Lords Sitting of 13 November 1997

Preamble
The House met at three of the clock (Prayers having been read earlier at the Judicial Sitting by the Lord Bishop of Birmingham.): The LORD CHANCELLOR on the Woolsack.
Earl Cadogan—Sat first in Parliament after the death of his father.
Lord Plunket—Took the Oath.

Areas of Outstanding Natural Beauty
Lord Renton of Mount Harry Lord Renton of Mount Harry asked Her Majesty's Government:
What action they propose to take to provide secure funding for areas of outstanding natural beauty that are not national parks.
The Parliamentary Under-Secretary of State, Department of the Environment, Transport and the Regions (Baroness Hayman): My Lords, the Countryside Commission is currently reviewing the funding and management of areas of outstanding natural beauty (AONBs) generally, and the arrangements for the South Downs in particular through two separate consultations. The commission proposes to bring together the results of that work next spring. The report to Ministers will include advice on the funding implications for AONBs and will be considered carefully before decisions are taken.
Lord Renton of Mount Harry: My Lords, I thank the Minister for that reply, and declare an interest as the new chairman of the Sussex Downs Conservation Board. May I remind the Minister—
Noble Lords: Ask!
Lord Renton of Mount Harry: My Lords, does the Minister know—I assumed that she did—that most of the countryside proposals which we are now studying pre-suppose a large element of central government funding? Will she assure us that at the end of the day somedegree of central government funding will be available? Otherwise I fear that we face two years of discussion, inquiry, sound and fury and, in the end, no central government money.
Baroness Hayman: My Lords, I cannot, as the noble Lord will understand, anticipate the results of the review. Obviously the reviews are looking into the funding issues. Recommendations will be made about them. Those recommendations will have to be considered in the light of general public expenditure plans at the time.
Lord Molloy: My Lords, is my noble friend prepared to consider the views and information—I have valid
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information—of the local authorities involved? They could be of great assistance. Is she prepared to accept that?
Baroness Hayman: My Lords, I am prepared to hear the views of the local authorities involved, both on the general consultation which is already under way, and on the specific consultation about the South Downs AONB, which is to be launched at a conference on 26th November.
Lord Campbell of Croy: My Lords, as a system of national parks has never existed in Scotland, and conservation, amenity and recreational opportunities have been provided by othermeans, and as there has been a lively, continuing debate in Scotland on possible changes—long before a Scottish parliament could get around to considering that—have the Government any proposals on this subject for Scotland?
Baroness Hayman: My Lords, I defer to the noble Lord and his knowledge of Scottish concerns surrounding AONBs, although I recognise that they are not designated in the same way in Scotland. I hope that he will forgive me if I undertake to write to him on the issue.
Lord Hardy of Wath: My Lords, will my noble friend encourage her colleagues in government to promote adequate co-operation between the Countryside Commission and local authorities with a view to protecting areas which are attractive but vulnerable, and which have been imperilled, largely because of the inadequate arrangements for local authority funding which have affected many parts of the country?
Baroness Hayman: My Lords, those are the types of concerns that have given rise to the Countryside Commission's investigations, and which will be considered when we have the results of those consultations next spring.
Lord Chorley: My Lords, we welcome the news that the Countryside Commission is looking into this matter, and that a report will be sent to the Minister. Will she tell us when the report will become publicly available so that we can all know what advice has been given? Secondly, will she confirm that while we all recognise the importance of AONBs being funded, there will be no question of attacking the funding of national parks which are already under pressure?
Baroness Hayman: My Lords, we will be receiving the advice from the Countryside Commission next spring. Then we can look at how we take forward ministerial decisions on that advice, and what will be the most effective and appropriate solutions, both in terms of designation and ways of future funding.
Lord Marlesford: My Lords, does the Minister agree that since those excellent reforms of the Attlee government which introduced AONBs and national parks, pressures on those areas have grown

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immeasurably? There is a real danger now of them deteriorating to a wholly unacceptable extent. Something will need to be done fairly urgently. They need not necessarily be national parks.The Norfolk Broads is an excellent example of a tailor-made authority which solved a real problem.
Baroness Hayman: My Lords, I agree with the noble Lord that a range of solutions might be appropriate in differing areas. One particular solution may not necessarily be appropriate for all the areas that we need to protect and conserve.
Viscount Mersey: My Lords, the Minister referred to the South Downs, not to the Sussex Downs which is at the moment a separately administered area from the Hampshire Downs. Does she anticipate amalgamation of the two bodies?
Baroness Hayman: My Lords, I am sure that that is one of the issues that will be addressed during the consultation, and upon which people on both sides of the question, I know, have strong views.
Baroness Nicol: My Lords, will my noble friend assure the House that the present funding of national parks, which is poor—she may not know, for example, that the Lake District now receives £100,000 less than it did four years ago—will be at least maintained, and, if possible, enhanced?
Baroness Hayman: My Lords, as I said earlier, I cannot at the moment give assurances about public expenditure while the comprehensive spending reviews are going on. However, I can give the assurance that the value and importance of those areas of outstanding natural beauty that we need to protect are well understood in the department.

All Work Test
3.10 p.m.
Earl Russell Earl Russell asked Her Majesty's Government:
Whether they have any plans to alter the all work test for incapacity benefit.
The Parliamentary Under-Secretary of State, Department of Social Security (Baroness Hollis of Heigham): My Lords, as your Lordships would expect, we are looking at all aspects of provision for sick and disabled people as part of our wider review of social security. Naturally, this also means that we are reviewing the appropriateness of the all work test as we develop our welfare to work programmes.
Earl Russell: My Lords, I thank the Minister for that Answer. While I understand that, like her noble friend, she cannot anticipate the results of a review, is she aware that there is considerable scepticism about the possibility of medical diagnosis by filling in a form? Would she agree that asking people to answer "yes" or
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"no" when they suffer from a fluctuating condition causes considerable problems if the only honest answer is "sometimes"?
Baroness Hollis of Heigham: My Lords, yes. I take on board the point made by the noble Earl. It is one of the reasons for reconsidering the all work test. As part of our welfare to work strategy, we wish to focus on what disabled people have the capacity to do and not on their incapacities. A test which scores for lifting a bag of potatoes or putting a hat on yourhead is not the best indicator of whether you can work at a word processor. As the noble Earl and I argued when the Bill was going through your Lordships' House, the test defines what people cannot do rather than what they can.
The all work test was reconsidered in the spring in order to take greater account of fluctuating conditions. We need to assess whether it is fully appropriate in the situation described by the noble Earl and we would welcome feedback on its use and appropriateness. Therefore,I am happy to assure the noble Earl that the all work test will be reviewed.
Lord Ashley of Stoke: My Lords, does my noble friend know of a single disabled person who regards the test as fair, because I do not? However, I do know some decent disabled people who are anxious to work but feel guilty about applying for benefits because of the test. Is she aware that the test may be working well as a cost-cutting exercise at the expense of disabled people. but that it is not working well as a fair and equitable test?
Baroness Hollis of Heigham: My Lords, I share my noble friend's anxiety. Approximately 80 per cent. of all disabled people who take the test go on to receive incapacity benefit. Of the 20 per cent. who fail the test, if I may use that expression, and do not receive incapacity benefit about half appeal and of those about half succeed. One of the more worrying aspects is that of the people who go on to receive the jobseeker's allowance, having lost incapacity benefit, only about 7,000 ever find a job. That is why the Government are determined to press ahead with the welfare to work strategy, as disabled people wish.
Lord Higgins: My Lords, can the Minister tell us why we no longer have a Minister for disabled people specifically to look after their interests? In relation to the review, does she recall the Government's response to the report of the Social Security Advisory Committee on the disabled, which stated that there were too few to bother about and the issue was too complicated? What is the position of a lone parent receiving incapacity benefit who fails to meetthe all work test?
Baroness Hollis of Heigham: My Lords, there are Ministers for disabled people in the Department for Education and Employment. However, the Government are determined that there should be a Minister within the Department of Social Security who has the responsibility for disability benefits. That happens to be me, and I am privileged to be asked to do so. Therefore,

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at the core of two important departments are Ministers working together in order to ensure that the rights, opportunities and benefits of disabled people are properly regarded.
As regards the position of lone parents receiving disability benefit, if I have understood the noble Lord's question correctly, we estimate that only 15 per cent. of lone parents sufferfrom a disability and they are entitled to income support with a disability premium if they soqualify.
Lord Addington: My Lords, will the Minister confirm that any new test will be driven by individual needs and not by overall spending constraints? Only if individual needs are the primary concern will many of the problems that have been pointed out today be overcome.
Baroness Hollis of Heigham: My Lords, the problem with the all work test was not that it was designed to cut spending. Indeed, 80 per cent. of people went on to receive incapacity benefit. My belief—and it has been reinforced by all the research that I have seen since crossing the Floor—is that the problem with the test was that it defined people by what they could not do in terms of manual dexterity and functional ability and not in terms of their capacity to enter the labour market and be employed. In today's world, disabled people tell us that they want help to enter the world of work, part-time or full-time, and we are determined to be able to offer them that.
Earl Russell: My Lords, does the Minister agree that it is difficult to devise a substitute all work test since there is not a single activity known as work?
Baroness Hollis of Heigham: My Lords, I am confident that the noble Earl would be one of the first to submit feedback on how he would define work, including unwaged work in this House.

Church Schools
3.16 p.m
Baroness Young Baroness Young asked Her Majesty's Government:
What is their policy on Church schools.
The Minister of State, Department for Education and Employment (Baroness Blackstone): My Lords, the Government believe that schools with a religious character are an essential part of our education system, enriching its diversity and quality. We are therefore committed tosafeguarding the character of these schools. We recently announced developments to the new school framework which will strengthen these safeguards. The Churches have welcomed these developments.
Baroness Young: My Lords, I thank the Minister for that Answer. Is she aware that the important document dealing with the framework for the organisation of schools has not been available in the Printed Paper
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Office and certainly was not available today? Those of us who try to follow these matters depend on such documents for our information. What arrangements have been agreed with the Churchesas regards the critical question of the number of foundation governors in aided schools? That is one of many issues which causes concern to such schools which have had a long tradition in our education system and which are highly regarded by parents for their excellent results.
Baroness Blackstone: My Lords, I did not know that the foundation document was not in the Printed Paper Office. I apologise and will ensure that it is there as soon as possible. As regards the number of governors in aided schools, on 27th October my right honourable friend the Secretary of State for Education and Employment announced that the majority of foundation governors on the governing bodies of aided schools will be increased to two at primary schools and three at larger secondary schools, reflecting the current position at voluntary aided schools. The commitment to strengthening representation for parents on governing bodies will bemet by ensuring that the additional foundation governors are parents.
Lord Pilkington of Oxenford: My Lords, does the Minister remember the conversation that we had two days ago when I reminded her that the document was not available in the Printed Paper Office? It still was not available this morning.
Baroness Blackstone: My Lords, I regret to say that in the past two days, as a result of being busy with a number of other issues, I failed to take up the matter. I apologise to the noble Lord and will do so immediately.
The Lord Bishop of Birmingham: My Lords, I am grateful for what the Minister said about the Government's commitment to the place of voluntary schools within the maintained sector. I should welcome a categorical assurance that it is the Government's policy that Churches should continue to have an effective and decisive majority on the governing bodies of Church schools. Do the Government accept that if it is right that within the voluntary sector there should be provision for the Roman Catholic Church, the Church of England and the Jewish community to have schools for their children it is, in principle, a matter of justice that there should also be the provision for schools of other faith communities? That is an acute question in particular for Moslems.
Baroness Blackstone: My Lords, as regards the right reverend Prelate's first question, I repeat what I said in answer to the noble Baroness, Lady Young. The Government are absolutely committed to having a majority of Church governors in voluntary-aided schools.
As regards his second question about the establishment of state-funded schools for other religions, it will continue to be the case that there will be opportunities for voluntary bodiesor groups of persons

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of any religious persuasion to seek to establish state-funded schools. The Secretary of State currently makes decisions on those proposals. In future we propose that decisions will be taken at local level.
There have been five applications for voluntary-aided or grant-maintained schools from the Moslem community. Two were rejected by previous Secretaries of State and one was withdrawn. Two applications for Moslem grant-maintained schools are currently under consideration. Of course, each must be considered on its merits and the right reverend Prelate will understand that it would be wrong for me to comment on individual cases.
Lord Gisborough: My Lords, in view of the dangerous result of single-religion schools in Ireland and the attempts to mix children up at an early age, is it not rather dangerous to encourage too many single-religion schools?
Baroness Blackstone: My Lords, the current situation is that if people wish to promote state-funded schools, they are able to put forward proposals. But they must meet certain criteria, including that they are able to offer the national curriculum. It is not a matter of encouragement, but of enabling people who wish to make the case for such schools to be able to do so.
Lord Mackie of Benshie: My Lords, is the standard of education in Church schools equal to that in state schools?
Baroness Blackstone: My Lords, the standards of education in Church schools are veryoften extremely high but Church schools will vary just as schools maintained by local education authorities vary.
Baroness Blatch: My Lords, will the noble Baroness accept not only that the document was not in the Printed Paper Office during the course of this week but that throughout the consultation period it has not been available to Members of this House or shadow Members at all? In fact, I received my copy this morning, which I passed on to my noble friend Lord Pilkington, with the results of the consultation. I find that very disturbing. In future, we should like to be able to obtain copies. Not only was it not in the Printed Paper Office but that office was not aware of the document itself. Although I knew the document existed, it took five telephone calls to the DfEE before I received confirmation that it did exist and that I would be receiving a copy.
Secondly, what are the distinguishing features, under the new arrangements, between a Church school and a foundation school, which will be the option for grant-maintained schools?
Baroness Blackstone: My Lords, once again, I should say that I was not aware that the document was not in the Printed Paper Office until the day before yesterday. I shall take up that matter with the Department for Education and Employment and its officials. It is important that we should ensure that such
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documents are available not only to Members of the Opposition but to all Members of your Lordships' House.
As regards the noble Baroness's second question, the Secretary of State for Education and Employment announced at the end of October that there will be three categories of school: a community category; a voluntary category, which will consist of the existing voluntary-aided schools and any voluntary-controlled schools which wish to be members of that category; and foundation schools which will be most of the existing grant-maintained schools which choose to be members of that category, and any voluntary-controlled schools which wish to be members of that category.

Party Political Donations
3.24 p.m.
Lord McNally Lord McNally asked Her Majesty's Government:
What guidelines exist regarding access to Ministers by large donors to party political funds.
Lord McIntosh of Haringey: My Lords, there never have been any guidelines other than those in the Ministerial Code which reminds Ministers of the Government's commitment to conduct all their business in a way that upholds the highest standards of propriety and stresses that they should always be alert to avoid any actual or perceived conflict of interest. My right honourable friend the Prime Minister has also asked the committee on Standards in Public Life, chaired by Sir Patrick Neill, to undertake a wide-ranging review of party funding.
Lord McNally: My Lords, I thank the Minister for that reply. Does he not agree that the Government obviously started with the best of intentions and have made a terrible mess of implementing those intentions? Is it not now time for the Labour Party to set an example to all political parties by opening its books so that the public and Parliament can be fully assured that there is no linkage between large political donations, access to Ministers, influence on policy or, indeed, on patronage?
Lord McIntosh of Haringey: My Lords, that is exactly the reason for the reference given to Sir Patrick Neill and his committee and why it is in such broad terms. As the Prime Minister confirmed yesterday, Sir Patrick has been asked to cover all aspects of party funding, including all the matters to which the noble Lord refers. Both the Labour Party and the Government will respond to Sir Patrick's recommendations when they arrive. They will do that as a government by incorporating any recommendations in legislation proposed by the Home Office.
Viscount Cranborne: My Lords, will the noble Lord confirm that minutes were kept of the meeting which took place between Mr. Ecclestone, Mr. Max Mosley and the Prime Minister? In view of accusations about special treatment being given to the motor racing industry, expressed particularly by other sports which in

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the past have benefited from the sponsorship of tobacco companies, would it not be reassuring if the Prime Minister were able to make available those minutes to Sir Patrick Neill's committee in order that they should facilitate his examination of the question?
Lord McIntosh of Haringey: My Lords, as regards the minutes, it was not a ministerial meeting. The Prime Minister was the only Minister present at the meeting and my understanding is that it is not the normal custom for minutes of such a non-ministerial meeting to be made public.
On the issue of whether it is right for the Prime Minister to provide access to those who have particular points to make, I remind the noble Viscount the Leader of the Opposition that a wide range of his Back-Benchers and a Front Bench spokesman only on 21st October were urging me very forcibly to take account of the concerns of the motor sport industry and to ensure that Ministers gave proper consideration to those concerns.
Lord Merlyn-Rees: My Lords, would it not be a good idea, as a beginning, if all political parties were to publish in their annual reports a list, by name, of all those who have donated sums over £5,000. That is done already by the Labour Party and the list is published at its annual conference. At least one would know who those donors were. The next step might be to send the list to the Cabinet Office so that it was aware of the people who had given those sums of money. However, as I say, the list is available; it was available in Brighton recently.
Lord McIntosh of Haringey: My Lords, I can confirm to my noble friend that the established practice of the Labour Party already is to make an announcement of the names of those who have donated more than £5,000. The Labour Party and the Government are determined that the issue of how far that should be extended shall be pursued. The Prime Minister said yesterday that he could confirm that we are asking Sir Patrick to consider the whole area of party funding: whether donors should be disclosed; whether the size of a donation should be disclosed; whether there should be a limit on individual donations; whether there should be a limit on overall spending; and whether there should be different arrangements altogether, such as increased state funding. I must ask the Opposition whether they agree with those increased terms of reference and whether they agree that there should be the further disclosure for which my noble friend rightly asks.
Lord Harris of Greenwich: My Lords, does the noble Lord agree that it would be rather surprising if the Conservative Party were to be in favour of the inquiry by Sir Patrick Neill and his colleagues, given the fact that the Conservatives voted against just such a proposition on 5th February this year? Indeed, in his speech, the noble Viscount, Lord Cranborne, specifically declined to support a Motion tabled in the name of my noble friend Lord Jenkins of Hillhead.
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I welcome the fact that the contribution which has received so much publicity in the past few days has been repaid. Does the noble Lord agree that it would be an extremely good idea if the noble Viscount and his friends were now to agree to repay the £365,000 of stolen money from Polly Peck International, as the administrators specifically asked Conservative Central Office to do? Would that not be very desirable, given the interest of the Opposition in this matter?
Lord McIntosh of Haringey: My Lords, I am not in a position to answer on behalf of the Conservative Party; nor am I in a position to arrange for circumstances in which such an answer might be given. The Conservative Party is strangely reticent about all such matters. Conservatives have not expressed any views, other than critical views about other people, as to what they think the right thing should be. However, as the noble Lord said, I can certainly confirm not only that the Conservative Party has resisted—and, indeed, did so on 5th February—any suggestion that there should be further disclosure of party political funding, but also that it resisted any suggestion that it should support the ban on tobacco advertising as proposed by the European Commission.
Lord Stoddart of Swindon: My Lords, does my noble friend agree that the real problem is that far too many millions are being spent on national campaigning and that, as a result, our general elections are being fought on the basis of a sort of presidential contest? Therefore, is it not time to impose a very strong restriction on the total amount of money spent on electioneering? Is it not also time that electioneering should be returned to the constituencies so that ordinary people can be involved in the election, with their candidates, and not be dependent upon television and radio broadcasts?
Lord McIntosh of Haringey: My Lords, as I believe I just said, the issues raised by my noble friend are those which we specifically asked Sir Patrick Neill to address. I have some personal sympathy with what my noble friend says about constituency and national funding. However, those are matters for Sir Patrick in the first instance. The Government will take account of that fact.
Although there may have been some confusion in the past week, I take a very upbeat view of what is happening. I believe that the result of the events of the past week or so have encouraged—and, indeed, made essential—a proper review of party funding. That will be taken by an independent organisation. I hope that we shall make real progress as a result of that review.

Standing Orders (Private Business)
The Chairman of Committees (Lord Boston of Faversham): My Lords, I beg to move the Motion standing in my name on the Order Paper.
With your Lordships' permission I shall move all the amendments together. They raise no matters of substance and result chiefly from changes in the designation of a number of government departments and agencies.
Moved, That the Standing Orders relating to Private Business be amended as follows:
Amendment
No.
Standing Order 27
1. Line 74, at end insert ", Transport and the Regions" Standing Order 27A
2. Line 23, leave out "three" and insert "four"
3. Line 24, after "Environment" insert ", Transport and the Regions"Standing Order 29
4. Line 8, leave out "Transport" and insert "the Environment, Transport and the Regions"Standing Order 30
5. Line 6, leave out "Energy" and insert "Trade and Industry"Standing Order 30A
6. Line 5, after "Environment" insert ", Transport and the Regions Standing Order 31
7. Line 7, leave out "Transport and insert "the Environment, Transport and the Regions"Standing Order 32
8. Line 13, leave out "National Rivers Authority" and insert "Environment Agency"Standing Order 33
9. Line 10, leave out "National Rivers Authority" and insert "Environment Agency"Standing Order 34
10. Line 10, leave out "Transport" and insert "the Environment, Transport and the Regions"Standing Order 37
11. Line 10, at end insert ", Transport and the Regions"
12. Line 17, at end insert ", Transport and the Regions"Standing Order 39
13. Line 3. after "bill", insert "four at the Department of the Environment, Transport and the Regions"
14. Line 3, leave out "at the Department of the Environment and"
15. Line 9, leave out "of National Heritage" and insert "for Culture, Media and Sport"
16. Line 9, leave out "the Department of Transport"
17. Line 35, leave out "Great George Street" and insert "Whitehall"Standing Order 42
18. Line 8, leave out "National Rivers Authority" and insert "Environment Agency"Standing Order 43
19. Line 8, leave out "National Rivers Authority" and insert "Environment Agency"Standing Order 45
20. Line 17, leave out "Transport" and insert "the Environment, Transport and the Regions'Standing Order 47
21. Line 11, after "Environment" insert ", Transport and the Regions"Standing Order 139
22. Line 12, leave out "Transport" and insert "the Environment. Transport and the Regions"
23. Line 26, leave out "Transport" and insert "the Environment, Transport and the Regions".—(The Chairman of Committees.)
On Question, Motion agreed to.

Competition Bill [H.L.]
3.33 p.m.
The Minister of State, Department of Trade and Industry (Lord Simon of Highbury): My Lords, I beg to move that the House do now resolve itself into Committee on this Bill.
Moved, That the House do now resolve itself into Committee.—(Lord Simon of Highbury.)
On Question, Motion agreed to.
House in Committee accordingly.
[The CHAIRMAN OF COMMITTEES in the Chair.]
Clause 1 agreed to.
Clause 2 [Agreements etc. preventing, restricting or distorting competition]:
Lord Fraser of Carmyllie Lord Fraser of Carmyllie moved Amendment No. 1:
Page 2, line 21, at end insert—
("( ) Subsection (1) applies only if the agreement, decision or practice has, or is likely to have, a significant effect on competition within the United Kingdom.").
The noble and learned Lord said: I must tell Members of the Committee immediately that this is not just a probing amendment. It is our view that the wording of the prohibition should be explicitly confined to those arrangements which have a "significant" effect on competition. It is not just a matter of improvement of the wording for the sake of drafting; there is a real value involved.
The prohibition in the 1996 draft Competition Bill specifically applied only where there was a "significant" effect on competition. Under the law of the European Union, the scope of Article 85 is limited to arrangements which have an "appreciable" effect on competition. Therefore, in our view, it is entirely consistent with Clause 58 for the United Kingdom prohibition, modified as we suggest, to be worded in that way. We do not believe that that wording would hinder the overall aim of consistency with EU jurisprudence. The noble Lord, Lord Simon, will be aware from what was said on Second Reading of the Bill that, if we have one broad intention in putting forward amendments, it will be that so far as possible we shall attempt to secure the aim of consistency. We believe that the insertion of the word "significant" will be of particular benefit—
Lord Ewing of Kirkford: I am sorry to interrupt the noble and learned Lord, but I have to say that I am absolutely astonished to find him speaking from the Dispatch Box today. Am I not right in assuming that the noble and learned Lord has, in the past few days, been appointed non-executive chairman of an oil company? For a party that made so much so-called "capital" out of the shareholding in BP of my noble friend Lord Simon, I wonder whether the noble and learned Lord is entitled, first, not to declare an interest and, secondly, to speak from the Front Bench.
Lord Fraser of Carmyllie: I certainly will be declaring that interest. As I understand it. there is

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nothing in the rules of the House which restricts me from speaking from this position. If the noble Lord wishes to make a further point, I shall allow him to do so. However, I certainly did not understand that there was any such restriction. As the noble Lord indicated, I have been invited to become a non-executive chairman of an oil company. I should make it absolutely clear now, as I was intending to do in the register—which, I believe, is to be republished before the end of the month—that I shall certainly not be speaking on any matters relating to energy policy or, indeed, any matters relating to energy affairs.
As I was seeking to say, if the requirement of significance were attached to the wording, it would be of value to business and also to the OFT in that it would help to ensure that unnecessary notifications are not made. Those who are familiar with the problems that the European Union has encountered will be aware that, because of the wide interpretation that has been given to Article 85. a vast number of unnecessary notifications have been made. In those circumstances, the Commission has been unable to cope. We would not wish to see such an experience repeated within the United Kingdom. I should also point out that this matter is of concern not only to business broadly; there are legal interests who have brought the same point to our attention. I beg to move.
Lord Ezra: Amendment No. 4 in my name has been grouped with the amendment just moved by the noble and learned Lord. I wish to reinforce what the noble and learned Lord, Lord Fraser, had to say. It seems to me—this arises from points made by several noble Lords in the Second Reading debate—that we need, as far as possible, while accepting the general purpose of this Bill, to limit the amount of uncertainty and to limit the number of unnecessary notifications. I should have thought that the inclusion of the single word "significant" in the amendments standing in the names of the noble and learned Lord, Lord Fraser, and myself would help in that direction. I very much hope, therefore, that the Government will find it possible to introduce that word which was in the original draft Bill which accompanied the Green Paper on this subject.
Lord Borrie: I thought I should raise an issue which is not only relevant to this amendment but also to others which I have noticed have been tabled in the name of the noble and learned Lord, Lord Fraser of Carmyllie. Under the present jurisprudence of the European Union, as I understand it, Article 85 applies only where the effect on competition is appreciable. If the word "appreciable" and the word "significant" are more or less the same, is the amendment that is proposed otiose?
I also have a more general point to make. The noble and learned Lord, Lord Fraser, suggested that it was desirable to incorporate into our UK legislation the point at which European jurisprudence has reached in terms of the prohibition applying only if there is an appreciable effect on competition. That point can, of course, be applied to many, many matters in this Bill. I wonder whether the amendment is also unnecessary because, as I understand Clause 58 of the Bill, it
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incorporates into this UK legislation the current state of European jurisprudence, at any rate most clearly at the level of the European Court of Justice.
If we are to accept the point that is being made by the noble and learned Lord, Lord Fraser, and the noble Lord, Lord Ezra, I wonder whether we shall set a train in motion where we shall want to amend all sorts of clauses in order to ensure that we are brought up to date with European law. I know that will save lawyers from having to check their reference books as to what the state of European law is, but I do not think that is particularly the job of this Chamber or indeed the other Chamber.
3.45 p.m.
Lord Campbell of Alloway: As the noble Lord has said, this measure represents the perceived jurisprudence of the Commission and the Court of Justice today. However, that was not the case originally. In the very early days—I know this as I used to appear in these cases before the Commission and the court—before the jurisprudence developed, one had to register in order to obtain block exemption or exemption. No one really quite knew in those days where they were. I can see every advantage in this. This is not the thin edge of incorporating the jurisprudence of the court and the Commission into this Bill. This is an essential, practical and precautionary measure so that right at the outset everyone understands that, put another way, a de minimis situation is simply not relevant. What is the objection to that kind of clarity? One can put in a de minimis provision. That is the way we would draft it. That is the way our restrictive practices court looks at the matter. However, the Commission and the Court of Justice look at it in the terms of this amendment, so why not use it? Why not clarify the position?
The Earl of Balfour: Before the Minister replies, I wish to ask a question. I was interested to note that Amendment No. 1 standing in the name of my noble and learned friend Lord Fraser states,
"Subsection (1) applies only if the agreement …has, or is likely to have, a significant effect on competition within the United Kingdom".
Almost exactly the same words appear in Amendment No. 4 which contains the words,
"has, or is likely to have".
Clause 2(3) of the Bill states,
"Subsection (I) applies only if the agreement, decision or practice is, or is intended to be, implemented in the United Kingdom".
I wonder whether this should be "was" or "was intended to be" because I cannot see how the Government can take action over something that has not yet been decided. This may be a technical point but I think it is worth raising. I was interested in the difference in sense as regards the amendments which have been tabled.
Baroness Oppenheim-Barnes: I, too, think this is an important amendment. I note the points that have been made by my noble friend which I believe are apposite. Those points illustrate perfectly that throughout the whole of this Committee stage we must not forget that

