§ 5.8 p.m.
§ Lord Strathclyde rose to move, That the draft order laid before the House on 26th October 1988 be approved [36th Report from the Joint Committee, Session 1987–88].
§ The noble Lord said: My Lords, I beg to move. This order makes two amendments to Schedule 3 to the Fair Trading Act 1973 which governs the procedures of the Monopolies and Mergers Commission. The first will reduce the minimum size of the groups appointed to carry out investigations from five members to three. The second will allow the chairman acting alone to seek the Secretary of State's agreement to the laying aside of a merger reference, where the merger proposal has been abandoned before a group has been appointed for that investigation.
§ It may be helpful if I briefly remind noble Lords of the work carried out by the MMC. The MMC can have matters referred to it under a number of enactments. The core of its work remains monopoly and merger references under the Fair Trading Act, anti-competitive practice references under the Competition Act 1980 and efficiency audits of public bodies under Section 11 of that Act. But there can also be general references and references of restrictive labour practices under the Fair Trading Act, and references under the Telecommunications Act 1984, the Airports Act 1986 and the Gas Act 1986 relating to proposed changes to the various authorisations issued under those Acts. Similar provisions to these are also included in the Water and Electricity Bills now being considered in another place.
§ Schedule 3 to the Fair Trading Act governs the MMC's procedures for all these references. Investigations are in practice carried out by groups of commissioners appointed for the purpose. The schedule provides that the minimum size of such groups is five, though in recent years the usual number has been six. The first of the amendments made by this order will reduce the minimum to three and will apply to all references except those under the Telecommunications Act. The power to amend Schedule 3 to the Fair Trading Act does not at present relate to references under the Telecommunications Act, for technical reasons which I can explain if noble Lords wish. An amending provision in the Companies Bill, now before your Lordships' House, will rectify this.
§ The Companies Bill includes a number of amendments to mergers legislation, putting into effect proposals in the DTI policy paper on mergers published in March. However, this is a useful minor change which can be made now, by statutory instrument, as we undertook to do in our policy paper.
§ I should make it clear that the order will not in itself mean that the size of MMC investigation groups will be reduced for all or even most inquiries. But it will enable smaller groups to be appointed, where appropriate, in the interests of greater flexibility. Which references the smaller groups are 852 used for is a matter for the chairman, who will of course have always in mind the need to ensure an adequate spread of experience and expertise.
§ The second change relates solely to merger references. Proposed mergers are sometimes abandoned very soon after they are referred to the MMC, and often this is before the inquiry group is set up. The Secretary of State's agreement is then sought to laying the reference aside. It was in the past the practice for the chairman of the MMC in such cases to act alone. However, the Court of Appeal in 1986 held that the decision to lay aside a reference was beyond the powers of the chairman acting alone. Since then it has been necessary to set up a group just for this purpose. This is clearly inefficient and the change we are making would therefore remove the need to do so by allowing the chairman to exercise the MMC's functions for this purpose only.
§ These two changes will not affect the role the MMC performs or substantially change the way it operates. They certainly have no bearing on the matters referred to the MMC, or the way decisions to refer are made. However, by improving the procedures in two small but useful respects they will contribute to the speed and efficiency of its operations.
§ Moved, That the draft order laid before the House on 26th October 1988 be approved [36th Report from the Joint Committee, Session 1987–88].—(Lord Strathclyde.)
§ Lord Williams of Elvel
My Lords, the House will be grateful to the noble Lord, Lord Strathclyde, for introducing this draft statutory instrument and explaining its purport. The House will also be particularly grateful to the noble Lord for going through the activities of the Monopolies and Mergers Commission. It is sometimes insufficiently appreciated, if I may put it like that, that the Monopolies and Mergers Commission has been in operation for a long time now, has performed a valuable function, and has continued to do so under successive governments and with successive governing Acts. Any change, therefore, in the procedures of the commission needs to be scrutinised with a great deal of care because things that have worked in the past should not be changed just for the sake of change.
The noble Lord pointed out that there are essentially two provisions in this order—both changes in the way the commission is to function. The first reduces the minimum number on a panel from five to three. One of the problems that the Monopolies and Mergers Commission has had to face over the past few years is that it does not act as a commission. In other words, it is like the Parole Board and unlike the old Price Commission.
In the Parole Board, to draw that analogy, there are panels that are set up to deal with a particular case, and those panels will report vertically upwards and will have the full force of the board in recommendation. The same is true of the commission. A panel is formed by the chairman. It then reports, and the report is published as a report of the full Monopolies and Mergers Commission. It does not go prior to publication to a full meeting of 853 the commission. Therein lies a problem, because if the full commission were to approve every report, as used to happen in the Price Commission, it would come with a somewhat different authority than that of a simple panel.
The legislators of the Fair Trading Act 1973 drew on earlier experience in setting the minimum number at five rather than three. The figure of five is important because the Monopolies and Mergers Commission has to interpret a series of rather difficult criteria which are set out in Section 84 of the Fair Trading Act. These criteria are, if I may put it like this, balanced criteria. They say that the Monopolies and Mergers Commission must consider, on the one hand, employment and, on the other hand, efficiency; on the one hand, competition and, on the other hand, a proper and reasonable balance of industry. Each criterion has to be weighed to see how important it is and on which side of the fence the Monopolies and Mergers Commission comes down in any inquiry
That is not an easy job I believe that to have five people doing that job makes it much easier to arrive at a balanced view than having three people doing the job. That is why I have to tell your Lordships that we on this side would resist an amendment to the effect that the noble Lord is advocating.
I personally agreed with the Court of Appeal in 1986. 1 thought that it hit the nail on the head, that the chairman of the Monopolies and Mergers Commission has enough power as it is. He selects the panels. He can decide who is going to be on which panel. It is in his sole discretion, and it is not for anybody else—the full commission, the Secretary of State, or anybody—to challenge the chairman's decision. To give the chairman even greater power to decide at his sole discretion whether a situation has occurred where a putative merger is not going to take place seems to me to be giving him something on which he should properly take advice from some of the other members of the commission, and I do not regard that as being an inefficient procedure at all. I regard that as being a sensible protection.
It is in the custom of your Lordships' House for us not to divide the House against statutory instruments that are produced to your Lordships in draft, and I have no intention of breaking that convention today. Nevertheless, I have to tell the noble Lord, Lord Strathclyde, that although I shall not divide the House against this statutory instrument, if this draft is put into final form and promulgated as such I intend to move amendments to the Companies Bill to nullify the two provisions that this statutory instrument sets out.
§ Lord Strathclyde
My Lords, I should like to thank the noble Lord for speaking for a few moments on this subject. He is quite right in extolling the virtues of the MMC, which has been with us for a number of years. The noble Lord said that it was not an easy job, and I totally agree with him. The commission has done well for a number of years and with a number of governments.
I have to disagree with the noble Lord when he says that the individual investigation panels are simple panels. This is not really so. All commissioners are 854 experienced, well-balanced people, and it is up to the chairman to decide which of his commissioners should sit on these panels. Therefore although he says that five people are better than three, that may not always be the case when the panel is looking at a fairly small point. In my opening remarks I said that in itself it would not mean that the size of the investigation groups would be reduced for all or even most inquiries. I must make the point here that we are speaking of minimum figures and nothing else.
As regards the other point raised by the noble Lord concerning the second part of the order, it was the Master of the Rolls who suggested that the chairman should be able to act. That is why this order has been produced.
Finally, the noble Lord is quite entitled to make amendments to the Companies Bill. I am grateful for his warning. No doubt noble Lords will enjoy themselves in Committee discussing them.
On Question, Motion agreed to.