USE OF FINES BY OFT

HC Deb 13 June 2002 vol 386 cc1042-58

'.—(1) The OFT will consider whether any fines which it imposes under Chapter I or Chapter II of the 1998 Act might be applied for any purpose or purposes which would contribute towards remedying harm suffered by consumers generally as a result of the infringement of those provisions. (2) The OFT may in pursuance of subsection (1), make such direction as it considers appropriate.'.—[Mr. Waterson.]

Brought up, and read the First time.

Mr. Waterson

I beg to move, That the clause be read a Second time.

Mr. Deputy Speaker

With this it will be convenient to discuss the following: Amendment No. 3, in clause 4, page 2, line 24, at end insert— 'and (d) an assessment of the additional costs to business of the exercise of its functions.'.

Government amendment No. 156.

Amendment No. 6, in page 2, line 34, leave out— 'seriously and prejudicially affect the' and insert— 'significantly harm the legitimate business'.

Amendment No. 210, in clause 6, page 3, line 9, after "consumers", insert "and producers".

Government amendment No. 157.

Amendment No. 8, in page 3, line 20, leave out— 'seriously and prejudicially affect the' and insert— 'significantly harm the legitimate business'.

Amendment No. 211, in clause 8, page 3, line 35, after "consumers", insert "and producers".

Government amendment No. 223.

Amendment No. 212, in page 3, line 39, after "consumer", insert "and producer".

Amendment No. 213, in page 3, line 41, after "consumer", insert "and producer".

Amendment No. 214, in page 4, line 1, after "consumer", insert "or producer".

Amendment No. 215, in page 4, line 3, after "consumer", insert "or producer".

Amendment No. 216, in page 4, line 9, after "consumers", insert "and producers".

Amendment No. 217, in clause 9, page 4, line 18, leave out from beginning to "section" in line 19.

Amendment No. 218, in clause 11, page 5, line 2, after "consumer", insert "or producer".

Amendment No. 219, in page 5, line 5, after "consumers", insert "or producers".

Amendment No. 10, in page 5, line 6, leave out "90" and insert "60".

Amendment No. 11, in page 5, line 13, leave out subsection (4).

Amendment No. 220, in page 5, line 15, after "consumer", insert "or producer".

Amendment No. 221, in page 5, line 18, after "consumers", insert "or producers".

Amendment No. 222, in page 5, line 34, at end insert— 'and— (c) "producer" means an individual involved in the manufacture, production or sale of goods or services.'.

Mr. Waterson

Our new clause and amendments again deal with the general functions of the OFT. The hon. Member for North-East Derbyshire (Mr. Barnes) has also tabled amendments, and I look forward to our usual fascinating debate.

We debated the provisions of new clause 3 in Committee, and it is part of the Opposition's responsibility to make choices about the issues to which we wish to return on Report. We thought that this issue was worth debating again, because it is important and because we did not think that the Under-Secretary's response in Committee was adequate. As she has had more time to reflect on the matter, we might now make more progress. A glance at the new clause shows that it would determine the fate of fines determined under chapters I and II of the Competition Act 1998 and use them for the benefit of consumers.

Substantial income might be derived from such fines in any given year, and that money could be applied for the remedial benefit of consumers in general. The Consumers Association has publicised the case in which a car manufacturer—I forget which one—agreed to donate substantial funds to the association as part of the settlement of potential proceedings. The association undertook to use that money to inform consumers about the purchase of cars, including purchase from suppliers based on the continent. When the offence alleged is predatory pricing, the consumer will have benefited from lower prices, albeit at the longer-term loss of competition. In such cases, under current legislation consumers would be unlikely to recover damages. However, if the funds obtained were applied for the benefit of consumers in general, that would sensibly reflect the fact that there is no individual remedy.

If the Under-Secretary's reply is based on the one that she gave in Committee, I know that she will say that there are separate provisions in the Bill for funds to be applied for consumer information and education. We welcome that. However, the new clause would ensure the use of a separate stream of funding to consumers in general.

I have already given a couple of examples, and another one would arise when consumers had clearly been disadvantaged but it was impossible to identify or trace those harmed. Something may have gone on for many years across an entire market without records being kept of the people involved. In another example, many people might have lost a tiny amount as the result of a harmful practice. However, recognition should be made of the fact that there has been misdoing by the companies involved.

3 pm

The Minister was less than convincing when she addressed the problem in Committee. One of her defences was that we might encourage the OFT to operate a slash and burn policy, and go out of its way to find people so that it could produce the stream of funding. That is far-fetched. In fact our suggestion would make sensible use of the funds, unlike the alternative, which allows them to disappear into the black hole of the Treasury.

We discussed an amendment similar to amendment No. 3 in Committee, and I accused the Minister of intransigence. I had hoped that she might reconsider her case, because we need to assess the additional costs to business that will arise when the OFT exercises its functions. The Conservative party is keen to stick up for businesses, large and small, when it comes to the extra burdens and costs that are heaped on them. There is a cumulative process of placing more burdens on business, and those have a particular impact on smaller firms.