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after the passage of this Bill there will be an entirely new playing field with goalposts in some cases having been moved radically in relation to some of the monopoly legislation that we already have, and particularly with regard to definitions. What will the new definitions be? How will we be responsible for implementing them? Are they better, or likely to be better than the ones we already have?
Lord Simon of Highbury: I agree with the noble and learned Lord, Lord Fraser, and the noble Lord, Lord Ezra, that the competition regime should concern itself only with a situation where the anti-competitive effects of an agreement are significant or appreciable. That is the intention of the Bill as drafted. I accept that it will have the effect of reducing administrative overload if those points are clear. However, as the noble Lord, Lord Borrie, said, EC jurisprudence states that Article 85 applies only where an agreement has an appreciable effect on trade and competition. "Appreciability" is already part of EC jurisprudence. We consider therefore that the chapter 1 prohibition will apply only if an agreement has an appreciable effect on competition.
On that basis an explicit significance test written into this clause is unnecessary, and, moreover, we believe could be harmful in indicating a departure from the established European principles where this is not the intention. An explicit appreciability test does not fit well with our approach of reliance on European case law except in areas where it is clear a different approach is required. Worse, there is a risk that in apparently departing from established European principles, we might inadvertently create so high a threshold for action that we could impede the effective tackling of anti-competitive agreements.
As we stated at Second Reading, the reason for bringing in the changes is that, as we all agreed, the current system is not working well as an approach to competition. I believe, therefore, that it is better to stick with the established principles in the jurisprudence in this area.
I will nevertheless reflect most carefully on the points made by the noble Lord, Lord Ezra, and the noble and learned Lord, Lord Fraser. I hope that at this stage they are prepared to withdraw the amendment.
Lord Fraser of Carmyllie: I can immediately tell the noble Lord that I intend to withdraw this amendment. I am grateful for the approach that he took, and in particular his remarks about the intent on the part of the Government in promoting this legislation, that it is only those arrangements that have either appreciable or significant effect that will be caught.
The noble Lord, Lord Borrie, referred to Clause 58. It is a very important provision. We shall need to examine it very carefully—not today, I regret to say, but perhaps in a week or two when we reach it.
I am grateful to the noble Lord, Lord Simon, for his recognition that there is a risk of administrative overload if business is uncertain whether or not the arrangement into which it has entered is of such a nature that it needs
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to be notified. I am sure the noble Lord will acknowledge through that recognition that that is a problem which has confronted the Commission in the past. The inclusion of the word "significant" would at least provide business with a clear appreciation as to what is required of it and seems desirable. The noble Lord indicated that he would reflect on the amendment, and I am grateful for that. We may return to the matter at a later stage. However, I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Lord Fraser of Carmyllie Lord Fraser of Carmyllie moved Amendment No. 2:
Page 2, line 23, leave out ("implemented") and insert ("acted upon").
The noble and learned Lord said: This amendment is grouped with Amendment No. 3. Unlike my first amendment, which I consider to be important, this one is simply a matter of drafting.
The amendment relates not only to undertakings or decisions. In those circumstances the use of the word "implemented" in the United Kingdom would seem a perfectly natural piece of drafting. However, the noble Lord will notice, in line 2 of Clause 2, that "concerted practices" is the third activity that is covered. In our view the words "acted upon" would be preferable to "implemented". It is purely a drafting matter but would seem to us to be an improvement.
The purpose of the second amendment is to ensure that if agreements have effects on competition in the United Kingdom, and a party to that agreement is located in the United Kingdom, the agreement should be within the scope of Clause 2, even if the decisions or concerted practices are not to be implemented or acted upon within the United Kingdom itself. It is a short point. It would seem to us to have the effect of widening the scope of the prohibition; however, the circumstances are such that in our view it would be desirable. I beg to move.
Lord Campbell of Alloway: I support the third amendment—with respect to my noble and learned friend, the second is neither here nor there. The third, if it goes to jurisdiction, could avoid certain disputes, certain difficult administrative problems and arguments over jurisdiction. It is a good safeguard and a useful amendment. I hope that the noble Lord will keep an open mind before rejecting it out of hand.
Lord Simon of Highbury: I thank the Committee again for the way in which the debate is being conducted at this stage. Questions of administrative overload, to which we referred previously, are matters for discussion as the Bill proceeds. It is well understood, and the point is well taken. That theme will continue through our discussions.
Turning to Amendments Nos. 2 and 3, it is perhaps best if I refer to the third and then comment on the drafting implication of the second. It may be helpful to set out the Government's thinking behind the territorial limitation provision in Clause 2(3). The prohibition is

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cast in terms of effects. Therefore, its territorial scope is extremely wide-ranging, even with the limitation that the effects on trade and competition actually be in the UK. It does not follow that we should depart from the normal UK policy of territoriality and follow the so-called "effects doctrine", where jurisdiction is claimed on the basis of the economic effects felt within a state resulting from behaviour outside that state, however indirect that link might be. I am advised that that could be the result of the second amendment tabled by the noble and learned Lord, Lord Fraser. The Government believe that to be too wide a basis for jurisdiction for the prohibition.
However, it is recognised that the place where an agreement having an anti-competitive effect is made is not always a determinate factor. We would not want to create a loophole whereby parties could avoid the prohibition by simply executing their agreements outside the UK.
We therefore decided that the best approach was to follow the current jurisprudence of the European Court of Justice based on the term "implementation" as set out in the case known as Woodpulp. That test requires that the agreement be implemented in the EC for the prohibition to apply. Similarly, the UK prohibition will apply only if the agreement is implemented in the UK.
Following the test set out in the Woodpulp case, there is also the advantage of allowing business to tap into European jurisprudence on the meaning of the term. I am advised that adopting the first amendment of the noble and learned Lord, Lord Fraser, would lead to uncertainty as to its meaning and therefore create an additional doubt in the mind of business.
By, in effect, copying out the test in Woodpulp on the face of the Bill, we are also ensuring that in the event that EC jurisprudence develops and creates a pure effects-based doctrine, the application of the UK prohibitions will not follow suit. I therefore ask the noble and learned Lord if he is prepared to withdraw his amendment, given the implications of the word "implementation" and the existing jurisprudence.
Lord Campbell of Alloway: Before the noble Lord sits down, perhaps I may ask a question on the point about extra-territorial jurisdiction to which the noble Lord referred. I am fully conversant with the nature of our concept of claim and the American concept of such claim. But with the greatest respect to the noble Lord, that is not quite what is involved in this amendment. We are not claiming extra-territorial jurisdiction:
"a party …is located within the United Kingdom".
The concept of this dispute as to territorial claim is very interesting but, with the greatest respect, as far as I can see, it is not relevant as an objection to the amendment. The noble Lord may wholly disagree with me but perhaps he will consider that point?
4 p.m.
Lord Simon of Highbury: The point I am trying to make is that we want to be absolutely clear of the relationship between the European jurisprudence and our own. The linkage with the United Kingdom as the
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location for the effect in this instance is the most important issue. We do not wish to put ourselves into a position where we have linkage in the extra-territorial effect and thus throw doubts into the mind of the business concerned. That may be a drafting point to which we shall wish to return. I am clear in my own mind as to what we are trying to achieve; but, if we need to discuss the matter further, so be it.
Lord Fraser of Carmyllie: Once again, I shall withdraw the amendments. As I indicated, they are drafting points. There was a recognition that Amendment No. 2 would have the effect of marginally widening the scope of the prohibition. I shall read carefully what the noble Lord said but I am surprised that the view is taken that it introduces an unacceptable degree of extra-territoriality. In speaking to the amendment I hope I indicated that it was important, as we too recognise, that it had to be in relation to an agreement which had an effect on competition within the United Kingdom. The only extension—if that is the right way to describe it—is that the agreement to achieve that effect might be implemented beyond our shores. I shall withdraw the amendment but we might return to it, together with the following amendment, at a later stage.
I am relieved to say that I shall not be batting on the next few groups of amendments. However, perhaps I may take this opportunity to signal a point in relation to Amendments Nos. 17, 19, 20, 21, 22, 23, 24 and 28. I should like to have a broad debate on predatory pricing. I understand that within that group of amendments a number of noble Lords wish to address the issue of predatory pricing in relation to the newspaper industry in particular. Before we reach that point perhaps we might reflect on whether it would be desirable to separate the two debates. It is of no great consequence to me but such a separation might be helpful for a more coherent debate. In the meantime, I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
[Amendments Nos. 3 and 4 not moved.]
Lord Kingsland Lord Kingsland moved Amendment No. 5:
Page 2, line 23, at end insert—
("(3A) An agreement, decision or practice to which subsection (1) applies shall not, for the purposes of this Part, be within the scope of—

(a) section 18(1);

(b) the Fair Trading Act 1973; or

(c) the provisions of, or any licence granted under,—

(i) the Telecommunications Act 1984;

(ii) the Gas Act 1986;

(iii) the Electricity Act 1989;

(iv) the Water Industry Act 1991;

(v) the Electricity (Northern Ireland) Order 1992; or

(vi) the Gas (Northern Ireland) Order 1996,

and any question whether such an agreement, decision or practice is to be prohibited on competition grounds shall be determined in accordance with this Chapter and not in accordance with the conditions of any such licence irrespective of whether such conditions are expressed in similar terms to subsection (I).").
The noble Lord said: The purpose of the amendment is to invite the Minister to accept that implementing a single prohibition through two different regimes operated by two different sets of individuals is a recipe for both excessive cost and immense confusion. I beg to move.
Lord Borrie: For the benefit of those—of whom I am one—who do not know quite what the noble Lord is getting at, would it not be appropriate for him to say just a few more sentences?
Lord Kingsland: I have already moved the amendment.
Lord Simon of Highbury: The noble Lord has moved the amendment. The point raised is the relationship between two prohibitions, the Fair Trading Act and the legislation regulating the utility sectors. It may be helpful if I explain how the Bill is intended to operate in this respect. I shall deal with each of the relationships in turn.
The two prohibitions introduced by the Bill will operate hand in hand. Essentially they will have the same relationship to one another as do Articles 85 and 86 of the treaty. That relationship is well established and works satisfactorily in practice. Accordingly, for example, in considering whether to give an individual exemption for the Chapter I prohibition, the Director General of Fair Trading will have to take account of the Chapter II prohibition. He should not grant an exemption if in doing so he would be exempting under that prohibition something that appears to him to be prohibited under the Chapter II prohibition.
These matters must necessarily be considered in tandem as an agreement may constitute an abuse of the dominant position. Similarly, it would be wrong for a firm to be allowed to abuse a dominant position because an agreement benefited from a block exemption. Enjoyment of the benefit of a block exemption under the Chapter I prohibition should not bring immunity from action under the Chapter II prohibition. The inter-relationship between the two prohibitions ensures that that will not be the case.
More generally, a jurisdictional dividing line between the two prohibitions would conflict with the Government's desire to see the prohibitions applied consistently with Articles 85 and 86. As the noble and learned Lord, Lord Fraser, noted, and as I have already said, consistency in interpretation will bring significant administrative benefits to business.
The relationship between prohibitions and the Fair Trading Act monopoly provisions is the subject of a separate amendment which we shall debate in due course. However, the Fair Trading Act provisions enable wider market investigations than are possible under the prohibitions. Essentially they enable investigations where competition issues arise fundamentally from structure of the market rather than from restrictive agreements or the specific abuses which we discussed with regard to the alignment of Articles 85 and 86. We
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do not think it right or practical to circumscribe the monopoly references and investigations under the Fair Trading Act. That may be a point to which we shall return. We do not believe that a strict jurisdictional separation would work well.
It is important to say that, before framing a reference, the director general might have to examine every aspect of the behaviour of, and relationships between, the players in a market in order to decide what could be examined by the competition commission on a reference; or the competition commission would have to determine what fell within the prohibition regime in order to exclude it from its considerations. The prohibitions will be the primary tools for dealing with anti-competitive behaviour in the market place. The Fair Trading Act provisions will be reserve powers to deal with certain limited market circumstances.
As regards the relationship between the prohibitions and the Fair Trading Act merger provisions, Schedule I to the Bill provides for a clear demarcation between the two. We can debate that demarcation when we reach the relevant parts of the Bill.
I think that at this stage I am along the road to addressing the noble Lord's point.
Lord Kingsland: Does the Minister feel that he has addressed the final part of the amendment with sufficient clarity and detail to respond to my own amendment?
Lord Simon of Highbury: Of course, the noble Lord spoke but briefly and his clarity was magnificent. I spoke at some length and I hope that I clarified the position.
Lord Kingsland: I would like to thank the Minister for his extremely full reply to my brief question. As to the question of the Fair Trading Act, the Minister will recall from our exchanges at Second Reading that he can expect at some later stage in the proceedings an amendment proposing that the activities of the competition commission, in so far as they refer to complex monopolies and monopolies of scale, ought to be transferred to the Office of Fair Trading. I accept that this is not the moment to go into detail on that point.
As far as the individual public utility regimes are concerned, and considering that there is so little in the Bill so far to show how costs will be saved in respect of the application of these regimes and that certainty will be guaranteed, does he think that the maintenance of a dual regime will redound to the benefit of competitiveness in the United Kingdom? There is nothing on the face of the Bill to ensure that the operation of two separate regimes in relation to the single prohibition will not lead to lengthy procedures and problems of double jeopardy. I would like him to deal with that matter in a little more detail.
Lord Simon of Highbury: That fuller question deserves a fuller answer. Perhaps I can now turn to the relationship between the prohibitions and the utility legislation because that will be helpful and we can talk about the implications subsequently.

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The two prohibitions introduced by the Bill are general prohibitions appropriate to the whole economy, and we believe that it is right that they should apply equally to the utility sector. Indeed, the amendments that we are discussing do not challenge that presumption.
It is important that competition is developing in the utility sectors. I believe that when we talked about it previously we talked of the dynamism of these particular market places being different from the general market place because we are creating markets in the utility sector. However, for that reason, there is still a strong case for retaining more detailed sector specific regulation of such matters as pricing, including the price caps. The access to networks is a crucial issue, as the dynamics of that marketplace develop, if we are talking about some of the energy sectors, the electricity sector and the gas sector.
We think it is right in the utility areas that the prohibitions apply and this seems to be part of the purpose behind the noble Lord's amendments. However, it is already the effect of the Bill. In other words, if one or other of the prohibitions is breached, action to be taken under the Bill would be possible, irrespective of the licence regime, so the general prohibition would apply. If the company is required to do something by law—and by this I include by a licence condition—then it is right that it should not be prohibited from complying with that requirement. The Bill achieves this result as well.
I hope in some way that much of what is sought in the amendments is achieved by the Bill. However, where the amendments seek to impose strict jurisdiction barriers, the changes, in my view, are unnecessary and probably undesirable. In practice, we believe that the Bill will ensure that the different regimes that we have discussed—the utility regime and the general regime—will apply in a complementary and common sense way.
The point in common-sense terms is the differing nature of the market places and the particular dynamism of the utility markets as they develop. Therefore, we need to see special capacities developed to understand those markets. Double-banking within the system would cause another kind of overload and would perhaps not be the best use of the valuable and scarce resources available for making the important judgments about the issues we have just discussed.
If that was a full enough answer to the second, rather fuller question, I ask whether the noble Lords is prepared to withdraw the amendment.
4.15 p.m.
Lord Ezra: Before the noble Lord, Lord Kingsland, answers that point, perhaps I can say that I am a little confused because it seems to me that that section of the amendment dealing with the privatised utilities legislation does provide the opportunity for the enterprises to act under licenses under the law. I would have thought that it was perfectly straightforward to say that so far as they do so they would not be subject to
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the impact of the prohibitions under this Bill. I am not absolutely clear why the Government seem to have any doubts about that.
Lord Simon of Highbury: As I tried to say in answer to the previous line of questioning, I think that that is the intention where a licence applies. Complying with the licence would, in general terms, not be outside the law. However, as I mentioned when we discussed a particular detail of a price cap which might be implicit in a licence arrangement, you could have a position where someone cut prices significantly in a price cap regime and, in fact, undercut the market to such an extent that they would be in an abusive position in terms of their market dominance in the relevant market. Therefore, what we are saying is that the overlap with the general prohibition, the two prohibitions, must stay in place despite the regime of licence being in general terms appropriate for the definition of good behaviour, if I can so put it, for a utility. There will be occasions when the prohibition will enter into effect; I have just mentioned one. I do not believe therefore that we can be absolute in drawing, if that is the appropriate phrase, the jurisdictional boundary.
Baroness Oppenheim-Barnes: Before the noble Lord sits down, as he originally said that there is now increased competition among the utilities, I wonder if he will acknowledge that it is no thanks to the party opposite that this position has occurred and that its claim to be a great supporter of competition has a few legs to grow before it can be taken seriously.
Can the noble Lord, on this important matter, tell the Committee whether he was referring to the possibility of discriminatory discounting practices, which are not at present subject to regulation in this country, except possibly under competition legislation, or was he speaking of different types of price cutting?
Lord Simon of Highbury: First, may I assure the noble Baroness that, as one whose title in my new career is half based on competitiveness, I can only applaud any progress made under any government to increase the competitiveness of our industry and of our people to do the things we know that we must do to create value in the world. I acknowledge that whoever has achieved that has served us proud.
As to the issue of pricing, it is important to note, as the noble Baroness rightly said, that discriminatory pricing is something which can be caught under the existing practice, but equally it is caught under both the prohibitions in the EC law. At the moment it can apply in both. When we discuss later, as I am sure we shall, the issue of pricing, we shall find that it is already covered in the general instance by the EC provisions. We have a separate law on that, as the Committee will be aware as we are about to discuss the impact of the Resale Prices Act, which applies to one sector currently but is generally being repealed. The answer is yes, I was talking about discriminatory pricing and it is currently covered by both regimes.
Lord Kingsland: The Minister will not be surprised to hear that we do not intend to press the amendment at

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this time. However, I hope he will accept that there is more to be said about it. In particular, we have taken note of his remarks about how sector specific these prohibitions are. If we are to accept that remark, perhaps we ought to be looking at this problem from the standpoint of the noble Lord, Lord Ezra, which is to leave the prohibitions in place in the individual sectors but to remove the prohibition from the Bill. At this stage, I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Baroness Nicol Baroness Nicol moved Amendment No. 6:
Page 2, line 24, after ("any") insert ("provision of an").
The noble Baroness said: I propose to return to a more conventional way of moving an amendment. In moving Amendment No. 6, I wish to speak also to Amendment No. 7. I should perhaps first declare an interest in that I am chairman of the All Party Retail Group. I hasten to say that it is not a pecuniary interest.
The Bill as drafted provides that an agreement which contains provisions which infringe the Section 2 prohibition is void in its entirety. The proposed amendment, which follows the clause in the draft Bill published in August 1997, has the effect of rendering the offending provisions in an agreement void, but not striking down the agreement in its entirety. In such cases, if the offending provisions can be severed from the lawful part of the contract, the relationship between the parties can be preserved. Parties to commercial agreements frequently insert an express provision in their agreements providing that the unenforceability or illegality of one clause will not affect the enforceability of the remainder of the agreement.
The provisions in the Bill reflect those in the Treaty of Rome, but the Committee will recall that that particular European provision has been subject to criticism. In particular, the provision has been used by parties seeking to avoid obligations they willingly entered into, arguing that one of the provisions in the agreement is unlawful and therefore the entire agreement fails, and they are excused from all their obligations. The amendment would remove that opportunity in English law in circumstances where the offending provision can be severed from the agreement.
Perhaps I may remind the Committee that the doctrine of severance in English common law provides that where you cannot sever the illegal from the legal part of a covenant, the contract is altogether void, but where you can sever them, whether the illegality be created by statute or by the common law, you may reject the bad part and retain the good. It seems sensible to recognise that in the Bill. I beg to move.
Lord Simon of Highbury: I agree with my noble friend Lady Nicol that the application of the prohibition to a contract should not always lead to the entire contract being void. I am advised that the best way to avoid such a possibility is to mirror the language of Article 85(2) of the European treaty, which deals with the consequences of an agreement being caught by the EC prohibition. That is what we have done in Clause 2(4).
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The European Court of Justice has held that it is only those elements of an agreement which are prohibited under Article 85 that are void. This principle of European Community law will apply to the interpretation of the Chapter I prohibition as a result of Clause 58 of the Bill, the clause relating the treaties to our own law base. Whether those elements are severable from the agreement as a whole is a matter for the normal rules of national law. Indeed, we consulted on the basis of the language set out in the amendment and we received comments from legal practitioners that it would displace normal UK rules of severance and prevent the possibility of severing offending parts of whole provisions. Moreover, it would risk divergence from EC law and therefore would create more burdens on business.
Advice has been taken. If my noble friend understands the legal construct we are putting—from her question it was clear that she did—I would ask her to withdraw the amendment.
Lord Graham of Edmonton: I declare an interest as secretary of the all party group, an interest properly registered in Part 3 of the Declaration of Interests. Is the Minister saying that the case made out by my noble friend is already covered and that, despite what we consider to be a blunderbuss or scattergun approach, the advice that has been given is to the effect that what we have proposed is not only undesirable but not possible? If what we have here is a sledge-hammer to crack a nut, which sometimes can be used to avoid obligations, and can lead to the calamity of the whole contract being declared null and void, that is not acceptable.
I note that the Minister relies heavily on Article 85(2) of the European treaty in this respect. However, given the circumstances pointed out by my noble friend Lady Nicol, where it is possible to make a clean break between an offending part and the whole, I wonder whether the Minister would care to look again at this point. If the wording we are using is not quite right perhaps the Minister can come up with another form of words to take care of the points that have been made.
Lord Simon of Highbury: I thank my noble friend Lord Graham for giving me the opportunity to comment again. The way in which the Bill has been redrafted, following the consultation process and the August document, has the effect that the noble Lord wishes. The reason for the change was to meet the circumstances which the noble Lord was saying might cause a large number of problems.
Baroness Nicol: I am grateful to my noble friend Lord Graham for adding to the arguments. I was convinced by the Minister's first answer and I certainly do not intend to press the amendment. However, I should like to read carefully what he said and to take advice on it. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
[Amendments Nos. 7 and 8 not moved.]
Clause 2 agreed to.
4.30 p.m.
Lord Graham of Edmonton Lord Graham of Edmonton moved Amendment No. 9:
After Clause 2, insert the following new clause—
MEDICINAL PRODUCTS ETC
(" . The Chapter I prohibition does not apply to any agreement, decision or practice relating to the price to be charged on the retail sale of any medicinal product, or any food comprising vitamins or minerals or both, which is at any time commonly sold in pharmacies without prescription:).
The noble Lord said: In moving this amendment I raise what I believe is a burning issue in a great many cases. I do so with considerable support outside the House. The Minister is aware, but I shall remind him, that there is a body called the Community Pharmacy Action Group (CPAG). When I look at the names of the bodies behind this group I am enormously impressed. They are the Royal Pharmaceutical Society of Great Britain, the National Pharmaceutical Association, the Pharmaceutical Services Negotiating Committee, the Scottish Pharmaceutical General Council, the Company Chemists Association, the Proprietary Articles Trade Association, the British Association of Pharmaceutical Wholesalers, the Proprietary Association of Great Britain, and last but not least, the Co-operative Pharmacy Technical Panel. That last body impresses me greatly. I declare an interest as chairman of a body called the United Kingdom Co-operative Council.
There is a two-edged argument: there is the philosophy of competition—I am not arguing against that—but in this amendment we are arguing against the application of this particular Bill and its effects on the consumer and the high street besides a great many other places. No one here has less experience than anyone else as regards observing what has happened in the high street over the years. We have all had the same experience.
I shall use as a general illustration a village or a small town which, many years ago, boasted a number of bakers, butchers, greengrocers, hardware shops and chemists. With the advent of the car-borne shopper and affluence, together with freedom and time and competition, the greengrocers have gone and in their place there is one big supermarket. I do not make a case against them because I believe in supermarkets which provide a very efficient form of retailing. Then one shrugs one's shoulders and says, "There used to be three very good butchers and now there is one which is struggling. There is now a very good supermarket which provides the meat". The same thing has happened to the baker. At the end of a period, say, 20 years, one finds that in the village high street there may very well be good overall provision of an efficient service, but the heart and nature of the village has declined. As a result of competition and people's choice—I do not argue about them—the village is the poorer and the life of the people in the village is the poorer.
The case made out in this amendment is that at the present time there is a modest attempt to keep in existence the agreements that have been made, but which this Bill will remove. That will inevitably lead to a diminution in choice for the consumer. By creating choice—I mean the ability to shop in the supermarket—
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the consumer may very well say that that is a better use of his or her time and opportunity. I have been told that out of 12,000 community chemists we may very well lose 3,000. That is not a guess, but the result of a properly carried out survey. I say to the Minister that we should reflect and we should stop.
What will be the effect of RPM on OTC? It is retail price maintenance on over-the-counter supplies. The effect of that is that there is a range of people who have relied for a long period of their lives on going to the same little chemist and getting service. They are not only comfortable in doing that, but they also have a rapport with, and sympathy, confidence and belief in the integrity of the chemist. Sometimes they are almost surrogate doctors. The customer asks for advice, he or she gets it and it is taken.
Therefore, I ask the Minister and his ministerial friends to reflect very seriously on the fact that there are large groups of people who will find that their access to an essential primary healthcare service will be restricted; namely, the elderly, infirm, carers, mothers with young children and the like.
I use my own town of Loughton as an example. I have lived their happily for seven years. When my wife and I decided to move there it was because there was a choice. It was not just the choice of a big supermarket at each end of the high street, but there was also a choice of little shops. Over the period of time that I have lived in Loughton there has been a steady diminution in the number of small shops. I almost do not argue against the general good, but far too often, after the event, people regret the fact that by being slothful and careless they have allowed something to happen which will result in a facility never returning. People might say, "You can start up another chemist or another bakers or butchers". But that is not the way it is. I hope very much that the Minister will recognise that this is a situation that can be stopped or deflected.
The Office of Fair Trading has carried out research. It found that 36 per cent. of those asked would switch to buying from supermarkets rather than pharmacies if RPM and OTC medicines were removed. That is consumer choice, but in exercising it one is also staring at the fact that one diminishes the number of smaller units that can provide the service.
I believe that this Government and others have had enough experience of wanting to see hypermarkets and large stores on the edge of towns, and good luck to them. Theyalso do not want town centres to disappear, but they have become the poorer. I say to the Minister that there is a case for re-examining the intentions of the Bill.
I mentioned my interest in the Co-op which I declare. It has over 400 pharmacies and they go back a very long way. Originally they were part of a network with the philosophy and belief of providing for the needs of ordinary people as near to them as possible. We are as interested as anybody else in establishing larger stores, supermarkets, hypermarkets and stores of that kind. I believe that the Minister and his colleagues might have missed a trick. Although the removal of RPM

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per se and philosophically may be a good thing, in social terms and in this instance, the removal of that modest protection will have enormous consequences.
I should not like to stand up in this House in 10 years' time when the impact has been felt and have either to make or defend a case in the knowledge that we might have done something to ameliorate the effects in 1997, and not to have to bemoan the fact in 2007 that we did not. I very much hope that the Minister is in a listening and giving mood and can say something of comfort to those outside who believe that my amendment is worth supporting. I beg to move.
Baroness Miller of Hendon: I rise to support the noble Lord, Lord Graham of Edmonton, in what he so ably said about the advantages of competition and the loss to the consumer of our independent pharmacists. Perhaps I may mention one matter which the noble Lord did not. Medicines should not be thought of in the same way as the products which consumers ordinarily buy. They should not be bought in bulk, stored, discounted and sold as loss leaders. Medicines are very important items. From my previous experience as a chairman of an FHSA, I believe that the best way to purchase medicines, whether over the counter or with a prescription, is by visiting a pharmacist.
Perhaps I may add another point for the benefit of the Minister. I very much hope that he will take this on board. When I was chairman of the Barnet FHSA, in line with the previous government's philosophy—I believe that it is also the philosophy of the present Government—we regarded as paramount the concept of bringing health care out into the community. We began an experiment in Barnet, known as "high street health". The idea was to enhance the benefits which independent pharmacists can bring to consumers by giving them extra training and by encouraging consumers who were suffering from, say, a cold or a sore throat to visit their pharmacist rather than blocking up their GP's surgery. That happened in the past when people used to visit their local chemist rather than rush immediately to the GP. That system in Barnet worked so well that it was used as a model by FHSAs across the country. In the areas where that system was adopted independent pharmacists became people of real value, not only to consumers but also to GPs. I stress that pharmacists in Barnet and elsewhere where the scheme was adopted worked in harmony with, and with the support of, their local GPs.
I grieve for the fact that if the Bill's provisions remain unamended we shall lose so many independent pharmacists that the benefits of competition, as we now know it, will be lost in this important area. I urge the Minister to look carefully at his noble friend's amendment.
Lord Morris of Castle Morris: I support the amendment proposed by my noble friend Lord Graham. The Minister and most of your Lordships may not be particularly well acquainted with the little country town of Llandysul, which nestles in a very agreeable part of west Wales. Your Lordships would not be out of kilter with many other citizens of both Wales and England in
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not being able to recognise Llandysul because it is a very small place and is not easily found either on a map or on the ground.
I mention Llandysul because last week I received a very closely argued, very detailed and very carefully researched plea from the pharmacist—the only one—in Llandysul pointing out in great detail the dangers which attended upon his particular business, which has been there for many years, if something like this amendment is not accepted by this Committee. In that area it is not easy for people to exercise any sort of choice. The area will support the work of only one pharmacist. May I therefore ask my noble friend the Minister when he goes home tonight to spare a moment or so to look on a map for the town of Llandysul and, before he goes to bed, to consider the very real problems which affect people in that area? I hope that the result will be that my noble friend's amendment will be accepted.
4.45 p.m.
Baroness O'Cathain: I rise to speak against the amendment moved by the noble Lord, Lord Graham. In doing so, I should mention that I know Llandysul very well, but I am not sure whether it is the same Llandysul because I did not recognise it from what the noble Lord said. Llandysul certainly has a pharmacy, but the people I know in Llandysul have as their objective catching the free bus down to the local Tesco where they can buy their pharmaceutical products. I can discuss this matter with the noble Lord, Lord Morris, because I happen to know Llandysul.
I heard from both the noble Lord, Lord Graham, and from my noble friend Lady Miller about the benefits of competition. Of course, it is lovely to have five pharmacists in one street in a small town, but the real benefit of competition is the fact that prices can come down. I have in my hand a list of comparative prices for the ordinary medicines that we all buy. You do not need to go to your local GP to get a prescription if you want aspirin or Nurofen—at least, I believe that that is the case.
A 24-pack of soluble aspirin costs 39 pence in a supermarket while a 24-pack of Disprin—exactly the same product—costs £1.50 in a pharmacy. There is a big difference between 39 pence and £1.50. In a pharmacy 24 Nurofen tablets cost £4.69 while in a supermarket they cost £.1.99.
I should declare an interest. Most Members of this Committee realise that I am a non-executive director of Tesco—
Lord Graham of Edmonton: Keep taking the tablets!
Baroness O'Cathain: I am sorry; I had been intending to declare that interest when we reached my amendments. I have it properly registered, according to the noble Lord, Lord Graham, in Section 3 of the Register of Interests. I have done that all along, but I repeat it for the benefit of the newer Members of your Lordships' House who may not know. Those who were here during our arguments on Sunday trading know perfectly well where I stand on this.

