG IV in particular—makes an agreement, because of the structure of the treaties, a consolidation by that party with another party will also come to the Commission's attention as an abuse of 84 dominant position. The structure of the treaty makes it true that only very large firms—firms on almost a world scale—will come to the Commission's attention.
That is not the case in the United Kingdom. On the contrary, there is a vast amount of clear water—most of the financial side of our industrial activity is in that area—between firms that could sign restrictive agreements and firms that have a dominant position according to anyone's definition, whether it is 20 per cent. of the market or otherwise. By aping European provisions without understanding the logic underlying them, the Bill brings into British law a bizarre position of which I do not believe the President of the Board of Trade is aware—if she were, I cannot imagine that she would support it—whereby very large numbers of very small, fiercely competitive British firms will have a strong incentive to link into increasing industrial consolidations and concentrations.
We can be sure of only one thing in those circumstances: the provision will reduce diversity and competition, and will tend to reduce pressure for decreases in price and increases in quality. If that is the intended purpose of the Bill under the banner of harmonising with European legislation, the President of the Board of Trade is much less intelligent than I had imagined. I think the right hon. Lady is wholly unaware of that consequence, because she simply asked officials to draft legislation that is in harmony with European legislation—and this Bill ostensibly is—and she is wholly unaware of what firms actually do because she is unaware of how the market operates. That is very unfortunate.
In the spirit of amity and constructive opposition, I spent some time wondering whether we would be able to cure that extremely large defect in the Bill by introducing amendments in Committee that you and your colleagues in Committee, Mr. Deputy Speaker, would allow as being proper and within the spirit of the legislation. Alas, I do not think that that can be achieved. I hope that the immense ingenuity of my right hon. and hon. Friends will permit such measures to come forward, but I must admit that I am sceptical. I think that the Bill's structure prevents it. It is extremely difficult to see how amendments that are in the spirit of the Bill could conceivably clear the area between small firms and dominant firms in a way that prevents concentrations and consolidations occurring as a means of escaping the Bill's anti-restrictive trade practices aspects.
If that is the case, I fear that we shall pass into law—the Government will undoubtedly use their majority to do it—legislation whose effects it will take decades to remedy. Large swathes of that part of our industry which is most entrepreneurial and generative of growth in this country will consolidate into large, increasingly sleepy giants under the aegis of an apparently pro-competitive piece of legislation.
§ Mr. Andrew Lansley (South Cambridgeshire)
My hon. Friend's comments are remarkable in their clarity and importance. However, perhaps he could assist me with one matter. Beyond a certain point—by reference to market share or some other characteristic—mergers and acquisitions are the subject of an inquiry by the Office of Fair Trading and, if they are held to act against the public interest, might be the subject of a reference. Am I correct in assuming that my hon. Friend is referring to those 85 immensely important parts of industry that would fall below the market share test or other tests governing mergers?
§ Mr. Letwin
I am grateful to my hon. Friend for his characteristically acute question. I agree that the brunt of my remarks so far has been directed at the movement between a very small firm and a firm with less than 20 per cent. market share, if the Commission chooses that as the definition of dominance.
However, I think the position is slightly worse than that which I have portrayed. Although I may have missed such provisions, I have a strong sense that, because the Bill is based on EU legislation, it is concerned almost exclusively with restrictive agreements and with the abuse of dominance rather than with dominance per se. If that is so, it may be possible for firms to agglomerate even to the point where—to take a ridiculous example—they are 100 per cent. of a particular sub-sector of a market.
In the past, they would clearly have fallen foul of all sorts of provisions under the Restrictive Trade Practices Act 1976, and the Monopolies and Mergers Commission would have been able to investigate them. However, as long as they tread a thin line between abuse and non-abuse—I refer to the lengthy and wholly useless discussions about unfair pricing, which show clearly how difficult it will be to establish that an abuse has occurred—they may now be able to maintain their existence as a comfortable, sleepy giant. I accept entirely that that is an extreme example.
§ Mr. Ian Bruce
My hon. Friend paints an alarming picture. Does he realise what happened when France Telecom, which I believe is the third largest telecom company in the world, announced that it would link up with Deutsche Telekom, which is the fourth largest telecom company in the world? The European Commission said that that was good in terms of bringing Europe together and was clearly not anti-competitive. That is the sort of ridiculous ruling that has been made by the European Commission. A few others have been allowed to enter the market, but that group is so big that they do not have a hope.
§ Mr. Letwin
My hon. Friend is quite right: the emergence of Global One, the grouping to which he refers, and of Unisource, its competitor—perhaps erstwhile—are good examples of the tendency among European regulators, following the structure of the treaties, to concentrate on abuse and not on dominance per se.
That seems to be an extreme argument, and I rest my case with the simple contention that this Bill—if it has a single tendency in the United Kingdom economy—will create consolidation and concentration. That must be the opposite of the Government's intention, and, on those grounds alone, I believe that we should support the Opposition amendment.
§ Mr. Michael Wills (North Swindon)
I shall be brief, as other hon. Members wish to speak in the debate. At the outset, I should declare an interest on behalf of my wife and me in television production, which was my profession before I entered this place.
I have sat through what is becoming a very lengthy debate and I have heard a great deal of detailed discussion about the Bill—proper and appropriate scrutiny. 86 The debate on the Labour Benches has been constructive, as we recognise the need for legislation. Opposition Members have piled detail upon detail and story upon anecdote—some of which has been entertaining—but I am not sure to what ultimate purpose. Are they trying to improve the legislation while accepting the need for it and its basic principles, or—this seems more likely—are they merely trying to justify maintaining the status quo in the belief that current legislation is as perfect as possible?
So I shall turn away from the detail to the ultimate objectives of the Bill. I shall remind the House of the broad principles that the Bill is designed to enhance and entrench, and explore why it is so important in modernising our economy. If we are to have a dynamic economy which is quick to succeed in the modern world; which produces sustainable growth and the jobs that this country deserves—which the previous Government signally failed to produce—and which is efficient, productive, adaptable, flexible, creative and innovative, effective competition is essential. I hope that the Opposition agree with that, at least.
Without effective competition, businesses become complacent and arrogant—their creative juices dry up, and their entrepreneurial vigour ossifies and dies. Few dispute such general, theoretical arguments in favour of competition. However, when it comes to individual businesses in practice, history tells us that the attractions of anti-competitive behaviour often become overwhelming. Economic power, just as much as political power, constantly shifting and flowing, possesses an inevitable tendency to cluster and grow around those who already have it.
No modern society and no modern economy can afford to allow vested interests to accumulate power against the public interest. In every area where power builds up and clogs the channels of opportunity for individual businesses—just as much as for individual citizens and consumers—we have a duty to act. Companies that abuse a market by means of a dominant market position—and I submit that abuse is the issue here—and businesses that adopt anti-competitive practices barricade the road to a dynamic, efficient economy and thereby harm consumers.
The Bill is a welcome and much-needed reform of competition law. In its adoption of chapters I and II prohibitions; in strengthening the investigative powers of the Office of Fair Trading—we have not heard much about that from the Opposition—in streamlining procedures to prohibit anti-competitive activity; in providing real deterrents to firms tempted to adopt anti-competitive behaviour; and in providing recompense for those damaged by such behaviour, the Bill will modernise our approach to competition and make it effective. Were we to maintain the status quo, as the Opposition seem to want to do, none of those things would result. I welcome the fact that the Bill will bring our competition policy in line with that of Europe.
I welcome also the reassurance given by my right hon. Friend the President of the Board of Trade about predatory pricing. Drawing a line between unacceptable predation and keen competition will often be difficult, but it is essential that we do so. It is encouraging that the proposed legislation will provide for tough and effective measures against predatory pricing and the abuse of a dominant position.
87 It is commendable that the Bill possesses potential for further evolution in line with any further European Union legislation and case law. There is a clear need for flexibility and adaptability. If nothing else, rapid technological change means that there must be constant vigilance against new forms of predation, as the debate over Microsoft's position in the United States makes clear.
The Bill is important, and not only for the practical and detailed reforms that it will introduce. It will also come to be seen as important for the new culture that it creates. With the move from a form-based approach to an effects-based approach will come a sharper and more practical focus on competition instead of the cumbersome bureaucracy of existing legislation. Over the years, as regulators and businesses come to terms with the arrangements, the greater concentration of effort on competition should help the Office of Fair Trading acquire new expertise in understanding markets. The Bill should lead to a more sophisticated understanding of how markets work. The Bill should foster a new culture among regulators and businesses alike that will promote the development of genuine and effective competition.
The Bill delivers on the Government's manifesto commitment. It provides robust new powers to promote competition in this country. It is a crucial building block in constructing a modern globally competitive economy, and one that will remain so.
I hope that those who oppose the Bill will keep clearly in their minds what signal their opposition is likely to send. Given that they so signally failed to introduce relevant legislation when they were in a position to do so, despite the fact that there has been a consensus for some time about the need for such legislation, opposition now will send the signal that vested interests will always have friends in the Conservative party—and friends they should have none, anywhere. Vested interests are the enemies of progress, and the Bill will tackle them.
Labour Members know the right way forward and we shall vote accordingly tonight. I hope that the Conservative party will think again about whether it really wants to vote against a Bill that will play such an important part in modernising our economy.
§ Mr. Andrew Lansley (South Cambridgeshire)
I am grateful for the opportunity to contribute to the Second Reading debate. I am surprised by the closing assertion of the hon. Member for North Swindon (Mr. Wills), because I suspect that the Conservative party, during 18 years in government, did more than any Government in living memory to attack vested interests and promote competition. In debating the Second Reading of a Bill concerned with competition policy, the hon. Gentleman made an astonishing assertion. When he reads Hansard tomorrow, he may feel slightly abashed.
There is a need for competition legislation. I suspect that many right hon. and hon. Members on both sides of the House would accept that the right legislation might have a role to play. It was precisely for that reason, for several years before the most recent general election, that Conservative Administrations worked carefully towards 88 the stage at which legislation could be introduced, principally to reform restrictive trade practices and resale prices legislation. I have no quarrel about that.
In general, we must wonder whether we have the right piece of proposed legislation before us. I wish briefly to illustrate how many difficulties there are. Perhaps there are enough so that I might share the view of my hon. Friend the Member for West Dorset (Mr. Letwin) that we are entirely justified in seeking to deny the Bill a Second Reading.
The first problem rests with the overall drafting of the Bill. Precisely for that reason, we arrive at the question whether an article 86 prohibition should be added to the Bill. There have been many difficulties in many places about the definitions of "abuse" and "dominant position". Overall, there is the question whether the drafting of the Bill is good enough.
I refer the House to the survey in the latest edition of Global Competition Review. Fifty-eight per cent. of the lawyers and 63 per cent. of the economists who responded to the survey stated that they did not feel satisfied that the Bill in its present form was drafted well enough to achieve sufficient clarity and legal certainty. That underlines the question that has been raised about the effectiveness of the Bill as it is.
I shall not dwell on the question of unfair pricing, but I entirely accept the view of my hon. Friend the Member for West Dorset. I listened with astonishment to some of the exchanges involving Labour Members. No one has the necessary information on which to judge whether there has been unfair pricing in the newspaper market. Even if we apply the Tetra Pak judgment, the question is not confined to the cover price of a newspaper. Account must be taken of the cover price and advertising revenues.
If a newspaper were cutting its cover price, and as a consequence gained market share and advertising revenue that more than covered the loss of revenue through its reduced cover price, that would be a rational market activity, and would not constitute an abuse or necessarily an anti-competitive practice. It would be a pro-competitive practice. However, I do not have the information on which to base that judgment, and neither, I suspect, do Labour Members. It is the Office of Fair Trading that can acquire that necessary information, and it has done so several times. It is to be hoped that it has that information now. It should be for the OFT to judge under present legislation whether it should initiate an investigation.
As for the Opposition amendment, it is right to instance the problem for community pharmacies. The hon. Member for North Swindon talked about effects. If the effect of the implementation of the Bill were to diminish the presence of community pharmacies in rural areas, I know how damaging that would be. Outside the context of competition policy, within the national health service, the value of community pharmacists in providing primary care and health information is important and growing. It has been the objective to have pharmacists providing more primary care information, to free general practitioners so that they might engage more in complex diagnoses rather than the provision of basic public health advice.
89 If chapter I prohibition is to be enshrined in legislation, there are several requirements. First, there is the block exemption for vertical agreements. It should be recognised that there is considerable potential value in vertical agreements, not least to consumers.
Secondly, we need guidelines on the types of provision and conduct that are likely to be regarded as giving rise to anti-competitive agreements, lest we leave companies completely unclear for a long time about the manner in which legislation will be implemented.
Thirdly, we need de minimis exemptions. I suspect that we are talking of considerably more than the £20 million that applied under restrictive trade practices agreements, and perhaps £50 million or a 5 per cent. market share in the relevant market.
It can be argued that there is difficulty in determining what the chapter II prohibition means. Mr. Derek Ridyard of National Economic Research Associates states:Look at Article 86 Case Law in Brussels, lots of people have been found to be abusing their dominant position and fined, but without any real explanation as to what is or is not abuse of dominant position.Likewise, we should explore the difficulty in the relationship between the prohibition as it affects complex monopolies and the Fair Trading Act 1973, and the interaction between the two. It would be useful if there was a bilateral presumption—one has not so far been offered by the Government—that activity that is regarded as not against the public interest under the Fair Trading Act 1973 should not be prohibited under chapter II prohibitions, and vice versa. We should avoid the double jeopardy of concurrent investigations on those two issues.
It is important to take up a number of wider issues on Second Reading and in Committee, the first of which is compliance. The President of the Board of Trade talked about the 10,000 agreements under the restricted trade practice legislation, but she did not tell us how many thousands of precautionary notifications are likely to be sought by companies to forestall action, especially under the chapter I prohibition.
Secondly, the Government propose to take greatly extended powers of investigation and search-and-entry for the OFT, to the extent that one lawyer has been quoted as saying that they areunnecessary, and too much, even if they are used correctly".That may be counter-productive, because it may convert the OFT into a body that is considered to have a highly aggressive and adversarial relationship with industry, rather than one that genuinely seeks to assist in the creation of free, fair and competitive markets.
Thirdly, I hope that hon. Members, notwithstanding the speech by the hon. Member for Plymouth, Sutton (Mrs. Gilroy), share my concern that the extension of concurrent powers to utility regulators could create problems. There could be competing interpretations of the law, a build-up of competing case law with different precedents, and double jeopardy between regulators and the other competition authorities. It would be preferable for the OFT to remain the competition authority for those sectors, and to act alongside the sector regulators rather than separately.
Will the Bill give rise to a simpler and more predictable competition policy? I suspect not. The President of the Board of Trade has been criticised recently for failing to 90 pursue the predictable competition-based mergers and acquisitions policy that she inherited from her predecessors. I have an interest in that, because I was private secretary to Norman Tebbit when he introduced the Tebbit doctrine.
