HL Deb 31 January 1985 vol 459 cc798-800

7.10 p.m.

Lord Lucas of Chilworth rose to move, That the order laid before the House on 10th December 1984 be approved. [6th Report from the Joint Committee.]

The noble Lord said: My Lords, I beg to move the third Motion standing in my name on the Order Paper. This order, together with the Monopoly References (Alteration of Exclusions) Order, put into effect the proposal in the White Paper on Airline Competition Policy to extend the Director General of Fair Trading's powers, bringing civil aviation more into the mainstream of competition legislation as it applies to industry generally.

The White Paper represented the Government's response to the review which the Civil Aviation Authority undertook, at the request of my right honourable friend the Secretary of State for Transport, of the implications of privatising British Airways for competition and the sound development of the industry. Among other things, the CAA drew attention in its report to the question of anticompetitive behaviour.

The Government are satisfied that the CAA's powers are generally adequate to deal with anticompetitive behaviour. By attaching conditions to a licence, it can cut back capacity and limit frequencies of flights. These powers can be used to prevent competing airlines from being forced out of the market; and the speed with which they can be applied makes the CAA the principal guardian of competition in the civil aviation industry.

Nevertheless, we consider that the director general should have a more substantial role in support of the CAA. Prior to the coming into effect of the order, the director general's power to investigate under the Competition Act possible anti-competitive practices in the civil aviation field was restricted to domestic United Kingdom services. This order has broadened the scope of his responsibilities to cover international charter flights.

International scheduled services, however, remain excluded from the scope of the Act. These services are governed by a whole series of bilateral air service agreements with overseas governments and are heavily regulated under the licensing system. Moreover, to interfere with these agreements would conflict with the United Kingdom's opposition to other governments' attempts to apply domestic legislation to matters regulated by such agreements—that is, on a government to government basis. For these reasons, the Government believe that it would be inappropriate for these services to be open to investigation by the director general.

The position under the monopoly provisions of the Fair Trading Act is similar; a separate order provides that the director general may ask the Monopolies and Mergers Commission to undertake investigations into monopoly situations in domestic services and international charter services.

The CAA drew particular attention in its report to the concern that had been expressed about the possibility of anti-competitive behaviour in the charter market. In particular, specialist charter operators were concerned that British Airways could use its position as the major United Kingdom airline to dominate the charter market.

The CAA rejected suggestions that restrictions should be placed on British Airways' operations in the charter market, on the grounds that to do so would be inconsistent with encouraging greater competition and that charter airlines were generally profitable and robust. However, the Government recognise that British Airways is the dominant force in United Kingdom civil aviation, and the possibility of its seeking to use its market power to the detriment of competitors cannot be ignored.

The extension of the director general's power provided by this order and the parallel monopoly references order open up the civil aviation market to scrutiny by the director general and extend the range of sanctions available. The Office of Fair Trading and the CAA will ensure that appropriate procedures are applied to each case. We would expect airline operators—and other interested parties—to approach the CAA in the first instance.

One particular area in which the director general's powers will not be extended is the part charter market—that is, the space available on scheduled services for resale to the public through charterers. The definition of "charter" in the order does not cover part charters, but only those services on which the whole capacity of the aircraft is available for charter. The reason for this is that part charters take place on schedule services; and the treatment of the two cannot be separated so far as action by the director general is concerned.

However, the CAA has powers to regulate part charter operations. In the light of the powers which it has, the CAA's role as the principal regulator of civil aviation remains constant. We do not think that the omission of part charters from the order will seriously detract from the effectiveness of the regulatory authorities' powers, certainly to examine anticompetitive behaviour in the charter market.

Finally, the order makes a significant extension to the director general's powers in the interests of promoting competition in both the domestic and charter air services market. But I emphasise that this role will be primarily as a back-up—a support—to the CAA, concentrating on those matters that could not easily be regulated through its licensing system, or which perhaps can be more effectively dealt with under the general competition legislation.

The two bodies' roles—that of the Office of Fair Trading and that of the CAA—should not overlap but reinforce each other, and they should together be able to deal with any anti-competitive behaviour arising in both the charter and domestic markets. With that explanation, I commend the order to your Lordships.

Moved, That the Anti-Competitive Practices (Exclusions) (Amendment) Order 1984 laid before the House on 10th December 1984 be approved. [6th Report from the Joint Committee.]—(Lord Lucas of Chilworth.)

Lord McIntosh of Haringey

My Lords, we are grateful to the noble Lord for that very clear explanation of what is in fact quite a complex issue, even though the wording of the draft order is relatively clear so far as such things go. We welcome the extension of anti competitive practices regulations and of the powers of the Director General of Fair Trading in, I am sure, successful collaboration with the CAA. I shall not tempt the noble Lord to comment on what effect such a statutory instrument might have had on the dispute between Laker Airways and British Airways, since that dispute is presumably sub judice, and he would resist the temptation anyway. There have been real cases of anti-competitive practices, and it is right and proper that the authorities who have this responsibility in other areas of trade should have their responsibilities in this area also.

Lord Lloyd of Kilgerran

My Lords, like the noble Lord who has just sat down, I thank the Minister for his careful and quite long introduction to the statutory instrument; and like the noble Lord who has just sat down, I resist the temptation of going into any of the details which arise from the speech that the Minister made. I limit myself merely to welcoming this short but important statutory instrument. As the Minister explained, it makes international charter flights, for the first time, the subject of investigation and control under the Competition Act 1980.

Under the White Paper, of course, international charter flights were not considered worthy of falling within the context of that Act. Now the Government have changed their mind, for reasons which the noble Lord did not explain and which I suppose it was not necessary for him to explain. I hesitate to describe that as a U-turn by the Government, because such a term is hardly fitting when one is dealing with aircraft flights. Nevertheless, I support this instrument.

Lord Lucas of Chilworth

My Lords, I am not going to resist the temptation to thank both noble Lords for their warm welcome for the order.

On Question, Motion agreed to.

Lord Brabazon of Tara

My Lords, I beg to move that the House do now adjourn during pleasure until

8.5 p.m.

Moved accordingly, and on Question, Motion agreed to.

[The sitting was suspended from 7.20 until 8.5 p.m.]