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We must recognise that all governments in this country have wanted to battle non-stop for low inflation. The mark-ups on some ordinary products are significant. Although such high mark-ups support the local pharmacies—I do not disagree with that strong point—it is the self-same people who use those local pharmacies who are the least able to pay those extremely high mark-ups on highly priced goods. I am afraid that by restricting supply and maintaining the retail price mechanism on such products we are not doing what the Bill sets out to do, which is to lower the cost of living for a lot of people.
Baroness Ludford: I am extremely sympathetic about the concerns which have motivated the amendment because I can appreciate the conflict between achieving lower prices through competition and the maintenance of essential local services, particularly (although not exclusively) in rural areas. In the very metropolitan area from which I come, the London Borough of Islington—the Minister is not unfamiliar with it—our local pharmacies are relied on particularly by those who are not mobile. As I said, although I am sympathetic to the motivation behind the amendment, I can see difficulties with the maintenance of the retail price mechanism on this basis.
Can the Minister assure us that he and his department will look carefully at other ways in which small shops can be helped either through the planning mechanism or the uniform business rate? The powers of local authorities are extremely limited in this regard. Even in urban areas we face ongoing problems in trying to maintain essential local shops. Can the Minister give us such an assurance, even if he cannot accept the amendment?
Baroness Oppenheim-Barnes: I rise to speak briefly and apologise to the noble Lord, Lord Graham, for not being present when he moved the amendment. My noble friend Lady O'Cathain has provoked me—
Baroness O'Cathain: Good!
Baroness Oppenheim-Barnes: Obviously, I respect my noble friend's knowledge of these matters given that she is a non-executive director on the board of Tesco, but I was a non-executive director on the board of Boots for 1 1 years and I must express this caution to my noble friend. She says that exactly the same aspirins are sold in different places. Many cut-price drugs have been manufactured in the third world where quality control is nowhere near as good as that which is applied to more reputable brands. Whereas in some cases the mark-ups may be exceedingly high—probably too high—I believe that to go for cheapness is not the greatest economy.
Lord Fraser of Carmyllie: I rise to support the amendment moved by the noble Lord, Lord Graham. I very much look forward to hearing the response of the Minister. If I have one disappointment about the Government Front Bench it is that for a debate as potentially important as this on the first day of the Committee stage there is no Minister from the
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Department of Health. There is here a risk of conflict between clear Government policies. As I understand it, the health policy of the Government continues the policy of the previous government; namely, that general practitioners are to be at the forefront of the National Health Service but every effort should be made and every encouragement given to ensure that they do not have an unnecessary workload. Accordingly, the approach promoted by my noble friend Lady Miller when she, among others, had responsibility for the National Health Service was that community pharmacies should be a valuable point at which people with a range of minor ailments could get the requisite advice. Therefore, instead of taking up the time of their GPs and wasting their own time sitting for hours in waiting rooms, they would be able to go along to a pharmacy and see whether their ailments could be quickly dealt with by over-the-counter drugs. Alternatively, if the chemist felt that there was a worry about the individual's health he would be properly referred to his GP. That seems to me to be a good policy. If it remains the policy that we on this side pursued when in government we warmly support it and will give every encouragement to its achievement.
A specific question was asked about this issue at Second Reading. The noble Baroness, Lady Jay, indicated then that the Department of Health was neutral on the point. Frankly, I found that astonishing. In moving this amendment the noble Lord referred to research which indicated that approximately 37 per cent. of those who currently went to pharmacies would go to Asda, Safeway and so on.
Lord Graham of Edmonton: The figure I gave was 36 per cent.
Lord Fraser of Carmyllie: I am grateful to the noble Lord for that precision. The effect of such a shift in buying patterns means that the economic viability of up to about 3,000 pharmacies throughout the length and breadth of the country will be affected. If those 3,000 pharmacies disappear it follows as night follows day that the policy of this Government on the vital matter of health will suffer serious detriment. If that is the policy—it should be the policy—we should look very carefully at anything that affects the viability of these pharmacies. It is not simply a case of special pleading for one sector; there is a sound public policy reason for maintaining their independent position.
It is of interest to note that prior to the last general election Labour Members of Parliament in another place were extremely supportive of RPM on over-the-counter medicines. Indeed, the consumer affairs spokesman, Mr. Nigel Griffiths, now the Minister, who is a colleague of the noble Lords, Lord Simon and Lord Haskel, in the Department of Trade and Industry, organised a petition in support of RPM on over-the-counter medicines. He urged his fellow election candidates and Members of Parliament to support it. While I know that Mr. Griffiths has signed just about every petition that there has ever been, this one was a soundly-based petition. It is regrettable that there should be even a hint of inconsistency over a matter of such important public policy.

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Sometimes the counter-argument is advanced that these pharmacies should not be dealt with by the device of maintaining RPM in respect of over-the-counter medicines; instead, there should be support through public funding under the essential small pharmacies scheme. There is some support provided in that way, but that is in respect of pharmacies which, even with the existence of RPM on over-the-counter drugs, are in such a perilous position that they need to be supported. They are pharmacies located perhaps in the more remote parts of Wales and Scotland. They simply could not exist if they did not receive some kind of payment. But the fact of the matter is that it is not a particularly effective subsidy and it barely covers the annual costs of a single pharmacist, let alone other overhead costs.
There is a very strong case to be advanced in support of these pharmacies. We wish to ensure that as this Bill proceeds nothing is done to damage their interests. I hope that the Minister will be able to provide me with some comfort that in the Government's view, if regard is had to Clauses 6 to 11 which provide block exemptions, the criteria in Clause 9 to allow for individual or block exemptions are sufficient to enable this group of pharmacies to be brought within the exemption.
I believe that I understand the argument advanced, but I am not wholly persuaded that it is as explicitly set out as it might be. If the noble Lord could provide us with some comfort on that matter we would be very pleased to hear it. That would enable us to consider constructively how at later stages of this Bill we can take forward the campaign on behalf of pharmacists to ensure that their position is protected. I should be grateful to receive any indication that the noble Lord is able to give at this stage that that is the Government's approach in seeking to protect these pharmacies.
There are other provisions in the Bill which affect these pharmacies and need to be addressed. The position is slightly complicated. My understanding is that at the moment the Office of Fair Trading is looking at the exemption which was provided as long ago as 1970. It has been considering the matter for about a year. A preliminary indication is that the matter may be taken back to the courts with a view to securing the removal of that exemption. My understanding is that there must be a first step taken to secure an indication that prima face there has been a material change in circumstances which means that the exemption should no longer remain in place. I do not believe that any such first step has yet been taken, notwithstanding the fact that this matter has been considered for at least a year without any clear outcome.
I invite the noble Lord to look carefully at one matter as a matter of procedure, not just drafting. I believe that it is unsatisfactory. The transitional arrangements which would affect the continuation of this RPM arrangement are to be found in Part III of Schedule 13. It could not be found in a more remote part of the Bill. Paragraph 8 provides:
"(I) The Chapter 1 prohibition does not apply to an agreement, decision or practice—
"(a) at any time when it is the subject of continuing proceedings".
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Can the noble Lord hazard a guess as to when the Bill will receive Royal Assent and when it will commence to operate? It is far from obvious when or if the requisite proceedings will begin.
It is extremely important, if we cannot resolve this in the way I hope it can be resolved by securing an exemption under the provisions to which I have referred, that we in any event have clearly set out what exactly will be the transitional arrangements for these pharmacies. We would at least wish to see the five year period maintained for it. More importantly, we would like to see in principle a continuing exemption provided for pharmacies.
I have spelt out in a constructive fashion the line that we would like to take forward, and we will listen carefully to what the Minister has to say. It is an issue that is causing real concern in the country and I am grateful for the contributions from all sides of the House.
I seldom part company with my noble friend Lady O'Cathain but I regret I very much do so on this occasion. We do believe that medicines are different. I will give one example of one respect in which medicines are different from other products. In the past two weeks the Department of Health has required that paracetamol be sold in small quantities. The reason behind that requirement is, in our view, a sound one. Regrettably, far too many people—young people in particular—take overdoses of paracetamol. Even if they have repented or relented of it subsequently, such has been the damage to them that their position is irrecoverable. That is a perfectly sound reason for the Government to make that requirement.
That is an example that we could find across a broad range and indicates that the sale of medicines—even if they are over-the-counter drugs such as paracetamol—is not in quite the same category as many other products which are now sold in supermarkets.
I hope that the Minister will give as clear an indication as possible of the way forward on this vexed issue.
5 p.m.
Lord Hughes: I have an interest to declare. I live in the village of Comrie in Perthshire in Scotland. In the village there is a pharmacy; the pharmacist is my daughter. I am the non-executive chairman of the company which owns the business. Having declared that, I will take no further part in the proceedings on this Bill, on any amendments—either voting for it or against it; I will abstain—but I think I have some information which will be useful.
I am the non-executive chairman but, because it is a family concern, I know a great deal of what goes on. I know the extent to which the chemist in a village plays a very important part in the life of the community. The village of Comrie is a very pleasant place in which to live. There are many people who retire to it and it has a very much larger proportion of elderly people than other villages. I am quite sure there are a number of villages up and down the country, both north and south of the border, which are in the same position.

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I know the extent to which my daughter plays a part in the life of the village. She is not just the pharmacist; she is called on for many things. She is involved in organisations, where people rely on the sort of advice that she can give them. As has been stated, the Government's policy now is to switch work from the doctor to the chemist—although there is no indication that the chemists are going to get any more money for doing it—and it would be a pity if they lost the important over-the-counter part of the business. Having said that, I hope that I will not be accused of seeking to influence the debate, but it is of interest that I am able to speak about this part of the life of a village.
Incidentally, when the register of interests was raised in this House, I informed the clerk who was dealing with it, Mr. Vallance White, and he informed me that I did not need to declare that as an interest. So if anybody looks, my name is not on the register.
Earl Howe: I rise, briefly, in support of what my noble and learned friend Lord Fraser and others have said regarding the amendment tabled by the noble Lord, Lord Graham, on this important matter.
The noble Lord, Lord Graham, set out with great clarity and persuasiveness the threat that this Bill poses to community pharmacies. There is a critical difference between, for example, the village shop and the village pharmacy because of the heavy reliance that is placed on local pharmacies by those who are in real need—by virtue of illness, infirmity or whatever—and who are dependent on quick and easy access to medicaments and advice. That has been emphasised by a number of noble Lords. The situation is exactly the same regarding their dependency on community healthcare services of other kinds.
At the very least I hope the Government understand that there is an issue here and that the Minister will acknowledge its importance to very many people. The public interest takes many forms, but I put it to the Minister that there are one or two areas of our national life where the public interest is not necessarily served by unfettered competition—and access to the community pharmacy is surely one of those.
Lord Simon of Highbury: I was enjoined a while ago by my noble friend Lord Graham to listen—and indeed I have. I have learned something rather important: that Llandysnl is a place that more than one person knows well in this House. I am also sure of another thing: whilst now knowing of it, I cannot spell it.
The discussion that we were all privileged to hear on the difficulties of balancing competition and value and service to the community at a cost—which is the real nub of this question—were excellently debated from both sides on the other side of the Committee. That of course makes the position a little more complex for me but it is interesting in terms of balance of advice. I do not wish to open a debate on our views on health policy when I am debating the Competition Bill, I could forebear perhaps to make a glancing reference to the
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point that the noble and learned Lord, Lord Fraser, made about one of my colleagues taking a neutral position. Perhaps "neutral" was used in the sense of "balance".
I will not go further on health policy but I will take the opportunity of welcoming him to the fraternity of the oilers. I miss that. I wish him great good fortune and as much happiness as I had in my brief period in the business—brief to the extent of 36 long years.
I came to the crucial question of the balance that we are thinking of very carefully and trying to strike. First—and I do not mean this in any way as a pun—I have to issue a health warning. The noble and learned Lord, Lord Fraser, mentioned and made clear that the Director General has announced his intention to refer retail price maintenance of over-the-counter medicines back to the restrictive practices court.
I am sure the Committee is aware that the Government have no role in decisions of the court or in the Director General's decision to refer. However, despite the intention to refer, we have thought it right that agreements which have been approved by the court should gain, on a transitional basis, exclusion from the relevant provisions of the Bill. That would be achieved by the cross referencing that the noble and learned Lord, Lord Fraser, mentioned, in Schedule 13. That would avoid repeating the scrutiny at too early a stage.
The period would start from the time the prohibition came into force, or, in the case of continuing proceedings, when the proceedings come to an end. The Bill sets that transitional period at five years. I refer here to the issue which the noble and learned Lord raised with me, which is the time issue relative to a reference. I hope that I have given you a clear answer on how that would follow. Members of the Committee will no doubt note that I have the extraordinary weakness of saying "you" on occasions. It is, I am afraid, my version of "urn", as I think, but is in no way meant to show disrespect.
Similarly, decisions under the Bill will be a matter for the Director General, subject to appeal to the new competition commission and, on points of law and the amount of penalties imposed, to the courts. I am now taking us back to the relationship under the new agreements. I am sure that the Committee will understand that it is not right for Ministers to comment upon the position under the Bill of any particular agreement on an arrangement such as resale price maintenance for medicines.
My noble friend Lord Graham's amendment, and his speech to which I listened carefully, raised important issues as to how the framework set down in the Bill—and, in particular, the criteria for exemption which the noble and learned Lord, Lord Fraser, mentioned—will operate generally. That is a matter which should properly concern us and which we need to get right.
By virtue of Clause 58 the interpretation of the exemption criteria by the Director General is to be along the same lines as the interpretation made by the EC Commission. Although the exemption criteria may seem narrow, the Bill requires them to be interpreted in the light of the general principles (Clause 58). I shall

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mention that clause frequently. It is the linking clause between EC law and our own in our new prohibition in the Bill.
In practice—this is important—the Commission has taken into account a wide range of countervailing benefits when making decisions under Article 85. In particular, the Commission has taken into account the public health benefits of agreements when reaching decisions. However, the issue goes wider, as we have discussed, than public health. The Commission has, for example, taken into account environmental benefits of agreements. Many have spoken of the environmental importance, in the broadest sense of the words, of the chemist's shop.
It is clear that under the Bill the Director General and competition commission can be expected to do likewise: to form the same judgments against the body of law that I have mentioned which have existed in the interpretation by the Commission under Article 85. Because we recognise that that is an important issue the department has commissioned a study on the case law of the ECJ and the Court of First Instance, and the practice of the European Commission in respect of Article 85(3). That was carried out by Professor Whish of King's College, London, who is a distinguished authority on competition law, and it confirms the analysis which I have given the Committee. I shall send a copy to my noble friend and will place a copy in the Libraries of this House and another place.
With regard to the point made by the noble and learned Lord, Lord Fraser, in his preamble on the exemption and how it would be seen. in the light of that, if an assessment is to be made by the Director General of the case for an exemption in respect of agreements for resale price maintenance in over-the-counter medicines, I would expect any public health benefits, the ready availability of over-the-counter medicines to consumers, and the benefits of local distribution, to feature in the assessment. I therefore believe that the Bill will provide the right, balanced framework for the Director General and the competition commission to deal properly with the complex issue that we have been discussing.
In those circumstances, I hope that my noble friend will accept that special provisions for over-the-counter medicines would be neither necessary in special terms nor desirable, given the legal framework that I have outlined. I hope, therefore, that he will feel able to withdraw his amendment.
5.15 p.m.
Lord Lucas: I do not see how the nuances of interpretation avail the Minister when Clause 9, which is the governing one on exclusions, provides—if I may paraphrase it—that the clause applies to any agreement which does not,
"afford the undertakings concerned the possibility of eliminating competition in respect of substantial part of the products in question".
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In the case about which we are talking that clause is clearly breached. Therefore there can be no exemption under the Bill, whatever nuance of interpretation is applied.
Lord Simon of Highbury: This is a swift interpretation and I take note of it. My case rests as it is; that we believe that the legal framework here allows us to strike a correct balance. If we need to discuss this matter further perhaps we can do so at a later stage.
Lord Graham of Edmonton: I am grateful to my noble friend the Minister because he has clearly listened. He has put up a good defence to show that the fears and worries of those whom I seek to represent are misplaced. That may or may not be the case. We shall have to wait to see. I am also grateful to the noble and learned Lord, Lord Fraser, for having linked what might be the defence, the outcome. or the manner in which those whom I seek to represent might have their fears allayed. That remains to be seen.
I had seen on a piece of paper the various points made by the noble and learned Lord. The Committee is indebted to him for putting the matter carefully and cogently. I understood what he said much better than what I read. That is an advantage in a debate such as this.
I welcome the noble Baroness, Lady Ludford, on the Liberal Benches to a debate like this. It is refreshing to have a new face and a new voice. The case she was making was that she did not like special exemptions. If the only way to protect a business or a sector of the community is to give a special exemption, I am all for it. It may not be necessary in this case. For the past 30 years the public have believed it to be necessary and we want the present position to continue.
The noble Baroness, Lady O'Cathain, said, in summary, that the criterion was price, price, price—not location, location, location!
Baroness O'Cathain: I thank the noble Lord for giving way. Of course it is not the overwhelming criterion. I merely said that it should be brought into the equation. We were talking about location, location, location, but there is another element. We must strike a balance between the high mark-ups and availability. I genuinely worry about those who are less able to pay high prices for over-the-counter drugs and I simply wished to add another spoke, so to speak.
Lord Graham of Edmonton: I agree that we are talking about the people who, on the one hand, say "I want to be able to shop in a smaller shop, even though the price may be higher", and the 36 per cent. of people who say, "Even though the distance is further, if the price is cheaper I am prepared to go there". I know that this is not an empirical study and that interpretations must be made.
I was most taken with the case made by the noble and learned Lord, Lord Fraser, that when the Minister and. more importantly, those outside the House look at the explanation they may well take the view that there is no need to proceed down this route.

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I wish to draw one issue to the Minister's attention and to follow on from what was said about it by Labour Party spokesmen before the election. Nigel Griffiths, who is a good friend of mine, spoke honestly and sincerely in repeating what had been said by Chris Smith, now a Minister. Chris Smith said:
"the question of RPM on non-prescriptive medicines is important and Labour believes that RPM plays a valuable role in safeguarding the position of local pharmacies.".
If that is not the road down which we are going I shall be happy to withdraw the amendment. But we need assurances from others, the Minister having served us well at this stage. I advise him to keep taking the tablets, but in the meantime I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Baroness O'Cathain Baroness O'Cathain moved Amendment No. 10:
After Clause 2, insert the following new clause—
("Non-excluded cases
NON-EXCLUDED SUPPLIERS: THE CHAPTER I PROHIBITION
(" . Any case which would be excluded by virtue of section 3, but in which a supplier without any published and justifiable reason—

(a) refuses to supply goods to a reseller or categories of resellers who cannot obtain those goods elsewhere on suitable terms, or applies to them differing prices or conditions of sale, or

(b) applies less favourable prices to resellers in one territory as compared with prices applied to resellers in any other territory,

shall not be treated as excluded for the purposes of section 2.").
The noble Baroness said: In moving Amendment No. 10 I shall speak also to Amendments Nos. 11, 31 and 32. First, I wish to declare an interest; I am a director of Tesco. I apologise for not doing so during my intervention on Amendment No. 9.
We all know that the objective of the Bill is to strengthen competition law, in effect allowing greater competition by removing barriers to competition. My noble friend Lord MacLaurin, who regrets that he is unable to be here today to reinforce the views that he expressed on Second Reading, stated during that debate that he agreed with the right honourable lady the President of the Board of Trade who,
"spoke of the importance of using competition policy to ease the pressures on family budgets".—[Official Report, 30/10/97; col. 1179.]
The purpose of the amendment is to achieve just that by virtue of dismantling selective distribution agreements. I am aware that such agreements are not at the forefront of most people's minds, but they are what they describe. Some manufacturers, for their own reasons, say, "We will not distribute our products to retail outlet X or supermarket A". They restrict the number of outlets allowed to sell a product.
I suggest that the public interest is not generally served by such action. Some suppliers refuse to supply certain outlets because they fear that those outlets will discount the goods. The self-same suppliers—and they are mainly from overseas—see this market as an opportunity for high margins if they restrict the outlets in which their goods are sold. Some companies refuse
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to negotiate price with the retailers, which results in consumers being disadvantaged. In respect of some goods, the mark-up is as high as 300 per cent.
Perhaps I may give the Committee some hard examples, although Members may not be in the market for Levi's 501s, which are jeans. The US selling price of those jeans is the equivalent of £25, while the price in the United Kingdom is £52. In the US, Calvin Klein's men's jeans cost the equivalent of £28, while in the United Kingdom they cost £59.95. The problem is that the suppliers of such jeans suggest that selling them in supermarkets ruins "the allure" of the product.
Perhaps not all your Lordships identify with jeans, but many will identify with champagne. Is the allure of Moët & Chandon ruined by being universally available in supermarkets and other outlets? Perfumes or fine fragrances, as they are known in the trade—they are reasonably dear to my heart—present another case. I suggest that people should be allowed to buy their jeans and fine fragrances wherever they live or normally shop, irrespective of their economic classification of A, B, and C 1 s, C2s or D3s. Surely it is the Government's view that access and availability should not be restricted.
When debating Amendment No. 9 we discussed the small pharmacy in Llandysul but this amendment does not deal with such small pharmacies. The manufacturers who are restricting the distribution of their goods are huge international and multi-national businesses. Unilever, for example, which is one of the biggest companies in the world, owns the European rights to Calvin Klein perfumes.
The point was clearly made at Second Reading by my noble friend Lord MacLaurin. He said:
"The more goods you allow to be sold by a diverse and large number of retailers the more you will improve the quality and standard of living of the population as a whole. You will also hear down on inflation—a goal shared by every government I can recall".—[Official Report, 30/10/97; col. 1180.]
Furthermore, the National Consumer Council has expressed concern about selective distribution and its impact on the customer.
I am not launching an attack on branded and luxury goods; after all, they are the spice of life and I want more people to have them. However, I am anxious that consumers in London or Leeds pay prices for the goods they wish to buy that are comparable to the prices paid by consumers in Seattle or Atlanta. Retail price maintenance was abolished in 1964 save that certain classes of goods are exempt from that prohibition on public interest grounds. I suggest that this Bill is an ideal vehicle by which we can stop that apparent discrimination caused by selective distribution agreements. I beg to move.
5.30 p.m.
Lord Borrie: The noble Baroness, Lady O'Cathain, has made a very plausible case. Indeed, it is more than plausible. It is extremely accurate in relation to many types of selective distribution agreements and goods because they have involved what one might call covert retail price practices. They have involved the refusal to

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supply those retailers who are known to reduce margins, perhaps through their efficiency, so enabling customers to buy goods at a cheaper price than elsewhere. However, the noble Baroness's speech was just a little one-sided. It was as if all goods must be supplied to Tesco, or all branded goods made available to the mass distributor without restraint.
The noble Baroness mentioned some products. I am perhaps more familiar with champagne and perfume than I am with Levi 501s. However, there is evidence that the success of some goods—of many perfumes, I am sure—is due in part at least to the fact that they are available only in a particular kind of environment or shop. There is mutual benefit to the manufacturer, the retailer and of course to the consumer who feels that he has something special. Let us take the gift shop at the House of Lords. If those chocolates and other items with the appropriate brand markings upon them were available freely in Tesco, it might be that there would be some diminution of value, excitement and enjoyment to the customers.
However, I have a more serious point to make. There are a number of distribution agreements which are beneficial to manufacturer, retailer and customer because particular kinds of retail outlet are freely chosen by the manufacturer on the basis that they offer a certain kind of service or repair service; or they have certain kinds of skilled employees; or they wish to promote those goods through marketing arrangements which involve the retailer's agreement to take certain steps in relation to, for example, product display and so on. Those retailers would not be prepared to do that if the goods were available freely everywhere because they would be incurring a great deal of expense in marketing those goods and would achieve very little return because the goods would be available in all sorts of other places.
I am saying to the noble Baroness, Lady O'Cathain, and the Committee that you can make generalisations but there is merit in those cases being dealt with on a case-by-case basis. After all, that is fundamental to this Bill which enables the director general and the competition commission on appeal to determine whether agreements which appear to be prohibited should be specially exempted or not. I should not like to see a generalised provision of the kind which the noble Baroness suggests.
Lord Simon of Highbury: My noble friend Lord Borne has approached the problem, in a sense, from the end of the jeans back to the general. I should like to stay with the general in trying to respond to the noble Baroness's amendments.
I put this matter in the context of what is the scope of the prohibition. I emphasise that the Government's intention in reforming competition law is to set up an effective framework for investigating anti-competitive practices; for assessing in individual cases whether a practice is anti-competitive; and to take action to stop anti-competitive practices where identified. The Bill is not designed to deal explicitly with every conceivable anti-competitive practice. We could not do that.
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Very shortly we shall be debating specific amendments in relation to the exclusion of vertical agreements from the Chapter I prohibition, which will be relevant in general terms. If introduced, any such exclusion must of course allow anti-competitive practices to be tackled. A refusal by a dominant supplier to supply certain outlets, a problem sometimes associated with selective distribution agreements, would, if found to be abusive, remain subject to the Chapter II prohibition. Equally, I am advised that there is EC jurisprudence that differential pricing by dominant firms which is abusive may be tackled under Article 86. Therefore, both those approaches exist. As I shall continue to say because it is such a pivotal point, such jurisprudence will apply in the interpretation of a Chapter II prohibition as a result of Clause 58. Therefore, we are covered in general terms for the particular set of circumstances which the noble Baroness put before the Committee.
Finally, the safety net, as it were, is that anti-competitive practices resulting from networks of vertical agreements will remain subject to an examination under the Fair Trading Act. Therefore, with those three statements of the way in which we can generally approach the particular problem that the noble Baroness put, I am confident that we have a regime which will work, and work effectively, in tackling anti-competitive behaviour however it expresses itself and in particular in the sense explained by the noble Baroness explained. Therefore, I ask the noble Baroness to withdraw the amendment.
Lord Lucas: I should be grateful, if not now then later, if the Minister will enlighten me as to how this Bill works in with copyright law. A similar difficulty to that raised by the noble Baroness exists in relation to buying US books in this country. People set much higher prices for the same book in the UK than would be paid in the US, even counting the cost of postage. I should be grateful for the noble Lord's advice as to whether this Bill overrules that sort of practice under copyright law.
Lord Simon of Highbury: I take note of that question. It sounds to me as though we are into extraterritoriality, which was a word that I knew if I tried to say it twice, I would get wrong. I take note of the question raised by the noble Lord, Lord Lucas, and I shall return to it if necessary.
Baroness O'Cathain: I am grateful to the Minister for his comments on my amendment. I was slightly concerned when he referred to the fact that the Bill would set up an effective framework against anti-competitive actions, assessing whether the actions are anti-competitive and taking action against those anti-competitive actions. All of that made me return quickly to the Official Report and the Second Reading where I registered one major concern at col. 1166 about the hidden costs of the Bill. I hope that by having a three-pronged attack or approach to the problem, we are not building in huge costs. I have thought long and hard about my amendment and it seemed to me an easy way

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to tackle the problem. However, I shall read most carefully what the Minister said. I shall think again on the matter. I shall go back to Article 86 and its jurisprudence, and do my homework. If I am not satisfied, I shall return to the matter at later stages of the Bill. In the meantime, I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Clause 3 [Excluded agreements]:
[Amendment No. 11 not moved.]
Baroness Wilcox Baroness Wilcox moved Amendment No. 12:
Page 2. leave out line 42.
The noble Baroness said: I have been asked by the Whips' Office to apologise on its behalf for the fact that there is a mistake in the way that Schedule 4 has been placed on the Marshalled List. It shows the schedule as standing part in isolation when it should be grouped with Amendments Nos. 12, 51 and 52. Therefore, I am speaking to Amendment No. 12 under Clause 3, and I shall also oppose the question that Schedule 4 be the fourth schedule to the Bill.
It is important for us to have a debate about the way in which the reformed competition system, and this Bill in particular, will deal with professional rules. Perhaps I may make some general points about professional services. They have been a growing area of our economy over recent years. Many more of us now have contact with professional services than we did 20 years ago, whether it be accountants helping us to wrestle with self-assessment or lawyers helping us to enforce our rights. It is therefore important that we, as consumers of those services, are adequately protected from any anti-competitive practices. Although I would not agree with Bernard Shaw that,
"all professions are conspiracies against the laity",
there has been concern that some of the professions have operated rules over the years which have been anti-competitive. They might relate to advertising or to the setting of fees, or the range of services that can be offered in one firm. Of course, after prodding by the Monopolies and Mergers Commission, many of the professions have improved to some extent.
The Office of Fair Trading has published a number of reports about the professions, many of which were produced when the noble Lord, Lord Borrie—and I am extremely glad to see him in the Chamber today—was Director General of the OFT. For example, in 1986 Members of the Committee may remember looking at restrictions on multi-disciplinary practices among architects, accountants, barristers and solicitors; and, indeed, supporting the idea of mixed partnerships. In 1989, the National Consumer Council published a document called, Ordinary Justice in which, under the doughty leadership of my noble friend Lady Oppenheim-Barnes, who is sitting here beside me, it supported the concept of multi-disciplinary practices. I believe that consumers could be provided with more choice in professional services on offer. For example, when buying and selling houses, should not people have
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the option of obtaining a mortgage, a survey, help with the selling of a house and also conveyancing services all in one place?
The legal restrictions on solicitors as regards multi-disciplinary practices were removed by the Courts and Legal Services Act 1990. However, as pointed out by the Director of Competition Policy at the OFT, Margaret Bloom, in July of this year, the Law Society's practice rules do not reflect the legal position. I know that the situation is being monitored by the OFT. It has been pressing the Law Society to change its rules. Despite the improvements that we have seen in recent years, it is important that we do not now start to go backwards. The way professions behave should be monitored carefully and action taken when necessary. That is why we need to debate the way in which this Bill deals with professional rules.
As the Bill is currently drafted, the professional rules will be excluded from the prohibition on agreements which prevent, restrict and distort competition. In considering that, perhaps the Minister could answer the following questions. Under the reformed competition policy, how could the OFT deal with the situation that I have just outlined with regard to the Law Society and multi-disciplinary practices? More generally, why should the professions listed in Schedule 4 be treated any differently from any other service sector of the economy? Should the competitive aspects of the professional rules of surveyors be treated any differently from those of an estate agent? Will we have the ludicrous situation where the Director General of Fair Trading could force estate agents to change their rules, but not force surveyors to change theirs?
Why not keep the professional rules within the prohibition in Chapter I so that the OFT has the power to investigate and take action over any of those rules which are anti-competitive? I ask the Minister: how did the Government arrive at the particular professional services which are listed in Part II of Schedule 4? Why are not licensed conveyancing services or osteopaths, for example, included? I should like to suggest that it would be a much simpler process if those rules were included within the scope of the prohibition so that the Director General of the OFT could scrutinise the rule books. He could then exempt those parts of the rule books which guarantee genuine consumer protection.
I should like to hear what the arguments are for excluding professional rules listed in Schedule 4 from the prohibition in Chapter I. I must say that I will need some persuading that they should be treated differently from equally important and valuable consumer services. 1 beg to move.
5.45 p.m.
Lord Berkeley: I rise to express my support for the noble Baroness in her amendments. For the convenience of the Committee, perhaps I may speak to Amendments Nos. 51 and 52 which are tabled in my name. I should, first, declare an interest as a member of the Institution of Civil Engineers. I believe that we shall find ourselves in a situation where we shall be talking about sheep and goats—that is to say, those who are included and those who are not.