Predictability is slowly but surely being undermined. The director general and the seven—at least to begin with—utility regulators, the Competition Commission, the Court of Appeal and the European Court of Justice will be involved. My hon. Friend the Member for South Dorset (Mr. Bruce) reminded us that the ECJ would be operating a law that presumes the protection of a single market and a pro-European Union application, not one particular to United Kingdom circumstances. Nevertheless, it is to be introduced to the United Kingdom domestic context. I should be surprised if all that becomes predictable and simple.
I want to be brief, to allow other hon. Members to speak, but I must discuss the system of financial penalties, to which no one has referred. Up to 10 per cent. of United Kingdom turnover is cited. [Interruption.] Have I done my right hon. Friend the Member for Wokingham (Mr. Redwood) an injustice? I beg his pardon, because he mentioned it. I was present earlier, but was obviously not paying sufficient attention. If I agree with him, he will forgive me for that.
Up to 10 per cent. of United Kingdom turnover is cited, but clauses 37 and 39 refer to a system in which that high level of penalty may be applied in ways that we know not of, and by reference to guidelines issued by the director general that would be approved by the Secretary of State, but not referred to Parliament. The Bill does not say how the severity of financial penalty would be related to the relative severity of abuse or of contravention of the prohibition. That is a dangerous structure, and one to be deplored.
The President of the Board of Trade lauded her achievement in introducing the Bill so quickly. She might have done better to reflect on why it took the previous Government several years to produce a draft Bill in August 1996, and why it differed from this Bill. The draft Bill did not include the general prohibition paralleling article 86. Even though she claims to have produced clear legislation, she must reflect on why lawyers and economists conclude, on balance, that the Bill will not help in that respect. Several issues are yet to be sorted out.
Those grounds are enough to deny the Bill a Second Reading, and I support my right hon. Friend's amendment. If the Bill is given a Second Reading, I hope that the Minister will have the honesty to admit that there is much more work to be done in Committee.
§ Mr. David Borrow (South Ribble)
I welcome the Bill, which is a long overdue modernisation of competition policy. It is remarkable that the shadow Secretary of State is happy with the status quo: there is clear evidence that, when in office, the Conservative Government were preparing legislation to be introduced had they won the election, and therefore implicitly accepted that the status quo was not satisfactory and that changes were needed.
Although the official Opposition think that the status quo is satisfactory, representations that I have received suggest that the business community is broadly satisfied with the new framework laid down by the Bill. 91 The involvement of European legislation and European law in United Kingdom competition policy is especially welcomed by much of British industry as simplifying the approach to competition through common rules in Europe as within the United Kingdom.
The Bill puts teeth in competition policy by creating real investigative powers, and powers to intervene when there is evidence of improper competition. As my hon. Friend the Member for Crewe and Nantwich (Mrs. Dunwoody) so clearly showed, the problems of bus privatisation and obvious examples of unfair competition, with which existing legislation fails to deal, would be dealt with by the Bill. It will also bring into force powers for fining those engaged in unfair competition, so companies that can show that they have suffered as a result of unfair competition have redress, which, under existing legislation, they do not.
The Bill's approach is to be welcomed for those reasons. We often consider competition law in terms of whether it benefits the consumer, but it must also benefit players in the market if we are to have proper competition. Small companies are often hurt by existing legislation: they are put in adverse situations by large companies because they are unable to achieve fairness under existing competition rules.
We must, however, examine in detail certain areas within the broad framework. I have received representations on the impact of European legislation and case law and British legislation and regulations, and the extent to which we are in danger of operating under two competing legal systems. There is genuine concern about that issue. Much of the business community is genuinely worried about the extent to which there can be quick redress, and whether redress under the new regulations will be expensive. Those matters must be dealt with in detail in Committee.
I wish to deal with three specific areas of concern. First, I have received representations from the music industry, which is subject to the copyright tribunal under domestic legislation, and is worried about the Bill's impact in terms of a double jeopardy. Other industries are in a similar position.
Secondly, I wish to discuss retail price maintenance for over-the-counter medicines. About a third of my constituency is rural, and rural communities are worried about the survival of a good network of community pharmacies.
I accept the argument that competition law should consider whether the restrictive practices court will find, as it did in 1970, that the existing system should continue, and that the retail price maintenance in that sector is justified because it maintains a network of community pharmacies. However, should the court find that it is not justified, the Government still have a responsibility to ensure that a network of community pharmacies continues to exist.
The £4 million that is given to maintain essential community pharmacies is but a small part of what might be needed if retail price maintenance in that sector were removed. Taxpayers' money should not be used to subsidise large and successful businesses, and consumers should not pay over the odds, but a good network of community pharmacies in rural areas, and in deprived 92 urban areas without ready access to town centres, should be maintained. Although it is not the DTI's responsibility, I hope that the issue will be addressed in due course.
Thirdly, I recognise that the Bill strengthens the position on predatory pricing beyond the status quo, which the official Opposition find satisfactory. It does so by introducing into British law the findings of the Tetra Pak European Court decision in 1994, which laid down that, if the average variable cost of a product is above the price charged, that clearly shows that there is predatory pricing. Many people are worried that the Bill will not do what was originally promised.
One argument that has not been tackled this evening is that competition policy should take a common approach across all industries. If we accept that argument, clause 19 should not have been included in the Bill. If we want to take measures to ensure that we have a diverse and free press, it should be done not through competition policy but through some other legislation.
That issue needs to be debated. I remain to be convinced that the Bill will strengthen competition in all sectors and tackle predatory pricing. If people think that that is the only issue concerning the media in general and the newspaper medium in particular, they are living in a fool's paradise. It is not the main thrust of our concern about how the media are managed, owned and operated in the UK.
I assume that the Bill will receive a Second Reading. Many issues need to be tackled and debated in Committee, and I hope that the Government will take on board some of the comments that I have made.
§ 8.4 pm
§ Mr. Colin Breed (South-East Cornwall)
I am happy broadly to welcome the Bill, which has been a long time arriving in this place. Some of us have been a long time waiting to make a brief speech about it.
There can be no reason to legislate on competition, other than to deal with the balance between competing businesses and the impact on public interest. It is therefore essential that the notion of "public interest" is properly defined and understood. The public interest test, which should be the most important factor in determining the value, or even the relevance, of the Bill, applies to every sector that has been mentioned this evening.
The previous Government believed that the market would always sort out the proper relationship between businesses, that, through that mechanism, consumers would ultimately benefit through price reductions, improved services and even product innovation, and that a strong and vibrant economy would be built up as a consequence. In theory, that is perfectly possible. It was applied to the then publicly owned monopoly utilities, which resulted in the exercise that we all came to know as privatisation.
The theory ran that, if competition was introduced into those trading organisations, they would begin to function more efficiently, and would become much more responsive to their customers. It was rightly recognised that just floating the businesses into the private sector would not automatically introduce competition, but that consumers—and therefore the public interest—needed to be protected, and that it would also promote competition within the industry.
93 I do not have time today to consider in depth the rights or wrongs of privatisation, or whether it succeeded or failed, but there have clearly been great benefits and some disbenefits as those regimes have matured in today's market. Privatisation has provided us with an opportunity to examine in hindsight what we understand to be the public interest. This Bill—and, I suspect, future legislation—can be made more responsive to consumers' needs in both the short and medium term. Trying to predict the long term is impossible.
It should therefore be expected that competition policy will have to be reviewed from time to time in the light of fast-moving events. Clearly, the narrow interpretation of public interest as relating only to the short-term price of goods and services, without considering the wider implications of competition and monopoly, is insufficient.
In the absence of a proper definition, may I suggest a few essential elements that must be part of the public interest test, and thus part of how we review this extensive Bill? Those are efficiency and equity; and consistency and certainty. A more realistic view of legitimate public interest can therefore be established, and, most importantly, business can function in a secure and predictable environment.
The public need to be protected in matters of health and safety, for which it is far easier to legislate, but it is much more difficult to legislate for the wider collective public interest, with which the Bill seeks to deal. It includes the need to counteract anti-competitive behaviour by businesses, and to ensure that all customers and consumers can freely negotiate fair terms with businesses that have or may have a dominant position in the marketplace.
Just as the appointed regulators have a special role in maintaining a balance between certain businesses and consumers, so the Government, through competition policy, must hold in tension the legitimate commercial aspirations of business and the wider public interest. As the Bill sets out new rules for the regulators in the light of experience since privatisation, it must also address other competition issues in the light of current practice and experience.
Competition regulation should not merely be about restrictions, but must actively and positively promote effective competition. It should encourage greater efficiency while protecting diversity. It should ensure equity between customers and business, so that the product of efficiency gains is shared fairly between shareholders and consumers. It should promote the use of new technologies, enable new investment to be made and new products and services to be introduced, to the benefit of both big business and the consumer. It should also enable new competitors to enter the market by ensuring that entry barriers are not erected by established businesses to prevent new competition.
The Bill seeks to replace a considerable amount of current legislation, which I believe has served the public interest reasonably well. Although it is necessary to update existing law, it is vital that we do not abandon the aspects of fair trading and competition that still have a role to play, merely to make the legislation less complicated or to introduce new deregulation for its own sake.
Some anti-competitive practices have already been highlighted in the debate, and no doubt they will be the subject of considerable discussion in Committee. I place on record my concern that, unless the Bill is more specific 94 about particular industries and services—we realise that some of them are unique in their influence or position in the United Kingdom market—this extensive and comprehensive legislation will be rendered ineffective when tested in the courts, as it surely will be at some time.
It is impossible to provide a strong and coherent competition framework through a series of general clauses that try to cover every possible commercial activity. Nor would it be sensible to rely solely on the fact that the Bill falls into line with existing European law, most of which is inappropriate and untested in the British courts. The commercial marketplace in this country has developed and progressed along totally different lines from most of Europe, and has been subject to different regulation. In some ways, we are far ahead of Europe; in others, some way behind. Some aspects of our social and community life can be regulated only by discreet and individual attention.
Our national newspaper industry is unique. It provides us with benefits, but also causes some disquiet. To say that it can be controlled through European legislation alone is naive. Similarly, the growth of food retailing in this country has been an almost overnight revolution. It has developed in a completely different way from European markets, although some, notably in France, are experiencing similar and familiar problems.
I have no doubt that supermarkets have brought consumers many benefits, with lower prices, greater choice and convenience. Only now are we beginning to experience some of the problems. The dominance of a few large supermarket chains is beginning to have an enormous effect on our communities. That is a good example of the way in which our understanding of public interest has changed. Other considerations must be taken into account when determining what public interest means.
Lower prices through competition are to be encouraged, but not at all costs. That applies to all competitive markets. A narrowly defined public interest that uses the simple test of low prices as the only measure of whether the public have benefited, especially in the medium term, is unlikely to satisfy the aims of the Bill.
If the Bill is to achieve its purpose, to ensure that the public interest is protected and enhanced, it will require a degree of bravery and honesty that the Government have not so far shown. They will have to oppose highly skilled, extremely well-funded, and profoundly influential vested interests. They will have to face up to those vested interests on behalf of the whole country. That will almost certainly bring them into conflict with some major commercial concerns, and that may be very uncomfortable.
The Prime Minister is fond of saying that tough decisions must be made—lone parents know that only too well. The time has come for even tougher decisions to be made in the national interest, and I hope that the Government will not fail the test.
§ Dr. Phyllis Starkey (Milton Keynes, South-West)
Like my hon. Friend the Member for North Swindon (Mr. Wills), I am unsure of the argument that the Opposition have been trying to make, although I have been listening carefully. Unlike him, however, I did not find many of the anecdotes amusing, mainly because they were rather laddish. That is a common failing of Conservative Members.
95 The Bill is eminently sensible. During the debate, the Opposition have been busy manufacturing ever more improbable scenarios to try to show that the Bill poses a great threat to British industry. However, the absence of that threat is shown by the fact that the representative of the Confederation of British Industry who is supposed to be advising them on the Bill has deemed the threat to be so tiny that he is not bothering to be around today: he is on a course and is obviously using his time more effectively.
§ Mr. Boswell
The hon. Lady's anecdote about the CBI is interesting, but does she concede that, before disappearing on that course, about which I know nothing, the CBI adviser submitted seven major points of concern that remain outstanding, despite the consultations that the CBI had with the Government on the Bill?
§ Dr. Starkey
The CBI provided all hon. Members with a brief. The CBI broadly welcomed the Bill, although it made one or two minor points. That hardly shows that it believes the Bill to be the enormous threat that the Conservative party is making it out to be.
I shall keep my remarks brief. I merely want to emphasise the positive measures to provide effective competition legislation, and the importance of such legislation for small and medium businesses. Those hon. Members who know my constituency will not be surprised to hear that I am interested in such businesses. Milton Keynes contains a small number of large employers, including foreign multinationals that are active in the town, but the strength of the local economy is the hundreds of small and medium enterprises that have between one and 50 employees.
I have not visited all the companies in my constituency, but I intend to do so. I have been struck by their ingenuity in exploiting many different markets and in developing new markets. A high proportion, including some of the very small companies, are exporters and export all or most of their products, often into Europe but also to the rest of the world. Those companies, which are incredibly important to the local economy, have two major concerns which will be addressed by the Bill.
Those businesses, by their very nature, are highly competitive. They are entirely satisfied if they are competing on a level playing field, but they deeply resent larger companies in particular using uncompetitive practices to reduce the advantages of small companies.
I welcome the proposal in the Bill to enable the Director General of Fair Trading to stop restrictive practices straight away, instead of waiting as long as nine years—as the President of the Board of Trade stressed in her opening remarks—before making a decision, as happened under the previous Administration. Nine years is several lifetimes for small firms. In that time, such firms attempting to compete in a climate of unfair practices would go out of business.
It is important for small and medium firms to have effective sanctions that can be implemented immediately to stop such practices, and firms that are damaged by them should be able to obtain recompense. Those matters have not been given the prominence that they deserve, because the Opposition have focused mainly on the bits of the Bill that they do not like.
96 Large and small businesses in Milton Keynes will welcome the simplification of bureaucracy, especially the move towards making UK legislation more consistent with that in Europe. As I have said, many firms in my constituency trade extensively within the European Union, and it is incredibly irritating for them to operate one set of rules and regulations in the UK and a completely different set in the rest of the EU. I am sure that they will welcome the move towards making the rules more consistent.
The previous Government engaged in extensive consultation on competition legislation. The Labour Government have also consulted, but the difference between us and the Conservatives seems to be that, having consulted, the previous Government decided to do nothing, whereas we have decided that it is best to produce legislation that will, for the most part, be widely welcomed by all sectors of business.
§ Mr. Alasdair Morgan (Galloway and Upper Nithsdale)
I shall try to be brief, as many hon. Members wish to speak.
I suspect that many hon. Members were dismayed by the Bill's size and complexity. In the mid-1960s, one lecture in an applied economics course sufficed to cover the Restrictive Trade Practices Act 1956, a measure that has long since gone the way of all flesh. The increasing complexity of legislation is shown by the fact that about a third of the Bill repeals or amends earlier legislation. Early legislation had little such repeal or amendment. It is incumbent on us as legislators to make sure that we fully understand the consequences of the Bill.