It is important to make a regular assessment of the additional cost to business of the OFT's exercise of its functions. That is eminently sensible. We debated how to assess that burden in Committee, and it is worth trying to work out whether the burdens on business are substantial, as we fear they might be, and how they stack up against the benefits to consumers. Unbelievably, the regulatory impact assessment of the Bill concluded that its provisions would impose no extra cost burden on business. We do not accept that, and it requires explanation.

In Committee, my hon. Friend the Member for Huntingdon (Mr. Djanogly) gave the example of a company that started to trade in a new market. It received a letter from the Department of Trade and Industry saying that the trade was against the public interest. In effect, the Department threatened to wind up the company and prosecute the directors. The company took legal advice and was very worried. It would have cost a great deal to clear the company's name, and the matter never went to court. The director involved settled with the Department, the company was wound up and various other measures had to be taken. The company simply did not have the resources—or, perhaps, the courage—to sit out the argument with the powers that be.

We all accept that the OFT needs to be beefed up and provided with more staff and resources. I often see job advertisements for the OFT in the papers—not that I make a habit of looking through the appointments sections; I merely have a wistful curiosity about all those positions that allow people to earn more than I do. The OFT is obviously building up its staff in anticipation of the changes. When the Bill receives Royal Assent, they will be like coiled springs, waiting to leap into action. The OFT will have massive resources and deep pockets, which may not be true of the companies with which it deals.

Amendments Nos. 6 and 8 replace similar amendments tabled in Committee. The phrase significantly harm the legitimate business is important. We must carefully tie up the requirements of the investigating authorities. We want to harmonise the words used in part 1 and part 9. Our amendments would tighten the obligation for the OFT to ensure that it chooses to use its powers in a judicious way.

We debated recent dawn raids involving the Serious Fraud Office and other prosecuting authorities. Although such action might be relevant and necessary in certain cases, we want to ensure that restraints and constraints on the new authorities are included in the Bill. We do not want the new authorities, flush with new resources, responsibilities and powers, aggressively and vigorously to pursue companies that may be innocent and blameless. The disruption of a company's business and the undue publicity could have a serious effect on it.

I expect the OFT to take a more rigorous view of company raids than other authorities. Only a few weeks ago, several pharmaceutical companies were subject to a dawn raid, and it is staggering how the details of raids are often firmly in the public domain and the media before they take place. That is of great concern, especially as we still operate under the premise that people are innocent until proved guilty. Such cases are usually complex and take many months, or even years, to resolve. Although prosecutions are often not pursued or are unsuccessful, incalculable damage is inflicted in the meantime on the interests of the companies under investigation.

Amendment No. 10 deals with super-complaints. Those are an important and useful innovation, strongly supported by all the main consumer bodies. They ensure that something that is happening across the country does not have to be pursued by individual trading standards departments, but by a super-complaint brought, typically, by a consumer body. The Bill specifies, however, that the OFT should publish a response to a super-complaint within 90 days. We agree that there should be a limit on the time taken to respond, but our amendment suggests 60 days. There can be no practical objection to that. Extensions of time could always be applied for and given.

It is almost inevitable that substantial publicity will be generated, especially by the first super-complaints. They will be a novelty and probably come on the back of a substantial consumer campaign on a particular malpractice or piece of sharp trading. If such publicity is generated and it blights the activity of a company or group of companies, it is important that the period should be as short as possible. On the other side of the coin, it must surely be in the interests of consumers that such matters be resolved as speedily as possible.

The sister amendment, amendment No. 11, would remove subsection (4) from clause 11, which allows the Secretary of State to take the power to amend the time limit, presumably up or down. In Committee we debated the best intentions of this particular Secretary of State and those who advise her, but we still think that the clause should be changed.

Mr. Harry Barnes (North-East Derbyshire)

Some 13 amendments are in my name and in those of my hon. Friends. They fall into three categories. In some, the words "and producers" is inserted after the word "consumers". There is one category where that operates in connection with the super-complaints procedure. A separate amendment seeks to keep alive section 12 of the Fair Trading Act 1973, as compared with certain aspects of this legislation where it affects producers and the public interest. I have much more sympathy with the Fair Trading Act than with some items in this Bill, even though there is much more in the Bill which deals with consumers, which is a distinct improvement.

As I said, I want to insert "and producers" after "consumers". While all of us cannot exist without being consumers, we depend on producers, and I hope that the great majority of us are producers for considerable sections of our lives. We are producing legislation on this occasion, so we are part of that procedure. Everyone is just about covered by the categories of "producer" and "consumer", but that does not mean that the way in which they operate is the same, or that they have identical interests.

Sometimes, the consumer interest may rub up against the producer interest. The cheap production of goods and services may be a consumer interest, but the people who are directly producing goods—working people by hand or by brain—may not wish to have their goods sold at the cheapest possible price all the time. They may want to raise some resources for themselves, so that they themselves can begin to become effective consumers. If we put all our eggs in one basket—with the consumer—we do not seem to serve our constituents in as full and as good a way as possible. That is the reasoning behind the amendments that insert the words "and producers".