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My view on this particular aspect of the Bill is that, if we support the principles of the legislation, we have to consider any exclusion extremely carefully. This Chamber has a right to hear the reasons which the Government may put forward regarding any exclusions which are to remain in the Bill. The noble Baroness gave us a clear explanation of why she believes that Schedule 4 should be excluded. My amendments were tabled with a view to something which is perhaps a little easier to accept; in other words, leaving the exclusions in if there are proper legal reasons for them but, nevertheless, excluding anything which affects competition between members of that profession. I do not believe that I have drafted them particularly well, but perhaps I may explain the reasons behind my amendments. That will at least enable the Minister to consider them.
I have taken on board what my noble friend the Minister said about the role of the director general and of the competition commission and the powers that they will have to consider exemptions and exclusions. One has to ask why we should exclude them specifically now. I cannot speak about Schedules 1 and 3, but Schedule 4 has the effect of excluding only Chapter I prohibitions and not those under Chapter II, though I suppose we should be grateful for that fact. But why are the professions any different?
I can only speak for engineers, but we have a long list in Schedule 4. One engineering company that I know well is a big firm of civil engineering consultants. It is owned by a company which used to be called Welsh Water and is now called Hyder. I believe that it is now a publicly-quoted company and, indeed, there are many others like it. Why is that company any different from estate agents or window cleaners? Why are accountants included along with lawyers? I am sure that there are very good reasons for that, but surely they have a duty to compete among themselves and with others in the same way as any other company or organisation in this country is required to compete for services. Surely they should be prohibited from engaging in restrictive practices which are obviously against public interests.
I am not convinced about this long list of,
"civil engineering: mechanical, aeronautical … agronomy … metallurgy, chemistry".
and
"(f) any other form of engineering or technology analogous to those mentioned in sub-paragraphs (a) to (e)".
There must have been a reason for that incredible drafting. Perhaps it is to be found in the reasons for which these organisations were set up in the previous century; namely, to protect the interests of their members. We could debate whether they do protect the interests of their members now. However, I strongly believe that this whole schedule, or certainly the anti-competitive element, has no part in this Bill. I shall be pleased to hear what my noble friend the Minister has to say on this matter.
Baroness Oppenheim-Barnes: I speak briefly but with the credentials of someone who was created in
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effigy by architects so that they could stick pins into me as a result of the dealings which I had with them—as the noble Lord, Lord Borrie, will recall—in trying to dragoon them into at least adopting a posture where their restrictive practices were not pursued. I do not think I was as successful as I would have liked. I believe the noble Lord, Lord Borrie, will also recall that at one time he wanted me to attack veterinarians. I told him that I could not possibly do that as they were folk heroes and under no circumstances was I about to incur their wrath. On a serious note, it seems that in an age when everyone, including the party opposite, has now accepted the value of competition with the bottom line being the consumer and what he or she obtains in terms of value, or safety in many cases, there should not be the kind of exemptions from this Bill which have existed in the past which have not benefited consumers.
Lord Howie of Troon: As older Members of the Committee will know, I have a long-standing connection with the construction industry and with consulting engineers and architects. I would never dream of putting a pin in the noble Baroness who has just spoken—although I may in a moment!
I oppose these amendments on the ground that professions are not the same as businesses. I shall not discuss estate agents and people of that kind; I shall stick to those I know; namely, consulting engineers and architects. The noble Baroness, Lady Wilcox, quoted a well known maxim of Bernard Shaw, a man whom I greatly admire. However, she quoted one of his more foolish remarks. If she wishes to understand the difference between professions and businesses she should read the debates that took place in the previous Parliament on compulsory competitive tendering for local authority professional services. That whole matter was discussed at great length by myself and others. I shall not speak of that at great length tonight. The noble Baroness should also turn her mind to a well known philosophical work on the acquisitive society by R.H. Tawney. In that work the difference between professional services and businesses is clearly explained. I admit that the situation now is not as clear as it was in Tawney's day. My noble friend Lord Berkeley has referred to Welsh Water in this connection.
We opposed competition at the design stage—I emphasise I am talking about design here—because a cheap design is not necessarily the design that you want. This is the weakness of CCT. A good design, whether of architecture or structural engineering, is a design in which the life cost of the commodity, be it a building or a structure, is the cheapest. We all know that a cheap initial cost leads to increased maintenance costs later, making the long life cost of the structure dearer than it might otherwise have been. That is the difference between buying and selling things across a counter—that is, business—and the buying and selling of what is essentially intellectual property. That is a different matter entirely. To confuse the two is merely to become a fanatic of competition. I have no doubt that competition has some merits here and there, but they should be closely examined.

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I noted that the noble Baroness, Lady Oppenheim-Barnes, indicated earlier in the debate on pharmaceuticals how a distinction could be made in competition terms. I draw her attention and the attention of my noble friend the Minister to a distinction which should be made here. 1 now have to do something extremely uncivil in that I must apologise to the Minister because I must leave the Chamber almost immediately for what we normally describe as a pressing engagement. I apologise as I know that is rude. If I miss my noble friend's reply, I shall certainly read what he has said.
Lord Skelmersdale: Before the Minister replies and the noble Lord, Lord Berkeley, rises to speak, I have two questions which have been prompted by this short debate. I understand that we are also discussing Schedule 4 in this grouping of amendments. Given that my noble friend Lady Wilcox said that the legal restrictions on multi-disciplinary practices were removed for solicitors by the Courts and Legal Services Act 1990, one wonders why solicitors are mentioned in line 8 of page 50 of the Bill in Schedule 4. Is it not legal tautology to refer to solicitors in both places?
The other question which sprang to my mind while I was listening to this short debate was that under Clause 3 the excluded agreements mentioned in Schedules 1, 2 and 3 are grouped together in that the Secretary of State can add to or subtract from them, by order, at any point—I believe those are the words used in the Bill—whereas in Schedule 4 he has no such permission. Again, one is bound to wonder why. For example, chiropracting is gradually being accepted in this country. Indeed there is a register these days of chiropractors and another one of osteopaths. As many of the professional services listed in Schedule 4 are medical services, one wonders whether at some stage the Secretary of State might well want to include either of those professions in such a list, or at another point remove something else so that, for example, nurses and midwives come together. That may well happen in the fairly near future. Surely there should be a way to add to or subtract from Schedule 4 not using primary legislation.
Lord Lucas: I, too, wish to support my noble friend Lady Wilcox. I am delighted to see that the noble Lord, Lord Howie of Troon, is present. I remember the debates we had in the course of the housing and construction Bill on a particularly daft definition clause. The noble Lord, Lord Howie, demolished that at great length and in the end managed to make considerable changes to it. I think we have a similar situation here. I am a chartered accountant and speaking of my own profession I can understand why auditing might have some special part in the Bill. Auditing is governed by statute and the Government may wish to exercise greater control than normal over the way in which the rules that are applied to associations of auditors are established. The way in which this Bill allows changes to be made by the Minister rather than by the Director General of Fair Trading seems to me to be reasonable. But why govern accounting? Anyone can do accounts. There is
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absolutely no reason why rules governing accounting should be subject to special pleading. It is a perfectly ordinary activity.
Anyone can do any number of the things that are mentioned in this list. I myself have been a midwife, although I have not offered professional services in that regard. There are some services in the list that seem to have a special place; but there are any number of others which are just ordinary trades, trading in information rather than goods, and should be in the Bill along with everything else. I hope that the Government will very seriously reconsider this part of the Bill, especially Part II of Schedule 4.
The Earl of Balfour: Will the Minister dealing with the Bill consider the pilotage functions of pilots taking ships in and out of ports and around this coast? Recently their circumstances were changed quite dramatically. If this list is to be part of the Bill, pilots working around the coast should be considered.
Viscount Bledisloe: I must declare an interest as a practising barrister—which I believe is still a profession! Without going into the detail of the professions listed or seeking to interfere with the desires of those who abandon unprofessional accountancy and take up equally unprofessional midwifery, surely the whole concept of a profession is that it restricts competition. The concept of a profession is that certain activities shall be limited to those who have acquired certain qualifications and who behave in the ways laid down by their professions. That is the distinction between a profession and a business. A profession which has no rules and is wholly open to competition is not a profession. If anybody could appear in court and address an argument to the court on behalf of a client whether or not he has passed an exam, behaved appallingly or whatever it may be, it would no longer be a profession. To talk about professions without restrictive rules regulating the degree of competition and degrees of behaviour is to abolish professions.
6 p.m.
Lord Simon of Highbury: In responding to the noble Baroness, I find myself in a certain confusion. I am never quite clear as to whether it is a problem or a benefit if one is on the list. That is my quandary at the start-point. I shall return to the question of who might be on the list at the end of a statement I wish to make as to why there is a list and to what extent it offers differential treatment from a list that might start with candlestick-makers or whatever that wonderful rhyme might be.
In looking at what special treatment, if any, should be afforded to the professions under the Bill, it is helpful to begin by recalling what their present treatment is under competition law. In the past it has been accepted that competition law should not be applied to them willy-nilly, and we need to consider the arguments.
At present, agreements in respect of the provision of many professional services are excluded from the Restrictive Trade Practices Act by virtue of Schedule 1 to the Act. That means that not only are professional

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rules excluded, but also other agreements that members of professions might enter into, including agreements they may reach to fix prices or share markets. So those agreements do exist. No doubt that was of some comfort to members of the professions concerned, including some Members of this House.
The Government do not consider that replicating an exclusion as wide as that contained in the Restrictive Trade Practices Act would be justified. We see no reason why the normal run of agreements between members of a profession in the carrying out of their professional services should not be subject to competition law just like those of any other business. Despite what I said earlier about members of the professions, I am sure that that view is widely supported.
I do not, however, accept that professional rules are necessarily the same as the normal run of agreements into which businesses may enter, as my noble friend pointed out. Their purpose is to protect the public. They have attached to them disciplinary arrangements which often involve some judicial process and under which penalties can be severe. Enforcement of them may be reviewed judicially. They are often subject to approval by Ministers or members of the judiciary. In those ways they are a form of quasi-public law. Indeed, many professional rules have the force of statute and would not, anyway, be covered by the Chapter 1 provision. So there seems no good reason to have markedly different arrangements for members of different, even if related, professions—for example, solicitors and barristers—depending on the arrangements by which their rules are made. For those reasons, we believe it would be sensible if the Chapter 1 prohibition did not cut across the existing arrangements for making and enforcing professional rules.
Noble Lords have commented that it is all well and good but have not professional rules in the past served the purpose of protecting members of the profession and not the public? That is the point of the amendment tabled by my noble friend Lord Berkeley. I wholly accept that professional rules can give rise to competition concerns. The question then is whether we can enable professional bodies to draw up rules and regulate the professions as they do now, while at the same time enabling competition considerations to be brought to bear where necessary in a focused and targeted way.
I submit that that is what the Bill does, for it requires the Director General of Fair Trading to keep the list of designated professional rules under review and to report to the Secretary of State if he considers that any of them should no longer be designated and hence be excluded from the list. The Committee will note that I said "requires". The Bill places duties upon the director to do those things.
The Secretary of State will then wish to consult—and indeed under the Bill must consult—any other Minister who has functions in relation to the profession. It is to be hoped that a professional body will have regard to any criticisms that the director may make and consider whether its rules should be amended. But it is clear that,
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as well as being targeted on professional rules which may give rise to competition concerns, the Bill must provide a way of enforcing proper competition scrutiny. The Bill therefore enables, subject to affirmative resolution by your Lordships and in another place, the designation of a professional rule to be revoked and subjected to the Chapter 1 prohibition.
I stated at the start the need to bear in mind the present position of the professions under competition law and to consider the arguments for any special treatment. The Government do not accept that there should be a blanket exclusion from the Chapter 1 prohibition for the professions. The Government believe that, viewed as a whole, it would be unwarranted to apply prohibitions designed primarily for the private sector business to the quasi-public law processes of drawing up and enforcing professional rules. The Government accept that there needs to be appropriate competition scrutiny to prevent consumers being damaged by any anti-competitive professional rules, and believe that that needs to be done in a targeted way.
I said that in responding to the questions raised by the noble Baroness, Lady Wilcox, I would come back to the list. I am not sure whether this is the answer she wants. Non-mention of licensed conveyancers, osteopaths and other people on the list means that they are subject to the ordinary rules of competition. The prohibition therefore applies to all anti-competitive agreements, and the director general is free to look at them. Members have asked about the nature of the list. It is a fixed list and reflects the position under the Restrictive Trade Practices Act, though adjustment to the list would be a function for those carrying out the tasks allotted to them in drawing up the new framework and applying the prohibitions.
I hope that on reflection Members of the Committee will agree that the Bill now strikes an appropriate balance between protecting the consumer by appropriate frameworks for people working in professions in order to guarantee standards and allowing the prohibitions to take their effect in those areas where we wish to see competition apply. I hope that in the light of that explanation the noble Baroness, Lady Wilcox, will withdraw her amendment and not press her opposition to Schedule 4 and that my noble friend Lord Berkeley will not move his amendment.
Lord Skelmersdale: The Minister has given us a full explanation and proved that I was wrong—or half-wrong—in what I asserted earlier. My attention has been drawn to sub-paragraphs (3) and (4) of paragraph 6 of Schedule 4 on page 49, particularly to the end of sub-paragraph (3). That shows quite clearly that I was wrong and that the Secretary of State may by order revoke the designation if certain acts have taken place. However, the Minister has still not explained whether the Bill contains a procedure for adding to the list should that be necessary in the future. Surely one does not want primary legislation?
Lord Simon of Highbury: I think the appropriate answer is that one must always have the list under review. The appropriate balance will have to be struck

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between what is required within a designated profession to protect the consumer and the requirement for competition to ensure that the marketplace is protected and not abused. There is currently no procedure for adding to the list. The issue is whether we should review it. I think that we can consider and review procedure.
Lord Berkeley: Before the noble Baroness, Lady Wilcox, rises to speak to her amendment, perhaps I could say that I very much welcome the Minister's comments on these amendments, which I shall read very carefully. I believe that we should restrict our comments to the restrictive practices, if any, between members of the same profession. This is not about other, unqualified people joining the profession but about whether there is opportunity for fair competition between members of the profession. be they public limited companies, professionals or whatever. We should consider carefully whether the professions can and do regulate themselves in the interests of consumers.
6.15 p.m.
Baroness Wilcox: I thank Members of the Committee for the debate. I am sorry that the noble Lord, Lord Borrie, felt unable to take part. I have great respect for him and the work that he did at the Office of Fair Trading. Perhaps it was sufficient for me to refer to his achievements.
I am very grateful for the points that have been made, some of which I had missed. When I made enquiries to find out why there was a problem I was given all sorts of fudges, such as that under European law there is no ruling that professional rules constitute an agreement and that professional rules are part of public law or quasi public law. It was all pretty unsatisfactory and it does not sound much better now.
I will admit to an interest. I am the mother of a barrister, so I understand what the noble Viscount, Lord Bledisloe, said. However, I find it odd that people who make rules for themselves would be admonished by someone else and would then consider whether they should change their rules. In the meantime, a member of the general public who has been hurt, maimed, done-badly-to, has to sit back while the professionals consult themselves on their own rules. It is like putting children in a sweet shop and telling them to make up the rules as to how many sweets they should eat. I do not accept that argument.
I hope I am right in believing that the Minister said that he would consider the procedure following the request of my noble friend Lord Skelmersdale. I welcome that. I was pleased to see the amount of work being done in the corner following my questions. It was gratifying to see civil servants, and indeed some Ministers, on their hands and knees with bits of paper. I can only assume that some of the questions were interesting and exciting, though some of the answers that I received were not very satisfactory.
I do not understand why we cannot keep professional rules within the Chapter 1 prohibition so that the OFT has power to investigate and take action over rules that are anti-competitive. I do not understand why the
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Government, who are so keen on being in Europe, which is very much against any form of self-regulation, intend to continue with the rules as they are now. I hope that the Minister will give further consideration to this point. I am prepared to withdraw the amendment at this time but reserve the right to speak again on the subject.
Amendment, by leave, withdrawn.
Lord Kingsland Lord Kingsland moved Amendment No. 13:
Page 2, line 42, at end insert ("or)
(e) Schedule (Exclusion for vertical agreements)").
The noble Lord said: Amendment No. 13 seeks to add to Clause 3(1) a fifth category of exclusion for vertical agreements. Amendment 53 sets out an appropriate definition of "vertical agreements", which will form the new schedule. Essentially it proposes that all vertical agreements be excluded save for two categories: those which have the character of price-fixing agreements and those made in contemplation of a parallel agreement between competitors.
I believe it was accepted by the Minister during the debate on Second Reading that the Government were contemplating the possibility of that approach but felt themselves in difficulties about how to put it into execution. The alternative approach would be to include vertical agreements and then have a raft of parallel exemptions and home-grown block exemptions, which—if the experience of the European Community is anything to go by—would be numerous and complex and would have to be renewed at frequent intervals.
I am aware that the European Community is currently looking at the question of vertical agreements. We do not know what conclusions it will reach, but it is highly likely that what will emerge will be, if not a new regime based on the one proposed in these amendments, an extremely light regime. In those circumstances, and given that we are talking about smaller enterprises than those that will be subject to the Community regime, I hope that the Minister will be sympathetic to these amendments. I beg to move.
Lord Lucas: Perhaps I may speak briefly to Amendment No. 14 which is along the same lines, but drafted differently to incorporate my concerns that, first, the Government should be able to draw in general classes of these agreements which are seen at the time to be anti-competitive and, secondly, that the director general should have that power with regard to specific agreements when they are brought to his attention, but, if so, that there should be no retrospection in the penalty which he imposes.
I have one particular concern which I suspect arises from the drafting of Amendment No. 53, where the concept of "connected" is introduced. Perhaps it goes back to a lack of understanding of the definition of "undertaking". Is "undertaking" defined in this Bill in such a way that it is necessary to introduce this concept of connection? I cannot find a definition, so perhaps the Minister could elucidate on that.
Baroness O'Cathain: Generally, I support the proposition that vertical agreements are largely benign.
I have one particular concern which I suspect arises from the drafting of Amendment No. 53, where the concept of "connected" is introduced. Perhaps it goes back to a lack of understanding of the definition of "undertaking". Is "undertaking" defined in this Bill in such a way that it is necessary to introduce this concept of connection? I cannot find a definition, so perhaps the Minister could elucidate on that.
Baroness O'Cathain: Generally, I support the proposition that vertical agreements are largely benign.
I have one particular concern which I suspect arises from the drafting of Amendment No. 53, where the concept of "connected" is introduced. Perhaps it goes back to a lack of understanding of the definition of "undertaking". Is "undertaking" defined in this Bill in such a way that it is necessary to introduce this concept of connection? I cannot find a definition, so perhaps the Minister could elucidate on that.
Baroness O'Cathain: Generally, I support the proposition that vertical agreements are largely benign.

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Amendment No. 53 is grouped with Amendments Nos. 13 and 14 and I am worried because Amendment No. 53 excludes all vertical agreements other than price fixing, and price fixing is not always transparent. A lot of people know exactly what is going on and this came out at Second Reading of the Bill.
Some vertical agreements can act against the interests of the consumer. I would draw my noble friend's attention to the fact that, as I read it, a blanket exclusion would prevent the Director General of the Office of Fair Trading from investigating cases where there are clear abuses.
I should like to see some amendment whereby the effect of this exclusion of vertical agreements could be judged by the Director General of the Office of Fair Trading; in other words, to give him some power to make an economic assessment, to investigate the real effect of the exclusion of vertical agreements, rather than looking at these vertical agreements themselves. I hope I have made myself clear.
Lord Borrie: I have some sympathy with what the noble Baroness, Lady O'Cathain, has just said. We did have a consensus around the Chamber earlier on and the noble Lord the Minister, if I do not understate what he said, indicated that the prohibition in Chapter I of this Bill is a prohibition of agreements which have meaningful and appreciable adverse effect on competition. If that is so, and if there are vertical agreements apart from price fixing agreements that might have an appreciable adverse affect on competition, then why should they not be within the prohibition? For reasons similar to those of the noble Baroness I am not keen on a blanket exclusion.
The other point which I should like to make is that if at some point in the near future there is a greater definition given by the European authorities to what vertical agreements should be exempt, then it seems rather odd if we devise or agree in this Bill to have a definition of vertical agreements, which are excluded from the prohibition, which may be out of line with that forthcoming exemption that the European authorities may devise.
At this stage, I feel it may be unwise to agree an exemption of this sort.
Lord Simon of Highbury: A great deal has been said in this debate with which I can agree. I accept that if we can adequately exclude vertical agreements, the new competition regime will operate with more certainty, and the administrative burden on the Office of Fair Trading, caused by people seeking clearance of their agreements for safety's sake, is going to be reduced. We have all agreed that that is devoutly to be desired.
It will enable the director general to concentrate his resources on the kinds of agreements and conduct which are a real source of competition concern. We all know, and it has been mentioned, that many vertical agreements are benign and only become a source of concern when the party has market power, in which case they can be dealt with under the Fair Trading Act or under Chapter II prohibition. So that follows.
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That being said, it would be as well not to overstate, as I fear some noble Lords may be at risk of doing, the impact of the Bill on vertical agreements, such as an agreement between an undertaking and its customer or supplier. Many such agreements are in no sense anti-competitive and a Chapter I prohibition in the Bill, therefore, would not apply to them.
Furthermore, many of those agreements that may have an effect on competition should be perfectly capable of individual or block exemption. Indeed, many will, without further ado, be exempted under the Bill since they will have been exempted under Article 85 and provisions in Clause 10 on parallel exemptions. That will ensure that they are automatically exempt from the Chapter I prohibition.
As many noble Lords will know, the treatment of vertical agreements under Article 85 is currently under review in Europe. The noble Lord, Lord Kingsland, mentioned that fact. If, for example, the Commission were to provide for wider exemptions for vertical agreements, agreements to which those exemptions applied likewise should automatically be exempt from Chapter I prohibition under the terms of the Bill.
Nevertheless, as I have said, I can see that there would certainly be an advantage in excluding vertical agreements from Chapter I prohibition. That is why the Bill provides the power to make exclusions from the Chapter I prohibition, in certain circumstances, by order. The Bill also provides for an exclusion, once made, to be varied. This is to help ensure that any exclusion remains appropriate in the light of developing experience.
The difficulty is, of course, how to frame a definition which is of real practical benefit in giving comfort to businesses that their agreements are not at risk from the prohibition, without at the same time allowing seriously anti-competitive agreements to avoid the application of the Chapter I prohibition. We cannot claim to have cracked the conundrum yet although the noble Lord, Lord Kingsland, encouraged me to crack it as fast as I could. I do regret that. However, we have made progress in discussions with business in identifying the considerations that will need to be taken into account in the drafting. In accordance with our approach of close and detailed consultation in order to bring forward this Bill, we shall be continuing the dialogue so that we draw up a suitable definition.
I will certainly reflect carefully on the points which have been made by the noble Lords. Unfortunately, the process of consultation will necessarily take time. I believe that it is right that it should because we know the difficulty of what we are attempting here. I would hope that noble Lords will feel able to withdraw the amendment to allow that process to continue. In summary, I would say that as an ex-businessman, and after listening to noble Lords' arguments, I attach considerable importance to finding a solution and a suitable definition regarding this problem.
In turning to definitions—this may not encourage the noble Lord as much—I should like to respond to the query of the noble Lord, Lord Lucas, about the definition of an undertaking. The definition of an

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undertaking is the definition standing in Articles 85 and 86 of the Treaty of Rome. I understand that an undertaking is an undertaking.
6.30 p.m.
Lord Kingsland: Perhaps the noble Lord will undertake to crack this conundrum before the Report stage of the Bill. It would make such a difference to business if there were real certainty in this area. It is not so much the fear that if there is not an exclusion a great many firms will be caught by the rules—I do not think they will—but the uncertainty that will continue if there is not an exclusion, which will lead to compliance costs being needlessly expended by those firms. However, in the spirit of the Minister's answer, I am happy to beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
[Amendment No. 14 not moved.]
Lord Lucas Lord Lucas moved Amendment No. 15:
Page 3. line 6. leave out ("or removing").
The noble Lord said: I simply wish to inquire of the Minister which bits he is thinking of removing; and if he is not thinking of removing any bits, why he needs this power. I beg to move.
Lord Simon of Highbury: The powers in Clauses 3 and 19 of the Bill are important and extensive. Their broad purpose is to ensure that the prohibitions remain targeted efficiently and effectively on areas of real concern in the light of changing economic circumstances and practical experience of the operation of the prohibitions.
In the case of the exclusions provided in respect of Schedule 1, their more specific purpose is to ensure that the exclusion for certain mergers and concentrations dealt with elsewhere under the competition law, which, as we shall doubtless see in our discussion on a later group of amendments, is a very difficult line to draw, can be refined if their operation shows that there are gaps or overlaps.
The ability to amend or remove a case in Schedule 1 with respect to the Chapter I prohibition at present extends only to new cases added under the power in Clause 3 and to the planning obligations case. This is because that is the only specific exclusion of particular agreements as opposed to exclusions based on general propositions or on powers to exclude which the rest of Schedule 3 provides. If, during the course of our deliberations, we were to add further specific exclusions to the schedule—and, as I shall explain in the debate on a later group of amendments, I am continuing to receive representations for them—the Government may propose that the Clause 3 power to amend or remove should apply to them.
The Government have no proposals in mind to exercise the powers to remove exclusion cases, but we believe that the ability to refine the exclusion for the purposes I have mentioned must include the ability to remove a case. As the noble Lord will be aware, your Lordships' Select Committee on the Scrutiny of Delegated Powers has specifically reported that these
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powers are acceptable. If the Secretary of State were, however, to propose to remove a case under Clauses 3 or 19, or otherwise exercise her powers under those clauses, the Bill contains a significant safeguard. By virtue of Clause 67, the order cannot be made unless a draft of it has been laid before Parliament and approved by a resolution of each House. Your Lordships would therefore have the opportunity to debate, and if necessary divide, should noble Lords be concerned about the exercise of the power to remove an exclusion case which we are incorporating in the Bill.
In the light of that safeguard, I hope the noble Lord is able to see the case for the withdrawal of the amendment.
Lord Lucas: I am grateful to the Minister for that extensive explanation. It satisfies my every desire and indeed goes further in confirming the right of this House to divide on affirmative resolutions. I am delighted to withdraw the amendment.
Amendment, by leave, withdrawn. Clause 3 agreed to.
Clause 17 [Enactments replaced]:
Lord Fraser of Carmyllie Lord Fraser of Carmyllie moved Amendment No. 16:
Page 10, line 16. after ("practices)") insert ("and those sections of the Fair Trading Act 1973 relating to monopoly investigations").
The noble and learned Lord said: This amendment sets out to ensure that the provisions relating to complex and scale monopoly investigations will cease to have effect. The effect of the present proposals in the Bill for a wide-ranging general prohibition on the abuse of market power combined with the retention of both the complex and scale monopoly provisions of the Fair Trading Act will be to impose a more extensive regime for regulating the competitive behaviour of firms than presently exists in the United Kingdom. Indeed, as we understand it, it would provide for the imposition of a more extensive regime than anywhere else in Europe or North America, and, for all we know, anywhere else in the world.
We see no pressing need for such heavy regulation. The Minister knows of our agreement with the approach that has been taken on matters of ensuring competition, but we really must do what we can to avoid an unnecessary degree of regulation. This may be the most important area where that seems likely to be imposed. What is of particular concern to us is that this combination of powers seems to have been undertaken without any real research into its potential effects on the United Kingdom economy. If I am wrong about that, and the Government have undertaken a careful assessment of how these sets of powers will interplay and can come to the conclusion that, contrary to what I am saying, there is not an unnecessary degree of heavy regulation, I hope the Minister will spell that out.
The concern I express has been put to us from a wide range of business interests. Even if the Minister cannot indicate immediately that he will look again at the way

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these provisions interplay, I hope he will at least leave the Committee with an undertaking that before we return to the matter at Report stage he will have looked at it.
Lord Borrie: I should like quite strongly to oppose the amendment. I have wrestled with my conscience in case this was in part due to some long-standing affection for parts of the Fair Trading Act which, as Director General of Fair Trading, I, from time to time, employed in asking the Monopolies and Mergers Commission to make studies of particular industries under the scale monopoly or complex monopoly provisions of the Fair Trading Act. But I do not think it is just that view, which might be personal to myself.
The Chapter I prohibition, as stated several times when we were dealing with that part of the Bill, concerns agreements and concerted practices. Agreements have to be established in order to suggest that they should be prohibited. I suggest that there has to be evidence of concerted practices before one can say that there are such between two or more firms. Sometimes there is similarity of conduct of a fairly remarkable kind between firms in the same industry but no evidence of agreement, of meetings in hotel back rooms, or of anything to show that they have concerted deliberately in the activity of, let us say, keeping up prices. Nevertheless there is a parallel activity between the companies concerned which inhibits competition and is damaging to customers. At the present time and, indeed, for the past 40 years, it has been possible for that kind of parallel conduct between firms to be examined by the Monopolies and Mergers Commission on a reference of complex monopoly provisions from the Director General of the Office of Fair Trading.
It would be a pity to get rid of those provisions when there is a gap between what can be proved as an agreement or concerted practice under Chapter I and what can be regarded as an abuse of a dominant position of a single company under Chapter II.That is my case for suggesting that we should retain the possibility of complex monopoly references being made to the Monopolies and Mergers Commission which in future will be called the competition commission.
As regards scale monopolies, the case is less strong: nonetheless I make it because if one examines the remedies in the Bill where an abuse of a dominant position is established and proved one does not find among those remedies the possibility of a structural remedy such as a demerger or the separation of certain activities of one firm from another in order to create a more competitive situation. While being a remedy which, in this and other countries, has been very rare indeed, it is one which is available in our law at the moment. It would be a pity if it were lost in order to deal with the more extreme kind of abuse of monopoly power. What is wanted is not the simple imposition of a penalty for conduct but a much more sophisticated structural remedy imposed by the competition authority.
My final point is that this is a new Bill. I know that we are following the method of dealing with anti-competitive practices in the European Community. There is a great deal of experience there from the
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European authorities. But this is a new Bill for the United Kingdom. It seems to me undesirable that we should throw overboard the possibility of references under the Fair Trading Act in order to rely solely on what is for United Kingdom law something entirely new; namely, the prohibitions and their particular wording in Chapters I and H.
Lord Simon of Highbury: I am grateful to the noble Lord, Lord Borrie, for the voice of experience in what is quite a complicated and important part of the debate, as we recognised at Second Reading. There is no doubt that the new prohibition will be the principal weapon against abuse of dominance. It is also clear that the current regime under the Fair Trading Act and the Competition Act, as the noble Lord, Lord Borrie, has pointed out, based on his experience, has very significant failings and badly needs strengthening. I do not believe that we would wish to throw out the baby with the bathwater.
As the noble Lord, Lord Borrie, says, this is a new Bill and at this stage we believe there is a very strong case for retaining the Fair Trading Act monopoly provisions to enable investigations to be conducted into markets in cases where competition issues arise from the structure of the market rather than from anti-competitive agreements or specific abuses by a dominant company. The current regime under the Fair Trading Act enables wide-ranging and impartial investigation of such situations by the Monopolies and Mergers Commission. It also provides scope for a wide range of remedies—and that is important—to be imposed if matters are found to be contrary to the public interest. With that sort of approach it is right that the imposition of remedies should be subject to parliamentary scrutiny and that the responsibility should rest with Ministers.
I believe that it is widely recognised that the complex monopoly provisions fill a gap between the two prohibitions. The Chapter I prohibition will deal very effectively with anti-competitive agreements and the Chapter II prohibition with abuses by single dominant companies. But the complex monopoly provisions will continue to be a more effective tool for dealing with anti-competitive parallel behaviour by companies where there is no agreement between them.
We also believe that the scale monopoly provisions will continue to have value although we do not intend that their use should be limited with the introduction of the new prohibitions. In future we do not expect references to be made of scale monopolies except in circumstances where there has already been proven abuse under the prohibition and where the DGFT believes that there is a real prospect of future abuses by the same firm. In these circumstances the structural remedies available under the Fair Trading Act may provide a more effective means of preventing further abuses.
The final point I need to make to the Committee is that it should be aware that the use of the scale monopoly provisions as regards the regulated utility sectors is the subject of separate consideration in the context of the current utility review. As Members of the Committee will know, that is due for report and