I shall deal briefly with some selective concerns. I think that the hon. Member for Eastleigh (Mr. Chidgey) mentioned the professions, but apart from that they have not been dealt with in detail. In a debate in the other House, George Bernard Shaw was quoted:All professions are conspiracies against the laity.I do not go quite that far, but we must recognise that not all professional rules are introduced for the benefit of the public; some of them are for the benefit of the profession.
Paragraph 5 of schedule 4 places a duty on the Director General of Fair Trading to keep a list of the rules and to keep it under review. I remain to be convinced about the effectiveness of that procedure. Schedule 4 should contain more about the frequency of the reviews and about the criteria that will be employed in them.
We need more explanation about the professions that are included in schedule 4 and about those that have been omitted. The National Consumer Council asks why solicitors are included while estate agents are not, although there is a considerable overlap, certainly in terms of the contact that people in those professions have with the public. The Law Society of Scotland asks why notaries public are excluded from the list. They perform important functions in Scotland.
The subject of community pharmacies has been much canvassed and is potentially serious. I do not agree with the Opposition, whose reasoned amendment suggests that they wish to reject the entire Bill simply because it is deficient on the matter of community pharmacies. Of course, when the Government have a majority of 179, the Opposition have the luxury of being able to say what they 97 want in an amendment because they know that it will not be accepted. As the hon. Member for South Ribble (Mr. Borrow) said, community pharmacies fulfil a real need not only in rural areas but in many urban areas. Services that are not always available from hard-pressed general practitioners, who are inevitably less skilled in such areas, may be obtained from pharmacists. In many areas, the people who are least able to get to a supermarket or to another pharmacy will benefit from local advice. At the most recent meeting of the Scottish Grand Committee, we heard about pharmacies that are closing, so that problem is with us here and now.
I accept that it could be said that all pharmacies depend solely on profits from the sale of over-the-counter medicines. They are not, but there is no doubt that some large, profitable pharmacies do very nicely, thank you very much, from the vastly inflated prices of over-the-counter medicines. Equally, many small pharmacies in rural areas and in some urban areas are on the margin and inflated profit on such medicines makes the difference between viability and failure. It is valid to argue that artificially keeping up the price of goods is the wrong way to ensure the delivery of a social service.
The new Government are falling over themselves to keep to Tory spending limits, and they are totally obsessed with the public sector borrowing requirement. Will the Department of Health find the extra money to keep pharmacies going? Some money goes to the essential pharmacies scheme, but I do not think that the Government will find the extra money that is necessary to replace profit support. Perhaps a small anomaly in competition policy would be a small price to pay to keep valuable social services going. It will be too late to fix the problem when the pharmacies close, because they will not reopen.
Many of us have been lobbied about a matter that I do not think has been mentioned. It certainly came up in debates in the other place on the Bill. It is the issue of look-alike products. Some manufacturers imitate the packaging of a brand leader so that people buy the wrong product. The Government have said that they do not think that that is an apt subject for the Bill and that there are other ways to deal with it. Have they had further thoughts on the matter? It is clear that the industry does not agree with the Government that the existing legal system is satisfactory, despite the judgment in the Penguin v. Puffin case of look-alike biscuits. Many jobs and much investment are tied up in existing brands, and, just as it is wrong for the manufacturers of branded goods to keep prices artificially high through vertical agreements, it must also be wrong for such firms to be undermined by competitors that are almost counterfeiters.
The Competition Commission will replace the Monopolies and Mergers Commission. The MMC holds hearings in Scotland to take evidence. Will the Minister confirm that the new commission will be enabled to do that?
On the issue of newspapers and predatory pricing, we heard much about the philanthropy of Mr. Rupert Murdoch in lowering the price of his newspapers. I am sure that that is his main motivation, as the right hon. Member for Kensington and Chelsea (Mr. Clark) implied. We have a slightly different situation in Scotland, because another couple of broadsheets there, The Herald and The Scotsman, have largely been able to keep The Times at bay, but it is a difficult matter. We all recognise that 98 many of these publications operate fairly much at the margins and that the profits to be made are not large, so anything that puts their existence in potential peril is a likely problem.
The President of the Board of Trade said that the Bill strengthened competition law, and argued with some justification—we have heard contributions to this effect—that the amendment to clause 19 which was added in the other place was badly worded and would prohibit behaviour that was simply part of normal competition. However, if that is true, she has to say—because there is a problem here, which has been graphically described by Labour Members—whether the Bill is strong enough to stop predatory pricing and the other tactics of Mr. Rupert Murdoch. I do not think that that case has yet been made. The Government will have to make that case strongly before hon. Members who feel as I do vote to delete the amendment.
§ Dr. Ashok Kumar (Middlesbrough, South and Cleveland, East)
Thank you, Mr. Deputy Speaker, for calling me on Second Reading.
I am fully committed to the general principles of the Bill and will vote for it tonight. However, I want to make some general comments and then dwell on two aspects of the Bill that cause me particular concern. The first is the vexed issue of neighbourhood community pharmacies, which have been mentioned by the hon. Member for Galloway and Upper Nithsdale (Mr. Morgan), and the possibility of the end of resale price maintenance on over-the-counter medicine. The second is part II of schedule 4, which attempts to define engineering disciplines, which have been mentioned by the hon. Member for Eastleigh (Mr. Chidgey), the Liberal Democrat spokesman. It is at best confused, and it certainly needs reviewing.
It is noteworthy that, despite the fact that the last Tory Government spent much time circulating discussion documents on competition issues, in the time they were in power they made no attempt either fully to draft or to enact any legislation to control abuses of market power, cartelisation or monopoly. It is this Labour Government who are doing that and who are standing up for the consumer. For that, they will, in general, be warmly thanked by both consumers and industry.
That is not to say that there are no contentious issues. In a complex society and diverse marketplace as ours, there are bound to be anomalies. It is on two anomalies that I want to dwell. These issues are not trivial, but important in themselves. They are not aimed at undermining the Bill's central thrust, but they need serious, diligent and robust examination in Committee.
There is no doubt that community pharmacies are a contentious issue for many people, not least small pharmacists and the people who depend on them. My constituency is largely rural, with a hinterland of small ex-mining villages and market towns. Unemployment is high, and there are many villages where many people are not wealthy and where car ownership is very low. In some villages, about 45 per cent. of people—no more than that—own cars.
Those villages are located a long way from the main shopping centres. Public transport access to the main towns of Middlesbrough and Redcar can often involve a 99 long bus journey of up to an hour. If local pharmacy services did not exist, a constituent—say, a mother with a child—might have to fork out more than £4 just to get some simple medicine. Luckily, because of the work of successive local health authorities and trusts, aided, I must say, by the local council, almost all those villages have a functioning general practitioner surgery service.
Those surgeries and clinics are linked to a number of small local pharmacies. All those without exception are fearful of the impact that ending RPM on over-the-counter medicines would have on their shops, on their future and, perhaps more important, on their service to the community. They are concerned that, without RPM, they could lose that vital margin that supports the drug and medicine prescription service to their customers.
§ Dr. Kumar
No. I have a short time, and I know that other hon. Members want to speak.
The people who will really suffer will be those who most need the services of local chemists: the elderly, mothers with young children, disabled people and carers. By definition, those people are among the least mobile in our community.
This is not only a local, but a national problem. The community pharmacy action group estimates that, nationally, 3,000 local chemists would have their economic future put in jeopardy. That prediction is based on the conservative estimate that, without some form of RPM, 20 per cent. of customers with access to personal mobility would switch from using their neighbourhood chemist to supermarket chains. That conservative figure is shadowed by what I call a "worst case" scenario, based on an Office of Fair Trading poll, which showed that some 36 per cent. of people are prepared to make the switch to the supermarkets.
Local pharmacists make a real difference to the work of local GPs and community nurses. They do not act just to make up medicines and sell proprietary drugs. They assist local people with expert help and expert knowledge and give free advice on common health problems. They lighten the burden on already overworked GPs, GP nurses and receptionists. They act as a vital part of the community health network.
Again, the community pharmacy action group estimates that, if just one tenth of people who treat themselves with medicines that are bought on advice from their local neighbourhood chemists, were instead to go to their GP, an additional bill of some £4.7 billion would fall on the national health service—and that in the crucial sector of local primary health care.
Those are real fears. I recently spoke to one small pharmacist in Loftus in my constituency about the matter. He said:Over 75 per cent. of my turnover is accounted for by NHS work.The profit margins for this work are constantly being narrowed as remuneration packages from the NHS Executive become tighter.I am kept afloat by RPM on over the counter medicines, and if that goes then the floodgates will open.The concentration of initial sales in the hands of big supermarkets will mean the loss of vital local knowledge, and the loss of personal relationships with people who have come to depend on me.100I am also fearful that involvement by the supermarkets could well be aped by smaller discount shopping chains and by newsagents.This is something that could well mean the promotion and sale of a cocktail of drugs to local people and the involvement of totally inexperienced people in the sale of medicines and the giving of advice.Those are not mere abstractions conjured out of the air by pressure groups, but the views of men and women who are involved in delivering a community service, as well as running a business—people who both employ staff and have the confidence of local people. We cannot afford to lose that.
The Labour Government are tackling the inherited problems in the NHS that were left to us by the previous Government. The announcements over the past few months, weeks and, indeed, days by my right hon. Friend the Secretary of State for Health have meant a lot for the NHS, for the country's good health and for my constituency in particular. There is no logical reason why those gains for the NHS should be negated by the effects on community pharmacists, such as those I quoted, of ending RPM.
It is for that reason alone that I urge the Government to think carefully. They should think carefully about the real strength of feeling that was demonstrated by the success of the amendments sponsored and supported by peers of all parties and by Cross Benchers in the other place.
I totally agree that we should aim for a society where competition is on a level playing field. However, that famous playing field must represent the genuine interests of local people and local communities. In this case, I believe that most people would back the little man or woman and the needs of local communities above the need to conform to rules that merely benefit the multiple trader and the out-of-town hypermarkets—rules that benefit the big boys and disadvantage local communities.
I want now to deal with another issue, relating to schedule 4, which gives a definition of trades and professions. In particular, I am concerned with the paragraph headed "Engineering", which, as currently drafted, is a dog's dinner. Originally, I thought that I wanted to speak as someone trained as a chemical engineer. That is an important profession serving, disproportionately, successful elements of British industry and technology—elements vital to our economic future. Chemical engineers are the backbone of the chemical, oil, gas and pharmaceutical industries. They also contribute to a successful food industry and help to sustain Britain's process engineering capability. That area of professional engineering is left out of the schedule.
I had intended to protest about that, but, as I looked through the schedule, I felt more and more that what was needed was not something that might be seen as professional pique; other areas of engineering competence have also been overlooked. Hon. Members who might come from other occupational or professional sectors have as much right as I have to ask for the inclusion of their professions.
What is needed is a root-and-branch revision of this part of the Bill. I do not think it appropriate to include activities such as forestry, livestock rearing or agronomy under the heading "Engineering". That is absurd. I do not deny that they are important occupations, with their own forms of accreditation, but they are not engineering functions—although they certainly rely on engineers to carry them out.
101 The sensible approach would be to reorder and revise the schedule to make membership of or accreditation to a professional body the qualifying factor. In engineering, 16 distinct bodies are recognised by the charter as representing areas of expertise. A corporate member of one of those institutions can be recognised as fully qualified to practise that profession. He can be viewed as someone working within the discipline of his professional body in terms of competence and knowledge. The law and, indeed, society recognise the standing of the professional engineering institutions. They hold royal charters and often have up to 150 years of experience in upholding professional standards. I suggest that they be viewed as the appropriate qualifying bodies for the purposes of the schedule.
That leaves those occupations and professions mentioned in the schedule that are not engineering-related. Those such as metallurgy, biochemistry and physics can have wide boundaries, but they should be treated similarly, so that someone's membership of a suitable qualifying professional body becomes the mark of accreditation.
I will not go into detail now, but under the catch-all heading of ecology, membership of the Royal Town Planning Institute or the Institute of Wastes Management could be relevant. Other academic qualifications cover people offering services as diverse as livestock rearing, agronomy, mineralogy and geology, which I am sure will provide a suitable benchmark for recognising competence.
When the Bill goes into Committee, those elements should be examined closely. An accurate schedule will prevent heartache later. It will help to prevent charlatans and unqualified people from gulling consumers and small businesses. It will give confidence to those who need professional expertise and guidance so that they can be sure of the qualifications of those whom they might employ or engage. If things go wrong, it will give them the knowledge and comfort that they can seek redress not just through the law, but by bringing an incompetent or fraudulent person to account through action by his professional body.
I hope that my points about the need to keep a flourishing community sector and the need for clarity in defining professional status are borne in mind by my hon. Friend the Minister.
§ Mr. Peter Brooke (Cities of London and Westminster)
I congratulate the hon. Member for Middlesbrough, South and Cleveland, East (Dr. Kumar) on an eloquent speech outlining the interests both of his constituents and of his profession. For 18 years before entering this House and joining the Government, I was involved in a small company that employed 10 people when I joined it and 200 when I left. It was the sort of business that the hon. Member for Milton Keynes, South-West (Dr. Starkey) looks at when she goes round her constituency.
My speech today is a bare-faced bid to serve on the Committee. I make it with no great optimism, as my last two such bids, since I served on the 1996 Housing Bill, have failed. In the last Parliament, my offer to serve on the Crime (Sentences) Bill was rejected by my Whips Office—I suspect on the ground that my voting pattern would not have been wholly reliable. In this Parliament, 102 my offer to serve on the Wild Mammals (Hunting with Dogs) Bill was rejected, presumably on the grounds that my constituency is used more for country sports rallies than for country sports themselves.
On the basis of the Bill's progress in the other place, where there were only three Divisions in more than four months of debate, the Bill is clearly not wholly controversial. In passing, I have to say that I am not surprised that the Government periodically lose votes in the other place, as I note that on the two substantive Divisions, more than 70 of their Lordships voted in one or other of the Divisions, but not in both. If the Government cannot get their troops into the Lobby, they are likely to lose Divisions. The Bill began in the other place on 30 October and did not leave it until 5 March, since when another two months have elapsed. That suggests that it is one of those Bills about which Mr. Sherlock Holmes might have said, "These are deep waters Watson." Either that or the Government are having some difficulty with their legislation.
Lord Simon of Highbury alluded on Second Reading on 30 October to the fact that some competition inquiries had taken as long as nine years. Those longueurs seem to have infected the Bill. The scale of support on the Labour Benches for the President of the Board of Trade when she opened the debate suggests that the Government are at least marching towards the sound of gunfire—but I hope that the Treasury Bench will forgive me if I say that the Government have not been marching very fast. Perhaps competition is not as clarion a call for the Government as they would wish us to believe.