I attempted in Committee—it has already been dismissed to some extent by the Opposition Member who talked about G.D.H. Cole—to draw that distinction. I was a bit late in doing that. This is complex legislation, and the day after I found out that I had been placed on the Bill, I had to turn up at one of the meetings to try to fathom what we were dealing with.

By the time I had tabled an amendment to introduce the word "producers", it was in a rather odd position—it meant producers being involved merely in matters that were of consumer interest. That will be the case to some extent with some of these amendments, but the main intention is to say that producers will have specific producer concerns themselves. In particular, the producer provisions in connection with the super-complaints procedure in amendments Nos. 218 to 222 are meant to produce a situation in which producers, as defined in amendment No. 222, will be able to have a say and an influence, and to make representations to the OFT about their concerns and their interests, in the same way as consumers do.

It is not entirely a G.D.H. Cole measure, as the producers are not defined just as being workers by hand or by brain. They are defined as people who are involved in the productive selling and manufacturing system, so it cuts across class barriers to some extent. The Minister may have some problem in determining the weight that should be given to different sections. I want to refer to the concerns and interests of the TUC and particular trade unions in such matters.

3.15 pm

Various trade unions have pressed us on the matter. Members of the Committee received a letter from the Transport and General Workers Union's agriculture food section, in which it suggested that producers' interests should be considered as well and that we should have something about that in the Bill, presumably in line with the type of measures I am putting forward.

I saw one representation relating directly to the Bill in the Financial Times on the day of Second Reading. It was from Ed Sweeney, general secretary of Unifi, the financial sector trade union, who said: Consideration should also be given as to whether the new super-complainant' procedure (that will enable certain consumer organisations to have the right to compel initial investigations by the Office of Fair Trading into specific markets) should be extended to other third parties. That is what I am attempting to do with the amendments.

I am keen that we should progress because I am interested in the public interest provisions. I would not want to talk myself out on those, but I have an amendment that seeks to preserve section 12 of the Fair Trading Act 1973. It allows the Secretary of State to give directions to the Director General of Fair Trading on a number of issues, including prioritising in order to identify practices that may adversely affect consumers; determining priority markets requiring assessment as to whether a monopoly exists; and deciding whether to refer monopoly cases to the Competition Commission, or trade practices to the consumer protection advisory committee under part II of the Fair Trading Act.

The right to refer monopoly cases to the Competition Commission is part of the argument that I will seek to advance later when we deal more particularly with mergers and the public interest provisions, but Unifi and the wider labour movement are clearly concerned that mergers and monopoly development situations will seriously affect the well-being of people and the future of their firms, which may close. In those circumstances, producer interests in terms of earning one's livelihood are to the fore. The Secretary of State needs to be able to continue to take that into account as an interest.

If we have producer bodies and a producer's super-complaints procedure, that will provide an avenue for bringing concerns to the attention of the Director of Fair Trading. In addition, later amendments will enable such matters to be brought to the attention of the Secretary of State so that he or she can act. Amendment No. 217 is necessary to facilitate matters that appear later in the Bill. I hope that the Minister will respond favourably to the notion that producer interest can be squeezed by this sort of legislation, admirable though it is in dealing with consumer interests. There might be a need for balance if other viewpoints are to be put forward.

G.D.H. Cole suggested in his early days that Parliament should be reformed and there should not be a House of Lords and a House of Commons. He advocated that instead there should be a House of Producers and a House of Consumers. The consumers would be rather like the House of Commons because we are all consumers. The producers would be organised through guild trade unions—presumably there would be a form of indirect election—and would operate the other House. He thought that within a socialist society these bodies would not conflict with each other. However, he felt that if they were in conflict, over-riding provision should be given not to the House of Consumers but instead to the House of Producers, that being the nobler ideal.

Without going as far as G.D.H. Cole would have wanted, perhaps we can learn something from some of the things that he said.

Dr. John Pugh (Southport)

First, I shall respond to the hon. Member for North-East Derbyshire (Mr. Barnes). One suspects him of trying to introduce social revolution on the back of the Bill, that is by smuggling in Marxism through the back door. I am sure that that is not far away from the plot. In this instance, however, he seems to seek only an innocuous change of wording. Clause 6(1) states: The OFT has the function of…making the public aware of the ways in which competition may benefit consumers". If the amendment were agreed to, the subsection would provide that competition may benefit consumers and producers. In that event, the OFT would have a more difficult job. Some producers will not significantly enjoy any benefit of competition. In some instances, they would like no competition.

I move on to the issues raised by the hon. Member for Eastbourne (Mr. Waterson), and on some I do not want to trespass. There is a sophisticated legal debate on the appropriate term for legal proceedings. That is whether it should be 90 days or 60 days. I can leave that to others.