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consultation at the beginning of the new year so we need to take into account the timetable for that review in considering the progress of our discussions on this Bill.
In summary, the monopoly provisions of the Fair Trading Act will essentially become reserve powers to deal with situations where the problem is market structure rather than abuse. It is for that reason that 1 mention to the Committee the issue of the utility review and the issues which surround it specifically in terms of those scale provisions. We believe that the provisions will continue to have value in such limited circumstances. I have listened very carefully to the noble and learned Lord, Lord Fraser—
6.45 p.m.
Lord Fraser of Carmyllie: I shall respond more fully to what the noble Lord has said, but there is one matter I am interested in in relation to the utility review. When does he anticipate the reporting? Is it likely that that will happen before the Report stage of the Bill? Is there a prospect of seeing it before then?
Lord Simon of Highbury: I think it is unlikely, but I shall confirm that point later. I am glad that the noble and learned Lord has noted our thought processes with regard to the issue of scale monopolies. I have tried to explain why I believe that it would be unwise of the Committee to throw out the baby with the bath water at this stage. I have listened carefully to the arguments that have been made and shall certainly reflect on them, but for the present I ask the noble and learned Lord to withdraw his amendment.
Lord Fraser of Carmyllie: I am grateful to the Minister for his response, which reveals a rather surprising lack of confidence in the efficacy of the two prohibitions which are at the core of the Bill. The noble Lord, Lord Borrie, seemed to be promoting not so much a belt-and-braces approach to the problems, but rather an approach based on handcuffs, manacles, shackles and leg-irons.
Although I listened to what the Minister said and we certainly do not intend to press the amendment this evening, we remain to be convinced that there is anything like the gap or the risk at which both the noble Lord, Lord Borrie, with his great experience, and the Minister hinted. If I understood the noble Lord, Lord Borrie, correctly, he was getting pretty close to conceding that, at least as far as scale monopolies are concerned, it is more difficult for him to advance any particularly obvious gap. If that is the case, we shall want to consider this more carefully. It will be unfortunate if we do not have the utilities review by the time that we return to this amendment at a later stage. We shall certainly want to examine whether there are any gaps to be filled, because if there are any gaps we want them to be filled.
For the sake of UK business we should not have unnecessarily heavy regulations and any duplication must be kept to the bare minimum. In our view, it is probably highly unnecessary to retain this set of complicated legislative provisions at the same time as
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introducing the two prohibitions. We shall want to return to this but, for this evening, I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Clause 17 agreed to.
Clause 18 [Abuse of dominant position]:
The Deputy Chairman of Committees (Lord Strabolgi): I have to inform your Lordships that if Amendment No. 17 is agreed to, 1 cannot call Amendments Nos. 18 and 24.
Lord Fraser of Carmyllie Lord Fraser of Carmyllie moved Amendment No. 17:
Page 10, line 18, leave out subsections (1) and (2) and insert—
("(1) Predatory pricing or price discrimination by a dominant firm, which is carried out with the intention and has the effect of eliminating a competitor or of substantially lessening competition in the relevant market, shall be prohibited.").
The noble and learned Lord said: As I said earlier, although we now come to a fairly extensive grouping it seems more desirable if I speak to my Amendments Nos. 17 and 24, leaving the other amendments for debate in another grouping. I hope that the reasoning behind my suggestion will emerge from what I am about to say.
Our concern is that the present basis of the introduction of a prohibition into the United Kingdom of abuse of a dominant position, if it is directly based on the wording of Article 86, means that there will be insufficient clarification and inadequate precision with regard to the type of conduct being prohibited. We are concerned that uncertainty as to the reach of the prohibition will not have the intended effect of deterring anti-competitive behaviour. I am sure the noble Lord, Lord Clinton-Davis, appreciates that we share his objective of deterring anti-competitive behaviour.
A further concern which I expressed on Second Reading is that where there is uncertainty there is a risk of a "chilling effect"—if I may use again the language of the CBI—on competition and commercial responses in the market place. If that were to be the case, it would be very unsatisfactory and ultimately damaging for the UK economy.
Our next concern is that business should be clear about exactly what type of behaviour will give rise to the use of the powers of investigation, including the potential for criminal penalties, and which will potentially be subject to large fines.
I could provide the Committee with a number of examples to demonstrate our concerns, but at this stage it may be sufficient for me to limit myself to the case of Tetra Pak II, with which I believe a number of your Lordships are familiar. It was concluded that if a company is dominant in one market it can infringe Article 86 by its conduct in other, separate markets which are linked to the first, but where the company is not dominant.
Following that through, let us take as an example a company which is dominant in one market and makes vehicles which rely on the internal combustion engine. Would there be a real risk of the company being

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severely constrained if it wished to innovate and enter a new market—again, providing vehicles, but where the movement was powered by electricity? In such a new market, the company will have to act from day one as if it were dominant. It would not, for example, be able to select its customers freely, establish prices freely or target discounts at particular sectors.
On the basis of what I understand to be a correct interpretation of the Tetra Pak II case, that would have the effect of reducing such a company's incentive to innovate and invest in the other market. Accordingly, we would suggest that a better way to achieve deterrence of anti-competitive behaviour would be to rely instead on the definition in my Amendment No. 17.
Perhaps I may turn now to my next amendment in the grouping, Amendment No. 24. The effect of the amendment would be to ensure that for the purposes of a Chapter II prohibition abuse cannot be found unless dominance is used to achieve it. It requires that dominance must be the cause of the abuse. We had some exchanges at Second Reading on this with the noble Lord, Lord Borrie. In our view, there is nothing wrong with a company being big. That should not make it subject to penalty or prohibition. The problem occurs when a company has dominance in a market place and abuses that dominance. We believe that the amendment would spell that out more clearly and thus improve the Bill. I beg to move.
7 p.m.
Viscount Waverley: Perhaps I may weigh in on these issues. What guides me is the underlying principle of there being a social duty to pay a fair value for a product and so, by extension, a general duty to prevent producers or providers of services going bankrupt or facing undue financial hardship through any particular buying or anti-competition strategy.
I have two principal areas of concern. I deal with one of them in a substantive way and touch on the other, not least to register a potential problem area. My first point stems from a circumstance that arose in 1995 with Asda supermarkets. I mention Asda simply to give relevance to my short case study. One of Asda's operations totally undermined the political efforts of the government of the day to defend the European Union banana import regime which honoured the Lome commitment to provide an accessible and viable market for traditional ACP producers. That policy has been confirmed by both the Lord Privy Seal and the noble Lord, Lord Whitty, on a number of occasions when I have raised this issue in your Lordships' House.
Asda took a marketing decision to offer certain heavily discounted merchandise to draw customers into their stores. Its rationale in taking that policy decision was to use bananas as a loss leader in an attempt to improve overall store revenues. My involvement arose when it became clear that Caribbean banana growers were suffering acutely as that policy placed immense downward pressure on retail and wholesale prices, and ultimately on the returns to those producers; in other words, ultimately the growers paid for this marketing
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strategy. I believe that Asda could have been charged with manipulating the banana market in a cavalier fashion without due regard to the consequences. I recall that the noble Lord, Lord Carter, while in opposition, put the matter in the following way in a Question to the noble Baroness, Lady Chalker, asking if the Minister was aware,
"that the situation involves apparent predatory pricing by powerful supermarkets?".—[0fficial Report, 2/11/95: col. 1501.]
The previous Administration felt that it would be difficult for them formally to intervene as technically Asda was not operating outside the rules. A suggestion had been made that the Office of Fair Trading's rules on predatory pricing had been broken either by a breach of the Fair Trading Act 1973 or the Competition Act 1980. To test that would have meant taking initiating action in the courts similar to that initiated by the leading manufacturers of over-the-counter drugs. All of those major multinational pharmaceutical companies were able to secure an injunction which prevented Asda from selling over-the-counter drugs at reduced prices. It was with regret that the high cost of litigation dissuaded the Caribbean interested parties. I should like to be assured that that does not happen again. I should be grateful if the Government—and indeed the noble and learned Lord, Lord Fraser, if he were able—could assure me that my concerns will be appropriately addressed.
From a recent editorial it has come to the attention of many that British Airways is considering setting up its own low-cost carrier, with the fear that it is prepared to lose money to eliminate small competitors. Once they have been eliminated fares will be raised again. The European Commission has stated that it wishes to operate an open skies policy with free and fair competition within Europe. Article 86 of the Treaty of Rome already outlaws predatory pricing, with the effect that a dominant player in a market may not sell its products below cost price with the intention of eliminating a smaller competitor.
Baroness O'Cathain: I thank the noble Viscount for giving way. I should declare an interest as a director of British Airways. I do not believe that the noble Viscount is fair in his comment about British Airways giving consideration to setting up a low-cost no-frills airline. I assure the noble Viscount that the last thing British Airways would do is to set up a no-frills low-cost airline with the absolute certainty that it would lose money in order to maintain its competitive position. That is certainly no part of the thinking of British Airways, and I believe that it is quite wrong for the noble Viscount to make that comment.
Viscount Waverley: I thank the noble Baroness for her remarks. I hope in turn that British Airways will not set up a low-cost airline that will have the effect of preventing other low-cost carriers from offering low prices within the European Union.
Baroness O'Cathain: I thank the noble Viscount for again giving way. In no way can the noble Viscount say that British Airways should not set up a low-cost no-frills airline. British Airways is not necessarily going

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to set it up, but it is thinking about it, and that is generally agreed. Why should British Airways be prevented from setting up a low-cost no-frills airline if it will lose money? It is in an open and competitive business. Certainly, it will not set up such a business necessarily to put someone else out of business, but it is an open market. The purpose of this Bill is to make sure that in the end the customer has greater choice and is not penalised by agreements.
Viscount Waverley: This has been a useful exchange. I look forward to seeing tomorrow in greater detail the comments of the noble Baroness. I should draw to her attention that such issues are covered by Article 86. Let us see how the whole gameplan unfolds. The Minister may wish to comment on a number of the points that the noble Baroness has made in relation to British Airways.
Lord Borrie: I have some difficulty in understanding the extreme width of Amendment No. 17 moved by the noble and learned Lord, Lord Fraser. If I understand it correctly, the amendment would remove altogether the Chapter II prohibition on the abuse of a dominant position. Among all of the abuses of monopoly power that can exist, including forcing people to take goods that they do not want in order to get goods that they do want, the noble and learned Lord has inserted merely one kind of abuse which is predatory pricing and given it a definition. If I am correct in what I say, I wonder about the definition of predatory pricing in Amendment No. 17. The noble and learned Lord will recall that the Chapter I prohibition concerns agreements which have the intention or effect of restricting competition. In the amendment the definition of predatory pricing or price discrimination by a dominant firm is that it must be both with that intention and effect. It appears to me that that is a much more difficult proposition to establish and that it removes a great deal of the mischief with which the Chapter II prohibition is intended to deal.
Lord Haskel: I believe that we are considering Amendments Nos. 17 and 24. It is not for me to enter into the argument between the noble Baroness and the noble Viscount. However, I believe that both should welcome the Bill since it sets up a mechanism for settling their dispute. I hope that those are words of comfort.
Clause 18 prohibits the use of dominant market position. That prohibition is closely modelled on Article 86 of the Treaty of Rome. By virtue of Clause 58 of the Bill the prohibition will be applied so as to avoid inconsistency with the interpretation of Article 86. As a result, the principles applied in interpreting what may constitute an abuse of a dominant position under European law will be applied in the same way under the domestic prohibition. This is of crucial importance because it will ensure that business can look to European Community jurisprudence as a guide to the interpretation of abuse under the domestic prohibition and that business will not have to deal with differing prohibitions at European and domestic level. I hope that that deals with the concerns of the noble and learned Lord, Lord Fraser.
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For that reason the illustrative list in Clause 18(2) is drawn directly from Article 86. It would be wrong to tinker with the list. To have a different list would seriously risk creating a divergence between the domestic and European prohibitions. For the reasons I have explained, that would be highly undesirable. As to the specific changes proposed they add nothing in practice to the prohibition.
Turning to Amendment No. 17, this removes the general prohibition from the Bill and replaces it with a narrow prohibition directed solely at predatory pricing and price discrimination, as my noble friend Lord Borrie said. This undermines the objective of the Bill to introduce a general prohibition of abuse of dominance in line with European jurisprudence.
Amendment No. 24 relates to abuses based on economic strength in another market. Again, EC case law shows that in certain circumstances Article 86 may apply where an undertaking that is dominant in one market commits an abuse in a different, neighbouring market.
The list in Clause 18(2), like the one in Article 86, is illustrative and not exhaustive. Depending on the circumstances, different types of behaviour might constitute an abuse. However, behaviour of the type set out in the list would not necessarily be an abuse because each case will turn on the structure of the market and the effect of the conduct in question. This will deal with the noble Viscount's question regarding the bananas, about which he was so obviously concerned. It is, after all, the effect that is important to customers and to other firms.
In short, the prohibition introduced by Clause 18 fulfils the Government's commitment to bringing forward stronger legislation to prohibit abuse of dominance in the economy as a whole. In view of this explanation, I ask the noble and learned Lord to withdraw his amendment.
Lord Fraser of Carmyllie: It will be clear that at this time of night on a Thursday we do not intend to press amendments to a Division. But the night is still young. Certainly, just before dinner, I do not propose to press this amendment to a Division.
This amendment seeks to achieve a clear separation or distinction between the Article 86 provisions in the treaty and what is in this Bill. It may be that it could be expanded to cover another set of clearly identified types of abuse, but what it is intended to do is to highlight two matters; one of which is, as I said at Second Reading, that there is a clear concern expressed by British industry that the effect may be to have a chilling effect on innovation in the market place. I am sure that the noble Lord agrees that such a consequence would be undesirable.
We are disappointed that there seems to be little acknowledgement from the Government that any such risk might exist. If it does exist, I hope that there will not be a shrug of indifferent shoulders from the Government on such an important matter.

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The second matter is this. In my example I highlighted the case of Tetra Pak II. I hoped to tease out from the Government whether they had any concerns about the way the jurisprudence of the ECJ had developed; that it was going too far to say that if you are dominant in one market it has far greater significance on how you have to act in another market. That seems to be the consequence of Tetra Pak II and it is undesirable and going too far. What we and organisations such as the CBI wish to highlight is that that might have an effect on the innovation expected in the market place and introduce a greater degree of uncertainty than is desirable.
I am not going to press these amendments but before this Bill leaves this House we want to be satisfied that the concerns that I and organisations such as the CBI have expressed are unfounded. We also want to be satisfied that there is a clearer and greater confidence about the way that the jurisprudence of the ECJ is developing and that the Government believe, at this time and at this stage, that none of it is prejudicial or undesirable in the development of the United Kingdom market.
We shall undoubtedly return at a later stage in an attempt to obtain answers to those two issues. I beg leave to withdraw Amendment No. 17.
Amendment, by leave, withdrawn.
7.15 p.m.
Lord Simon of Highbury Lord Simon of Highbury moved Amendment No. 18:
Page 10, line 19, after ("position") insert ("in a market").
The noble Lord said: The purpose of Amendments Nos. 18 and 27 is to ensure that Clause 18(3) is not read as limiting the relevant geographic market for assessing dominance to the United Kingdom. It has never been our intention that it should do so, but it is important that the drafting of the legislation is not ambiguous on this point.
In order to assess whether an undertaking holds a dominant market position it is necessary to establish what the relevant market is. Clause 18 is modelled closely on Article 86 of the Treaty of Rome. There is considerable EC case law concerning the principles for defining the relevant market. By virtue of Clause 58 of the Bill these principles will also apply in determining whether an undertaking is dominant for the purposes of the UK prohibition.
In addition, the director general is required under the Bill to issue guidelines as to how he intends to apply the prohibitions. The definitions of the market and the interpretation of dominance is a key issue which we would expect to be covered in the guidelines. That, I hope, will go some way to removing the chill of the chilling effect; although it does not seem to have chilled our competition on the Continent, which has been operating under these conditions for some time and competing very strongly.
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As currently drafted, Clause 18(3) defines a dominant position as,
"a dominant position in the market within the United Kingdom".
It is necessary to specify that there must be dominance within the United Kingdom to ensure that the legislation does not catch firms which are dominant in markets wholly outside the UK. However, Clause 18(3) is not intended to limit the relevant market to the UK.
As a person who has practised business, and with particular responsibilities for single market issues, I am very well aware of the challenges and opportunities presented by increasingly global markets. Indeed, we wish to encourage our companies into them and many of them compete in those markets which extend considerably beyond the UK.
The competition that these companies face in these markets, both at home and abroad, must be fully recognised in assessing whether or not these companies are dominant. In the interests of clarity, therefore, Amendment No. 27 deletes the reference to the market within the UK in Clause 18(3). Here we are interested only in market dominance, not any other sort of dominance which one might conceivably think of. That is why we originally included the reference to the market in Clause 18(3). Because Amendment No. 27 would delete this reference, Amendment No. 18 inserts "in a market" in Clause 18(1). The amendments are to define dominance in the wider market place, and separate that out as a test issue, and then to refer to the UK as a specific instance outside that. I beg to move.
On Question, amendment agreed to.
Lord McNally Lord McNally moved Amendment No. 19:
Page 10, line 23, at end insert ("or deliberately accepting losses in order to reduce competition").
The noble Lord said: The most hostile audience I ever addressed when I was a Member of Parliament for Stockport was when I was introduced with the memorable words:
"Before we start the bingo, we will have some words from our Member of Parliament".
The last mover of amendments before the dinner hour faces an equally hostile audience. So perhaps I can calm the Committee by saying that I intend to move only Amendment No. 19, and to use the opportunity to speak to Amendments Nos. 22, 23 and 28 which I shall not move.
As was indicated earlier, my intention in moving the amendment is to deal with issues within a particular industry—the newspaper industry. The amendments are couched in general terms. As the noble Viscount, Lord Waverley, said, some of the issues raised may relate to other sectors and other industries. In short, the purpose of Amendment No. 19 is to prevent a firm from purposely making a loss to damage weaker competition.
Amendment No. 21 replicates the wording used in the US Sherman anti-trust laws. Amendment No. 22 addresses the problem of predatory pricing which, as currently defined, requires the predator to be the dominant undertaking in the same market in which the abuse is carried out. Amendment No. 28 is similar

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to Amendment No. 22 in that it would redefine the use of "market" to refer to a firm being dominant in just one particular sector of the market.
My clear intention in moving the amendment is to deal with the particular problems of the newspaper industry. We in this country are proud of the diversity of our press and of the high level of readership. We see such diversity as underpinning our democracy. The relationship between a free Parliament and a free Press should never be comfortable but they should be mutually supportive. That is why I want to use the opportunity of the Competition Bill to enable us to consider what I believe to be a deep malaise in the newspaper industry, which stems from weaknesses in our competition law and which threaten its diversity and choice.
It is only to be expected that the amendments may be seen in terms of being anti-Murdoch or anti-News International. Indeed, yesterday in his own paper, The Times, Mr. Murdoch is quoted as saying:
"No way will I call a truce. No one else wants to call a truce. They insult me everyday. so they can go to hell. People do not much seem to like competition in this country".
Mr. Murdoch is an aggressive competitor. He steps on a lot of toes, but I am not in the business of protecting anyone from fair competition from the Murdoch press. What I am concerned about is that we have allowed to grow up in the newspaper industry a competition regime more lax than anywhere in the world. That laxity is based upon the definition of "dominant position", which takes no account of the ability of major media conglomerates to cross-subsidise, loss-lead, and predatory price in a way which would not be tolerated in any other industry.
I hope sincerely that the Minister will respond constructively to the amendments. In opposition, the Labour Party showed itself to be most robust in these matters. I could delay the Committee by giving some long quotes from Mr. Nigel Griffiths. I would recommend to the Minister that he looks hard and long at his speeches, because I fear that he will have them quoted at him ad nauseam over the next few months and years. I think I would ask to move to the Foreign Office in the next reshuffle.
The problem is that in the newspaper industry it seems that it is not enough for a victim to be bleeding. Apparently our present legislation requires a corpse before the OFT will act. Such a response is just not good enough if we are not to see irreparable damage done to the newspaper industry. Let us look around. The Independent is no longer independent, but needs the support and protection of larger groups. The idea of a similar venture being attempted against the background of present day newspaper economics is unthinkable.
Not one of our major broadsheets operates on anything like a commercial basis. Yet The Times sells regularly on Mondays at a price which is blatantly below cost. Media analysts believe that that aggressive price cutting is aimed at undermining the Daily Telegraph. It certainly seems to be working, with Daily Telegraph profits down from over £60 million to under £1 million. It is estimated that The Times itself is losing
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£30 million a year, financed through cross-subsidy by other parts of News International. That is a publication which has, over the past four years, regularly sold at less than half its true costs on Mondays.
There is something rotten at the heart of our newspaper financing. What other industry, which generates revenue of over £700 million, produces overall losses of £50 million, and is still supposed to be operating commercially? Big issues and powerful forces are at work here. They go to the heart not just of the economics of our newspaper industry but the functioning of our parliamentary democracy. This is a government who came to office with a powerful mandate to improve our system of government in all its aspects. Included in that programme of reform must be a healthy and truly competitive press. I urge Ministers to accept the amendments, not just as good competition law, but as a fulfilment of that wider mandate to reform. I beg to move.
Viscount Astor: Amendment No. 23 is grouped with the amendment moved by the noble Lord, Lord McNally. My amendment has a similar purpose, but is slightly different. If I may describe it as such, it is the vertical approach rather than the horizontal one. With great respect to the noble Lord, my amendment may be preferable as it would clearly not reach other sectors of business. The horizontal approach could apply to other businesses, and so it could be argued that that could produce unacceptable curbs on price competition in other industries.
I do not believe that the law can prohibit the acceptance of losses, deliberate or otherwise. Market conditions can sometimes force all the participants in an industry into loss and give them no alternative but to accept the result. If a market is overcrowded, prices are likely to fall until the surplus is eliminated. In such conditions it will be hard to set prices that did not have the result of possible losses.
It could be argued that my approach is contrary to the statement made by the Secretary of State in her White Paper in August, that there was a good case for excluding most vertical agreements. It is important to stress the word "most" with regard to vertical agreements. I agree with the sentiments. That is why my amendment, unashamedly, signals that the press is different. I make no apologies for making an exception of it. It is different. Competition, plurality, and diversity in the press are even more important than they are in other industries. They are part of the fabric of democracy, and the Government should recognise that.
That is, of course, not a new concept. There is a precedent to accept that the press is a special case in competition legislation. The Fair Trading Act 1973 has different monopoly and merger conditions for the press and for other sectors of industry. Predatory pricing is accepted as an abuse, whether or not financed by cross-subsidy, but there are differing ideas of what it is. Dominance can be in one sector, and abuse can be in another. It is unlawful only if a company prices its goods below cost in the market in which it has dominance, not in other markets. That is the nub of the problem which is not addressed by the Bill.

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If one is dominant in an industry there may be no need to embark on a predatory price war. Perhaps the only companies which do so wish to become dominant. I believe that in those cases such action should infer a presumption of dominance, whether in the same market or a separate one.
A recent editorial in the Evening Standard put the case well when it stated that newspapers, like other businesses, have competed by persuading the consumers that their product was better or better value for money. Bad competition is where those who distort the market while trying to eliminate competition entirely force their rivals to fight dirty to stay in the business, a problem that has recently been much in evidence in the press.
Interestingly, News International, despite having such a large share of the newspaper market, is reported to be sceptical that this type of amendment to the Bill, if it were accepted, would make any difference to its company's pricing policy. It denies that its pricing policy is predatory, but claims that it is market promotion and not a permanent feature. If that is its view it has nothing to fear from the amendment. However, I find its defence of its pricing policy difficult to accept. It is true that by lowering prices it has increased readership, but at a huge cost. This promotion looks pretty permanent to me!
I am not anti-Rupert Murdoch—I admire him. He sorted out the problems which afflicted Fleet Street when I worked in that industry 20 years ago. He created BSkyB, which is a huge success. News International is rightly exploiting a gap in the competition law. Murdoch likes to be successful and who can blame him? We all accept that plurality is beneficial to industry and to consumers. For this industry and for this country, it is vital.
I hesitate to bring a note of politics into the debate, but I ought to point out to Ministers opposite that Robin Cooke, when shadow Secretary of State for Trade and Industry, said in another place that Murdoch was able to cut prices only because of his profits from other interests and that we were now faced with blatant predatory pricing. That line was echoed by Mo Mowlem, when shadow Heritage spokeswoman, who said that unless action is taken Murdoch will weaken his British competitors to the point where he will dominate the market.
The noble Lord, Lord Simon, opening for the Government on Second Reading, said:
"The Bill shows our commitment to ensuring effective and fair competition. It would benefit both consumers and business".—[Official Report, 30/10/97; col. 1144.]
If the Minister really believes that, then he ought to be able to consider my amendment favourably, or will this be the case of another government U-turn?
7.30 p.m.
Lord Borrie: In taking part in this debate I must declare an interest in that I am a non-executive director of Newspaper Publishing plc, which is the publisher of the Independent and the Independent on Sunday.
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One of the most important areas of competition law which the Bill leaves untouched is the law relating to mergers between companies in general and newspapers in particular. As the noble Viscount, Lord Astor, rightly said, the Fair Trading Act 1973 makes special provision for newspaper mergers. Then the swallowing up of a major newspaper by another newspaper or newspaper group was properly considered to be of particular significance in a democratic society beyond mergers and takeovers in general because newspaper mergers could seriously reduce the availability of a diversity of opinion. Under the Fair Trading Act it is mandatory for reference to be made of a major newspaper merger. The Monopolies Commission is specifically required to take account,
"of the need for accurate presentation of news and free expression of opinion".
Over the years, the Monopolies Commission in a variety of reports on newspaper mergers has frequently emphasised the importance it attaches to choice of newspaper and diversity of views. All that is existing law, but I suggest that the continued availability of diverse organs of news and opinion can be ended not just by merger and takeover but by a persistent campaign of below-cost price cutting on the part of one newspaper group which is well able to cross-subsidise from other businesses to the detriment of certain newspaper groups.
The pricing policy of The Times newspaper, referred to by the noble Lord, Lord McNally, regularly to sell at 10p on Mondays, has repeatedly threatened the continued existence of the Independent. That distorts competition with the Daily Telegraph and other broadsheet newspapers and, I have no doubt, has a serious exclusionary effect because it is likely to deter those who might otherwise think of entering the market. Who today, I ask, would dare to start a new broadsheet newspaper, as was done by Mr. Andreas Whittam Smith and others when the Independent was started in 1986? It seems to me that such persistent conduct should be regarded as seriously damaging to the competitive process and as an abuse of dominant position. Therefore, I feel favourably disposed—and I hope that the Minister will feel favourably disposed—towards either or both of the amendments that have been proposed today.
Lord Ackner: I support everything said by the noble Lord. Lord Borrie. It must be a fundamental purpose behind Clause 18 that abuses of power should be prevented. What has been described seems to me to be a most blatant indication of power being abused. As has been stated, competition has been distorted and the diversity of opinion among the press is threatened. There is a threat to the very freedom and variety of expression. I should have thought that it would be remarkable if this Government were not prepared to see such a situation properly catered for. That is not the case as Clause 18 now stands.
Lord Haskel: The concern of the noble Lord, Lord McNally, for predatory pricing in the newspaper industry has been well documented and I have a great deal of sympathy. He has conducted the campaign well

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and with a great deal of ability. However, it would be quite wrong of me to comment on the specific complaints relating to the newspaper industry as discussed. The purpose of the Bill is to establish a legal framework under which the Director General of Fair Trading, the Competition Commission and the courts can assess whether individual agreements and conduct are anti-competitive. I shall therefore restrict my comments to the issues of principle raised by the amendments. Perhaps I may remind Members of the Committee that when Sir Bryan Carsberg was Director General of Fair Trading he rejected previous complaints, taking the view that the decision of The Times to reduce its prices was a reasonable commercial strategy.
The amendments relate to predatory pricing tactics; that is, price cutting designed to force competitors out of the market or to discourage new competitors from entering the market. However, it is perfectly clear that such practices carried out by a dominant undertaking may constitute an abuse under Article 86 of the treaty, depending on the particular circumstances of the case. This Bill introduces stronger legislation on abuse of dominance and that, depending on the circumstances, also covers predatory pricing.
As well as referring specifically to the newspaper industry, the noble Viscount spoke also about vertical agreements. That is proper territory for the Director General of Fair Trading, the tribunal and the courts. This amendment carries the same risk as other amendments which seek to depart from the illustrative list in Article 86. Over and above that, it would be especially undesirable to refer in the list to any particular sector of the economy. Clause 18 is a general prohibition on abuse of dominance modelled on Article 86 and it provides a clear legal framework against which to assess whether any particular conduct is abusive and likely to restrict competition.
In view of the fact that this Bill introduces stronger legislation on abuse of dominance and covers predatory pricing, I should have thought that the noble Lord would support the Bill as drafted and withdraw the amendment.
Viscount Astor: Will the noble Lord confirm that if a company is dominant in one market but the abuse is in an entirely different market, that will be covered by this Bill when in the past, it has slipped through the gap?
Lord Haskel: As I said on the previous amendment on abuse of economic strength in another market, EC case law shows that in certain circumstances Article 86 may apply where an undertaking that is dominant in one market commits an abuse in a different market.
Lord McNally: I thank the Minister for his kind comments. I ask him to observe that in a fairly lightly attended Chamber, speeches of support have been made from Conservative, Labour, Liberal Democrat and Cross Bench Members of the Committee. Therefore, I hope that Ministers do not underestimate the strength of feeling on this issue. There is some disappointment that there has been such a spectacular U-turn from what the party spokesman was saying in opposition.
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I shall not press the amendment this evening. However, I shall consult the noble Viscount, Lord Astor, to see which of us can come up with the best course for the next stage of the Bill. We shall probably seek the advice of the noble Lord, Lord Borrie, and even of the noble and learned Lord, Lord Ackner, if he is not too expensive.
Lord Ackner: There will be cut prices on this occasion only!
Lord McNally: I am even more encouraged. However, I warn Ministers that we may well test the opinion of the House on this matter on Report. However, at present, I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Lord Haskel: I beg to move that the House be resumed. In moving this Motion, I suggest that the Committee stage begins again not before 8.40 p.m.
Moved accordingly and, on Question, Motion agreed to.
House resumed.