I served on the Committee stage of the 1978 Companies Bill, the last such Bill brought in by Labour before 1997. Both the Ministers who led the Committee are still in the House—the current Minister for the Environment, the right hon. Member for Oldham, West and Royton (Mr. Meacher), and the right hon. Member for Caithness, Sutherland and Easter Ross (Mr. Maclennan), in his prior party guise. There were moments when their utterances served as a harbinger of the comments of my hon. Friend the Member for West Dorset (Mr. Letwin) about the Bill. On our side we were, apart from myself, a distinguished octet. Five of my then colleagues now serve as Privy Councillors in another place, all having served in government. Only my right hon. Friend the Member for South Norfolk (Mr. MacGregor) sits in this House. Sadly, and finally, that notable and idiosyncratic Back Bencher, the late Sir Brandon Rhys Williams, died a decade ago.
The relevance of that Committee stage was that it sat 24 times for two and a half hours each without ever sitting other than in the morning. It could not be said of the Government Whip that he drove us, as Raymond Asquith said of a chauffeur in the early days of motoring, with the passion of Shelley and the precision of Pope—although I was happy to be reminded through the bizarre suggestion of my hon. Friend the Member for North Swindon (Mr. Wills), who I regret has left the Chamber, that the last Government had not injected dynamism into the economy, of the great late Ian Mikardo's comment on that Committee about the woman who said to the Duke of Wellington, "Mr. Smith I presume," to which he responded, "Madam, if you will believe that, you will believe anything." My other aspect of continuity is that more than 40 years ago, in the first year of a postgraduate degree at the Harvard business school, I became saturated in American 103 anti-trust law in a course known by the unlyrical acronym of BRAS—which stood for business responsibilities in American society. Even earlier, I had met Lord Borrie, who was a distinguished treasurer of the National Union of Students when I was an improbable member of the NUS executive.
This bid to serve on the Bill's Committee stage is effectively a non-speech, but even a non-speech must have structure, and mine has 11 points—reflecting the tendency to see all life through a filter of cricket—although the House will be glad to hear that I have already made the first seven.
When I spoke on the Finance (No. 2) Bill's Second Reading, I essentially addressed Committee points, although I was not seeking to serve on that Bill's Committee stage. However, I do have a constituency interest in this Bill, which will give rise to genuine constituency points. I have a constituency interest in the Bill not only because I have a business constituency—with as many businesses as households in the W1 postal district, and 50 times as many employees as electors in the City of London—but also because of those who have written to hon. Members about the Bill, to whom other hon. Members have alluded in this debate.
British Music Rights, to which the hon. Member for South Ribble (Mr. Borrow) referred; the British Brands Group, to which the hon. Member for Galloway and Upper Nithsdale (Mr. Morgan) referred; the Community Pharmacy Action Group, to which almost everyone has referred; and the Association of Solicitor Notaries in Greater London are all my constituents, as are the Worshipful Company of Scriveners, about whom the solicitor notaries wrote. Although the Confederation of British Industry is not my constituent, it is right on the border.
What the Bill patently needs is highly detailed scrutiny, on the same scale as it received in another place. Although I share with my hon. Friend the Member for West Dorset a concern about how amenable the Bill will be to improvement, given the form that the Government have conferred on it, our job—the Committee's job, if we are privileged to serve on it—is to make it work better than it currently promises to do.
There is nothing in this speech for the Minister to reply to, not least as my coming on the Committee will not be for him. For myself, I have never served as a Department of Trade and Industry Minister, which in some ways seems the most persuasive credential to put forward in offering myself for the Committee.
§ Dr. Stephen Ladyman (South Thanet)
I, too, shall try to keep my comments brief—largely because many of the points that I had planned to make have already been made, but also because I think that the need for the Bill is self-evident. Our economy operates in a single market. It therefore seems clear that that market should operate within the framework of a single competition strategy—which is essentially what the Bill is intended to provide by bringing us into line with the European Union.
The Bill would introduce other major improvements to United Kingdom competition law—not the least of which is that it would give officers powers to act immediately 104 when they perceive some irregularity, rather than obliging them to wait for the conclusion of a lengthy investigation. As right hon. and hon. Members have already said, such delay has often led to businesses going bankrupt before they can be helped by regulation.
The Bill would also improve powers to enforce regulations.
The Bill's main improvement on current competition legislation—about which the right hon. Member for Kensington and Chelsea (Mr. Clark) seemed to be somewhat confused—is to replace the need to prove intention with a simple mechanistic process in determining issues such as predatory pricing.
The hon. Member for West Dorset (Mr. Letwin) asked a question on the simple mechanistic process. To answer his question, I simply quote the European Court of Justice's Tetra Pak judgment—which is specifically dealt with in clause 60 and must be considered by both the commissioner and the courts in determining the operation of predatory pricing:Where an undertaking fixes its prices at a level below average variable cost, it is to be conclusively presumed that the undertaking's purpose was to harm its competitors.How can one argue that that is not a mechanistic means of determining the existence of predatory pricing?
§ Mr. Letwin
I repeat the question: if the European Court of Justice intended—or if the Bill will have the effect of making British courts conclude—that any action in which a firm charges below average variable costs is, ipso facto, unfair pricing rather than pricing that is trying to harm a competitor, will not vast swathes of British industry find themselves, in current conditions, in default of the Bill?
§ Dr. Ladyman
I do not accept that argument. The judgment—to complete the argument that I was trying to make when the hon. Gentleman intervened—uses the words "conclusively presumed". There is therefore no question of "on the one hand" and "on the other hand" in the matter. Predatory pricing will be conclusively presumed if the test is met.
A second passage in the judgment dealt with a second part of the test in determining predatory pricing. The court stated:Where an undertaking fixes its prices at a level above average variable cost but below average total cost, its conduct is to be regarded as predatory only where there is independent evidenceof intention.
I therefore believe that the Bill's other clauses, and the Tetra Pak judgment, will offer adequate protection—which we will undoubtedly scrutinise during the Bill's Committee stage. Nevertheless, I believe that the Bill—by removing the need to prove intent and adopting a mechanistic approach—will considerably strengthen United Kingdom competition law.
Opposition Members cannot have it both ways. The right hon. Member for Kensington and Chelsea seemed to be arguing in favour of a mechanistic approach. If other Opposition Members want to argue in favour of the opposite approach, they will have to resolve that personal argument among themselves.
I believe that the Bill's mechanistic approach will also deal with the issue of predatory pricing among newspapers, thereby making clause 19 unnecessary. 105 I agree strongly that—as a Government and as a Parliament—we have to examine the framework within which the United Kingdom media operate. I should be very interested to scrutinise a media Bill dealing with the structure of newspapers and other media. There is great demand for such a Bill, but we will not build an appropriate regulatory framework for the media in a Competition Bill, and it is wrong to expect this Bill to sort out all the problems that we think there might be in the newspaper and broadcasting industries.
Clause 19 not only tries to provide something that the Bill already provides: it would also introduce various dangers—two of which I have already dealt with in interventions earlier in the debate and will not repeat. However, one other possible danger lies in clause 19(2)(b), which states:other action which may reduce the diversity and independence of the national newspaper press".That provision might be interpreted as meaning that newspaper bingo, for example, constitutes unfair competition. Newspapers might be taken to task over bingo. You may argue that a law that makes newspaper bingo illegal is inherently a good thing, and I might even agree with you, but I would not agree on the basis of competition law.
§ Mr. Deputy Speaker (Mr. Michael Lord)
Order. The occupant of the Chair has no view about newspaper bingo. The hon. Gentleman is using the wrong parliamentary language.
§ Dr. Ladyman
I am grateful, Mr. Deputy Speaker, and I apologise.
Clause 19(3) defines "dominant position" only as a company that holds a dominant positionin the national newspaper market".The subsection would introduce another restriction, as we may want to examine a company's dominant position in the media industry as a whole, including its ownership of other types of media. Clause 19 is not only unnecessary but introduces dangers, and it needs to be removed.
Like others, I am greatly concerned about community pharmacies. I stress that we are talking about community pharmacies, not rural pharmacies; some hon. Members seem to use the terms as though they are synonymous, but we should not lose sight of the fact that many pharmacies in urban areas also need support. Retail price maintenance is not necessarily the best way in which to help them. The Department of Health has a big task ahead in reviewing the way in which we support pharmacies in locations that may not be commercially viable.
My right hon. Friend the President of the Board of Trade said that it is estimated that retail price maintenance costs the consumer an extra £900 million. Only a small part of that sum goes to community pharmacies; the bulk still goes to the main hypermarkets and supermarkets. I note in passing that, according to the Library research paper, the Asda supermarket chain made two attempts to break the retail price maintenance agreement and was stopped only by injunctions, so I wonder whether Conservative Members will be entirely unanimous on the amendment tonight.
§ Mr. Roger Gale (North Thanet)
I do not think that Pfizer in Sandwich, which employs a lot of the hon. 106 Gentleman's constituents and a lot of mine, would be too pleased at the abolition of retail price maintenance. That aside, what will the Bill, which the President of the Board of Trade said was in the interests of consumers, do to protect the small chemists of Thanet?
§ Dr. Ladyman
Pfizer, which is my former employer, will not be hurt in any way by the reduction of retail price maintenance, because it will continue to sell through other chains. I agree entirely that the Bill does not introduce the support that is necessary for community pharmacies. My argument is that the Government must give an undertaking that the Department of Health will examine the way in which pharmacies are to be remunerated, then retail price maintenance can go and the consumer will benefit.
As I understand it, the commissioner will be able to recover fines imposed through the legislation as civil debt. Perhaps my hon. Friend the Minister will comment on that. That may be an important improvement because, whereas civil debts imposed through a court can be enforced across European boundaries, criminal debts, such as fines on companies, cannot. In my constituency, two Swedish companies that were found to be responsible for the Ramsgate walkway disaster are refusing to pay their fines, and there is absolutely nothing that we can to about it. If the Bill remedies that, it will certainly be a great strengthening of competition law and the means by which we enforce it.
§ 9.3 pm
§ Mr. John Bercow (Buckingham)
I begin with something that may come as a surprise to the House, and especially to the Minister: I congratulate the Government. I believe that, on one issue, they are right. Indeed, I shall go so far as to employ the term favoured by the Prime Minister himself: they are absolutely right to resist the McNally amendment. I am sorry that the President of the Board of Trade came under sustained assault from Labour Back Benchers, because the Government's position is correct.
Predatory pricing is already illegal. There have been three recent inquiries into alleged predation, and, on each occasion, it has been demonstrated to the authorities' satisfaction that that predation had not taken place. The hon. Member for North Durham (Mr. Radice) said that the most recent investigation was in 1994. I hope that he will forgive me if I suggest that he is mistaken: an inquiry in September 1996 arrived at the same conclusion as the previous two.
I wondered which Minister would take it upon himself or herself to upset old Labour by being the bearer of bad tidings about the Government's intentions; the President of the Board of Trade began the bad news, and no doubt the Minister of State will conclude it.
I was genuinely saddened by the response of the hon. Member for Sunderland, South (Mr. Mullin). I said to him that, if it was Mr. Murdoch's intention to extinguish all his competitors, he had presumably been unsuccessful, because, over the past six years—since the year before the first inquiry—the broadsheet market has expanded by 14 per cent. The hon. Member's response was pitiful: he said that it would take time and that Mr. Murdoch was—I think he used these words—"working on it".
107 Subsequently, the hon. Gentleman said that he was interested not in Mr. Murdoch's motives but in the effects of his behaviour. He cannot have it both ways: the effects have been entirely benign. Labour Members who are opposed to Mr. Murdoch cannot keep shifting the goalposts: the rules are there, the investigations have taken place, and Mr. Murdoch's behaviour has been adjudged to be entirely proper. I hope that the Government will remain firm. The Minister will have some unlikely allies on that aspect of the Bill, if not on others.
My view on vertical agreements is rather less friendly to the Government. The President of the Board of Trade pronounced on the subject last August. The Confederation of British Industry had said that most such agreements were benign, and the Brewers and Licensed Retailers Association had said that, if the Bill were to scrap the beer tie, it would be "disastrous", with the closure of thousands of pubs and the destruction of tens of thousands of jobs.
What was the response of the President of the Board of Trade? She said:I see a good case for excluding most"—not many, some, or a good proportion, my right hon. and Friends will note, but most—vertical agreements from the scope of the Bill".She went on proudly to say that that wassomething that I know business will welcome.It was reasonable to infer from that statement that the Government proposed to define what constituted a vertical agreement and to list the specific agreements currently obtaining that they considered acceptable and which would therefore be excluded from potential discrimination under the terms of the Bill. Despite that statement, made last August, and despite the fact that the Bill received its Second Reading in the other place 193 days ago, and completed its stages there 67 days ago, the Government have still failed to come up with a list. That is a pretty unsatisfactory state of affairs, and I hope—even now, at the 59th minute of the eleventh hour—that the Government will improve on it.
Several hon. Members have talked about community pharmacies. I agree with those on both sides of the House who have argued for the continuation of existing treatment, but I have an objection to the speech of the hon. Member for South Thanet (Dr. Ladyman), to which I listened carefully. It is not good enough for him to say that he does not believe that retail price maintenance is the only means by which to protect community pharmacies, rural or urban—to argue by advocacy—unless he can argue in favour of an alternative that the Government can reasonably be expected to support and implement.
In reality, the essential small pharmacies scheme, which is sometimes touted as a saviour for those beleaguered entities, supports only 286 pharmacies. Conservative Members are concerned about the threat to 3,000. In the other place, Baroness Jay of Paddington said that the Government were neutral about the impact of retail price maintenance abolition and the effect of the Bill. I must tell the Minister of State that I am not neutral about the impact on pharmacies in my constituency, and my right 108 hon. and hon. Friends are not neutral, either. We will demonstrate our firm support for community pharmacies by the way in which we vote tonight.
The hon. Member for Galloway and Upper Nithsdale (Mr. Morgan) raised the important issue of look-alike products. The Government have said that they do not think the Bill is the appropriate place in which to treat that issue. I do not necessarily disagree, but the Minister should know that the British brands group has argued that lookalike products have two effects: they cause confusion, and they allow those who deal in them a free ride on the investment and innovation of other companies.
Those effects are serious. In a recent survey, 17 per cent. of people said that they had purchased look-alike products by accident, and, in a survey of purchasers of four specific products, between 42 and 52 per cent. thought that the look-alikes were probably or definitely made by the manufacturer whose brand the products resembled. There is a regrettable intention to deceive, and I ask the Minister of State to reflect on a matter that is not a party political issue. The British brands group considers existing remedies inadequate, so, if the Minister considers that the matter cannot be dealt with here, how can it be addressed?
§ The Minister of State, Department of Trade and Industry (Mr. Ian McCartney)
My hon. Friend the Minister for Competition and Consumer Affairs has met interested parties to discuss the matter. There is no common agreement about the way forward, but we have asked them to come up with proposals to deal with the matter. We are all keen to find a way to prevent individuals, companies or groups of companies from undermining the capacity of other organisations to sell their goods in the marketplace.
§ Mr. Bercow
I am grateful to the Minister for his constructive and forward-looking response. I do not want to rehearse the issue further, but I am glad to know that the organisations and spokesmen concerned are still in the tent and discussing future resolutions of the problem.