The spirit behind the idea of using fine income to reprocess for the benefit of the consumer seems to be entirely correct. It has an element of earmarking, which is attractive. There is also the element of restitution. Presumably those who are offended will have an opportunity to contribute to the common good. It even brings in modern concepts such as hypothecation. It seems that the idea will do good.

The Minister's argument appears not to be that the idea will not do good, but that it may lead to further harm. It is suggested that the OFT will take an aggressive attitude towards charging producers that it thinks errant or wrong and accumulate money to use for other purposes that it has in mind. That is an objection in principle to many fines in many places. The same objection could be made in respect of traffic-calming measures and speed cameras, for example. It could be made also in terms of traffic wardens. There seems not to he a fundamental objection.

The wording suggested by the hon. Member for Eastbourne is surprisingly mild. It is that the OFT will consider whether any fines that are imposed under chapters 1 and 2 of the Act might be applied for any purpose. The wording does not command the OFT to do that. It merely gives a power to the office should it consider that to be an appropriate and good thing to do. The Minister might well wish to revisit this idea. Ministers are not loth to throw away powers unnecessarily offered to them. In this instance, the hon. Gentleman is offering a new power to the Government, in a sense. The OFT is not exactly the same thing as the Government, but it may find the process of administration useful in future circumstances.

I disagree with the hon. Gentleman on one issue, and it is an issue on which we disagreed in Committee. It relates to illustrating the additional costs that are incurred by business as a result of the various procedures in which the OFT will engage when investigating mergers, cartels and the like.

I share the hon. Gentleman's scepticism in that the Government are often thoroughly wrong when they talk about the effects of a piece of legislation, the red tape that will be involved and the cost to business. We have the shocking example of the Government declaring not too long ago that the effects of the increased burden on care homes would be cost neutral. I think that that is what the Government's investigation showed. Everybody accepts that the costs amount to about £300 million. If the effects of that legislation are cost neutral, care homes are behaving in an add way: they are going out of business.

There is a problem, and it was aired in Committee. An easy assessment to make is that of the costs involved in complying with a piece of legislation. The Government should get that right, and conventionally they get it wrong. However, businesses can do all sorts of things in responding to an investigation into their affairs. For example, they can hire the most expensive lawyers in the land. They can engage their top management night and day. They can inflate costs as and when they wish. In this context, they are not merely complying; they are reacting. Although I am sympathetic to the remarks of the hon. Member for Eastbourne, I see no realistic way in which business costs can be quantified in this instance. Therefore, there is no purpose in producing statistics that have little meaning, although the Government do it quite frequently.

Mr. Richard Page (South-West Hertfordshire)

I shall speak specifically to amendment No. 223. I wish to reinforce the remarks of my hon. Friend the Member for Eastbourne (Mr. Waterson) about the timetabling of consideration. It is ridiculous that we shall try to get through about 200 new clauses and amendments in about four and a half hours, and especially an item as important as amendment No. 223, which deals with the codes of conduct and behaviour of trade associations.

In making my short contribution, I shall worry the Minister by saying that I am broadly in favour of amendment No. 223. I welcome it, but I feel that it should go a little further. The provisions set out in the Bill needed to be amended in any event to take it into account that trade associations should properly be representative of the area of commerce or industry in which they operate, and that their finance, organisation, policies and procedures for redressing consumers' complaints should be as transparent as possible. These considerations are not taken into account in the Bill.

When the Secretary of State addressed the issue of consumer codes of practice on Second Reading, she told the House that provided they would be effective in protecting consumer interests and would meet core criteria yet to be defined, the Bill would include measures to enable the OFT to give formal approval to voluntary industry codes of practice…and to promote the benefits of those codes to consumers and businesses."—[Official Report, 10 April 2002: Vol. 382, c. 49.]. We all say amen to that. I do not think that anyone would quarrel with such an outcome if it could be achieved. However, there is an issue that was not made clear on Second Reading, nor was it made clear in Committee, and the issue still remains obscure. The amendment does not make clear where the boundary will lie between the criteria that the OFT will be specifying and where the voluntary codes of practice will take effect. They will be drawn up by trade associations and others, to be submitted to the OFT for its approval.

The House, as well as consumer groups and trade associations throughout the country, will want to know where they stand before the Bill comes into effect. They will not want to await an interpretation by the OFT in the fullness of time.

I know, Mr. Deputy Speaker, that you were in the House, as I was, when it passed legislation that led to the establishment of the Child Support Agency. We passed that legislation because it was absolutely right that parents who were not looking after their children should be called to account and made to contribute to looking after them. Everybody was agreed and the Bill went through Parliament in record time. However, none of us suspected that the rules and regulations that would follow, introduced by the civil service, would create a nightmare in years to come and clog our surgeries with problems for month after month. We are finally getting on top of things, but if we had known what was to come, we would have been rather more circumspect in deciding what to put into legislation.