Fishing Vessels (Decommissioning) Scheme 1997
7.45 p.m.
Lord Carter Lord Carter rose to move, That the scheme laid before the House on 5th August be approved [10th Report from the Joint Committee].
The noble Lord said: My Lords, as frequently happens when the House debates fisheries issues, the immediately topical questions are not always those covered by the substantive motion. This is likely to be the case today when the scheme we are considering relates essentially to clearing up unfinished business while noble Lords and the fishing industry will be anxious to hear about our plans for tackling the new obligations to which the Government are committed under the terms of MAGP IV.
It may therefore be helpful if I make clear at the outset that the 1997 decommissioning scheme is aimed at reducing the shortfalls against MAGP III targets, which will otherwise carry over into MAGP IV, and does not pre-empt, prejudge or otherwise anticipate the measures which we are still considering, in consultation with the fishing industry, for the implementation of MAGP IV. The final MAGP IV figures have only just been considered by the EU's Fisheries Management Committee and remain to be formally adopted by the Commission as decisions addressed to each of the 13 maritime member states. It would therefore be premature for me to attempt any analysis of them at this stage.
It is, however, relevant that, in making its proposals for these MAGP IV decisions, we finally succeeded in persuading the Commission to reflect the various adjustments to the UK's MAGP III figures which

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correct the long-standing impression that matters were actually worse than they really are. I understand that the corrections were extremely technical and officials are to be congratulated on the way in which the corrections were made.
The detailed position is a little complicated but is set out in full by my honourable friend the Parliamentary Secretary, Mr. Elliot Morley, in a recent Written Answer to the honourable Member for Boston and Skegness. In brief this confirms that the UK has met its overall MAGP III target for power and is within 3 per cent. of the total tonnage figure in gross registered tonnage. Within that the main shortfalls are in the pelagic and beam trawl segments where there have been few candidates for decommissioning in previous rounds. There are also shortfalls in the demersal trawl and distant water segments. However, as it is proposed that the definitions of these segments should be modified in MAGP IV, the read-across in terms of carry-over is not. so direct. Nevertheless any further progress we make now—in any or all of the areas of shortfall—will help to reduce the task ahead in MAGP IV. It may again help to clarify matters later if I emphasise now that there is no objective need to decommission any more nephrops vessels to meet MAGP III targets, which were over-subscribed in this segment by some 40 per cent.
My last general observation, before turning to the details of the scheme, concerns financial provision. As the House will know, the previous administration made provision for expenditure on decommissioning totalling £53 million over five years. In the four rounds which they operated, some 8.2 per cent. of fleet capacity was removed at a cost of £36.4 million. However, their public expenditure plans for this final year of the programme contained only £12 million. By re-ordering priorities, I am pleased to be able to announce that we have been able to increase this to a maximum of £14.5 million, subject, of course, to the value for money of the bids received. But, as I said, that is entirely without prejudice to our response to the industry's calls for further decommissioning expenditure in MAGP IV. We are still consulting on the means of achieving the new UK objectives and will need to take account of the outcome of our current spending review as well as the position resulting from the success or otherwise of the 1997 scheme itself.
I turn now to the details of the 1997 scheme. That is closely based on previous schemes but excludes vessels belonging to segments which have met their MAGP III targets. Applications are therefore restricted to vessels holding a valid Category A licence, excluding nephrops vessels. Provision is also made for the exclusion of vessels in other segments which have met or are close to meeting their MAGP III targets. To improve value for money and permit vessel owners to secure the value of their track record, successful applicants will, on a pilot basis, be permitted to retain or transfer their vessels' track records. Detailed arrangements for that have been drawn up in consultation with the industry and given appropriate publicity.
The scheme provides, as before, flexibility for Ministers to set deadlines for the scheme. My honourable friend has already announced that applications had to be received by 24th October and that successful applicants will be expected to have decommissioned their vessels and surrendered all licences and entitlements before 27th February 1998.
As the deadline for applications has already passed, we will be notifying applicants of the outcome of their bids within a short period of time. Save for the changes that I have already highlighted, the scheme is similar to its predecessors. The key points are that vessels must be over 10 years old, be seaworthy and hold a valid Category A fishing licence; that, if accepted. vessels must proceed to decommission or be excluded from any future scheme; and that the tendering system, which is again used, is fair and well understood by fishermen and gives good value for money.
Finally, noble Lords will wish to note that my honourable friend has recently made available an independent report on the economic evaluation of the decommissioning schemes to date. That supports the changes that we are making this year and confirms that the tendering system has indeed offered good value for money. It also notes that the scheme has facilitated the renewal and modernisation of the fleet and concludes that there is a case for seeking an industry contribution to any future expenditure. I beg to move.
Moved, That the scheme laid before the House on 5th August be approved [10th Report from the Joint Committee].—(Lord Carter.)
Lord Pearson of Rannoch: My Lords, I am sure that the noble Lord, Lord Carter, enjoys the sympathy of the House for the unpleasant task that he has just performed. After all, we know that he is no lover of the common fisheries policy because in the last Session of Parliament the noble Lord opined to the House that if there was one European policy more crazy than the common agricultural policy it was the common fisheries policy. Indeed, only a week ago, the noble Lord confirmed that view (in col. 1479 of Hansard) when he said:
"The CFP makes the CAP look like a beacon of sweet reason and light".
So I. for one, can understand the noble Lord's discomfort at having to perpetuate this evening one of the most damaging aspects of the common fisheries policy; that being the decommissioning of vessels.
Nor is the Minister alone in holding such beliefs within his party. In 1995, two years ago, Mr. Gavin Strang (who was then the Labour spokesman on agriculture and fisheries) put one of the problems rather well. He said:
"Surely the Secretary of State for Scotland and his ministerial colleagues understand that it is unacceptable that we should be decommissioning vessels to facilitate additional fishing opportunities in waters around the United Kingdom for the fishing industry of one of our European partners, in this case Spain".
The figures which Mr. Strang may have had in mind are that Spain is to receive some £721.32 million between 1994 and 1998, under Objectives 1 and 5a of the Financial Instrument for Fisheries Guidance. In addition, an unknown sum from the structural and

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cohesion funds may be finding its way towards the upgrading and upkeep of the Spanish fleet. The UK generally pays some 14 per cent. of these figures, so we are looking at at least £100.98 million of our money going to Spain under these headings.
Then there is the money which the EU pays for the right to fish in other countries' waters outside the EU. For the four years from 1996 a total of £637.89 million has been spent in this way, of which the UK's share again comes to 14 per cent., or about £90 million. Here again, Spain is the principal European beneficiary. Most of the recipients of that money from the EU are poor third world countries, whose boats cannot compete with the highly efficient EU fleets. So I suppose one can also be forgiven for wondering how much of this money actually gets through to the fishing communities in question.
All this leads me to put a question to the Minister, which I put fairly regularly to the previous government without the benefit of a clear reply. It is quite simply this: is the UK paying more money to Spain to build and maintain boats to come and take fish from what used to be our waters than we are paying to our own fishermen to destroy their boats and, I might say, their livelihoods?
Further, can the Minister say whether it is true that this scheme splits licences from track records? In other words, when we destroy a boat, is the quota of fish that it used to catch cancelled or is it shared out among the remaining boats, a large number of which will be Spanish and highly sophisticated and powerful? If this is so, does the Minister agree that fishermen go out of business but the stock of fish is unlikely to be conserved? I believe that the Minister said something about track records possibly being, under some pilot scheme, shared out in future. Can the noble Lord confirm that point in greater detail in his response?
I suppose the noble Lord may be tempted to answer my criticisms by saying that a Conservative Government under Sir Edward Heath took us into the common fisheries policy in 1972. That is of course quite true, and for one, make no excuse for such an act of treachery, nor have I ever attempted to do so. But we now have New Labour in power and, during the election campaign, we were promised that the CFP would be reformed if New Labour won the election, thanks to its new ingratiating stance in Brussels. Can the Minister tell us how the Government are progressing on this one? To be precise, what is the latest state of play in the voting system required to reform the CFP? Are we any nearer to adequate reform now than we were under the Conservative Government? Or is the only way to get what we want and need for our fishermen in fact to leave the Treaty of Rome, which in any case seems increasingly redundant nowadays? I look forward to the Government's reply, and apologise again if these questions cause the Minister any personal embarrassment.
Lord Newby: My Lords, I am breaking new ground in speaking in the debate this evening. It is a long-held Liberal Democrat policy that the only people who are allowed to speak on fisheries policy are Cornishmen and
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Scotsmen. However, I make no apologies to my colleagues in the party for speaking on the matter. My experience of the fishing ports is not as great as that of some of my Cornish colleagues in particular, but having spent 20 years of my life regularly visiting the east Yorkshire ports of Bridlington, Scarborough and Whitby, I am only too well aware of the importance of the fishing fleet to those communities. I am also very well aware of the effect that that experience has had on my thinking about fisheries; namely, the greater importance that fisheries play in our national life than the simple figures of the number of fishermen employed or the number of fishing boats at sea imply.
Decommissioning is a necessary evil. There will be no long-term future for the fishing industry unless fishing stocks are given the chance to recover and. having recovered, the fish are then harvested at a sustainable level. No one who cares about the long-term future of the fishing stocks and of the fishing industry can, in my view, legitimately argue with the principle of the regulations. Indeed, despite the criticisms that might be made about the policy, one should be aware that in some areas at least fishing stocks are now increasing. Without a fishing policy and without a common fisheries policy, I suspect that that would not be the case.
Lord Pearson of Rannoch: My Lords, I wonder whether it is in order to ask the noble Lord a question. Is he aware of the examples of Norway and Namibia both of which have taken back control of their waters. and the fishing industries are doing very well as a result?
Lord Newby: My Lords, I am aware of the example of Norway, but I cannot claim to be aware of the Namibian example. Anyone who believes that a common resource such as fish, any more than many other aspect of common resources of the environment, can be dealt with purely on a national basis will be mistaken in the long term.
I was about to say that the background to the issue is, in my view, the depressing failure of the previous government to grasp the nettle and introduce a decommissioning scheme at an earlier stage. That played a major part in the development of the abuse of quota-hopping and the sad spectacle, as the last election approached, of fishing Ministers going to Brussels making ever-more blood-curdling threats and coming away having achieved nothing. It is perhaps not surprising that, as a result, many fishermen found it difficult to support their traditional party.
I turn now to the details of the scheme. There are some aspects of the changes in the new scheme over those in previous schemes which we welcome. For example, we welcome the decision to allow vessel owners to secure the value of their track record. We also obviously welcome the fact that there will be more money available, although in doing so we note that the expenditure in this country is considerably less than that which has been made available over a number of years in some other member states.
However, some things in the scheme have not changed and we wish that they had. We know, for example, that there is still the policy of scrapping

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vessels as being virtually the only way of dealing with their decommissioning. In our view that is a classic case of a gold plated regulation and a more rigid application of it than applies elsewhere. I note that the only exemption from that rule is for fishing vessels that find their way to museums. I would love to know how many decommissioned fishing vessels have found their way to museums. I hope the Minister can tell me that. I suspect that is hardly an important aspect of the scheme.
If one looks more generally at the common fisheries policy, I think anyone must accept that there is one aspect which is simply not working. I suspect that the noble Lord, Lord Pearson, might agree with me on this point. I refer to the question of enforcement. If the fisheries policy is to achieve its goals it simply has to be enforced more rigorously than is the case at the moment. As we have a common fisheries policy this is obviously an EU matter. However, I wonder whether the Minister and his colleagues might consider whether, as part of their activities during our presidency of the EU, more impetus could be given to the whole question of enforcement of the common fisheries policy as this is one of those areas where failure tends to bring the whole policy into disrepute.
I cannot leave this issue without referring briefly to the wider problems of the fishing communities and the regions in which they are found. In the case of Cornwall, for example, even the most optimistic person on the future of the fishing industry does not believe that it will be capable of lifting the whole region out of high unemployment and low income levels. There is, therefore, a compelling case for a range of employment generating initiatives, of which in Cornwall the establishment of the university of Cornwall and the establishment of a regional development agency are probably the most important. We shall press for progress on both those initiatives during the course of this Parliament. However, whatever is done on these alternative methods of employment, it is difficult to imagine Cornwall, or indeed east Yorkshire, without a strong, viable and sustainable fishing industry. The scheme under discussion today will play a small part in making that possible.
8.5 p.m.
Lord Mackay of Ardbrecknish: My Lords, this is the first time I have talked about fishing in this House since I entered it. Part of the reason for that was that while I was a government Minister I never had responsibility for fishing, and another reason was that prior to joining the Government I was the chairman of the Sea Fish Industry Authority and I decided that I was precluded from discussing fishing matters, whether or not that was actually the case. Therefore this is my first opportunity to discuss fishing in this House. I could be tempted to make a far more wide-ranging speech than will be the case. I was almost tempted by my noble friend Lord Pearson and the noble Lord on the Liberal Democrat Benches to make a slightly more wide-ranging speech on general points about the common fisheries policy. However, I shall resist that temptation.
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This decommissioning package is part and only part of the policy on fishing, both the common fisheries policy and the policy on fishing of the British Government. It is difficult to talk about a specific part of decommissioning without discussing some other parts. Therefore I shall probably make a slightly more wide-ranging speech, but I shall try to resist the temptation to speak too widely.
The primary purpose of the scheme is of course to spend the £12 million which was budgeted for and which is the final tranche of the 1992 scheme. As the Minister rightly pointed out, the scheme will deal with the current unmet capacity reduction targets under the multi-annual guidance programme. As the Minister rightly pointed out, there are two differences between this scheme and the previous schemes. The first is the exclusion of Nephrops vessels from participation on the ground outlined by the Minister that this sector has fulfilled the capacity reductions laid down.
I do not think it is quite as simple as that. As the Minister will know, the Nephrops fishermen around the coast are not at all happy that they have been excluded from the decommissioning. My reasoning for thinking it is not entirely wise to exclude that section is that the sections of the fishing industry are not self-contained compartments because vessels and fishermen move from one sector to another. People change from fishing principally for white fish to fishing for Nephrops. More importantly, I think it is fair to say that older vessels tend to find their way into the Nephrops fleet. I suspect that is why the Nephrops fleet took up the decommissioning on offer. That will still be the case. Looking at the whole fleet, if Nephrops vessels wish to come out of the fleet, I suspect that will create openings in the Nephrops fleet for vessels in rather more heavily fished parts of the fleet. I underline the point that the Nephrops fleets in, for example, the west of Scotland and, I suspect, in Northern Ireland are not happy about the discrimination against them.
Further, there is the point about allowing fishermen to dispose of the track record separately so that the grant scheme will relate only to the value of the vessel and not to the value of the track record. I am not sure that I can join the noble Lord on the Liberal Democrat Benches in welcoming that, for two reasons. First, it suggests that the industry itself might be part funding this decommissioning; in other words, the boat being decommissioned will get some of its money from the scheme and some of its money from its track record—and that means from other parts of the industry. What is perhaps more worrying, I do not think there is anything to preclude these track records from passing into the hands of the flag ship operators. That will make the position on flag ships even worse.
The position on flag ships is relevant to decommissioning because the industry feels strongly that the two issues are linked. I shall not discuss the history of this. We tried hard as a government to find a legislative way to stop quota hopping. We thought we had done so as we had received some sound legal advice on the matter. Unfortunately, the European Court decided that we were wrong and that we could not do it because the common fisheries policy, which was

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designed not by Ted Heath but in the early '80s, was inconsistent with the Treaty of Rome. My view of that is that the European Court may have had logic on its side but it did not make a sound judgment. It ought to have considered the matter in the round. Undoubtedly the people who created the common fisheries policy thought they were working within the treaty and thought they were doing the right thing in tying quota to country. They did not envisage in any way that there would be any quota hopping. Therefore I believe that this is a linked problem.
The previous government had said very clearly that they would not go down any of the MAGP IV routes until this problem of quota hopping was addressed. The noble Lord on the Liberal Democrat Benches said that we were making belligerent noises. That was the case. However, all we have heard from the Government is that there is an exchange of letters between the Prime Minister and the President of the European Commission saying that something will happen. A few months have passed since June when the letters were exchanged and nothing seems to be happening. I wonder where we are on these issues.
If one limits effort, because that is what decommissioning is about, and one moves into a MAGP IV situation where there are limits to efforts, which means that vessels are forced to tie up for a certain number of days in the year, I wonder what the consequences of that will be. I can see a link between restriction of quota and restriction of days at sea. If one needs only to spend a couple of hundred days at sea to catch one's quota, perhaps it is easier to judge one's fishing effort in terms of days at sea. However, I know that the industry is not convinced about that. We would have to do much more work before we replaced quota with days at sea. I must tell the Minister—this has always been said by fishermen—with his knowledge of agriculture that fishing is an industry which receives little money from the taxpayer in comparison to agriculture.
If we go down the route of restricting the number of days fishermen go to sea that looks—dare I say?—not unlike agricultural setaside. To this Government, and to the previous government, many fishermen said: "Why can we not have the same kind of payments as the farming industry enjoys on setaside?" I always found my answers less than convincing; and I do not suppose that the Minister's answer will be much better than mine.
All these measures are designed to protect the stocks. When I read the results of the European Fisheries Council as announced by the noble Lord, Lord Donoughue, to the noble Lord, Lord Williams of Elvel, on 4th November, I was disappointed on a number of matters and approved of a number of matters—for example, gradual increase in the size of mesh provided it is still realistic. I was glad to see that the Government resisted an increase to 110mm in the North Sea, but there is an argument for a gradual increase in mesh size elsewhere around our coast from 80mm to 100mm. I was disappointed to see that the square mesh idea was not being adopted other than in the nephrops nets. The nephrops nets having square mesh panels is a
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considerable improvement; however, square mesh could be used rather more widely in fisheries. When I was chairman of the Sea Fish Industry Authority I advocated that change quite firmly. We were absolutely convinced by research done by the authority that it allowed for a better escapement of under-sized fish.
I did not fully understand the point about minimum landing sizes being changed in order to reduce discards. While it is not all that relevant, perhaps the Minister will write to me.
My final point relates to the interesting fact that the only other subject which the Minister in the Commons decided to take up with the Commission was progress on driftnets. I should like to have seen from the Statement that he had taken up the need to make progress on quota-hopping. However, if it has to be driftnets, it has to be driftnets. My question—and I am sure the noble Lord, Lord Williams of Elvel, will also be interested in the answer—is: does the definition of "driftnet" cover driftnet fishing off the Northumberland coast of England, which is an interceptory net to the salmon returning to the Scottish rivers?
8.15 p.m.
Lord Carter: My Lords, we have had a lively and interesting debate on issues which will be very material to the long-term survival of both the fishing industry and the stocks on which it depends. I am grateful to all noble Lords who took part.
Perhaps I may first make a general point, and then deal with questions in so far as I am able. Improving the balance between catching capacity and what stocks will bear is fundamental and, I hope, common ground between all concerned, be they politicians of whatever party, fishermen of any member state or the scientists and administrators who have the very difficult job of devising and implementing the policies required. The problem, which we all understand, is that the equation between capacity and fishing effort, or fishing effort and fishing mortality, is not straightforward and varies according to the circumstances involved. A broad brush approach may penalise legitimate fisheries of no conservation concern, but a finely targeted approach will inevitably be much more complex to administer. The MAGP process has discernibly shifted from broad brush to fine targeting over the past few years, bringing with it a legacy of outstanding issues.
I now turn to the many questions that were asked. I am pleased to see the noble Lord, Lord Pearson of Rannoch, in his usual place on the common fisheries policy. In relation to the remark I made about the CAP, I can only say that I should learn my lesson. You should never try to make a joke in this House, because it comes back to hit you. I congratulate the noble Lord on the assiduity with which he read Hansard.
To turn first to the noble Lord's question on decommissioning and facilitating quotas for other member states, he is not correct: the quotas of other member states are not affected by decommissioning, which concerns fleet size.

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The noble Lord asked about the money for Spain. Spain has the largest fleet in the European Union. It is therefore not surprising that it receives a significant share of EU money.
Another question concerned money for building boats in Spain. That is true, because Spain has met its MAGP targets and does not compare directly with UK expenditure on decommissioning, which is still needed to meet the targets which the previous Administration failed to meet.
I was also asked about transfer and track records. We decided to detach track record from licences following requests from the industry and after full consultation, which showed strong support for greater flexibility in the use of track records. Moreover, as there is a financial value associated with track records, and mindful of the need to try to reduce the level of bids so that the taxpayer will receive better value for money from decommissioning, we decided to take account of that on a pilot basis to see whether that would have any effect on the value of bids. The noble Lord referred to the former Prime Minister, Sir Edward Heath, accusing him of treason. That was a little on the strong side, even for the noble Lord.
The system of voting on the common fisheries policy is by qualified majority, as required by the treaty. There are no plans for changing that.
I welcome the noble Lord, Lord Newby, who is speaking for the first time from the Front Bench. He has my sympathy since his first speech is on fishing. I assure the noble Lord that things will get better. I am extremely grateful for the support that he provided.
The noble Lord asked how many of the decommissioned boats are in museums. I understand that there were three last year. It is for owners of museums to make the necessary arrangements.
On the important regional question—the impact of decommissioning on vulnerable ports—my honourable friend the Parliamentary Secretary, Mr. Elliot Morley, has had a series of meetings with representatives of some of the ports that have been badly affected. We have considerable sympathy with those who are suffering as a result of the problem. However, if we consider the way in which the decommissioning scheme has been structured there is little control over where the bids come from and whether they come disproportionately from England or from any particular port. There is a socio-economic impact on those ports. At this stage all we can say is that we recognise that fact and are giving some thought as to whether there is any way in which the problem can be mitigated. I repeat that we have great sympathy with those who are suffering the impact of decommissioning.
I turn now to the points made by the noble Lord, Lord Mackay. I welcome him on the same side as the noble Lord, Lord Pearson of Rannoch, although obviously not agreeing with him. Turning first to the question of nephrops, this round of the scheme is designed to focus on those segments of the fleet which have not met their targets under MAGP III; since the nephrops segment overshot it target Ministers did not want to see that
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segment of the fleet run down further and were not able to justify the public expenditure that would have been involved in decommissioning capacity which would not contribute to our meeting the MAGP III targets.
The noble Lord asked about the separate disposal of the track record. We decided to detach track record from licences after requests from the industry and after full consultation, which showed strong support for greater flexibility in the use of track records. Moreover, as there is a financial value associated with track records, and mindful of the need to try to reduce the level of bids so that the taxpayer will receive better value for money from decommissioning, we decided to take account of that on a pilot basis to see whether it would have any effect on the value of the bids.
On quota-hopping, we are not able to discriminate on grounds of the nationality of the owner. As previously, the scheme is confined to fishing vessels registered and licensed in the UK. That will continue to apply. If quota-hoppers are decommissioned, that will contribute to our targets and increase the quota available to the rest of the fleet. It is clear that the Amsterdam deal will not get rid of all quota-hoppers. It is now open for the Government to lay down requirements to ensure that real economic links exist between the UK fishing fleet and our coastal communities which are dependent upon fisheries-related industries.
Treaty changes were never a realistic option. There was no support for them from any other member state. We have clear guidance from the Commission on measures that we can take to ensure that fishing vessels have genuine economic links with the UK and will continue to work up a package of measures based on that guidance and in consultation with the industry.
The noble Lord also asked about MAGP IV. The Commission has now formally consulted the member states through the Management Committee procedure and will proceed to approve the resulting proposals in the next few weeks. Rates of reduction vary considerably according to vessel type (segment) and stock fished. The calculations also differ according to the means of implementation. The calculations are made either by reducing capacity (decommissioning) or introducing limits on time spent at sea (effort control). It is therefore not possible to give a single figure for the whole fleet in terms of either capacity or effort. The highest weighted reductions, which apply to the pelagic segment, will be about 20 per cent. over the next four years, while vessels under 10 metres in length may face no reduction at all.
I refuse to be drawn on the comparison with the set-aside. No one likes the principle of set-aside in farming. So why repeat it in fishing?
I know that the noble Lord is concerned about the question of square mesh. I am sure he knows this, but it is as well to repeat that as from 1st January 2000 a 70mm square mesh panel will be required in nets in the range of 32mm to 54mm; an 80mm panel will be required in nets in the range of 70mm to 79mm. This is the first time that EC legislation has required such panels on a mandatory basis. Any other net may

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incorporate a square mesh panel of at least 80mm. The so-called Baltic panels, at the side of the net rather than on the top, can be used in any net of at least 100mm.
Finally, I believe the noble Lord made a point with regard to panels not being mandatory in all nets. It is true that we too were disappointed that it did not prove possible to secure the Community's agreement to the mandatory inclusion of panels in all nets. However, there is a requirement in the regulation for the Commission to give priority in the next three years to funding research projects concerned with the use of square mesh panels or other selective devices. The Council will then be better placed to make informed decisions about further improvements to selectivity in nets at a later stage. That is very welcome.
Drift nets on the Northumbrian coast are outside the terms of the scheme but I shall be pleased to write to the noble Lord with regard to that matter.
As I said, today's debate is about setting the record straight and going into MAGP IV committed to meeting our obligations and serving the best interests of the industry. Much work remains to be done, and there will no doubt be many opportunities for debate. Within the limited terms of the 1997 scheme, and without prejudice to the continuing consultation with the industry on the implementation of MAGP IV, I trust that I may count on the support of the House in approving the scheme.
On Question, Motion agreed to.
Baroness Farrington of Ribbleton: My Lords, I beg to move that the House do now adjourn during pleasure until 8.40 p.m.
Moved accordingly, and, on Question, Motion agreed to.
[The Sitting was suspended from 8.23 to 8.40 p.m.]

Competition Bill [H.L.]
House again in Committee on Clause 18.
Lord Lucas Lord Lucas moved Amendment No. 20:
Page 10, line 30, after ("no") insert ("necessary").
The noble Lord said: This amendment is intended to address what I find to be one of the most tiresome abuses of a dominant position, and that is bundling. The noble Lord, Lord Borrie, whom I believe is enjoying a long supper, referred to it earlier as making the customer who wanted to buy one good take another good with it if he was going to get the first good. This is an abuse of a dominant position which goes back to biblical times, when the poor man was not allowed to marry Rachel until he had married her older sister. This is prevalent also in modern times with the way in which Microscoft is alleged to have been dealing with its rival Netscape.
There are many more domestic examples of this abuse. Without naming names, I can think of a major company which is in a dominant position in the supply of a raw material which insists that its customers also buy transport from it if they wish to buy the raw
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material. I can think of a dominant supplier of a consumer good who insists that if you want one of their goods you have to buy another half-dozen as well.
These are all practices which, it seems to me, should fall squarely within the prohibitions of Clause 18 of the Bill. However, the example given in Clause 18(2)(d), illustrating how this sort of abuse would be tackled, is restricted to,
"acceptance by the other parties of supplementary obligations which, by their nature or according to commercial usage, have no connection with the subject of the contracts".
Clearly, that is far narrower than is intended by this prohibition and far narrower than European practice. If we have an example in this Bill which is so narrow it will surely encourage our courts to define abuse narrowly, which is not what we wish to achieve. I know that this follows the wording of the European Treaty, but since we are dealing here, not with a piece of definitive law, but merely an example. it would be advantageous to render it into English rather than Eurospeak. It would be advantageous to render it nearer to what we mean and to put the word "necessary" between "no" and "connection" so that where companies are indulging in a practice where there is some connection, as indeed Microsoft would be able to say there was with its Internet Explorer and where there are indeed the domestic abuses I have illustrated, they would be able to claim that there was some connection and thereby they did not come under the example. I am sure the example was drafted to show the sort of abuses that were intended to be caught, and that therefore they should not be caught by this provision, but surely we should use wording more in line with our intentions rather than the particular wording that has arisen through copying a European statute. I beg to move.
8.45 p.m.
Lord Simon of Highbury: The noble Lord has given me the defence which I am afraid I must plead. Subsection (2) of the clause sets out an illustrative list. It is based, as the noble Lord rightly suggests, exactly on the corresponding illustrative list in Article 86. While I can see that the noble Lord, Lord Lucas, may wish to change its emphasis, I believe that the right course is to follow Article 86 as closely as possible.
Although the noble Lord may think that it is Eurospeak, it has the advantage of being absolutely clear, and for that reason reduces the business burden. I emphasise that the list is illustrative and amendments would not affect the substantive effect, prohibition of the abuse, but that is a secondary issue. We are talking about the clarity of the statement and I am afraid, as the noble Lord observed, we believe that it is better to stay as closely attuned to the Article 86 text as possible for reasons of clarity and lack of doubt for business.
I hope, on that basis that the noble Lord is prepared to reconsider and to withdraw the amendment.
Lord Lucas: I expect to end up by withdrawing the amendment but I would hope that the noble Lord could address himself, if not to the technical aspects of the amendment, to the substance of it. I would appreciate confirmation of the sort of anti-commercial practices

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outlined by the noble Lord, Lord Borrie, previously. I took the noble Lord's name in vain because the noble Lord, before supper, gave, as an illustration of an abuse of a dominant position, being forced to take one good when you wanted to buy another. I hope the noble Lord the Minister can confirm that that is very much the sort of thing which the clause is aimed at and that it is his hope and expectation that the Director General of the Office of Fair Trading will come down hard on such abuses when he has the ability to do so.
Lord Simon of Highbury: I understand the point that the noble Lord is making. In no way was I intending to suggest that the drafting should give any doubt as to the severe penalties that will be available if abuses of this nature can be proved.
Lord Lucas: I shall have to be content with that. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
[Amendments Nos. 21 to 26 not moved.]
Lord Simon of Highbury Lord Simon of Highbury moved Amendment No. 27:
Page 10, line 33, leave out ("in the market").
On Question, amendment agreed to.
[Amendments Nos. 28 to 30 not moved.]
Clause 18, as amended, agreed to.
[Amendment No. 31 not moved.]
Clause 19 [Excluded cases]:
[Amendments Nos. 32 and 33 not moved.]
Clause 19 agreed to.
Schedule 1 [Exclusions: Mergers and Concentrations]:
Lord Simon of Highbury Lord Simon of Highbury moved Amendment No. 34:
Page 39, line 25, leave out (", or would if engaged in result,").
The noble Lord said: This amendment is grouped with Amendments Nos. 36, 37, 39 and 40. Schedule 1 excludes mergers from the prohibitions to avoid overlap with existing merger control regimes at the UK and EC level. Exclusions under this schedule cover mergers both above and below the thresholds for investigation at UK level. The Government have listened carefully to comments from legal practitioners and others that the draft Bill published in August needed to provide for a wide exclusion of all mergers, including those involving the taking of effective control over a company. As a result of the consultation the schedule now provides for that wider exclusion, which I think has been much welcomed by the business community.
The schedule provides a general exclusion from the Chapter I prohibition for mergers that fall within the description of enterprises ceasing to be distinct in Part V of the Fair Trading Act 1973. However, to provide an objective definition for the exclusion, certain arrangements that may be treated as mergers for the purposes of the Fair Trading Act must be treated as mergers for the purposes of the exclusion. These are
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arrangements—broadly the acquisition of control or material influence by one business over another—to which the exclusion has been extended in response to the consultation. But this extension of the exclusion creates some risk of providing a loophole for anti-competitive agreements. The schedule therefore provides that the director may, with notice, remove the benefit of the exclusion from an agreement where he considers it would infringe the prohibition and would not merit an additional exemption. This approach has been developed in consultation with practitioners.
The Government intend that this ability for the director to remove the benefit of the exclusion should apply only in respect of mergers that are mergers by virtue of Section 65(3) or 65(4)(b) of the Fair Trading Act and should not apply to mergers cleared by the Secretary of State or which the competition commission has decided, on reference, qualify for investigation. The Bill as introduced provided for these limitations to be prescribed in regulations made by the Secretary of State. However, we want to give certainty from the outset for those kinds of mergers where there is no ability for the director to remove the benefit of the exclusion and we wish therefore to set out on the face of the Bill the categories of protected agreements in respect of which the director is not able to withdraw the benefit of the exclusion. Amendments Nos. 39 and 40 give effect to this and remove the order making power. The department's memorandum to the Select Committee on Delegated Powers and Deregulation signalled our intention to do so, as noted in the committee's report.
Amendments Nos. 34, 36 and 37 make drafting amendments. Amendment No. 34 removes unnecessary wording. We do not believe that the Chapter II prohibition would catch contemplated conduct. Amendments Nos. 36 and 37 amend the exclusion for newspaper transfers to limit the extent of the exclusion from the two prohibitions to agreements and conduct to the extent that they constitute such a transfer. They incidentally remove the Chapter II exclusion from provisions directly related and necessary to the implementation of a newspaper transfer.
I am conscious that this raises an issue that is relevant to Amendment No. 35 in the names of the noble and learned Lord, Lord Fraser of Carmyllie, and the noble Lords, Lord Kingsland and Lord Lucas. I would prefer to deal with the issue when we discuss Amendment No. 35 but I can assure the noble Lords that I will keep an open mind on that. I beg to move.
On Question, amendment agreed to.
Lord Kingsland Lord Kingsland moved Amendment No. 35:
Page 39, line 27, at end insert—

("(I A) The exclusion provided by sub-paragraph (I) extends to any provision directly related and necessary to the implementation of the merger provisions.