Another issue that concerns me and others involves powers of investigation, scope for representation of those who are accused of offences, and fines. The CBI has said that the powers of investigation are excessive. The distinguished firm of lawyers Clifford Chance has said that no case has been made for such greater powers. We are talking about entitlement to confiscate documents and to take away computer records for up to three months. There is a question whether investigators—who, in some cases, must break into properties—may take away original documents that might impact on or damage the businesses that are being investigated. That is a legitimate matter of rights and the balance of what is appropriate. I ask the Minister to respond to that point.
§ Mr. Bercow
I hope my hon. Friend will forgive me if I do not. Other hon. Members wish to speak.
I am concerned about proposed fines, the level of which is arbitrary. I ask hon. Members to consider whether it is right to import the criminal law to this area of commercial activity. It may be right, but I am not persuaded. The onus is on the Government—Back Benchers, not just 109 Ministers—to make the case, and it is not clear to me that such a case has been made. People accused of offences should be accompanied by a legal representative to a hearing conducted by someone who is not involved in day-to-day investigation of such cases. If the rights of the person accused are to be protected, it is vital that proper neutrality is established and upheld throughout the process.
The motives of the Bill may be good, but the content is poor. I judge it so far to be ill prepared and potentially hazardous. As it stands, it is unfit for human consumption, and on that basis I will go with relish into the Lobby to oppose its Second Reading.
§ Mr. Nigel Beard (Bexleyheath and Crayford)
It is useful to consider where the Bill fits into the general pattern of economic policy, because it is about more than newspapers.
Businesses generally react to unregulated markets by curtailing competition to eliminate risks and increase profits. The consequence is limited customer choice and the concentration of market power into fewer and fewer hands. Central planning, nationalisation and detailed regulation have been regarded as answers to the unaccountable power of large monopolies and the adverse consequences of unregulated laissez-faire markets. That approach has proved too cumbersome and inflexible to match the supply of diverse goods and services to the subtle and fluctuating demands of citizens in modern democracies.
Competitive markets have proved to be the only way to secure an evolving, detailed match of supply and demand. The problem is that some business consolidation and co-operation, though tending to diminish competition, may be justified if an economy is to evolve and grow through improved productivity and innovation. The role of competition legislation is therefore to arrest the natural tendency towards the erosion of competition while leaving adequate scope for businesses to adapt to changing circumstances.
There is a clear consensus that the Restrictive Trade Practices Act 1976 did not work. It was complex, riddled with anomalies and more a matter of form than of substance. It wasted time and effort without preventing anti-competitive behaviour. The Bill reflects a fundamental change from targeting the symptoms of anti-competitive behaviour, which were often misleading. It sets out clear principles directly related to what it is intended to achieve.
First, any anti-competitive behaviour should be prohibited. The only basis for commercial advance will therefore be the satisfaction of customer demands. Secondly, it will prohibit any abuse of a dominant market position. It is the abuse which is banned, not the scale of operation. Large enterprises such as British Telecom may build up a substantial market position in Britain so that the home market becomes the launching pad for international competition. If British firms are circumscribed in their scale of operation at home, international competition against, for example, United States and Japanese companies with large home markets will be jeopardised. Those principles are clear and understandable.
The congruence of the two principles on which the Bill is based with articles 85 and 86 of the European Union treaty mean that satisfying the requirements of United Kingdom legislation will also satisfy European Union 110 legislation. Companies will thus be saved the complexity and expense of satisfying two different sets of legal principles and proceedings.
I should be grateful if the Minister could clarify whether clause 60 provides for reference to the European Court of Justice for interpretive rulings on points of European law. Can he confirm that it may enable the European Commission to leave to United Kingdom authorities matters that might otherwise have been decided by the Commission?
The Bill applies across all sectors of business and the professions, which adds to its clarity. The amendment produced by Lord McNally in another place to cover abuse of a dominant position by national newspapers is unnecessary. The Bill unamended is applicable to the circumstances of the amendment, as my right hon. Friend the President of the Board of Trade said.
The amendment also introduces absurdities into the Bill by prohibiting justifiable actions which, although they might reduce the diversity and independence of the national newspaper press, do so for entirely reasonable purposes. Let us suppose that a newspaper takes up a noble cause that attracts readers, like the Daily Mail's support for the Labour party. Is the Director General of Fair Trading supposed to say, "You cannot do that. Go back to your lost cause, the Conservative party, or the Daily Mirror and The Guardian will be jeopardised"? It is absurd.
To oppose the amendment is not a matter of caving into press barons. To bolt on amendments for a range of specific industrial circumstances is more likely to confuse the Bill's purpose than to clarify matters. If The Times is guilty of predatory pricing, let the Director General of Fair Trading proceed according to clause 18. I oppose the new and redundant clause 19.
The Director General of Fair Trading, in implementing the legislation, will be adjudicating issues worth many times more than the awards that may be available in civil courts. When so much is at stake, the incentive to frustrate the regulator by withholding or destroying evidence is great. If the penalties are weak, they will be treated as a licence for malpractice. I note that the Confederation of British Industry has said that the powers for investigation and enforcement are excessive, but it underestimates the strength of the forces likely to be ranged against the legislation.
No one, least of all members of the CBI, will benefit if the Bill is ineffective because its provisions are unenforceable, or if the penalties have little impact. For the purposes of investigation and enforcement, the Bill has been given sharp teeth. Those teeth will bite when the Director General of Fair Trading has decided to investigate a potential breach of the provisions of the legislation, and when a decision has been made.
What I do not find clear is the redress available to a third party who has suffered from the anti-competitive behaviour of another company, whose activities have not been investigated by the Office of Fair Trading. Third party rights were mentioned explicitly in the original consultation document, but all mention of third party rights has been eliminated from the Bill. Will the Minister of State clarify the position?
111 The final criterion by which the Bill should be judged is that innovation in goods and services and in business practice should not be impeded. Clause 2(2)(b) speaks of prohibiting agreements thatlimit or control … technical development",but many new technical developments depend on two or more companies bringing together complementary technological expertise to develop a commercially attractive and innovative technology.
For example, a biotechnology company may develop tests for early diagnosis of disease based on the latest understanding of the human genome, but to be useful that has to be harmonised with electronic instrumentation that will enable the tests to be applied in a medical centre or hospital. Likewise, in modern reprographics, the dyes, inks or films have to fit intimately with the equipment that does the printing, so the two need to be developed together.
Investment from each collaborator will be significant; they could not responsibly commit themselves to the investment unless they could see a potential advantage. Moreover, the possibility of legal difficulties, added to the inherent risks, will inhibit companies from becoming involved in such developments.
The European Commission has been hostile to agreements that extend development collaboration to joint production and marketing, but it now sees such early-market joint-venture agreements as far less objectionable.
I should be grateful for the Minister's reassurance that the sort of block exemption used by the European Commission goes far enough to cover collaboration in the launch and early marketing of innovative products and so will not inhibit innovation.
The Bill makes the Director General of Fair Trading a very powerful influence on the way in which the British economy is modernised. He should account to the House for the use of the powers conferred on him by the Bill. That might be achieved by the director general appearing regularly before the Select Committee on Trade and Industry, in the same way as the Governor of the Bank of England appears before the Treasury Select Committee.
The Bill replaces discredited and ineffective legislation with a clear structure for regulating a modern economy at the heart of the European Union. It leaves scope for the economy to evolve and to increase productivity and innovation, while providing the powers to ensure that the law is enforced. It is another major contribution towards modernising Britain, which deserves the whole-hearted support of the House.
§ Sir Nicholas Lyell (North-East Bedfordshire)
I am grateful to catch your eye, Mr. Deputy Speaker, albeit to speak briefly at the end of this debate and to follow the hon. Member for Bexleyheath and Crayford (Mr. Beard). If he believes his last sentence, he has another think coming, but I hope that, by the end of its scrutiny, the Bill will be a little closer to the utopia that he attempted to describe.
I must declare an interest as a lawyer. The Bill has been criticised as a potential lawyers' charter. I come from a chambers that specialises partly in competition law.
112 I want to make four important points. The Bill constitutes a very important change in the United Kingdom's approach to competition. Hitherto, our approach has been one of liberty, subject only to registration, and one might be attacked if one had registered or failed to register. We now move to the approach of prohibition, which can be drastic unless it is clearly and carefully handled. The previous Government considered that approach carefully, but, as the hon. Member for Bexleyheath and Crayford said, the present Government, for all their hype, have a lot of thinking to do.
My first point relates to vertical agreements. We must not move from prohibition to the complete exemption of vertical agreements; they must be approached case by case. They are very important to many small and medium-sized businesses. Community pharmacists have, rightly, been discussed at length, and I strongly support our reasoned amendment to try to protect them. However, filling stations, book shops, publicans, travel agents and newsagents all benefit from vertical agreements, which can give them commercial support in circumstances where the law of the jungle might otherwise apply.
Those agreements have been carefully and effectively policed to a great extent by the common law. The idea that we are entering a brave new world and that those agreements were never regulated in the past by the common law or the Restrictive Trade Practices Acts is mistaken.
My second point relates to the Competition Commission's appellate role. I make a strong plea for a senior judicial figure to head the commission, particularly with regard to its appellate role. The commission will have to make decisions on complex legal and economic questions; it will have to evaluate oral and written evidence, and its judgments will go straight to the Court of Appeal. If as much of the Bill's contents are left vague as appears will be the case, it is important that the commission is of high quality and is led by someone who not only is an experienced lawyer and judge, but has a background in competition law.
My third point concerns the interplay of competition and regulation. The Bill provides the opportunity to use two lines of attack. The first is the powers that would normally be used by the Director General of Fair Trading under the Bill, but he is not the only investigatory and enforcement body. All the regulators for telecommunications, electricity, water, rail and gas, including their equivalents in Northern Ireland, will have concurrent powers under the Bill. Businesses, large and small, are entitled to know which way the cat will jump. It should normally jump according to the Bill's provisions. Regulators should not use their existing powers to achieve the same effect that their powers under the Bill would have. The Bill needs to be clarified to show that its powers, which are draconian but accompanied by certain safeguards, will be the usual route adopted—so that those safeguards are heeded.
My final point concerns clause 60, which requires the director general of the new tribunal to have regard to the judgments of the European Court. Much more needs to be spelt out in this area, although I have no time to go into detail. As the clause states that regard shall be had to "relevant differences" from Community law, why cannot the Bill spell out in detail what those relevant differences are?
113 In summary, the Bill needs a great deal of careful scrutiny. Lord Borrie, the former director general, clearly felt himself lacking in power to restrain anti-competitive behaviour by some over-mighty businesses. The Bill certainly gives his successor that power, but the danger is that we may leave too much uncertainty while sacrificing too much of the flexibility that has been one of the key benefits of British competition policy over the years.
The Government still have much to think out, but our proposals and amendments will be constructive, and I hope that the Government will listen carefully to them.
§ Mr. Tim Boswell (Daventry)
The choreography of this Second Reading debate—against which background my hon. Friends and I will shortly be voting—has been interesting. The genesis is interesting, too; it is over eight months since the Bill had its Second Reading in another place—virtually the gestation period of a human baby. Given the uncertainty still apparent in the Bill, perhaps the gestation period of an elephant would have been more appropriate.
The debate has been marked by its intensity and by the terseness of the speeches. More than 20 Back Benchers have spoken, all of them with their own distinctive contributions to make. Had I been a Government Whip, I would have taken some comfort from the fact that the McNally clause—clause 19—and the conduct of the press have taken a front seat, even taking priority over the 184 Back-Bench signatories to the early-day motion about community pharmacies, which perhaps represent a more sensitive issue.
Let us begin by reminding ourselves, as a matter of common ground, that we all seek competitiveness. We all, at least in principle, accept that competition is the best way to secure it—and the Bill is about how best to secure competition. I have no objection in principle to some assimilation of EU competition law, or to re-examining our law—but it has to be got right. The danger with the Bill, despite its long consideration to date—reference has been made to its longueurs—is that it is still incomplete. Its details have been withheld, and it is not yet sufficiently precise for us to agree to it with any confidence. That is why we shall vote against it tonight.
Going back to first principles, what we do know is that Lord Simon of Highbury, introducing the Bill in another place, said that it was not only important but complex and technical. This was perhaps a politer version of the apercu of Lord Kingsland, who asserted that the Bill would prove an El Dorado for lawyers. I am not a lawyer; like many others, I am on a voyage of exploration—not for gold but for a simple understanding of the rather awkward legal concepts involved.
I adopt a good standpoint for a Conservative when I say that, for all its faults, the complex of legislation developed in this country since 1948, under Governments of both parties, to regulate monopolies and mergers and competitive behaviour generally, including restrictive practices, has, broadly speaking, worked. It has been evolutionary, but its general effects have been positive.
I do not make the logical jump from that to conclude that the legislation was ideal—obviously, deficiencies were apparent, including deficiencies of delay, which have been mentioned—but it is most important that what replaces it is more certain and more effective, not less so. 114 I warn the Government that their besetting sin is that, although they are always strong on aspirations, they are weak indeed on finding means of putting those aspirations workably into practice.
As someone who has always respected that film of the battle of Arnhem, "A Bridge Too Far", I think the moral for the Government is not simply "a clause too far" but, in the case of this Bill, "a chapter too far" at least. Conservative Members retain toward the Bill not illwill but considerable reservations. Although problems remain—about clarity and penalties, for example—in the chapter I prohibitions on anti-competitive agreements, we have clear reservations about chapter II, on the abuses of dominant position.
It is still unclear to me—although it may be clear to others—what is meant bythe abuse of a dominant position".We await the Office of Fair Trading guidelines on that. It is not clear how it meshes with—whether it is con-terminous and identical with—article 86 of the treaty of Rome. How are we to define those awkward concepts of dominance—dominance in what markets, or in what sectors of markets?
The Government have now usefully clarified that the maximum penalty of 10 per cent. should apply only to turnover in the United Kingdom, so they are not claiming extra-territorial jurisdiction. Nevertheless, how is the relevant turnover to be defined, and are the means of powers of entry, for example, proportionate to the ill that may be perceived to be done, given that these are, typically, legitimate businesses going about their legitimate purposes?
There is a danger that, despite Ministers' good intention and the safeguards that they have already announced, there will be real difficulties of interpretation, especially for smaller businesses that have not previously traded abroad, which have therefore not been caught by European Union competition law concepts, and which will have to come to terms with them.
There is a danger that investment or entry to the market will be deterred—the so-called chilling effect on new entrants. For those reasons, the CBI—about whose support for the principles behind the Bill there has been some debate—has proposed a more targeted prohibition. The solicitors Clifford Chance—I suppose, one of the most distinguished practitioners in that area of the law—in a very interesting paper, have argued for a more phased approach, with a bit less big bang. It occurred to me that, if small businesses had to take advice on whether they were compliant, they might well incur three-figure rates per hour such as those that Clifford Chance would charge.
Leaving that aside, the proposal which Clifford Chance produced is forcapping the maximum penalty and delaying third party actions for say 3 years after introductiontogive a proper opportunity for the Director General to issue advice and guidance",for industry to react andto enable the initial enforcement of the prohibition to be developed under a less penal regime.That is wise advice for the Government.