I hope that we shall hear something helpful from the Minister. Organisations outside the House have already picked up the issue and have started to run with it. The CBI has made it clear that it wants further discussions on the framework and the principles that the OFT will be using to ensure that codes of practice will be fair and workable for both businesses and consumers. Citizens advice bureaux have already commented on the likelihood that the OFT will start to receive complaints that it should not have approved some codes in some instances and should have approved codes in others, or that the codes are not working properly. Those reactions will be the inevitable result of not spelling out the core criteria to be met and failing to explain how much room trade associations have in formulating proposals for the code of practice. An outline of the thinking behind the scenes would therefore be appreciated. I am anxious that Ministers are more concerned about putting in place a framework of regulation—indeed, the Bill should have been called the enterprise regulation Bill—than about achieving a proper balance between consumers' interests and ensuring that business is free to serve customers and consumers to the best of its ability. Government amendment No. 223 is worrying because it seems to show where the Government's priorities lie.

3.30 pm

On Second Reading, in the spirit of helpfulness and co-operation that I obviously like to adopt, I made clear my concerns about the need for proper recognition of trade associations and the role that they should play in arrangements for protecting consumer interests. I have since had several discussions with trade associations and Mr. Mark Boleat, who is not only a professional consultant but has been the director general of two of the largest trade associations in the country. He served in one for quite a few years, then moved to an even bigger organisation and has now set up his own consultancy practice. He has another tremendous merit as he is a constituent of mine, which obviously gives him every possible advantage. I listened to him with great interest and am grateful to him and a number of trade associations for their advice and assistance. They emphasised the fact that it is essential that trade associations, which will effectively draft consumer codes of conduct under the Bill, should be as representative of the industry as possible. If Ministers are aware of that point, they have not given any sign of it.

I do not want to be too prescriptive, but codes of conduct should be given only to leading trade associations, which enjoy at least 50 per cent. representation of the industry; I shall not object if that representation is 60 or 70 per cent. Some years ago, I went to Japan, where I expected to see a Minister but, instead, I was ushered into the presence of the Japanese shipbuilding trade association, the most powerful body in the area, with only one company not being a member. I rapidly came to the conclusion that the association was highly instrumental in Government business and in driving forward a number of activities, including exports and Government financial measures to help the industry. I commend that example to the Minister. My constituent, Mark Boleat, wrote a book some time ago—I do not recommend it unless people suffer from insomnia and want to go to sleep—on the history of trade associations. When I read it five years ago, it covered 1,400 trade associations.

The DTI cannot possibly have enough officers to deal with so many associations. Different associations need to be brought together so that the DTI can give a focus to a sector rather than trying to deal with hundreds of warring trade associations; that can only be beneficial for the economy. I make that point in the spirit of co-operation and helpfulness which is in my nature, as everybody in the House knows.

Trade associations seeking approval from the OFT for consumer codes of practice should make available to the public their membership, finances and strategic plans both on the internet and in hard copy. Trade associations should make the public as consumers aware of the composition of their governing bodies, policies and procedures for dealing with complaints. I do not doubt that the OFT will consider that when it looks at the codes submitted to it. I do not advocate a wholesale return to the guild system of the middle ages, but it had some good points; if anyone was not up to scratch in the production of a particular service or product, they either had to get up to speed or were put out of business. Codes of conduct should have some insurance backing; trade associations should ensure that every single member of the sector has insurance cover so that if it goes bust or produces faulty work, the consumer is protected. That will make a trade association's logo meaningful; every consumer will know that if they go to a company belonging to the association they will have redress if something goes wrong. If a company goes bust, consumers will not be left with faulty products or services.

The Government amendment, which alters the regulatory mechanism, does not advance that proposal. I hope that I am pushing at an open door; nothing in my suggestion should come as a surprise to Ministers. The Department published a guide on best practice models for trade associations as long ago as 1996; since then the subject has been thoroughly investigated by the Trade Associations Forum. The criteria that trade associations and others must meet when submitting consumer codes to the OFT for approval are sufficiently important to merit much more discussion than we can give them today. The Government amendment characteristically leaves the matter to the OFT, presumably in consultation with the Department, to determine. That is not good enough; it is in no one's interest for the OFT to set out guidelines on consumer codes that are likely to raise business costs substantially or prove too bureaucratic. On the other hand, consumers need reassurance about the procedures for complaint and redress offered by trade associations, and must have confidence in the OFT's regulatory role. Those issues have been passed over, so I would be grateful if the Minister could offer me some reassurance in her reply.

Mr. Mark Field (Cities of London and Westminster)

You may be relieved to have begun chairing the proceedings now, Mr. Deputy Speaker, and not to have played any part in Committee, where debate was wide-ranging. Similarly, the last three contributions have brought forth thoughts on the socialist philosopher Mr. Cole, the care home crisis and the Child Support Agency; there are no immediate comparisons among those three subjects.

I agree with much of what my hon. Friend the Member for South-West Hertfordshire (Mr. Page) said. At Conservative party conferences, we are used to hearing the calls of many activists to bring back various things, but I have not yet heard of anyone going back as far as the middle ages. Perhaps we will hear other singular proposals in our debate.