(1B) In sub-paragraph (IA) "merger provisions" means the provisions of the agreement which cause, or if carried out would cause, the agreement to have the result mentioned in sub-paragraph (I).").

The noble Lord said: Amendment No. 35 refers to paragraph 2 of Schedule 1 to the Bill. Its simple intention is to include in paragraph 2 the identical

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phrases to those included in paragraph 1(2) and (3), so that in the context of these mergers ancillary agreements will not be caught by prohibition 2. It is very hard for the Opposition to understand why ancillary agreements to mergers are given protection against the application of prohibition 1 but not protection against the application of prohibition 2. That is the reasoning behind Amendment No. 35.
Amendment No. 38 applies to paragraph 4 of Schedule 1 and the discretion it gives to the director general not to apply a particular agreement if a direction is given under that paragraph. I ask the Minister to look in particular at paragraph 4(2)(b), which states:
"the agreement is not a protected agreement".
I have noted that the Minister has tabled his own amendment, Amendment No. 40, which defines protected agreements. I welcome that on behalf of the Opposition. However, it does not completely satisfy our objectives.
Perhaps I may ask the Minister to turn to heading (c) of his Amendment No. 40, beginning with the words,
"the agreement does not fall within paragraph (a) or (b)".
Our difficulty here is that part of the heading in the ultimate and penultimate sentences in brackets,
"otherwise than as the result of subsection (3) or (4)(b) of that section"
Those subsections refer to the Fair Trading Act 1973.
That Act allows the director general in some circumstances to investigate mergers where the control aspect is as low as 10 or 15 per cent. The effect of the exception in the brackets would be to continue to allow the director general, in certain circumstances where he wished, to look at mergers where the control factor was as low as 10 or 15 per cent. In the Opposition's respectful submission, that is too onerous a burden for mergers carrying that level of control to bear. We ask the Government to give an absolute exclusion.
The final amendment refers to what I think is an unintended, rather technical, point which is contained in paragraph 5(2). I quote:
"the Chapter II prohibition does not apply to the conduct if the Merger Regulation gives the Commission exclusive jurisdiction in the matter".
Paragraph 9 of the merger regulation gives member states the authority to request that their national competition authority should look at a merger which has a Community dimension, so that to that situation the word "exclusive" does not apply. The way to cover the problem posed by paragraph 9 is simply to remove the word "exclusive" altogether, so that the ultimate and penultimate lines would read:
"the Chapter 11 prohibition does not apply to the conduct if the Merger Regulation gives the Commission jurisdiction in the matter".
I beg to move.
9 p.m.
Lord Simon of Highbury: In Amendment No. 38 Members of the Committee seek to take away the ability of a director under certain circumstances to remove the benefit of the general mergers exclusion from an
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anti-competitive agreement. As I have already stated, we have listened very carefully to comments from legal practitioners and others that the draft Bill published in August should provide a wide exclusion of all mergers. We accepted that that point had force. However, there were concerns that in widening the exclusion there might be a risk of creating a loophole for anti-competitive agreements. The very width of what is to be regarded as a merger means that there is a risk that anti-competitive agreements might masquerade as mergers.
An approach was therefore developed, in consultation with the practitioners, in which the exclusion was widened, but with the provision for the director to be able, with notice, to claw back the benefit of the exclusion where he considers that it would infringe the prohibition and would not merit an unconditional exemption.
The claw-back is not to apply to certain categories of agreement. In the Bill as introduced these were to be prescribed by order. Government Amendments Nos. 39 and 40 will now set out these categories on the face of the Bill. I believe that it is right that where we can reasonably and properly widen exclusions we would and should do so. If it is necessary to provide safeguards in order to be able to widen such an exclusion, I believe that that is the right balance. I shall refer to a further example in relation to a later amendment where we hope to provide an exclusion, but with an appropriate safeguard provision.
However, if I were to accept the amendment we would lose all the safeguards. We would then have opened up a significant loophole in the prohibition as a result of the width of the exclusion. I believe that the better approach is to limit the claw-back powers to what is necessary and not to remove them altogether.
Amendment No. 35 would exclude ancillary provisions from Chapter II prohibitions as well as from Chapter I prohibitions, as the noble Lord mentioned. The purpose of the exclusion from mergers is to leave them to be dealt with as now under the merger regime of the Fair Trading Act to the extent that they fall within its jurisdiction, and not to subject them to new controls to the extent that they do not. Hitherto we have seen the risk of a merger being caught wrongly by the Chapter II prohibition as being a matter of the formation of the merger itself. We have viewed any ancillary restriction as being part of an agreement to which the Chapter I prohibition might apply, hence the exclusion from the Chapter I prohibition.
The noble Lord prompts the question whether we are quite sure that ancillary provisions which should properly be scrutinised as part of the merger regime can never fall foul of the Chapter II prohibition. That is a point on which I would like to reflect further. I am grateful to the noble Lord for drawing it to my attention.
Amendment No. 41 would delete the word "exclusive" in paragraph 5. The word is included in order to target the exclusion on EC concentrations to the extent that the Commission has exclusive jurisdiction. In so far as the UK may have competition jurisdiction because part of the concentration is referred back to it

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under the EC merger regulations, the exclusions in paragraphs 1 and 2 should apply. That is the effect of the paragraph as drafted.
We were talking about the level of a shareholding acquired and whether it will be defined as a merger or whether, if I can express myself in that way, it would be there for loophole purposes. The words in brackets in the new provision make agreements where a low level of control is acquired capable of being looked at as anti-competitive agreements. It does not affect their treatment under merger control. The issue is whether one can apply the anti-competitive agreement in order that one can test the loophole theory. The worry was that anybody taking small participations might claim merger and then avoid the competition clause. So it is effectively not to be looked at in the merger section but rather to be taken in the competitive section.
As I say, I would like to reflect further on the point made under Amendment No. 35. In the light of the points I have made, I hope that for the present the noble Lord will be prepared to withdraw the amendment while that particular point is considered.
Lord Kingsland: I thank the Minister for responding so sympathetically. In those circumstances, I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Lord Simon of Highbury Lord Simon of Highbury moved Amendment No. 36:
Page 39, line 31, leave out from beginning to second ("transfer") in line 32 and insert ("The Chapter I prohibition does not apply to an agreement to the extent to which it constitutes, or would if carried out constitute, a").
On Question, amendment agreed to.
Lord Haskel Lord Haskel moved Amendment No. 37:
Page 39, line 33, at end insert—
("( ) The Chapter II prohibition does not apply to conduct to the extent to which it constitutes such a transfer.").
On Question, amendment agreed to.
[Amendment No. 38 not moved.]
Lord Simon of Highbury Lord Simon of Highbury moved Amendments Nos. 39 and 40:
Page 40, line 4, leave out from (" 4(3)(a)") to end of line 6.
Page 40, line 10, at end insert—
("Protected agreements
An agreement is a protected agreement for the purposes of paragraph 4 if—

(a) the Secretary of State has announced his decision not to make a merger reference to the Competition Commission under section 64 of the Act of 1973 in connection with the agreement;

(b) the Secretary of State has made a merger reference to the Competition Commission under section 64 of the Act of 1973 in connection with the agreement and the Commission has found that the agreement has given rise to, or would if carried out give rise to, a merger situation qualifying for investigation;

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(c) the agreement does not fall within paragraph (a) or (b) but has given rise to, or would if carried out give rise to, enterprises to which it relates being regarded under section 65 of the Act of 1973 as ceasing to be distinct enterprises (otherwise than as the result of subsection (3) or (4)(b) of that section); or

(d) the Secretary of State has made a merger reference to the Competition Commission under section 32 of the Water Industry Act 1991 in connection with the agreement and the Commission has found that the agreement has given rise to, or would if carried out give rise to, a merger of the kind to which that section applies.").

On Question, amendments agreed to.
[Amendment No. 41 not moved.]
Schedule 1, as amended, agreed to.
Schedule 2 agreed to.
Schedule 3 [General Exclusions]:
Lord Simon of Highbury Lord Simon of Highbury moved Amendment No. 42:
Page 46, line 32, leave out from ("75") to ("(agreements") in line 33.
The noble Lord said: In moving this amendment I shall speak also to Amendments Nos. 43 and 44. These amendments extend the exclusion for planning obligations to cover Crown planning obligations. These are analogous to the planning obligations under Section 106 of the Town and Country Planning Act 1990 that may be entered into under Section 299A of that Act in respect of Crown land. There is no reason to treat Crown land differently from other land. I beg to move.
On Question, amendment agreed to.
Lord Haskel Lord Haskel moved Amendments Nos. 43 and 44:
Page 46, line 33, after ("land)") insert ("or 246 (agreements relating to Crown land) of the Town and Country Planning (Scotland) Act 1997)"
Page 46, leave out lines 36 and 37 and insert—
("(2) In sub-paragraph (I)(a), "planning obligation" means—

(a) a planning obligation for the purposes of section 106 of the Town and Country Planning Act 1990; or

(b) a planning obligation for the purposes of section 299A of that Act.").

On Question, amendments agreed to.
Lord Ezra Lord Ezra moved Amendment No. 45:
Page 47, line 8, at end insert—
("( ) In respect of conduct by a regulated utility, there shall be a rebuttable presumption that conduct which is in compliance with its licence and the statute under which its licence was granted or treated as granted does not constitute a breach of any prohibition under Chapter II.").
The noble Lord said: As the Bill is drafted the regulators will express prohibition powers for their own industry: concurrent powers with OFT. However, in each of the regulated industries there are already detailed rules set out in the licences which each company has to abide by. Those licences cover price controls, customer protection and how a company may respond to competition. In the case of gas, the licences had considerable parliamentary scrutiny, as I know, as recently as 1995. Despite that, there is little mention of the licences in the Bill, so behaviour that complies with a licence could then be questioned by the regulator as

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anti-competitive. The amendment tries to get round that problem by stipulating that behaviour that complies with a licence should be assumed not to be anti-competitive until proved otherwise.
A strong feeling throughout the Second Reading debate, and now in this Committee, has been our concern about the way in which utility regulators will exercise their powers under the Bill. The amendment simply states that the behaviour of a utility that complies with an existing licence provision should be assumed not to be an abuse of a dominant position unless proved otherwise. There is little mention in the Bill of how the provisions should interrelate with licence conditions. It would be wrong for the regulators not to consider the licences when exercising their new powers. That would undoubtedly be a worry and would put the utilities in the difficult position of complying with one statute but not knowing whether they had infringed another. I beg to move.
Lord Fraser of Carmyllie: I understand it to be a courtesy of your Lordships' House, but not a requirement, that if the Opposition want to agree with a proposal it is appropriate to signal that by putting a name to the amendment. I apologise for not having done so, but I should like to take this opportunity to say that with regard to Schedule 3 and this amendment, we have considerable sympathy with the points raised by the noble Lord, Lord Ezra. At a later stage we shall want to return to our concern that if the Government want to persist with a scheme under which the regulator is put into pole position, there exist opportunities nevertheless whereby a third party might then revert to the broader, general provisions relating to competition. That ought to be restricted so far as possible. If it were not, an unacceptable degree of uncertainty would exist. We are thinking of companies such as BG which have met their requirements (having possibly battled long and hard with the regulator to reach a compromise). It seems unacceptable that thereafter a third party might re-enter to challenge, say, BG, over price caps.
Whether the particular approach promoted by the noble Lord, Lord Ezra, is the most suitable means of achieving that end we leave open, but at this stage we signal that we share his concern that there should not be that ping-pong between the regulator (in the premier position) and those challenging companies. Such an approach has its attractions and might have the advantage of avoiding the problem almost entirely other than in the most exceptional circumstances. The presumption which the noble Lord has suggested ought to be included is not an absolute one, but, as the wording of the amendment suggests, it would be rebuttable.
ven if the Government are not prepared to accept the exact wording of the amendment, I hope that they will at least understand and be sympathetic to what the noble Lord seeks to achieve. We on the Opposition Front Bench ask nothing more than that the Minister gives us some signal that he will reconsider this point before we return to it on Report.
Lord Simon of Highbury: I recognise the point which has been raised. Schedule 3(3) provides an
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exclusion for compliance with legal requirements. It is clearly right that if a company is required to do something by law, it should not be caught by the prohibitions for complying with that requirement. In the utility sector, such legal requirements include the requirements imposed by the licence conditions. That is quite clear. It is the Government's policy that prohibitions should apply in the regulated utility areas. The purpose is to ensure that anti-competitive conduct can be dealt with.
It is wrong to make the assumption that licence conditions deal with all competition concerns that can arise particularly in a dynamic market place. The point of having separate regulation and expertise with the regulator is the fact that these markets are developing in very different ways and at a different pace as privatisation and competition grow in the market place. We must think of them as being different. If we made this assumption there would be no need to apply the prohibitions in these areas, but precisely because of the changes in the market place we have a certain amount of caution. As we do not make that assumption we believe that we would give utilities false comfort about the real position under the prohibitions if we accepted the amendment that there should be a rebuttable assumption that conduct in conformity with the licence did not infringe the prohibition.
If anti-competitive conduct which is not covered by explicit licence conditions takes place one wants the prohibition to be applied as rigorously and as effectively as elsewhere in the economy. I do not believe that it is appropriate to introduce a provision that seeks to alter the burden of proof in relation to the Chapter II prohibition for conduct in compliance with the licence conditions. So far as concerns the process, the director, the tribunal and the courts can in any event take account of all the relevant factors in applying the prohibitions. When we come to the process later it will become clear that a third party who brings an unreasonable or vexatious case before the Commission will be turned down.
9.15 p.m.
Lord Fraser of Carmyllie: I completely understand what the noble Lord has said about a requirement. We take no exception to that provision. It is desirable and well positioned within the scheme of the Bill. The particular point is related to the price-capping provision. As the noble Lord will be aware from his former position as a doubtless interested observer of the battle between the then British Gas and Clare Spottiswoode, there was an intense battle about the establishment of the price cap, including a reference to the MMC. It seems to us to be at least worthy of exploration that after such a battle has been concluded—perhaps there will be other battles in future—as the companies settle down and understand that that is where the line has been drawn, there may be a risk that a third party has the capacity to intervene and take it back into the general competitive regulation. It is the uncertainty that that causes which is the source of our anxieties.

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Doubtless there are expert advisers within the noble Lord's department who can deal with this matter. We do not suggest that there should never be intervention, but that a rebuttable presumption, not an absolute or irrebuttable presumption, in principle is the line that should be pursued.
Lord Simon of Highbury: I first respond to the issue of the price cap which, quite pertinently, the noble Lord has tabled. I should like to go back to an earlier exchange with the noble Lord, Lord Ezra. Pricing within a price cap is not a guarantee against anti-competitive behaviour. We have had a long discussion in other circumstances on the question of predatory pricing. The noble Lord spoke about the proposals of BG in discussion with the regulator. On the basis of experience, the discussion has often turned on how close it is to the price cap, not how far below it it may be given the price cap regime. It is always open to the company, if there is a concern that the cap may be challenged under the Chapter II prohibition, to make a notification to his regulator to obtain guidance. I believe that there is an opportunity to test the cap on the upside by guidance, and that the regulator always gives and is obliged to give. But one should not forget the issue of predatory pricing if the price level is well below the cap. There is no guarantee as to which of those two will pertain. It is for that reason that I believe that the prohibition is still a valuable notion in regard to licence regulation.
I shall reflect strongly on the question of whether rebuttal is an appropriate concept as to the way that the guidance process may be undertaken. In the meantime I would ask and urge the noble Lord, Lord Ezra, to withdraw his amendment if he is satisfied that we have positioned the debate in the right area.
Lord Ezra: May I express my appreciation to the noble and learned Lord, Lord Fraser, for his strong support. I am sorry that the noble Lord, Lord Simon, did not go a bit further. I take it that he is going to reflect on this. He having said that, that will lead me in a moment to withdraw the amendment.
We are left, nevertheless, with this issue: that these enterprises are operating under licence. There are two qualifications in the amendment: one is the rebuttable presumption—it is not a firm presumption, it can be rebutted—and, secondly, conduct which is in compliance with the licence.
The noble Lord referred to market evolution and changes of circumstances. Of course these can always occur, and if anything in those changing situations should lead the enterprises to do something which infringes this Bill when it becomes law, then there ought to be intervention.
Within the terms of the licence, and subject to this rebuttable presumption, the Government should attempt some reconciliation between the two pieces of legislation. I would take it very much amiss if I were in charge of one of those enterprises and meticulously stuck to the licence conditions, and then found that
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I was being attacked through this wider legislation, with the adjudicator being the same regulator who had set the regulatory terms. I would find that an intolerable situation to live under.
I hope that within the noble Lord's reflections he will take that into account and, at the next stage, come forward with some proposed wording. With that, I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Lord Simon of Highbury Lord Simon of Highbury moved Amendment No. 46:
Page 47, line 10, after ("Kingdom") insert—
("( ) imposed by or under the Treaty or the EEA Agreement and having legal effect in the United Kingdom without further enactment;").
The noble Lord said: I move Amendments Nos. 46, 71 and 251. Paragraph 3 of Schedule 3 provides an exclusion from the prohibition for things done in compliance with legal requirements, the rationale being that we should not prohibit what the law requires.
The main amendment in this group is No. 46, which extends this exclusion to cover requirements imposed by or under the EC treaty or the European Economic Area Treaty, which have effect within the UK without further enactment.
Amendments Nos. 71 and 251 are drafting amendments and apply the definition of the EEA treaty to Part I as a whole. On this point it will be helpful to know that we are considering for Report a number of other possible exclusions, one of which will be the exclusion from Chapter I prohibition of a regulated market for investment services in a EEA regulated state, just as similar markets in the UK regulated under the Financial Services Act have been excluded under Schedule 2.
On Question, amendment agreed to.
[Amendment No. 47 not moved.]
Lord Lucas Lord Lucas moved Amendment No. 48:
Page 48, line 13, at end insert—
('Agriculture
.—(1)The Chapter I prohibition applies to an agreement which relates to the production of or trade in an agricultural product only to such extent as the Secretary of State may by order provide.
(2) In this paragraph "agricultural product" means any product of a kind listed in Annex II to the Treaty.").
The noble Lord said: This amendment addresses the problem that agricultural co-operatives may experience under the Bill. The Bill quite rightly extends a general prohibition to horizontal agreements, agreements between people who are competitors in an industry. Agricultural co-operatives have had a long and useful role in the past—and one hopes for a similar future—as well as having a significant role as such in EC legislation. They might hope for exclusion under the de minimis provisions, eliminating small businesses from the scope of the Bill, but it does not take many farmers to band together before their turnover exceeds any likely level of that provision: perhaps just 50 or 100 farmers, given that those co-operatives trade in products and

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trade several times in their turnover, as it were, in physical terms, and may also provide the raw materials that farmers need.
It may need only 100 farmers to make up a £50 million turnover business when one reaches the agricultural co-operative level. They might hope for exemption under Clause 9, but they fail under Clause 9(a) because they are too far from the consumer to show that they are demonstrating a fair share of the resulting benefit to the consumer. They would fail also under Clause 9(b)(ii).
We turn to the question of how we deal with that problem. The amendment is intended to provide a means of doing so. It excludes agriculture, as defined in the treaty, from the scope of Chapter I, but allows the Secretary of State to provide certain subsets of agricultural agreements which would fall within Chapter I. That gives the Secretary of State the necessary ability to curb any abuses that there might be, while allowing agricultural co-operatives, which are not the most sophisticated and worldly of businesses, to proceed in any ordinary way, and to operate on the presumption that their ordinary way of doing business will not land them in trouble under the Bill.
This is a problem which does not apply to agriculture only; it applies to any small producers of primary products who are selling into a market which is dominated by much larger producers. The other obvious candidates would be fishermen and forestry products. I do not know those markets well, and I am not sure that they have organisations like agricultural co-operatives operating; but forestry is one that could do with it, and it would benefit greatly if those structures existed. We would see a great many under-used woodlands coming into use. That is diverging from the main point, but I hope that the Government will take on board the thrust of the amendment, will look rather wider than the amendment goes, and produce on Report an amendment which suits their tastes, and answers the problems which I have raised. I beg to move.
Lord Stanley of Alderley: I should declare an interest in so far as I have been a director of a few agricultural co-operatives. Therefore I must fall into the category of being fairly naïve, according to my noble friend. I support my noble friend, and I should, first, like to thank the Minister, the noble Lord, Lord Simon, for having taken so much trouble in contacting me last week to explain the Government's position on this matter.
I want to ask tonight that the Minister consider the matter, tell us what the position is, and if he cannot give a definitive answer tonight, I hope that he will be able to do so on Report. I am sure that he, like me, would like to make a decision fairly quickly rather than procrastinate on the matter.
Lord Graham of Edmonton: I am delighted to have support for co-operatives from the noble Lord, Lord Lucas. It is not a surprise. They are good organisations. They need some assistance and encouragement. The interest I declare is as chairman of the United Kingdom Co-operative Council which has, as one of its members, the Agricultural Co-operative Movement. The case for
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a modest interpretation of what can be done to assist agricultural co-operatives, and others of a similar size and position, has been well stated.
My noble friend the Minister and his colleagues have an opportunity, when one looks at "Competition" and the big boys, to remember that there are many little people struggling. I am not saying that the farmers are starving or in need, but they need to feel loved and wanted. One of the ways in which that can be achieved is by careful consideration of a Bill such as this, which could offer some ease. I hope that the Minister will do so and that he has some helpful comments to make.
Lord Lucas: Perhaps I, too, should have declared an interest in that my great-uncle, who held my title, set up a co-operative bacon factory in Hitchin in 1910.
Lord Graham of Edmonton: Is it still going'?
Lord Lucas: I have not been to see.
Lord Graham of Edmonton: You never said a rasher thing!
Lord Simon of Highbury: Perhaps I may take this opportunity to intervene and, unfortunately, take the mood of levity down a peg or two. I hope that I am able to offer solace to the noble Lords, Lord Lucas and Lord Stanley. The exclusion sought by the noble Lords has also been requested by the National Farmers Union and the Federation of Agricultural Co-operatives as part of the consultation process we have been undertaking.
The noble Lords made a good case for providing an exclusion on the Chapter I prohibition. Such an exclusion might well be along the lines of an EC treatment of agricultural agreements set out in EC Regulation 26/62. That would limit so far as possible any inconsistencies with the EC approach.
I believe the case to be strong. The points made merit very careful consideration and I shall do that between the Committee and Report stages. I hope that in the meantime the noble Lord, Lord Lucas, will withdraw his amendment.
Lord Lucas: Yes, I am happy to withdraw the amendment. Clearly, if the Government are unable to produce proposals by Report or Third Reading we may have to insist on something. In the meantime, I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
9.30 p.m.
The Earl of Lytton The Earl of Lytton moved Amendment No. 49:
Page 48, line 13, at end insert—
("Legal estates and equitable interests in or over land
The Chapter 1 prohibition does not apply to agreements creating or disposing of a legal estate or equitable interest in or over land, as defined in section I of the Law of Property Act I925.").
The noble Earl said: Perhaps I may first declare an interest as a practising surveyor with some ongoing involvement with commercial property. I have already

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indicated to the Minister that this is a probing amendment. It was tabled only earlier this week and the Minister has not had time to respond to me directly. I have bounced it on him and I apologise to him for that.
The amendment arises out of concerns expressed to me recently by the British Property Federation and the Royal Institution of Chartered Surveyors. The Minister is aware of those concerns.
There are at least two categories of commercial property agreements that I have in view in relation to the amendment. First, there are those commercial agreements which arise out of sales and joint ventures, often containing covenants and restrictions which may bind successors downstream. They are commonly encountered in property redevelopment schemes. The second category relates to commercial leases, in particular those covenants and conditions relating to what is euphemistically referred to as the interests of good estate management. They may occur in particular in multiple let developments and govern such things as the category of use of premises, the way in which insurance payments and policies are placed and maintenance service charge matters as well as assignments and alienations of leasehold interests. The question is whether those will be brought under Chapter I. Whatever the answer, it is accepted that they will be subject to the provisions of Chapter II.
Chapter I would be retroactive, so it could at worst result in some important contractual terms being declared void if challenged. That could create all kinds of management risks and materially affect investment values, certainly while a new equilibrium was threshed out in the market place. That is undesirable. In moving the amendment, it is not my purpose to defend commercial practice in property matters which may be deemed to be anti-competitive—far from it—nor even other undesirable practices which may not be competition matters. But I want to get some certainty into this matter and to achieve a proper assessment of the Bill's impact on property agreements and the scope of that impact; how far would it run if property agreements are caught in the manner that I fear might be the case?
There is an added difficulty here in that property contractual matters are not conveniently divided into vertical and horizontal agreements. They just do not respond to that type of categorisation. Therefore, the effect of the amendment is to add another category of exemption. But its purpose is merely to probe the Government's intentions and to explain that there is some urgency in connection with the need to know in the commercial property industry because there is a whole raft of law and practice, as well as property economics, which could be materially affected in that regard. I beg to move.
Lord Simon of Highbury: First, I thank the noble Earl, Lord Lytton, for his positioning of the amendment. The Government accept that a good case can be made not to subject certain agreements relating to land to the
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Chapter I prohibition. When the Government raised that question in the consultation document, that was certainly the response that they received.
However, as we have found with vertical agreements, the problem of finding a clear definition which will prove of real value is complex. It has not been solved by the noble Earl's amendment which I recognise was drafted by the British Property Federation. To my mind, that would provide a very unclear exclusion which would foster the uncertainty which the noble Earl wishes to avoid. It would also very possibly be narrower than the BPF intends and might not be appropriate. Nor does it deal with the position in Scotland which has a different system of law which may not be amenable to the approach set out in the amendment.
Scope of a possible exclusion for certain land agreements has been discussed with the Lord Chancellor's department and the Department of the Environment, Transport and the Regions. Those discussions have made progress and are continuing. I hope that in the not too distant future, we shall have worked out an approach to the question which my officials will then share with interested parties such as the BPF.
On the basis of those comments and the position of the amendment, I hope that the noble Earl will feel able to withdraw the amendment at this time.
The Earl of Lytton: I thank the Minister very much for that detailed reply. Certainly, I should not wish to defend the precise wording of the amendment which, as he rightly said, was drafted by the British Property Federation. However, it has enabled me to raise the point with him and I am grateful for his response.
There must be seen to be some urgency about this in terms of making sure that property interests are not gratuitously destabilised in a way that would be manifestly unsatisfactory. It is an understatement to say that there is quite a lot at stake here. I do not intend to press the amendment but I should like to feel that the Minister will be able to return with something more definite at a later stage of the Bill and not ask the property industry to hold with the situation of uncertainty until some time after the Bill has become law. That would be terribly unsatisfactory. I reserve my position to return to this matter later in the Bill's progress and I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Lord Currie of Marylebone Lord Currie of Marylebone moved Amendment No. 50:
Page 48, line 13, at end insert—
("De minimis exceptions
The Chapter 1 prohibition does not apply to an agreement in respect of which a direction under section 21(2) of the Restrictive Trade Practices Act 1976 is in force immediately before the commencement date").
The noble Lord said: This amendment addresses the question of compliance costs for business. There are a whole raft of agreements under previous legislation,