I hope that the Government will reflect on the somewhat flimsy basis of "comfort letters" as a safeguard for commercial transactions, because, if a business has 115 written to the director and received a letter saying, "We think it is all right," the last thing it wants is suddenly to find itself formally and legally challenged at a later stage; it would be extremely unfair, if not a breach of natural justice, if that happened.
There are similar concerns about the unanticipated jeopardy for businesses. Let us remember that we are talking about legitimate firms trying to carry out their business which find themselves in a clash of overlapping jurisdictions between regulators. The Government are apparently keen on concurrent powers. Although I believe that, as a general principle, regulators should work together, and, above all, speak to one another, I am attracted to the working principle that one regulator should call the shots at any one time, particularly if it is the industry regulator whose main raison d'être is the regulation of that business, as opposed to general competition regulation. If, however, the industry regulator moves forward to general issues of competition, there should be a proper set of procedures, including appeal procedures, which should be linked in through the Bill rather than operating on a different, and perhaps more administrative, regime.
I am concerned that, given the Government's present attitudes, they may seek to drag a wider social agenda into competition issues—across the field of utilities regulation. Equally, there are still concerns about clause 60 and the overlap between the EU and domestic regimes. Although I am no lawyer, I think that that applies particularly to the procedural principles of action. Undoubtedly the EU begins with a different tradition—a rather healthy tradition—of administrative law, which has not been so well developed in this country. We must make sure that we are operating along the same lines.
My abiding fear is that businesses may act in good faith—and may even seek assurance and guidance from the director—yet may find that, because the regulators have a difference of opinion about powers, or because of a difference between the EU and domestic courts, or because other factors do not mesh in this complex domain, they are suddenly caught in a trap. That is not fair, and it is not good for business.
In that context, we must examine individual sectors of concern. I have already mentioned community pharmacists. There are reservations about vertical agreements in general. We may know that the Government seek to give relief, but we do not know on what basis, or whether it is justified. There are specific problems—for example, for agricultural co-operatives, in which I have a small interest. The British Medical Association has raised concerns.
Several hon. Members have expressed anxiety about look-alike products. Interesting comments were made by the hon. Members for Middlesbrough, South and Cleveland, East (Dr. Kumar) and for Eastleigh (Mr. Chidgey) about engineers. As an erstwhile livestock rearer and agronomist—although I did not usually give charged advice—I was slightly surprised to find myself relabelled as an engineer. There is something wrong with schedule 4, which must be put right.
The Government can claim some credit for good intentions. They have introduced, as they tend to do, stakhanovite legislation containing a huge mass of important and difficult concepts that will have to be 116 examined in the Committee, on which I hope my right hon. Friend the Member for Cities of London and Westminster (Mr. Brooke) will serve; my right hon. Friend will adorn the Committee with his wit and wisdom and will ensure that we have an interesting and enjoyable time, as well as an intellectually stimulating one. I hope that the Government will not squander the opportunity of introducing good legislation.
The Government have relied on their consultation exercise, but there does not seem to have been a great deal of follow-through. The wires in the business world are not buzzing with concern about the matter, and they should be. It is important that the issues raised by hon. Members throughout the House are properly articulated and considered in Committee. There is nothing wrong with a Committee stage. No lack of machismo is shown by a Government who are prepared to listen, as I hope the President of the Board of Trade and the Minister of State will do.
One could compare this legislation with the companies legislation that was introduced in the post-war period. It had a long genesis of two or three years under the post-war Labour Government. We legislate on complex technical issues in too much of a hurry, and we must get this matter right. There is a continuing danger that, although the Government seek to improve competition and reduce costs on business—I think that their compliance figures are implausible—they may create uncertainty for business, the need to seek expensive legal advice, and awkward compliance costs—and that is before an individual business may be caught in the toils of one of the procedures.
Businesses deserve a degree of stability and certainty that they do not have at present. It is essential that those matters be properly clarified before we can say that the legislation has been secured successfully. We need to set down a marker of concern for the Government tonight. We must signal that, irrespective of the Government's assertions, there is a danger that the Bill will operate perversely against the interests that it claims to promote. That is why we shall reject it in the Lobby tonight.
§ The Minister of State, Department of Trade and Industry (Mr. Ian McCartney)
I congratulate those 23 right hon. and hon. Members who contributed to the debate. It was conducted to among the highest standards of any debate that I have had the privilege to listen to and be part of during 11 years in this place. Of course, there are some obvious exceptions, to which I may refer later—I see the right hon. Member for Wokingham (Mr. Redwood) is in his place. Hon. Members generally made a thoughtful contribution, and I apologise for the fact that time prevents me from addressing many of the technical issues that they raised. Those matters will be debated in Committee. I have been in Committee with the hon. Member for Daventry (Mr. Boswell) on numerous occasions, and he knows that I am prepared to discuss matters in Committee. We shall examine a range of issues in Committee in order to ensure that, when the Bill emerges from Committee, it deserves the support of the House—as it does tonight.
My hon. Friends the Members for Ealing, Acton and Shepherd's Bush (Mr. Soley), for North Durham (Mr. Radice) and for Sunderland, South (Mr. Mullin) set out their cases with a great deal of clarity and integrity. I welcome their contributions, as well as those of other 117 Labour Members. My hon. Friend the Member for Crewe and Nantwich (Mrs. Dunwoody) referred to the proposed sale of Rolls-Royce. I take genuine note of her comments and the spirit in which she made them.
The Bill will achieve much-needed modernisation and strengthening of our competition laws. It will be a highly effective regime that is tough on cartels and other anti-competitive activities. It fulfils our manifesto commitment fully, effectively and quickly. Reform of the current weak laws is long overdue, and the Bill brings United Kingdom laws up to date after years of indecision on the part of the previous Administration.
The hon. Member for Daventry expressed his views in a soft and thoughtful manner. However, it sticks in my craw that, although the Conservative party was in power for 18 years and did nothing about competition law for the last 10 years, Conservative Members complain that, in nine months, this Government have proceeded only to the Second Reading of the Bill.
The fact is that the Bill has passed through its stages in the House of Lords and there has been major public consultation. The matter was considered in a non-partisan manner with the Opposition in another place. We tried to persuade our colleagues to our view and to promote changes that would improve the Bill. No one can say that the Government have sat on their hands in relation to this issue.
The previous Government did not have the bottle to do something about the difficult questions regarding competition, and they left it to my right hon. Friends and me to deal with. Therefore, I shall take no lessons from the hon. Gentleman when it comes to the timing of this legislation.
The Bill puts right previous failings. It will give the Director General of Fair Trading the powers that he needs to uncover cartels, abuses and other anti-competitive behaviour. He will have effective powers to stop anti-competitive behaviour quickly and to impose stiff financial penalties that provide an effective deterrent.
If I understood the right hon. Member for Wokingham correctly, he said that he was basically satisfied with the current regime. We do not agree. The essence of a prohibition regime is that the onus is placed on companies to avoid anti-competitive action. It is not good enough to allow anti-competitive practices to continue until they are reviewed or, to use a better term, found out. That is why the present regime needs reform. Time and again the director general has announced that he has caught up with an anti-competitive practice, such as price fixing in laboratory equipment, only to be able to do no more than ask the parties kindly to stop what they are doing.
Many hon. Members have talked about vertical agreements. Many of these agreements will automatically be exempt from the prohibition of anti-competitive agreements. The Bill provides that vertical agreements, such as petrol solus agreements and exclusive distribution arrangements that meet the conditions of EC block exemptions, will be parallel exempt from the domestic prohibition. In general, vertical agreements are not anti-competitive. On that basis, there is a case explicitly to disapply the prohibition from vertical agreements to ensure the most efficient targeting of the regime to areas of more serious concern.
There is already provision in the Bill to make exclusions. We are in discussion with the CBI and other interested parties on whether additional flexibility in the 118 Bill would be desirable and how vertical agreements should be defined. I have no doubt that the issue will be discussed in Committee.
§ Mr. McCartney
The hon. Gentleman may not have noticed that I am still on my feet. I apologise to the hon. Gentleman but time is short. As I have said, we have had a good debate.
The Government are clear that it is important to have a strong, diverse and independent press. The importance of that is reflected in the special merger provisions for newspapers in the Fair Trading Act 1973, which are there to protect plurality of ownership and diversity of content.
Let us be clear about the way in which the Bill will work. It will prohibit anti-competitive conduct. Penalties and third-party claims for damages may follow. The Bill is serious and tough. We are not softening the law, as some seem to think; we are greatly strengthening it.
Clause 60 requires European jurisprudence to be followed. Having taken legal advice, I shall explain what that means. On predatory pricing, in the case of Tetra Pak, the European Court of Justice followed its earlier decision in AKZO that, where prices are below the average variable cost of production, predation should be presumed. In other words, proof of intent is not required. That is indeed an objective test.
Subsection (2) of clause 60 makes it clear that inconsistency must be avoided in the principles applied by courts in applying the domestic prohibition and those laid down by the European Court and any relevant decision of that court. The principle established in AKZO and Tetra Pak will apply under the Competition Bill. If prices are above average variable costs but below total average costs, conduct is to be regarded as predatory where it can be established that the purpose of the conduct was to eliminate a competitor. The principle established in European case law will apply under the Competition Bill when enacted.
European jurisprudence makes it clear that dominance means a position of economic strength that enables an undertaking to act independently of competition. Market share does not determine dominance, but it is an important factor. The Commission has made it clear that, although, in general, companies with market shares below 40 per cent. are unlikely to be regarded as dominant undertakings, some undertakings with market shares as low as 20 per cent. may be dominant if the nature and structure of the market enables them to act independently of competition. Clause 60(3) requires our courts to have regard to relevant statements of the Commission in applying domestic prohibition, so the assessment of dominance will follow the EC approach.
The McNally amendment is not about competition. It relates to wide-ranging regulatory intervention into newspapers. It is pernicious. Any action that may reduce diversity is caught if a newspaper holds a substantial degree of market power. The amendment does not distinguish anti-competitive abuses from a case where a newspaper becomes dominant through its good journalism and the failings of its competitors. If we leave the amendment as set out in the Bill, we shall be storing up 119 trouble for successful newspapers in future. As a consequence, we shall remove clause 19 from the Bill in Committee.
The Opposition amendment refers to over-the-counter medicines and the review of resale price maintenance. Agreements enforcing that practice, like other agreements, will in due course fall to be considered under the Bill. In recognition of the existing exemption for resale price maintenance in over-the-counter medicines, however, the Bill gives relevant agreements a special five-year transitional exclusion from the prohibition.
When Conservative Members had responsibility for those matters, they proposed in a draft Bill precisely what we advocate—allowing current proceedings to continue. They cannot have it both ways: they cannot pretend that the issue is new and complain about the director general's action now, as they do in the amendment. The director general announced in 1995 that he was to investigate the matter following the receipt of complaints. As long ago as October 1996, he said that he intended to bring proceedings, asking the restrictive practices court to review the matter.
Moreover, it is clear that we could not remove the matter from competition consideration, even if we wanted to do so. EU competition law has direct effect, and the Commission has not proceeded with complaints received on the basis that the Office of Fair Trading has proceedings under way in the court that could satisfactorily resolve the matter. The logic of that was most recently confirmed in a letter from Commissioner Van Miert to my right hon. Friend the President of the Board of Trade: that if the proceedings were stayed, the Commission would pursue its own investigation of the case.
Whatever the outcome, the public can be assured of our commitment to a national health service to which all people have access, regardless of who they are or where they live. We have published our proposals for creating a modern, dependable NHS which is there when people need it. My hon. Friend the Member for Middlesbrough, South and Cleveland, East made a passionate case. I can assure him that the community pharmacy is very much part of the Government's vision. Pharmacies provide somewhere to which patients can turn for advice and support as well as a place from which they can collect their prescriptions. The place of community pharmacies within the NHS is not in doubt.
The right hon. Member for Wokingham referred to the closure of pharmacies. Does he remember that 178 pharmacies closed during his membership of the previous Cabinet? If there is a rag bag, a muddle and a mess, it is the Opposition's position on the matter. For example, how will the hon. Member for Tunbridge Wells (Mr. Norman), the deputy chairman of the Tory party, vote tonight? Will he be in the Lobby supporting his right hon. Friend, or will he, as I suspect, take a different view, as do many Conservatives?
The right hon. Member for Wokingham also complained about powers of investigation. They are tough—there is no dispute about that—and so they should be. It has long been recognised that a major weakness of the existing regime is the inadequacy of powers of investigation. Strengthening is well overdue. 120 Anti-competitive behaviour, especially anti-competitive agreements, is invariably concealed. Strong powers are needed to get to the truth. There are appropriate safeguards and limitations on the exercise of powers. The Bill aims at alignment with the EU regime, and the powers are broadly similar.
The policy of the right hon. Member for Wokingham is to be soft on corporate crime and soft on the causes of corporate crime. That is wrong: anti-competitive conduct is cheating and bullying. Small companies and medium-sized enterprises can be seriously damaged and even driven out of business. No wonder the right hon. Gentleman was described as the worst Minister responsible for competition in living memory.
Business supports the Bill. The CBI, Kingfisher, CIA—[Interruption] the Consumers Association, the Law Society—[Interruption.] I knew that that would get Conservative Members going: the CIA is the Chemical Industries Association, with which I have a long-standing involvement, unlike the other CIA, in which Conservative Members may have had a long and active interest.
I make it clear that the Bill represents a manifesto commitment by the Government. We are now delivering on it, as we are on our other promises. That may surprise the Opposition, who consistently failed to address reform of competition law when in government. We have not failed business or consumers. I commend the Bill to the House.