I took on board my hon. Friend's claim that it would have been better to call the Bill the enterprise regulation Bill; that point is central to the concerns of my hon. Friend the Member for Eastbourne (Mr. Waterson). I acknowledge the fear that the OFT will flex its muscles too often. We must ensure that that temptation is kept to a minimum.

The key consideration is the cost to business. I am probably less sanguine than many of the professional bodies that wrote to members of the Standing Committee about the power of super-complaints. I am concerned that the self-appointed consumer champions will have far too much authority in relation to certain aspects of the Bill. There is a risk that legitimate business interests will be significantly harmed, so I hope that the Minister will give fair consideration, as she did in Committee, to the time limit for responses. A 60-day limit is sufficient. How will the Minister exercise her discretion to vary or override the current 90-day limit, a subject tackled in one of the Conservative amendments?

Miss Melanie Johnson

Our amendments Nos. 156 and 157 deal with the need to exclude any information relating to the affairs of a particular person or business the publication of which would or might seriously and prejudicially affect the interests of that person or business. In Committee the hon. Member for Eastbourne (Mr. Waterson) rightly said that it would make enormous sense to replicate the wording in clause 235 for purposes of clarity and consistency. I agreed to consider the suggestion, and to be as helpful as I could.

As originally drafted, part 9 did not cover information obtained by the OFT under part 1. Clause 235 in its original form listed considerations to which public authorities must have regard before disclosing competition information, as defined. I shall not go into all the details, but following discussions on part 1, the Government reviewed the application of provisions in part 9, including clause 235. The upshot was the tabling of amendments that effectively render clauses 4, 5 and 6(3) redundant. Protection from unwarranted disclosure will now be provided in part 9. That will achieve the consistency throughout the Bill that Opposition Members—particularly the hon. Member for Eastbourne—wanted and which we agreed would be beneficial.

Amendment No. 223 seeks to tighten the definition of a consumer code of practice, and to ensure that the widest possible range of organisations can act as code sponsors. The hon. Member for South-West Hertfordshire (Mr. Page), sadly, could not be with us in Committee—not everyone had that honour—but we all agreed then that the amendment would be helpful in giving the OFT clear powers to implement its new codes of practice regime, whose purpose was to help consumers to find reliable businesses. It was, I think, the hon. Member for Cities of London and Westminster (Mr. Field) who described this as an "enterprise regulation Bill". I trust that "regulation" in this context would include an element of self-regulation, for here we see an element that is not entirely to do with regulation in the classic sense, but which is much more akin to self-regulation.

The hon. Member for Southport (Dr. Pugh) noted that as drafted the clause would allow guidance-only codes to be approved. That was not our intention. The clause has been redrafted to make it clear that only codes regulating the behaviour of those signed up to them will be approved. To be approved, a code will have to comply with the OFT's criteria, which do indeed regulate the behaviour of members. Consumers will have the reassurance of knowing that if there is a problem, it can be put right: to obtain OFT approval, a code must contain mechanisms for both redress and compliance. Problems will be resolved, and failure to comply with the code will be dealt with.

We removed the words "relevant association" in case that was construed as limiting sponsors to trade associations. I know that the hon. Member for South-West Hertfordshire is a great fan of trade associations, but we wanted to ensure that the widest possible range of organisations would be able to act as sponsors. They might include local authority trading standards departments with good-trader schemes, or owners of shopping centres who had signed up their tenants to a code of practice.

Trade associations' redress systems will have to be transparent and compliant to meet the OFT's criteria. The whole system is voluntary. The OFT will publish criteria with which sponsors must comply to seek approval. It will all be spelled out. There has already been some consultation, in which I think the CBI has been involved.

As I said, we are not dealing with just lead trade associations. We wanted the arrangement to be as open as possible, to ensure that there were plenty of methods of entry for small businesses, which might not be members of the smaller associations. The most important thing is for organisations to meet the criteria, so that consumers have the protection that they expect from compliance with the code. Businesses will not have to belong to a trade association and pay for a full range of services to gain the right to use the logo.

3.45 pm

Mr. Page

I did not mean my remarks to apply exclusively to trade associations as such, but is there not a danger that if every small organisation—I will not say "whipstitch organisation"—qualifies, the logo will be devalued? Moreover, such organisations will not have the back-up and the managerial strength to provide the various required protections for consumer complaints. Organisations will have to be of a certain size to have any credibility in this regard.

Miss Johnson

Whoever fulfils the role will have to meet the same criteria. Obviously, that will be an issue if an organisation is too small to do so effectively, but there are a range of code sponsors that may not be small, but are not necessarily trade associations. I have mentioned local authorities, chambers of commerce and shopping centres, but registered charities could also be involved. It is not necessarily a question of scale.