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particularly the Restrictive Trade Practices Act, which may require approval and business will certainly need reassurance that it complies with the new Bill.
The Bill currently provides for a five-year transitional period for such agreements before they require approval. The estimated costs in the compliance costs estimate attached to the Bill is that that process of getting scrutiny would cost between £4 to £10 million. That is quite a substantial amount of the one-off transitional costs associated with the Bill and clearly, if it were possible, it would be desirable to reduce those costs.
Therefore, in that compliance cost assessment exercise the Government indicated that they were examining closely whether the cost of scrutinising such agreements was justified. One course proposed in the amendment would be to exclude such agreements from the Chapter I prohibition, not just for a transitional period but on a permanent basis, subject to appropriate safeguards, if necessary, which are not to be found in this current form of the amendment and to save those compliance costs on business without in any way affecting the objectives of the Bill. It would be helpful to have an indication from my noble friend the Minister as to the Government's intentions in that direction. My noble friend may also wish to respond to a question of which I gave him notice and clarify the purpose of some aspects of Clause 15 and Schedule 2 to the Bill. I beg to move.
Lord Simon of Highbury: I am grateful to my noble friend Lord Currie for the opportunity to address the question of agreements which have received a direction under Section 21(2) of the RTPA. These agreements are ones where restrictions excepted, or information provisions made, were found not to be of such significance as to call for investigation by the restrictive practices court. Many respondents to the August consultation document, as my noble friend Lord Currie said, referred to the effort and cost that would be required to review such agreements, even after a five year transitional period, and asked that they should remain outside the scope of the Chapter I prohibition for the full life of the agreements. The CBI has also forcefully put that point to us.
The Government, of course, wish to minimise the cost to business of complying with the prohibitions. We have considered the position and believe that an exclusion for the generality of agreements which have received directions under Section 21(2) is the right approach. However, there is the possibility that there may be agreements which have received Section 21(2) directions but which may turn out in practice to have anti-competitive effects. An exclusion should, therefore, be subject to a power for the Director General of Fair Trading to claw back the exclusion in certain circumstances. The Government intend to return on Report with an amendment on that basis.
I hope that my noble friend will be content to withdraw his amendment after I have spoken to his secondary question which relates to the Schedule 2 application. The schedule disapplies the Chapter 1 prohibition from certain agreements which are subject to separate competition scrutiny under other enactments.
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The enactments concerned are the Financial Services Act 1986 (which deals with the regulation of investment businesses); the Companies Act 1989 (Part II of which deals with the supervision and qualification of company auditors and its equivalent in Northern Ireland): and the Broadcasting Act 1990 (which, among other things, deals with the Channel 3 news provisions and networking arrangements).
Schedule 2 amends existing provision of those enactments which provide for modifications or exclusions from the Restrictive Trade Practices Act in respect of agreements which are subject to competition scrutiny under those enactments. The RTPA is repealed under Clause 1 of the Bill. Where agreements are scrutinised under other competition scrutiny regimes specially constructed to deal with a particular category of agreement I do not believe it is right for them to be subject also to the Chapter l prohibition. That would just create an unwelcome and unjustified double jeopardy.
The competition scrutiny regimes in question offer an effective means of ensuring that agreements in those areas are not anti-competitive. However, we need to ensure that the amendments to the competition regimes and the scope of the exclusion provided by this schedule are correct.
It has come to our attention that it may be necessary to make some amendments to ensure that this is the case. For example, there may be a need to make amendments in relation to the producer responsibility regime. We are considering whether changes to the schedule are indeed required and will, if necessary, bring forward amendments at Report. After that statement, I shall speak to Clause 15. I am sure that the Committee has been waiting for this.
Clause 15 sets out the effect of the giving of guidance by the director that an agreement is unlikely to infringe the Chapter I prohibition whether or not it is exempt, or that it is likely to benefit from an exemption. The director is to take no further action under this part against the agreement except in specified circumstances. These include, for example, where he has reasonable grounds for believing that there has been a material change in circumstances since he gave his guidance. The clause prevents a penalty being imposed in respect of an infringement of the Chapter I prohibition by an agreement which this clause applies. The director is able to remove the immunity in specified circumstances. If he does so because he has a reasonable suspicion that the information on which he based his guidance, and which was provided by a party to the agreement, was incomplete, false or misleading in a material particular, he is able to backdate the removal of immunity.
I believe this provision is important and will greatly assist business by giving it the security that the DGFT will be able to take further action in respect of an agreement only in specified circumstances if the DGFT has given favourable guidance of the kind to which Clause 15 applies. We are considering whether any amendments are needed in relation to this clause. In particular, we are considering whether the use of the expressions "likely to infringe" or. "unlikely to infringe" are consistent here and elsewhere in the Bill. We are

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considering whether there is a need to bring forward amendments at Report to ensure that each of these clauses in the Bill is consistent in this respect. I hope that that explanation satisfies the noble Lord, Lord Currie, and that, together with my response to his amendment, he will feel able to withdraw the amendment at this stage.
9.45 p.m.
Lord Currie of Marylebone: I am grateful to my noble friend the Minister for that full and helpful response. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Schedule 3, as amended, agreed to.
Schedule 4 [Professional Rules]:
[Amendments Nos. 51 and 52 not moved.]
Schedule 4 agreed to.
[Amendment No. 53 not moved.]
Clause 4 [Individual exemptions]:
Lord Simon of Highbury Lord Simon of Highbury moved Amendment No. 54:
Page 3, line 32, after ("rules") insert ("under section 49").
The noble Lord said: This is a drafting amendment. I beg to move.
On Question, amendment agreed to.
Lord Berkeley Lord Berkeley moved Amendment No. 55:
Page 3, line 34, at end insert—
("( ) The Director shall publish full details of all requests for individual exemptions within 28 days of receipt in such a way as he thinks most suitable for bringing them to the attention of those likely to be affected.").
The noble Lord said: In moving Amendment No. 55, I wish to speak also to Amendment No. 63. Amendment No. 55 refers to individual exemptions and Amendment No. 63 to block exemptions, imposing upon the director the requirement to publish details of all requests for exemptions within 28 days of receipt. The reason for the amendments is that unless there is some obligation on the director to publish information about applications for exemptions, the first people may hear of this, and also organisations which may potentially be affected by such applications, is under the circumstances mentioned in Clause 8(1) which states that,
"Before making a recommendation under section 6(l), the Director must publish details of his proposed recommendation".
I submit that, in many cases, that may be too late for representations to be made. Unless I have missed the provision elsewhere in the Bill, it would be very helpful if information were made available; indeed it is essential. I therefore beg to move the amendment.
Lord Simon of Highbury: It is important that, before the director grants individual exemptions or recommends that a block exemption order be made, interested parties are fully aware of the director's proposed action.
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The Bill already provides, in paragraph 5 of Schedule 5, that when the director is determining an application for a decision to grant an individual exemption, he is required to publish the application,
"in such a way as he thinks most suitable for bringing it to the attention of those likely to be affected by it, unless he is satisfied that it will be sufficient for him to seek information from one or more particular persons other than the applicant".
When considering whether to recommend that the Secretary for State makes a block exemption order, subsection (1) of Clause 8 requires the director to,
"publish details of his proposed recommendation".
That provision will ensure that there is adequate consultation before the director recommends a block exemption. The nature of a block exemption means that undertakings do not have to apply to the DGFT in order to benefit from it, unless the opposition procedure in Clause 7 applies. If an undertaking applies for a decision under Clause 14, the DGFT may decide that the agreement is exempt from the prohibition because of the block exemption. The application will be published as described above.
As the Bill already contains provisions to ensure that interested parties are able to make representations relating to block and individual exemptions, I ask my noble friend whether he is prepared to withdraw his amendment.
Lord Berkeley: I am grateful to my noble friend the Minister for that explanation. I shall read it very carefully, but I think it probably satisfies my requirements. In the meantime, I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Clause 4, as amended, agreed to.
Clause 5 [Cancellation etc. of individual exemptions]:
Lord Kingsland Lord Kingsland moved Amendment No. 56:
Page 3, line 37, at end insert (", after hearing any representations from the undertakings concerned").
The noble Lord said: I think that the general intention of these clauses is to include an element of sportsmanship in the relationship between predator and prey. The Minister will be aware of those sections into which the Opposition wish to insert the appropriate protection.
Amendment No. 56 relates to page 3, line 37, inserting:
"after hearing any representations from the undertakings concerned";
and Amendment No. 57 proposes the same insertion at line 44 on page 3. Amendments Nos. 77 and 78 relate to page 9 of the Bill. The insertion is slightly modified, but again has the same effect:
"after notifying the party which made the application and considering any representations".
Finally, Amendments Nos. 89 and 90 are amendments to the same effect.
Bearing in mind that the end result of this procedure is a fine—a penalty—we believe it is important that a company that is likely to be on the end of an investigation should have proper time to reflect and to make counter-representations.
I am aware that we have not yet seen the Minister's proposals on the detailed procedure for reply. He may well have in mind some appropriate assertions of the sort I have mentioned at that stage. I beg to move.
Lord Simon of Highbury: If the director cancels an individual exemption and imposes a penalty, his decision will be appealable to the competition commission under Clause 45. The appeal process provided in the Bill is the proper protection to which parties affected by the director's decisions are entitled. However, I accept that in addition there will need to be rules governing the procedures when the director takes further action after having decided that one of the prohibitions has been infringed or when cancelling an individual exemption, varying or removing a condition or obligation or imposing additional conditions or obligations.
If I may draw Members' attention to Schedule 9, they will see that paragraphs 5 and 6 make provision for rules on the procedures to be followed in those cases. I would expect that, among other things, the rules would make provision for the issues of notification and listening to representation raised by Members. I therefore hope that they will feel able to withdraw their amendments. The rules should make the appropriate provision clear.
Lord Lucas: I feel that the Minister could he a little more generous. There were so many qualifications in his answer that doing the exact opposite of what he implied would be perfectly consistent with what he said. If the Minister feels unable to go beyond the brief this evening, I hope that he will be able to feel more definite about the matter at Report and will give us satisfactory guidance to the effect that those who make applications and are concerned in this matter will be consulted in the way suggested by the amendments rather than saying that they might just possibly, maybe, one day, be consulted.
Lord Simon of Highbury: That sounds like a challenge to which the noble Lord will respond.
Lord Kingsland: I am much obliged to the Minister for his response. I simply add that it is not just in the interests of the alleged offender that these amendments are proposed. Some delay for consideration on behalf of the director general may lead him, for perfectly legitimate reasons, to change his mind about his original intentions. In those circumstances the appeal process would not have to be relied upon and a great deal of time and money would be saved by everyone. I thank the Minister for his response and beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
[Amendment No. 57 not moved.]
Lord Graham of Edmonton Lord Graham of Edmonton moved Amendments Nos. 58 to 61:
Page 4, line I, leave out from ("condition") to end of line and insert ("allows the Director, by notice in writing, to take any of the steps in subsection (l).").
Page 4, line 4, after ("(2)") insert (", (3)").
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Page 4, line 6, after ("(2)") insert (", (3)").
Page 4, line 9, after ("(2)") insert (", (3)").
The noble Lord said: In moving Amendments Nos. 58 to 61, I shall speak also to Amendment No. 62, which addresses a slightly different point.
This part of the Bill deals with the powers of the director general to cancel individual exemptions. Members of the British Retail Consortium are concerned about the form in which the words appear at present. Exemptions are important and valuable and in some instances could well be crucial. Therefore they are not to be given or abused lightly and certainly will not be lost lightly. The Bill provides for the director general to grant individual exemptions from the prohibition provided for in Clause 2 in respect of agreements if certain circumstances are satisfied. The director general can make individual exemptions subject to conditions.
The Bill provides that:
"If the Director has reasonable grounds for believing that there has been a material change of circumstance since he granted an individual exemption",
Or,
"If the Director has a reasonable suspicion that the information on which he based his decision to grant an individual exemption was incomplete, false or misleading in a material particular",
he may by notice in writing

"(a) cancel the exemption;

(b) vary or remove any conditional obligation: or

(c) impose one or more additional conditions or obligations".

However, the Bill provides that, if a condition in the individual exemption has been breached, the exemption is automatically cancelled and the Clause 2 prohibition will apply.
The amendments that I have moved, in effect, are saying to the Minister, "Steady on, it is possible to commit what, in the context, is a minor breach, and yet having done that there could be a technical breach such as a failure to provide information on time." That seemed possibly to fall within the ambit of what the director general can do. Therefore, with a small, modest dereliction one loses the benefit of the whole exemption. We think that is wrong. We suggest in these amendments that the director general should have power to impose a remedy proportionate to the problem, including the cancellation of the exemption if that is appropriate.
Amendment No. 62 replaces the automatic termination provision with one providing that the block exemption may contain provisions whereby the director general can by notice cancel a block exemption in respect of any agreement if there is a breach of condition for the reasons set out in the revised amendments to Clause 5.
Again, as with every amendment moved in the past seven or eight hours, they are substantially probing and designed to get from the Minister and his colleagues a reaction following which there may be further action at a later stage.,
This is a modest amendment and in the spirit of its being ten o'clock at night it is one which I hope the Minister will gladly give in order to go home early. I beg to move.
10 p.m.
Lord Simon of Highbury: I believe that the ability to grant block and individual exemptions is an important aspect of the prohibition regime contained in Chapter I of this part of the Bill. Both businesses and consumers will benefit from these exemptions. They will allow agreements which have countervailing benefits as set out in the criteria in Clause 9 to continue even where they have anti-competitive effects.
A decision to grant an exemption will be far from straightforward and will often involve the detailed consideration of the agreements and their economic effects. The ability to grant exemptions which impose requirements on parties to agreements will often be essential. It allows a necessary degree of flexibility when granting exemptions.
Our approach in this respect follows that under the Community prohibition contained in Article 85. The Bill provides for two kinds of requirements to be imposed, obligations and conditions. Where agreement reaches an obligation contained in individual or a block exemption the director must give notice in writing before taking action. In the case of an individual exemption he has a discretion as to whether there is a need to cancel the exemption, or whether it may be more appropriate to take other courses of action such as imposing an additional condition or obligation. Breach of a condition results in the automatic cancellation of that exemption with respect to that agreement with no need for the director to take further action.
The effect of these amendments would be to remove the distinction between conditions and obligations. Conditions would be treated in the same way as obligations currently are under the Bill. In each case, breach of these has the same effect as provided in the Bill.
Such a change would significantly weaken the flexibility which will be necessary when granting exemptions. At European level in granting exemptions the Commission has found it necessary to impose conditions as well as obligations.
There is a risk that if the director or Secretary of State is denied the ability to impose conditions the breach of which has the automatic effect of cancelling the exemption with respect to the agreement in question, he will be more cautious in granting exemptions. This would reduce the number of agreements which are able to benefit from block and individual exemptions under the prohibition.
Given that risk, I would urge my noble friend Lord Graham of Edmonton to withdraw these amendments at this stage.
Lord Graham of Edmonton: I am grateful to the Minister for being so frank. He has said that it is possible that people will misuse or abuse the exemptions and the risk that the recipients of exemptions may become cavalier. That is well understood and it is a possibility. I think the Government are really saying that they are not prepared to risk the possibility.
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This may be a huge issue but I am not competent to argue it in detail. I am sure the Minister has good grounds both for the words in the Bill and his explanation, which I found compelling but not completely acceptable. I shall take away the words he has used and consult colleagues. It may be that they will come back to the matter at a later stage. In the meantime, I beg leave to withdraw the amendment and wish the Committee good night.
Amendment, by leave, withdrawn.
[Amendments Nos. 59 to 61 not moved.]
Clause 5 agreed to.
Clause 6 [Block exemptions]:
[Amendments Nos. 62 and 63 not moved.]
Clause 6 agreed to.
Clause 7 [Block exemptions: opposition]:
Lord Kingsland Lord Kingsland moved Amendment No. 64:
Page 5, line 12, leave out from ("means") to end of line 14 and insert ("three months").
The noble Lord said: In moving this amendment perhaps I may also speak to Amendments Nos. 73 to 76, 81, 83 to 85, 87 and 93. The first set of amendments concerns block exemptions in Clause 7. The general intention of all the amendments is to reduce the element of uncertainty for the alleged offender.
Amendment No. 64 introduces a period of three months in place of the expression,
"such period as may be specified with a view to giving the Director sufficient time to consider whether to oppose under subsection (2)".
That is a very open-ended expression and could leave the alleged offender in doubt for a long time.
Amendment No. 73 is to page 7, line 41 of the Bill. The Bill presently reads:
"On an application under this section, the Director may give the applicant guidance".
If the amendment were accepted the Bill would read:
"On an application under this section, the Director must promptly give the applicant guidance".
Amendment No. 74 substitutes the word "shall" for "may" on page 8, line 20. If agreed the Bill would read:
"On an application under this section, the Director shall make a decision".
Amendment No. 75 seeks to insert at the end of line 20, page 8,
"within a period of three months".
Amendment No. 76 seeks to insert at the end of Clause 14 (2) a new subsection (3):
"If no decision has been made under subsection (2) after a period of three months the Chapter I prohibition shall be deemed not to apply to the notified agreement".
I turn to Amendment No. 83. Clause 21 (2) states:
"On an application under this section, the Director may give the applicant guidance as to whether or not, in his view, the conduct is likely to infringe the Chapter II prohibition".
Amendment No. 83 seeks to leave out "may" in page 11, line 20 and insert "shall".
Amendment No. 84 seeks to substitute "shall" for "may" in page 11, line 27 of Clause 22 (2).
Amendment No. 87 seeks to insert on page 11, line 31, at end:
"If no decision has been made under subsection (2) after a period of three months the Chapter II prohibition shall be deemed not to apply to the notified agreement".
Finally, Amendment No. 93 proposes, on page 55, line 3 of the Bill, to add the expression,
"An application for a decision shall be determined within a period of three months from the date of notification, and where no determination has been made within the three month period the conduct shall he deemed not to infringe the Chapter II prohibition".
It has been the experience of the competition authorities in the European Community that it sometimes takes a very long time before a company knows where it stands under the competition rules. It seems to me that we could set a good example to the Community by not allowing our competition officials to fall into the same trap and leave our own companies in a period of long and unacceptable uncertainty. I beg to move.
Lord Haskel: We are certainly keen to ensure that the prohibition regime operates efficiently. We agree with the noble Lord that, however long time, delays are inadvisable. They are bad for business and the economy. I appreciate the noble Lord's concern to ensure that the director does not delay in making decisions. It is of course important that business and consumers are not kept waiting for long periods. As the noble Lord pointed out, that uncertainty would be counter-productive.
However, it would be dangerous to impose a time limit of three months on the director. For example, when determining notification for a decision he may have to conduct a complex and detailed investigation of the economic and legal issues. He will wish to seek representations of third parties as part of his consideration. The effect of these amendments is that where he is unable to come to such a decision within three months, the agreement or conduct in question would be deemed not to infringe the prohibitions. We do not wish the director to be forced to make rushed decisions.
The Bill already makes provision to ensure that there is no undue delay in decisions made by the director which are expected to be brought into force once the system has bedded down. Both Schedules 5 and 6 make provisions which allow persons aggrieved by the failure of the director to determine an application for a decision to apply to a court for directions to secure that the application is considered without further delay.
Furthermore, Clause 49 enables the director to make rules on procedural and other matters. Schedule 9 elaborates on the kind of rules that can be made. Members of the Committee will see that paragraph 2(c) of that schedule makes specific reference to the possibility of rules making provisions for applications, whether for guidance or decision, to be dealt with in accordance with a timetable. I am sure that Members of the Committee will understand that until the system has bedded down and we have an idea of the volume
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of applications that may be made, we believe that it would not be right to tie the director down to a fixed timetable.
Equally, if we were to remove the director's discretion to give guidance the new regime would be damaged. We should be clear that in some cases the issues may not be black or white. In particular, in the case of guidance the application will not be published and the director will have no opportunity to consider what views third parties might have on an agreement. Were they aware of it? It would be quite wrong to tie the director down by forcing him to give guidance.
However, I can quite see the business interest in guidance being given promptly. Clause 49 enables the director to make rules on procedural and other matters. Schedule 9 elaborates on the kinds of rules that can be made. Members of the Committee will see that paragraph 2(c) of the schedule makes specific reference to rules making provisions for applications whether for guidance or a decision. I would expect such rules to deal with those concerns. In the light of these remarks, I hope that the noble Lord will feel able to withdraw his amendment.
Lord Kingsland: Is the Minister saying that in formulating the detailed rules that will apply to the procedure that the director general has to respect, specific time limits will be entertained?
10.15 p.m.
Lord Haskel: I am saying that at this stage we do not think it a good idea to tie the director general down but, once the system has been bedded down, we may consider the matter further.
Lord Kingsland: At the risk at this time of night of irritating the Committee, perhaps I may address just one more question to the Minister. As I understand it from what he has said, the intention is to look at the experience (presumably over a period of, say, one year after the system has come into operation) and, in the light of that, to consider specific time limits. I say that because leaving many of these matters open-ended will pose great difficulties for the industry which will not know where it stands with regard to the competition regime. I should like to hear the Minister say that he accepts the approach of fixed time limits as a matter of principle.
Lord Haskel: What I can say is that the Bill already makes provision to ensure that there is no undue delay in decisions taken by the director. I expect to bring that into force once the system has bedded down.
Lord Kingsland: I appreciate the fact that the Minister has responded so frequently on this. I shall reflect on his replies in the cold light of dawn—well, perhaps not quite dawn!—but, in the circumstances, I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Clause 7 agreed to.
Clause 8 [Block exemptions: procedure]:
Lord Berkeley Lord Berkeley had given notice of his intention to move Amendment No. 65:
Page 5, line 15, after ("Before") insert ("granting an exemption under section 4 or ").
The noble Lord said: On the basis of my noble friend's explanations of my previous two amendments, I do not propose to move this amendment.
[Amendment No. 65 not moved.]
Clause 8 agreed to.
Clause 9 [The criteria for individual and block exemptions]:
[Amendments Nos. 66 and 67 not moved.]
Clause 9 agreed to.
Clause 10 [Parallel exemptions]:
Lord Ezra Lord Ezra moved Amendment No. 68:
Page 6, line 13, at end insert—
("( ) An agreement is exempt from the Chapter I prohibition if the European Commission has granted a comfort letter clearing or exempting the agreement.").
The noble Lord said: In moving Amendment No. 68, I should like to speak also to Amendments Nos. 69 and 70. The purpose of these amendments is to ensure that where an agreement falls within the term of a European Union block exemption or has been granted an individual EU clearance (whether formally or informally) it should be regarded as valid under UK law and scrutiny of the same agreement by the UK authorities should be barred. That accords with the desired aims of consistency with the EU and of keeping the burdens on business to a minimum. The amendments would provide that informal comfort letters, which have been received from the European Commission in response to a notification, would be recognised as binding in the UK and that the DGFT will not be able to vary or cancel the terms of an EU exemption.
As noble Lords are probably aware, the vast majority of cases notified to Brussels do not receive a formal decision granting exemption but are dealt with by means of a comfort letter. In 1996, for example, out of 386 cases, 365 were dealt with informally by means of comfort letters and other forms of communication and only 21 by formal decision. If a firm has gone to the expense of submitting a notification to Brussels and then receives only a comfort letter, that should be regarded in the UK as equivalent to a formal notification.
Furthermore, we do not believe that the director should be able to change the terms of, or to cancel, an EU exemption by imposing stricter domestic law to the same agreement. We feel that that runs counter to the aim of consistency with the EU. If exemption decisions by the EU are considered inappropriate by the UK authorities, action should be taken to remedy that at EU level rather than causing confusion by subsequent conflicting domestic action. I beg to move.
Lord Haskel: I share the views of the noble Lord, Lord Ezra, on the need to seek consistency in the application of EC and UK prohibitions. This clause is
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designed to assist consistency. It provides automatic exemptions from Chapter I prohibition of agreements which are exempt from the EC prohibition of anti-competitive agreements or the EEA prohibition of anti-competitive agreements. This automatic exemption from Chapter I prohibition is referred to in the Bill as a parallel exemption. The parallel exemptions provided by Clause 10 are very wide ranging. Agreements that are not subject to the EC or EEA prohibition of anti-competitive agreements because they do not affect trade between the relevant member states, but which otherwise meet the conditions for an EC or EEA block exemption, are also to be parallel exempt from Chapter I prohibitions. Therefore, agreements with purely domestic effects can benefit from parallel exemptions.
I am sorry to go on at length at this late hour, but the noble Lord, Lord Ezra, has raised an important point. I turn to his Amendment No. 68. This would extend the principle of automatic parallel exemption to European Commission comfort letters which fall short of a formal EC exemption. Comfort letters will be relevant in the application of UK prohibitions. The Director of the European Commission will be applying a consistent prohibition test and therefore a European comfort letter will be of persuasive authority to the UK system. However, it would be dangerous to confer a blanket automatic exemption from the UK prohibition on agreements that had received comfort letters. For example, such letters may state that the agreement is not caught by Article 85 because there does not appear to be an effect on trade between member states, while leaving open the possibility that the agreement produces harmful anti-competitive effects within the UK.
Amendments Nos. 69 and 70 proposed by the noble Lord would deprive the director of the ability to tackle agreements that raised particular UK competition concerns. Of course, there might be particular circumstances in which the director should be able to take action against an agreement which was parallel exempt under the clause. Take, for example, an agreement which had purely domestic effects but was nevertheless parallel exempt because if it affected inter-state trade it would meet the conditions of an EC block exemption. Such an agreement might raise particular UK competition concerns, and the director would be able to impose conditions on its operation, perhaps an obligation to provide market update information. The parties might have had to provide such information to the Commission if their agreement had affected inter-state trade. The director should also retain the ultimate sanction of cancelling the exemption.
I also draw the attention of the noble Lord to subsection (5) which provides that the circumstances and manner in which the director may impose conditions in relation to, or cancel, a parallel exemption will be set out in the director's rules which will not come into effect until they have been approved by order made by the Secretary of State. These orders are the subject of annulment by resolution by either House.

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In view of the late hour and my explanation, I hope that the noble Lord will withdraw his amendment.
Lord Ezra: Those are two persuasive arguments for me to do so, but I very much regret the response that I have received. I should like to study it with care. Since the bulk of the cases notified to Brussels are responded to by comfort letters, it is a hit hard for the UK authorities to say that they do not really count. That means that practically nothing that has been notified to Brussels will ever be regarded as having been dealt with. We must return to this and to the other points that the noble Lord has raised. In the circumstances, I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
[Amendments Nos. 69 and 70 not moved.]
Lord Simon of Highbury Lord Simon of Highbury moved Amendment No. 71:
Page 7, line 17, leave out subsection (12).
On Question, amendment agreed to.
Cause 10, as amended, agreed to.
Clause 11 agreed to.
Clause 12 [Requests for Director to examine agreements]:
[Amendment No. 72 not moved.]
Clause 12 agreed to.
Clause 13 [Notification for guidance]:
[Amendment No. 73 not moved.]
Clause 13 agreed to.
Clause 14 [Notification for a decision]:
[Amendments Nos. 74 to 76 not moved.]
Clause 14 agreed to.
Clause 15 [Effect of guidance]:
[Amendment No. 77 not moved.]
Clause 15 agreed to.
Clause 16 [Effect of a decision that the Chapter 1 prohibition is not infringed]:
[Amendment No. 78 not moved.]
Clause 16 agreed to.
Schedule 5 [Notification under Chapter 1: Procedure]:
Lord Fraser of Carmyllie Lord Fraser of Carmyllie moved Amendment No. 79:
Page 52, leave out lines 24 to 27.
The noble and learned Lord said: With Amendments Nos. 79 and 80 are grouped Amendments Nos. 91 and 92. They are well grouped; they deal with an identical point. The amendments would remove the power of the director to convert unilaterally an application for guidance into an application for decision. It is a small but important point.
Companies must be able to make applications for guidance on a confidential basis. The ability to convert an application for guidance into a formal decision without the consent of the applicant could result in third parties becoming aware of confidential proposals, with
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the end result that companies would be less willing to seek guidance or assistance in cases of uncertainty. That would be contrary to what the Government wish to achieve by this scheme of guidance and subsequent applications for decision.
I invite the noble Lord to reflect on that. It seems to run contrary to what would be an appropriate basis for taking forward such applications. All we ask of the Government at this stage is some signal that they will reflect on that before we return to it on Report.
We have considerable respect for the detailed and courteous way in which the Government Front Bench has dealt with some extraordinarily complex matters today. I hope that they appreciate that we have attempted to approach this in a co-operative fashion and that before we return to these provisions on Report—either informally or otherwise—they will seek to identify those points on which we are keen to ensure that we receive proper responses. If I get that short response from the Government, I give a solemn and binding undertaking that I will seek leave to withdraw these amendments.
Lord Haskel: A solemn and binding undertaking, certainly to reflect upon the issue. I hope that at this stage of the proceedings the noble Lord will accept that we will reflect upon the issue, but of course we cannot accept the amendment.
Lord Fraser of Carmyllie: On that solemn and binding basis I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
[Amendments Nos. 80 and 81 not moved.]
Schedule 5 agreed to.
Clause 20 [Request for Director to consider conduct]:
Lord Lucas Lord Lucas moved Amendment No. 82:
Page II, line 11, after ("prohibition") insert (", or which may amount to a dominant position,").
The noble Lord said: I move Amendment No. 82 and speak to the two other amendments in this group at the same time. They have a simple purpose. It is right that an applicant should be able to ask the director for a decision after a guidance as to whether he is in a position which amounts to a dominant position. It is essential that if the director issues such guidance he has the power to issue it; otherwise, it is something that can be challenged and overturned. So it is essential that somewhere in the Bill he is shown to have the power to issue such guidance. I cannot find it. I hope that the Minister can point me to it. I beg to move.
Lord Haskel: I could point to Clause 18 which prohibits the use of a dominant market position, but not the holding of a dominant market position itself. There is nothing wrong in companies holding a dominant position. It is only natural for companies to try to increase their share of the market. That of course is what competition is all about.
Lord Lucas: But if a company wants to know whether it will be caught by the clause, it has to decide

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whether it is in a dominant market position. It may wish to seek guidance as to whether it is in a dominant market position. It would be especially difficult, for instance, to define what is the market and to be able to seek guidance as to whether it is looking at the market for vacuum cleaners or cleaning equipment as a whole. It is something that it would be reasonable to ask that the director give guidance on. So far as I can see in the Bill, he does not have the power to do it.
Lord Borrie: Perhaps I may intervene, just to say that I think that the noble Lord is asking for an academic question to be answered by an office which, even if it is resourced adequately, will have plenty of things to do. The prohibition applies only where the two conditions are satisfied: there is a dominant position and there is abuse. To enable people to ask whether one has a dominant position is to ask an academic question.
Lord Haskel: I thank my noble friend Lord Borrie for that. The director general is required under the Bill to issue guidelines as to how he intends to apply the prohibitions. Companies will be able to look to EC jurisprudence for guidance as to the principles which will be applied in assessing dominance. Some might put that as the ability to throw their weight around without worrying too much about the consequences, but business people usually have a fairly shrewd idea of the nature of their own markets and indeed the extent of their own market power. In view of that explanation, I would ask the noble Lord to withdraw the amendment.
Lord Lucas: I so do. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Clause 20 agreed to.
Clause 21 [Notification for guidance]:
[Amendment No. 83 not moved.]
Clause 21 agreed to.
Clause 22 [Notification for a decision]:
[Amendments Nos. 84 to 87 not moved.]
Clause 22 agreed to.
Clause 23 [Effect of guidance]:
[Amendments Nos. 88 and 89 not moved.]
Clause 23 agreed to.
Clause 24 [Effect of a decision that the Chapter II prohibition is not infringed]:
[Amendment No. 90 not moved.]
Clause 24 agreed to.
Schedule 6 [Notification under Chapter II: Procedure]:
[Amendments Nos. 91 to 93 not moved.]
Schedule 6 agreed to.
House resumed.

Public Processions etc. (Northern Ireland) Bill [H.L.]
Reported from a Grand Committee with an amendment.
House adjourned at twenty-five minutes before eleven o'clock.