§ Question put, That the amendment be made:—
§ The House divided: Ayes 169, Noes 314.123
|Division No. 268]||[9.58 pm|
|Ainsworth, Peter (E Surrey)||Cran, James|
|Allan, Richard||Curry, Rt Hon David|
|Amess, David||Davies, Quentin (Grantham)|
|Arbuthnot, James||Davis, Rt Hon David (Haltemprice)|
|Baker, Norman||Dorrell, Rt Hon Stephen|
|Baldry, Tony||Duncan, Alan|
|Ballard, Mrs Jackie||Duncan Smith, Iain|
|Beth, Rt Hon A J||Emery, Rt Hon Sir Peter|
|Bell, Martin (Tattoo)||Evans, Nigel|
|Bercow, John||Faber, David|
|Beresford, Sir Paul||Fabricant, Michael|
|Blunt, Crispin||Fallon, Michael|
|Body, Sir Richard||Feam, Ronnie|
|Boswell, Tim||Flight, Howard|
|Bottomley, Peter (Worthing W)||Forth, Rt Hon Eric|
|Bottomley, Rt Hon Mrs Virginia||Foster, Don (Bath)|
|Brady, Graham||Fowler, Rt Hon Sir Norman|
|Brake, Tom||Fraser, Christopher|
|Brand, Dr Peter||Gale, Roger|
|Brazier, Julian||Garnier, Edward|
|Breed, Colin||Gibb, Nick|
|Brooke, Rt Hon Peter||Gill, Christopher|
|Browning, Mrs Angela||Gillan, Mrs Cheryl|
|Bruce, Ian (S Dorset)||Goodlad, Rt Hon Sir Alastair|
|Bruce, Malcolm (Gordon)||Gorman, Mrs Teresa|
|Burnett, John||Gorrie, Donald|
|Burns, Simon||Green, Damian|
|Cable, Dr Vincent||Greenway, John|
|Cash, William||Grieve, Dominic|
|Chidgey, David||Gummer, Rt Hon John|
|Chope, Christopher||Hague, Rt Hon William|
|Clappison, James||Hamilton, Rt Hon Sir Archie|
|Clark, Rt Hon Alan (Kensington)||Hammond, Philip|
|Clifton-Brown, Geoffrey||Hancock, Mike|
|Cormack, Sir Patrick||Harvey, Nick|
|Cotter, Brian||Hawkins, Nick|
|Heath, David (Somerton & Frome)||Robathan, Andrew|
|Heathcoat-Amory, Rt Hon David||Robertson, Laurence (Tewk'b'ry)|
|Hogg, Rt Hon Douglas||Roe, Mrs Marion (Broxbourne)|
|Horam, John||Rowe, Andrew (Faversham)|
|Howard, Rt Hon Michael||Ruffley, David|
|Howarth, Gerald (Aldershot)||Russell, Bob (Colchester)|
|Hughes, Simon (Southwark N)||St Aubyn, Nick|
|Hunter, Andrew||Sanders, Adrian|
|Jack, Rt Hon Michael||Sayeed, Jonathan|
|Jackson, Robert (Wantage)||Shepherd, Richard|
|Jenkin, Bernard||Simpson, Keith (Mid-Norfolk)|
|Johnson Smith, Rt Hon Sir Geoffrey||Smyth, Rev Martin (Belfast S)|
|Jones, Nigel (Cheltenham)||Spelman, Mrs Caroline|
|Kennedy, Charles (Ross Skye)||Spicer, Sir Michael|
|Key, Robert||Spring, Richard|
|King, Rt Hon Tom (Bridgwater)||Stanley, Rt Hon Sir John|
|Kirkbride, Miss Julie||Steen, Anthony|
|Laing, Mrs Eleanor||Streeter, Gary|
|Lait, Mrs Jacqui||Stunell, Andrew|
|Lansley, Andrew||Swayne, Desmond|
|Leigh, Edward||Syrns, Robert|
|Letwin, Oliver||Tapsell, Sir Peter|
|Lewis, Dr Julian (New Forest E)||Taylor, Ian (Esher & Walton)|
|Lidington, David||Taylor, John M (Solihull)|
|Lilley, Rt Hon Peter||Taylor, Matthew (Truro)|
|Lloyd, Rt Hon Sir Peter (Fareham)||Taylor, Sir Teddy|
|Llwyd, Elfyn||Tonge, Dr Jenny|
|Loughton, Tim||Tredinnick, David|
|Luff, Peter||Trend, Michael|
|Lyell, Rt Hon Sir Nicholas||Tyler, Paul|
|MacGregor, Rt Hon John||Tyrie, Andrew|
|McIntosh, Miss Anne||Viggers, Peter|
|MacKay, Andrew||Walter, Robert|
|Maclean, Rt Hon David||Wardle, Charles|
|Maclennan, Rt Hon Robert||Waterson, Nigel|
|McLoughlin, Patrick||Wells, Bowen|
|Malins, Humfrey||Whitney, Sir Raymond|
|Maples, John||Whittingdale, John|
|Mates, Michael||Widdecombe, Rt Hon Miss Ann|
|Maude, Rt Hon Francis||Wilkinson, John|
|Michie, Mrs Ray (Argyll & Bute)||Willis, Phil|
|Moore, Michael||Winterton, Mrs Ann (Congleton)|
|Moss, Malcolm||Winterton, Nicholas (Macclesfield)|
|Nicholls, Patrick||Woodward, Shaun|
|Page, Richard||Yeo, Tim|
|Paice, James||Young, Rt Hon Sir George|
|Pickles, Eric||Tellers for the Ayes:|
|Redwood, Rt Hon John||Sir David Madel and|
|Rendel, David||Mr. Stephen Day.|
|Ainger, Nick||Bradley, Peter (The Wrekin)|
|Ainsworth, Robert (Cov'try NE)||Bradshaw, Ben|
|Anderson, Donald (Swansea E)||Brown, Rt Hon Nick (Newcastle E)|
|Armstrong, Ms Hilary||Browne, Desmond|
|Ashton, Joe||Buck, Ms Karen|
|Atherton, Ms Candy||Burgon, Colin|
|Atkins, Charlotte||Butler, Mrs Christine|
|Austin, John||Byers, Stephen|
|Banks, Tony||Caborn, Richard|
|Baron, Kevin||Campbell, Alan (Tynemouth)|
|Bayley, Hugh||Campbell, Mrs Anne (C'bridge)|
|Beard, Nigel||Campbell, Ronnie (Blyth V)|
|Beckett, Rt Hon Mrs Margaret||Campbell-Savours, Dale|
|Benn, Rt Hon Tony||Canavan, Dennis|
|Bennett, Andrew F||Caplin, Ivor|
|Benton, Joe||Casale, Roger|
|Berry, Roger||Chapman, Ben (Wirral S)|
|Best, Harold||Chaytor, David|
|Betts, Clive||Chisholm, Malcolm|
|Blears, Ms Hazel||Church, Ms Judith|
|Blizzard, Bob||Clapham, Michael|
|Borrow, David||Clark, Rt Hon Dr David (S Shields)|
|Clark, Dr Lynda (Edinburgh Pentlands)||Hain, Peter|
|Hall, Mike (Weaver Vale)|
|Clark, Paul (Gillingham)||Hall, Patrick (Bedford)|
|Clarke, Charles (Norwich S)||Hamilton, Fabian (Leeds NE)|
|Clarke, Rt Hon Tom (Coatbridge)||Hanson, David|
|Clarke, Tony (Northampton S)||Harman, Rt Hon Ms Harriet|
|Clwyd, Ann||Heal, Mrs Sylvia|
|Coffey, Ms Ann||Healey, John|
|Cohen, Harry||Henderson, Ivan (Harwich)|
|Coleman, Iain||Hepburn, Stephen|
|Colman, Tony||Heppell, John|
|Cook, Rt Hon Robin (Livingston)||Hesford, Stephen|
|Cooper, Yvette||Hewitt, Ms Patricia|
|Corbett, Robin||Hill, Keith|
|Corbyn, Jeremy||Hinchliffe, David|
|Corston, Ms Jean||Hodge, Ms Margaret|
|Crausby, David||Hoey, Kate|
|Cryer, Mrs Ann (Keighley)||Hood, Jimmy|
|Cryer, John (Hornchurch)||Hoon, Geoffrey|
|Cummings, John||Hope, Phil|
|Cunningham, Jim (Cov'try S)||Hopkins, Kelvin|
|Dalyell, Tam||Howarth, Alan (Newport E)|
|Darling, Rt Hon Alistair||Howarth, George (Knowsley N)|
|Darvill, Keith||Howells, Dr Kim|
|Davey, Valerie (Bristol W)||Hoyle, Lindsay|
|Davies, Rt Hon Denzil (Llanelli)||Hughes, Ms Beverley (Stretford)|
|Davies, Geraint (Croydon C)||Hughes, Kevin (Doncaster N)|
|Dean, Mrs Janet||Hurst, Alan|
|Denham, John||Iddon, Dr Brian|
|Dismore, Andrew||Illsley, Eric|
|Dobbin, Jim||Jackson, Ms Glenda (Hampstead)|
|Dobson, Rt Hon Frank||Jackson, Helen (Hillsborough)|
|Doran, Frank||Jenkins, Brian|
|Dowd, Jim||Johnson, Alan (Hull W & Hessle)|
|Drew, David||Johnson, Miss Melanie (Welwyn Hatfield)|
|Dunwoody, Mrs Gwyneth|
|Eagle, Angela (Wallasey)||Jones, Barry (Alyn & Deeside)|
|Eagle, Maria (L'pool Garston)||Jones, Helen (Warrington N)|
|Edwards, Huw||Jones, Ms Jenny (Wolverh'ton SW)|
|Ellman, Mrs Louise||Jones, Jon Owen (Cardiff C)|
|Ennis, Jeff||Jones, Dr Lynne (Selly Oak)|
|Etherington, Bill||Keeble, Ms Sally|
|Ewing, Mrs Margaret||Keen, Alan (Feltham & Heston)|
|Fatchett, Derek||Keen, Ann (Brentford & Isleworth)|
|Field, Rt Hon Frank||Kemp, Fraser|
|Fitzpatrick, Jim||Kennedy, Jane (Wavertree)|
|Fitzsimons, Lorna||Khabra, Piara S|
|Flint, Caroline||Kidney, David|
|Flynn, Paul||Kilfoyle, Peter|
|Follett, Barbara||King, Andy (Rugby & Kenilworth)|
|Foster, Michael Jabez (Hastings)||King, Ms Oona (Bethnal Green)|
|Foster, Michael J (Worcester)||Kingham, Ms Tess|
|Foulkes, George||Kumar, Dr Ashok|
|Galloway, George||Ladyman, Dr Stephen|
|Gapes, Mike||Laxton, Bob|
|Gardiner, Barry||Leslie, Christopher|
|George, Bruce (Walsall S)||Levitt, Tom|
|Gerrard, Neil||Lewis, Ivan (Bury S)|
|Gibson, Dr Ian||Linton, Martin|
|Gilroy, Mrs Linda||Livingstone, Ken|
|Godman, Dr Norman A||Lloyd, Tony (Manchester C)|
|Godsiff, Roger||Lock, David|
|Goggins, Paul||Love, Andrew|
|Golding, Mrs Llin||McAvoy, Thomas|
|Gordon, Mrs Eileen||McCabe, Steve|
|Grant, Bernie||McCafferty, Ms Chris|
|Griffiths, Jane (Reading E)||McCartney, Ian (Makerfield)|
|Griffiths, Nigel (Edinburgh S)||McDonagh, Siobhain|
|Grocott, Bruce||McDonnell, John|
|Grogan, John||McFall, John|
|Gunnell, John||McGuire, Mrs Anne|
|McIsaac, Shona||Ruddock, Ms Joan|
|Mackinlay, Andrew||Russell, Ms Christine (Chester)|
|McLeish, Henry||Ryan, Ms Joan|
|McNamara, Kevin||Salter, Martin|
|McNulty, Tony||Sawford, Phil|
|MacShane, Denis||Sedgemore, Brian|
|Mactaggart, Fiona||Shaw, Jonathan|
|McWalter, Tony||Sheerman, Barry|
|McWilliam, John||Sheldon, Rt Hon Robert|
|Mahon, Mrs Alice||Simpson, Alan (Nottingham S)|
|Mallaber, Judy||Singh, Marsha|
|Mandelson, Peter||Skinner, Dennis|
|Marek, Dr John||Smith, Rt Hon Andrew (Oxford E)|
|Martlew, Eric||Smith, Angela (Basildon)|
|Meacher, Rt Hon Michael||Smith, John (Glamorgan)|
|Meale, Alan||Smith, Llew (Blaenau Gwent)|
|Merron, Gillian||Snape, Peter|
|Michael, Alun||Soley, Clive|
|Michie, Bill (Shef'ld Heeley)||Southworth, Ms Helen|
|Milburn, Alan||Spellar, John|
|Miller, Andrew||Starkey, Dr Phyllis|
|Mitchell, Austin||Stevenson, George|
|Moffatt, Laura||Stewart, Ian (Eccles)|
|Moonie, Dr Lewis||Stinchcombe, Paul|
|Moran, Ms Margaret||Stott, Roger|
|Morgan, Alasdair (Galloway)||Strang, Rt Hon Dr Gavin|
|Morgan, Ms Julie (Cardiff N)||Straw, Rt Hon Jack|
|Morgan, Rhodri (Cardiff W)||Stringer, Graham|
|Morris, Rt Hon John (Aberavon)||Stuart, Ms Gisela|
|Mudie, George||Sutcliffe, Gerry|
|Mullin, Chris||Taylor, Rt Hon Mrs Ann (Dewsbury)|
|Murphy, Denis (Wansbeck)|
|Norris, Dan||Taylor, Ms Dari (Stockton S)|
|O'Brien, Mike (N Warks)||Taylor, David (NW Leics)|
|Olner, Bill||Temple-Morris, Peter|
|O'Neill, Martin||Thomas, Gareth R (Harrow W)|
|Organ, Mrs Diana||Tipping, Paddy|
|Palmer, Dr Nick||Todd, Mark|
|Pearson, Ian||Touhig, Don|
|Perham, Ms Linda||Truswell, Paul|
|Pickthall, Colin||Turner, Dr George (NW Norfolk)|
|Pike, Peter L||Twigg, Derek (Halton)|
|Twigg, Stephen (Enfield)|
|Pollard, Kerry||Vaz, Keith|
|Pond, Chris||Walley, Ms Joan|
|Pope, Greg||Ward, Ms Claire|
|Pound, Stephen||Wareing, Robert N|
|Powell, Sir Raymond||Watts, David|
|Prentice, Ms Bridget (Lewisham E)||Whitehead, Dr Alan|
|Prentice, Gordon (Pendle)||Wicks, Malcolm|
|Prescott, Rt Hon John||Williams, Rt Hon Alan (Swansea W)|
|Prosser, Gwyn||Williams, Alan W (E Carmarthen)|
|Quin, Ms Joyce||Wills, Michael|
|Radice, Giles||Winnick, David|
|Rammell, Bill||Winterton, Ms Rosie (Doncaster C)|
|Rapson, Syd||Wise, Audrey|
|Raynsford, Nick||Wood, Mike|
|Reed, Andrew (Loughborough)||Woolas, Phil|
|Reid, Dr John (Hamilton N)||Wray, James|
|Robinson, Geoffrey (Cov'try NW)||Wright, Anthony D (Gt Yarmouth)|
|Roche, Mrs Barbara||Wright, Dr Tony (Cannock)|
|Rogers, Allan||Wyatt, Derek|
|Ross, Ernie (Dundee W)||Tellers for the Noes:|
|Rowlands, Ted||Mr. David Clelland and|
|Ruane, Chris||Janet Anderson.|
§ Question accordingly negatived.