What is important at the end of the day is that consumers get what they expect from the logo and the code. We believe that clause 8 will give the OFT the power that it needs to run the codes regime in the way that it envisaged in its original consultation document, issued in February 2001.

New clause 3, as we know, concerns fines. I will not go into detail, but, like Opposition Members, I am keen to encourage projects or activities that benefit consumers, and clause 267 already allows the Secretary of State to do that. The consumer grants fund that it will establish could be used to give financial assistance to projects in areas where a general class of consumers has suffered harm—I gave examples in Committee—but where it is not possible for all the individual consumers concerned to be identified or to seek redress.

In that sense, clause 267 surely has a wider application than the new clause, which I think is sensible. Although one of our priorities will be to fund projects relating to the markets in which the OFT has established a breach of competition rule, the clause will ensure consideration of financial assistance for a wide range of products or other work that would benefit consumers. That will not be confined to consumers who have suffered from anticompetitive practices for which fines have been imposed under the Competition Act 1998; it will benefit consumers more widely, and will ensure that a more strategic view is taken, both of consumer issues that need to be addressed and of the funding available.

As was said in Committee, fines are by their nature unpredictable in terms of both timing and amount. Consumer benefits linked to them would also be erratic and unpredictable. Furthermore, fines can be imposed under the Competition Act only when the undertaking concerned has acted intentionally or negligently. Although such cases will frequently be those in which most damage is done to consumers, harm might also be done in other cases.

All that is, of course, in addition to our continuing ability to fund bodies such as the National Consumer Council which promote the interests of consumers.

For the reasons that I have given, I believe that clause 267 as drafted is better for consumers than the new clause and, indeed, makes it unnecessary.

Mr. Waterson

I take the Under-Secretary's point about the income stream from the source. However, is it not part of the point that the use of the money should be linked to the reasons for the fines? Will she confirm that if we do not act, the fines will simply disappear into the public purse?

Miss Johnson

There is no question of the fines disappearing into the public purse. They will be used for the projects and activities that I described.

Amendment No. 3 would require the OFT to produce a regulatory impact assessment every year. I do not have sympathy with the amendment because we could end up with regulatory impact assessments of every Act. That is a heavy bureaucratic burden. The OFT already has to consider the effects of its actions on business and it is therefore inappropriate and unnecessary to require it to quantify those effects in its annual report. We have a regulatory impact assessment of the Bill; we could argue about the detail if hon. Members wish. However, the OFT is not a legislative body and it will exercise only the powers that Parliament grants it. All the legislation that it enforces has been approved here and accompanied by an initial regulatory impact assessment. Now is the appropriate time to consider the additional costs that the new measure will impose.

There are statutory checks on the use of all the OFT's powers. For example, it cannot make a market reference unless it has reasonable grounds for suspecting that the reference criteria are satisfied. I expect that the OFT will not use its powers without good reason. The Bill increases its accountability in the system at all levels.

As I said when we considered Government amendments Nos. 156 and 157, amendments Nos. 6 and 8 have been overtaken by the deletion of clauses 4(5) and 6(3). We have therefore already dealt with those matters.

Amendments Nos. 10 and 11 cover the time allowed for the OFT to respond to super-complaints. The issue is whether 60 or 90 days are sufficient. The Opposition support the former and the Government the latter. There is not much meat in the argument, but I stick to my belief that a period of 90 days is right. We want to ensure that the OFT has sufficient time to consider super-complaints. If there is a case to answer, business will need to formulate a response and the OFT will need time to complete its analysis.

We believe that 90 days is the right period. However, if experience shows that super-complaints can be tackled properly in less than 90 days, the Secretary of State can curtail the statutory time scale by using the powers in clause 11(4). We should start with a time scale of 90 days and ascertain what happens. Amendment No. 11 would delete clause 11(4). As I said earlier, the flexibility should remain, so we cannot support the amendment.

Let us consider the points that my hon. Friend the Member for North-East Derbyshire (Mr. Barnes) made. He tabled amendments about producers and producer interests, which we recall from discussions in Committee. Amendment No. 210 seeks to ensure that the OFT makes the public aware of the ways in which competition may benefit producers as well as consumers and the economy, by providing advice and information.

Clause 6 gives the OFT the function of promoting to the public the benefits of competition for consumers and the economy. That reference to the economy already covers any relevant, if not all, producer interests. Indeed, producers are also consumers and both sets of interests need to be balanced, as my hon. Friend acknowledged. I therefore do not believe that it is necessary or desirable to specify producer interests in the clause.

The emphasis on consumers is surely right. Consumers are often unaware of the importance of competition for lower prices, higher quality and greater choice. Strengthening consumer knowledge of the benefits of competition, which strengthens the consumer voice, has a key role in improving economic performance.

Amendments Nos. 211 to 216 seek to widen the definition of a code of practice to include bodies that safeguard or promote the interests of producers, such as trade unions or business groups. That would allow such codes to be submitted to the OFT for approval under the new codes of practice regime. If the definition were widened, it would be outside of the scope of the scheme as set out by the OFT in its consultation paper. Its focus is solely on business-to-consumer codes of practice.

I do not suggest that there is no room for codes that protect producers, and there are almost certainly several perfectly good business-to-business and business-to-producer codes that benefit those involved. There is no reason for the codes not to follow best practice by making use of the OFT's criteria, if appropriate. However, the codes would not be eligible for OFT approval under the Bill.

Again, that is because we intend to help consumers find reliable businesses. Consumers do not always have access to sufficient data about businesses to make an informed choice. Often, they do not have the knowledge and experience to help them choose, for example, a reliable garage for car repairs. Producers such as trade unions or business groups are clearly more able to find good traders and better deals. That is why the scheme is limited to consumer codes.

Amendments Nos. 218, 220 and 221 would permit producer bodies such as trade unions, as well as designated consumer bodies, to submit super-complaints. Amendments Nos. 219 and 222 would enable super-complaints to be made about market features that harm, or appear to be harming, the interests of producers, who are defined in the measure.

We have made it clear that we view the Bill as a measure for consumers, and the focus on their interests benefits everybody. After all, we are all consumers, and companies that respond to consumers' needs are successful. That is to the advantage of the people who work in those businesses and the long-term viability of the businesses. To that extent, the Bill articulates the same values as my hon. Friend's amendments.

Mr. Mark Field

The Under-Secretary rightly points out that we are all consumers. However, we must remember that that is so because we have successful businesses. We want them to thrive, which is why we tabled our amendments. Clearly, we must get the balance right, but we all rely on a thriving and successful business sector.

Miss Johnson

The Government recognise the importance of a thriving business sector, which is the basis for our economic prosperity. Indeed, everything flows from that. Money for public services ultimately derives from that prosperity.

The intention of the super-complaints provision is to alert the OFF to market failures that significantly harm the interests of consumers. Individual consumers are unlikely to have access to that information, or the relevant resources or skills to formulate complaints. The aim is to enable consumer bodies to do that on their behalf. The procedure is designed to benefit consumers, and will therefore be available only to designated consumer bodies. Producer bodies do not have as their principal raison d'etre the protection of consumer interests. Producer bodies can already put complaints about market failure or other issues to the OFT, and nothing in the Bill prevents them from continuing to do so.

I want to speak about section 12 of the Fair Trading Act 1973. Amendment No. 217 would preserve that provision. The provisions relating to the consumer protection advisory committee will become superfluous because clause 10 abolishes it. As an independent body, the OFT should be free to set its own priorities in the new regime. The existence of the powers of direction under the Fair Trading Act could inhibit that freedom.

The amendment would change the intended functions of the OFT and would, in some cases, impose unnecessary burdens and constraints on it. I do not think that there would be a benefit to consumers, businesses or producers, and I therefore hope that my hon. Friend the Member for North-East Derbyshire will not press his amendment to a vote.

4 pm

Regarding my earlier answer to the hon. Member for Eastbourne on fines, I want to clarify the fact that the fines will go into the Consolidated Fund, so they will be in the public purse, but the money from the new consumer grants fund will be used for the projects that I described. That concludes my remarks on the amendments in this group.

Mr. Waterson

I am grateful to the hon. Lady for the trouble that she has taken to provide that explanation. I am pleased, not least because one of our concerns is being dealt with in a different part of the Bill; that seems to make sense. I do not want to prolong the debate about 60 days versus 90 days. We have probably beaten that argument to death, one way or another.

I was pleased that the Minister corrected what she had said earlier about fines. It is clear from the Bill that there is no mechanism for those fines to be diverted towards something useful for consumers, and that they will just go the way of all fines—that is, they will, as she has just confirmed, disappear into the Consolidated Fund.

I made it clear that we welcome the separate provision for funding for consumer information and so on, but it seems to us—alarmingly, perhaps, the Liberal Democrats seem to take a similar view—that it would be rough justice if the money could be directed towards consumers when fines were imposed. Diverting fines in that way would be particularly appropriate in cases of fines being imposed because of a particular practice or set of practices in which it was impossible to identify those who had been harmed. We therefore remain disappointed by the Minister's approach to the matter. We seem to have gone round in an enormous circle, having debated it more than once.

On business costs, I simply do not understand the problem. It would be a modest but necessary discipline on the new system if, once a year, or whatever, the Government were required to make an assessment of the costs to business of what they were doing. Otherwise, there would be no mechanism by which they could make a cost-benefit analysis of their activities. This is a modest proposal. It is all very well for the Minister to say that we would end up with regulatory impact assessments of every piece of legislation every year. If the legislation impacts directly on business, what would be wrong with that? We cannot keep on churning out pages and pages of legislation that affect business and add to its costs, without giving some thought to what it is costing the business community.

We are disappointed by the Minister's response on both those issues, but I shall not press the new clause to a Division. The matters should be further debated in another place, and I am sure that they will be. I beg to ask leave to withdraw the motion.

Motion and clause, by leave, withdrawn.