§ Main Question put forthwith, pursuant to Standing Order No. 62 (Amendment on Second or Third Reading):—
§ The House divided: Ayes 345, Noes 134.127
|Division No. 269]||[10.12 pm|
|Ainger, Nick||Cotter, Brian|
|Ainsworth, Robert (Cov'try NE)||Crausby, David|
|Allan, Richard||Cryer, Mrs Ann (Keighley)|
|Anderson, Donald (Swansea E)||Cryer, John (Hornchurch)|
|Armstrong, Ms Hilary||Cummings, John|
|Ashton, Joe||Cunningham, Jim (Conv'try S)|
|Atherton, Ms Candy||Dalyell, Tam|
|Atkins, Charlotte||Darling, Rt Hon Alistair|
|Austin, John||Darvill, Keith|
|Baker, Norman||Davey, Valerie (Bristol W)|
|Ballard, Mrs Jackie||Davies, Rt Hon Denzil (Llanelli)|
|Banks, Tony||Davies, Geraint (Croydon C)|
|Barnes, Harry||Dean, Mrs Janet|
|Barron, Kevin||Denham, John|
|Bayley, Hugh||Dismore, Andrew|
|Beard, Nigel||Dobbin, Jim|
|Beckett, Rt Hon Mrs Margaret||Dobson, Rt Hon Frank|
|Beith, Rt Hon A J||Doran, Frank|
|Bell, Martin (Tatton)||Dowd, Jim|
|Benn, Rt Hon Tony||Drew, David|
|Bennett, Andrew F||Dunwoody, Mrs Gwyneth|
|Benton, Joe||Eagle, Angela (Wallasey)|
|Berry, Roger||Eagle, Maria (L'pool Garston)|
|Best, Harold||Edwards, Huw|
|Betts, Clive||Efford, Clive|
|Blears, Ms Hazel||Ellman, Mrs Louise|
|Blizzard, Bob||Ennis, Jeff|
|Borrow, David||Etherington, Bill|
|Bradley, Peter (The Wrekin)||Ewing, Mrs Margaret|
|Bradshaw, Ben||Fatchett, Derek|
|Brake, Tom||Fearn, Ronnie|
|Brand, Dr Peter||Field, Rt Hon Frank|
|Breed, Colin||Fitzpatrick, Jim|
|Brown, Rt Hon Nick (Newcastle E)||Fitzsimons, Lorna|
|Browne, Desmond||Flint, Caroline|
|Bruce, Malcolm (Gordon)||Flynn, Paul|
|Buck, Ms Karen||Follett, Barbara|
|Burgon, Colin||Foster, Don (Bath)|
|Burnett, John||Foster, Michael Jabez (Hastings)|
|Butler, Mrs Christine||Foster, Michael J (Worcester)|
|Byers, Stephen||Foulkes, George|
|Cable, Dr Vincent||Galloway, George|
|Caborn, Richard||Gapes, Mike|
|Campbell, Alan (Tynemouth)||Gardiner, Barry|
|Campbell, Mrs Anne (C'bridge)||George, Bruce (Walsall S)|
|Campbell, Ronnie (Blyth V)||Gerrard, Neil|
|Campbell-Savours, Dale||Gibson, Dr Ian|
|Canavan, Dennis||Gilroy, Mrs Linda|
|Caplin, Ivor||Godman, Dr Norman A|
|Casale, Roger||Goggins, Paul|
|Chapman, Ben (Wirral S)||Golding, Mrs Llin|
|Chaytor, David||Gordon, Mrs Eileen|
|Chidgey, David||Gorrie, Donald|
|Chisholm, Malcolm||Grant, Bernie|
|Church, Ms Judith||Griffiths, Jane (Reading E)|
|Clapham, Michael||Griffiths, Nigel (Edinburgh S)|
|Clark, Rt Hon Dr David (S Shields)||Grocott, Bruce|
|Clark, Dr Lynda (Edinburgh Pentlands)||Grogan, John|
|Clark, Paul (Gillingham)||Hain, Peter|
|Clarke, Charles (Norwich S)||Hall, Mike (Weaver Vale)|
|Clarke, Rt Hon Tom (Coatbridge)||Hall, Patrick (Bedford)|
|Clarke, Tony (Northampton S)||Hamilton, Fabian (Leeds NE)|
|Clwyd, Ann||Hancock, Mike|
|Coffey, Ms Ann||Hanson, David|
|Cohen, Harry||Harman, Rt Hon Ms Harriet|
|Coleman, Iain||Harvey, Nick|
|Colman, Tony||Heal, Mrs Sylvia|
|Cook, Rt Hon Robin (Livingston)||Healey, John|
|Cooper, Yvette||Heath, David (Somerton & Frome)|
|Corbett, Robin||Henderson, Ivan (Harwich)|
|Corbyn, Jeremy||Hepburn, Stephen|
|Corston, Ms Jean||Heppell, John|
|Hewitt, Ms Patricia||Mallaber, Judy|
|Hill, Keith||Mandelson, Peter|
|Hinchliffe, David||Marek, Dr John|
|Hodge, Ms Margaret||Martlew, Eric|
|Hoey, Kate||Meacher, Rt Hon Michael|
|Hood, Jimmy||Meale, Alan|
|Hoon, Geoffrey||Merron, Gillian|
|Hope, Phil||Michael, Alun|
|Hopkins, Kelvin||Michie, Bill (Shef'ld Heeley)|
|Howarth, Alan (Newport E)||Michie, Mrs Ray (Argyll & Bute)|
|Howarth, George (Knowsley N)||Milburn, Alan|
|Howells, Dr Kim||Miller, Andrew|
|Hoyle, Lindsay||Mitchell, Austin|
|Hughes, Ms Beverley (Stretford)||Moffatt, Laura|
|Hughes, Kevin (Doncaster N)||Moonie, Dr Lewis|
|Hughes, Simon (Southwark N)||Moore, Michael|
|Hurst, Alan||Moran, Ms Margaret|
|Hutton, John||Morgan, Alasdair (Galloway)|
|Iddon, Dr Brian||Morgan, Ms Julie (Cardiff N)|
|Illsley, Eric||Morgan, Rhodri (Cardiff W)|
|Jackson, Ms Glenda (Hampstead)||Morris, Rt Hon John (Aberavon)|
|Jackson, Helen (Hillsborough)||Mudie, George|
|Jenkins, Brian||Mullin, Chris|
|Johnson, Alan (Hull W & Hessle)||Murphy, Denis (Wansbeck)|
|Johnson, Miss Melanie (Welwyn Hatfield)||Norris, Dan|
|O'Brien, Mike (N Warks)|
|Jones, Barry (Alyn & Deeside)||Olner, Bill|
|Jones, Helen (Warrington N)||O'Neill, Martin|
|Jones, Ms Jenny (Wolverh'ton SW)||Organ, Mrs Diana|
|Palmer, Dr Nick|
|Jones, Jon Owen (Cardiff C)||Pearson, Ian|
|Jones, Dr Lynne (Selly Oak)||Perham, Ms Linda|
|Jones, Nigel (Cheltenham)||Pickthall, Colin|
|Keeble, Ms Sally||Pike, Peter L|
|Keen, Alan (Feltham & Heston)||Pollard, Kerry|
|Keen, Ann (Brentford & Isleworth)||Pond, Chris|
|Kemp, Fraser||Pope, Greg|
|Kennedy, Charles (Ross Skye)||Pound, Stephen|
|Kennedy, Jane (Wavertree)||Powell, Sir Raymond|
|Khabra, Piara S||Prentice, Ms Bridget (Lewisham E)|
|Kidney, David||Prentice, Gordon (Pendle)|
|Kilfoyle, Peter||Prescott, Rt Hon John|
|King, Andy (Rugby & Kenilworth)||Primarolo, Dawn|
|King, Ms Oona (Bethnal Green)||Prosser, Gwyn|
|Kingham, Ms Tess||Quin, Ms Joyce|
|Kumar, Dr Ashok||Radice, Giles|
|Ladyman, Dr Stephen||Rammell, Bill|
|Laxton, Bob||Rapson, Syd|
|Leslie, Christopher||Raynsford, Nick|
|Levitt, Tom||Reed, Andrew (Loughborough)|
|Lewis, Ivan (Bury S)||Reid, Dr John (Hamilton N)|
|Linton, Martin||Rendel, David|
|Livingstone, Ken||Roche, Mrs Barbara|
|Lloyd, Tony (Manchester C)||Rogers, Allan|
|Llwyd, Elfyn||Rooney, Terry|
|Lock, David||Ross, Ernie (Dundee W)|
|Love, Andrew||Rowlands, Ted|
|McAvoy, Thomas||Ruane, Chris|
|McCabe, Steve||Ruddock, Ms Joan|
|McCafferty, Ms Chris||Russell, Bob (Colchester)|
|McCartney, Ian (Makerfield)||Russell, Ms Christine (Chester)|
|McDonagh, Siobhain||Ryan, Ms Joan|
|McDonnell, John||Salter, Martin|
|McFall, John||Sanders, Adrian|
|McGuire, Mrs Anne||Sawford, Phil|
|McIsaac, Shona||Sedgemore, Brian|
|Mackinlay, Andrew||Shaw, Jonathan|
|McLeish, Henry||Sheerman, Barry|
|Maclennan, Rt Hon Robert||Sheldon, Rt Hon Robert|
|McNamara, Kevin||Simpson, Alan (Nottingham S)|
|McNulty, Tony||Singh, Marsha|
|MacShane, Denis||Skinner, Dennis|
|Mactaggart, Fiona||Smith, Rt Hon Andrew (Oxford E)|
|McWalter, Tony||Smith, Angela (Basildon)|
|McWilliam, John||Smith, John (Glamorgan)|
|Mahon, Mrs Alice||Smith, Llew (Blaenau Gwent)|
|Snape, Peter||Twigg, Derek (Halton)|
|Soley, Clive||Twigg, Stephen (Enfield)|
|Southworth, Ms Helen||Tyler, Paul|
|Spellar, John||Vaz, Keith|
|Starkey, Dr Phyllis||Walley, Ms Joan|
|Stevenson, George||Ward, Ms Claire|
|Stewart, Ian (Eccles)||Wareing, Robert N|
|Stinchcombe, Paul||Watts, David|
|Stott, Roger||Whitehead, Dr Alan|
|Strang, Rt Hon Dr Gavin||Wicks, Malcolm|
|Straw, Rt Hon Jack||Williams, Rt Hon Alan (Swansea W)|
|Stuart, Ms Gisela||Williams, Alan W (E Carmarthen)|
|Stunell, Andrew||Willis, Phil|
|Sutcliffe, Gerry||Wills, Michael|
|Taylor, Rt Hon Mrs Ann (Dewsbury)||Winnick, David|
|Winterton, Ms Rosie (Doncaster C)|
|Taylor, Ms Dari (Stockton S)||Wise, Audrey|
|Taylor, David (NW Leics)||Wood, Mike|
|Taylor, Matthew (Truro)||Woolas, Phil|
|Temple-Morris, Peter||Wray, James|
|Thomas, Gareth R (Harrow W)||Wright, Anthony D (Gt Yarmouth)|
|Tipping, Paddy||Wright, Dr Tony (Cannock)|
|Todd, Mark||Wyatt, Derek|
|Tonge, Dr Jenny|
|Touhig, Don||Tellers for the Ayes:|
|Truswell, Paul||Mr. David Clelland and|
|Turner, Dr George (NW Norfolk)||Janet Anderson.|
|Ainsworth, Peter (E Surrey)||Greenway, John|
|Amess, David||Grieve, Dominic|
|Arbuthnot, James||Gummer, Rt Hon John|
|Baldry, Tony||Hague, Rt Hon William|
|Bercow, John||Hamilton, Rt Hon Sir Archie|
|Beresford, Sir Paul||Hammond, Philip|
|Blunt, Crispin||Hawkins, Nick|
|Body, Sir Richard||Heathcoat-Amory, Rt Hon David|
|Boswell, Tim||Hogg, Rt Hon Douglas|
|Bottomley, Peter (Worthing W)||Horam, John|
|Bottomley, Rt Hon Mrs Virginia||Howarth, Gerald (Aldershot)|
|Brady, Graham||Hunter, Andrew|
|Brazier, Julian||Jack, Rt Hon Michael|
|Brooke, Rt Hon Peter||Jackson, Robert (Wantage)|
|Browning, Mrs Angela||Jenkin, Bernard|
|Bruce, Ian (S Dorset)||Johnson Smith, Rt Hon Sir Geoffrey|
|Cash, William||Key, Robert|
|Chope, Christopher||King, Rt Hon Tom (Bridgwater)|
|Clappison, James||Kirkbride, Miss Julie|
|Clark, Rt Hon Alan (Kensington)||Laing, Mrs Eleanor|
|Clifton-Brown, Geoffrey||Lait, Mrs Jacqui|
|Cormack, Sir Patrick||Lansley, Andrew|
|Cran, James||Leigh, Edward|
|Curry, Rt Hon David||Letwin, Oliver|
|Davies, Quentin (Grantham)||Lewis, Dr Julian (New Forest E)|
|Davis, Rt Hon David (Haltemprice)||Lidington, David|
|Dorrell, Rt Hon Stephen||Lilley, Rt Hon Peter|
|Duncan, Alan||Lloyd, Rt Hon Sir Peter (Fareham)|
|Duncan Smith, Iain||Loughton, Tim|
|Evans, Nigel||Luff, Peter|
|Faber, David||Lyell, Rt Hon Sir Nicholas|
|Fabricant, Michael||MacGregor, Rt Hon John|
|Fallon, Michael||McIntosh, Miss Anne|
|Flight, Howard||MacKay, Andrew|
|Forth, Rt Hon Eric||Maclean, Rt Hon David|
|Fowler, Rt Hon Sir Norman||McLoughlin, Patrick|
|Fraser, Christopher||Malins, Humfrey|
|Gale, Roger||Maples, John|
|Garnier, Edward||Mates, Michael|
|Gibb, Nick||Maude, Rt Hon Francis|
|Gill, Christopher||Moss, Malcolm|
|Gillan, Mrs Cheryl||Nicholls, Patrick|
|Goodlad, Rt Hon Sir Alastair||Page, Richard|
|Gorman, Mrs Teresa||Paice, James|
|Green, Damian||Paterson, Owen|
|Pickles, Eric||Taylor, John M (Solihull)|
|Redwood, Rt Hon John||Taylor, Sir Teddy|
|Robathan, Andrew||Tredinnick, David|
|Robertson, Laurence (Tewk'b'ry)||Trend, Michael|
|Roe, Mrs Marion (Broxbourne)||Tyrie, Andrew|
|Rowe, Andrew (Faversham)||Viggers, Peter|
|Ruffley, David||Walter, Robert|
|St Aubyn, Nick||Wardle, Charles|
|Sayeed, Jonathan||Waterson, Nigel|
|Shepherd, Richard||Wells, Bowen|
|Simpson, Keith (Mid-Norfolk)||Whitney, Sir Raymond|
|Smyth, Rev Martin (Belfast S)||Whittingdale, John|
|Soames, Nicholas||Widdecombe, Rt Hon Miss Ann|
|Spelman, Mrs Caroline||Wilkinson, John|
|Spicer, Sir Michael||Winterton, Mrs Ann (Congleton)|
|Spring, Richard||Winterton, Nicholas (Macclesfield)|
|Stanley, Rt Hon Sir John||Woodward, Shaun|
|Steen, Anthony||Yeo, Tim|
|Streeter, Gary||Young, Rt Hon Sir George|
|Syrns, Robert||Tellers for the Noes:|
|Tapsell, Sir Peter||Mr. Stephen Day and|
|Taylor, Ian (Esher & Walton)||Sir David Madel.|
§ Question accordingly agreed to.
§ Bill read a Second time, and committed to a Standing Committee, pursuant to Standing Order No.63 (Committal of Bills).