HL Deb 25 November 1997 vol 583 cc868-77

3.15 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 again resolve itself into Committee on this Bill.

Moved, That the House do now again resolve itself into Committee.—(Lord Simon of Highbury.)

On Question, Motion agreed to.

House in Committee accordingly.


Clause 49 [Rules]:

Lord Lucas moved Amendment No. 191: Page 24, line 35, leave out ("may") and insert ("shall").

The noble Lord said: I believe that the purpose of these amendments is self-evident. I shall be very grateful to hear the Minister's reaction to them. I beg to move.

Lord Simon of Highbury

I am speaking to Amendment No. 191, but I take the grouping to include Amendments Nos. 192 and 193.

Lord Fraser of Carmyllie

Perhaps the noble Lord would also like to speak to the next group of amendments, Amendments Nos. 194 to 197, because, as far as we are concerned, they are all linked.

Lord Simon of Highbury

I shall try to catch up with the speedy movement of amendments. I am always encouraged to be moved along rather than hindered. I am grateful to the noble and learned Lord for giving me this opportunity to explain to the Committee our thinking on a timetable for dealing with applications, and on giving business adequate notice of the rules and the general advice and information under Clause 50. These are important matters, and as a former businessman I am well aware of the need to give business adequate time to prepare for the application of the prohibitions.

Schedule 9 to the Bill elaborates on the kind of rules that may be made under Clause 49, although it is not binding that such matters will be covered or exhaustive. Paragraph 2 of the schedule says, among other things, that the rules may make provision for an application for a decision and an application for guidance to be dealt with according to a timetable. I can confirm to the Committee that the Secretary of State intends that the director should make rules setting himself a timetable once the system has bedded down. She has a power in Clause 49(9) to direct the director to make rules about a particular matter if she thinks he ought to do so.

Turning to the question of preparation time for business, I accept entirely that the main elements of the new regime should be in place in good time before the prohibitions are brought into effect. We would not expect to commence the prohibition clauses until about a year after Royal Assent. Early in that period I would expect the rules under Clause 49 to be made.

At this point it will be helpful for me to refer the Committee to a letter I have received from John Bridgeman, the Director-General of Fair Trading, a copy of which I have had placed in your Lordships' Library. The letter concerns his office's work, in consultation with the sectoral regulators, on drawing up rules under Clause 49 and the advice and information under Clause 50. It provides useful background to the Committee's discussion of several groups of amendments today. So far as rules are concerned, the letter explains the consultation that has begun with other sectoral regulators, and confirms the director's intention to consult with business and its advisers on the draft rules. He says that he aims to publish a consultation draft of the rules as soon as possible, perhaps by late spring.

Given what I have said about a year's delay to the commencement of the prohibitions, this should give business adequate time to prepare for the new regime. There will, of course, also be a transitional period for agreements, but I see that there are amendments down to that schedule to the Bill and it may be best to discuss those transitional arrangements, as opposed to the period between Royal Assent and entry into the law base of the prohibitions, later in our deliberations.

The making of rules must necessarily allow proper time for consultation and for consideration of the points raised during consultation. If for any reason the rules could not be issued early in the period after Royal Assent, I would expect the Government to consider carefully the case for delaying the commencement date for the prohibitions.

To sum up, I am satisfied that the regime will provide businesses with both adequate preparation time before the prohibitions are brought into force and with a timetable by which they can expect their applications to be dealt with once they are in force. On that basis, I ask the noble Lord whether he is prepared to withdraw his amendment. I understand that he was speaking also to Amendment No. 194.

Lord Lucas

I am extremely grateful to the Minister for that explanation and for the opportunity to go through it in detail before we return to this matter after Christmas. In the context of the time that we shall have to digest what he said which, to my mind, will require going over several times before we can understand the nuances of the various let-outs which the noble Lord has allowed himself and the Government, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendments Nos. 192 to 197 not moved.]

Clause 49 agreed to.

Lord Ezra moved Amendment 198:

After Clause 49, insert the following new clause—


(" . The Director shall establish an office of the consumer representative which will represent the consumer interest when he carries out his duties under this Act, and in particular will—

  1. (a) advise the Director, when he is conducting an investigation under section 25, of the impact on consumers of any possible infringement of Chapter I or Chapter II prohibitions;
  2. (b) advise the Director, when he is making a decision following an investigation under section 30, of the impact of such a decision on consumers;
  3. (c) advise the Director, when he is considering granting exemptions under section 4, of the impact of such exemptions on consumers;
  4. (d) assess the impact on consumers of exemptions granted under section 4 which he considers appropriate, and at a time which he considers appropriate; and
  5. (e) publish the results of such assessments.").

The noble Lord said: This amendment refers to the role of consumers in the implementation of the Bill. Although it could be argued that supporting the interests of consumers is the fundamental objective of the legislation. nonetheless there is a feeling, particularly on the part of the National Consumer Council, that in achieving that objective of supporting the interests of consumers it would be helpful if consumers were formally involved in the process of applying the legislation. Therefore, it is proposed that within the competition office there should be some consumer representation in some form or another to enable consumers to participate in the consideration of developments which affect their interests. I very much hope that the Government will take on board this attempt to formalise the position of consumers' interests and that they will give it serious consideration. I beg to move.

Lord Borrie

I fully understand the noble Lord's references to the consumer interest. As he rightly said, the whole purpose of competitive activity is, or should be, for the benefit of the consumer. If my noble friend Lord Peston were in his place, he would no doubt be able to quote appropriately from Adam Smith's words to that effect. As the noble Lord, Lord Ezra, knows (because he has often referred to the matter in your Lordships' House), existing legislation allows some form of consumer representation with regard to the specific industry regulators dealing with gas, water and electricity. When referring to these matters on other occasions, the noble Lord has stated a preference for what I think he has called "the gas industry model" whereby the Gas Consumers' Council is independent of the regulator, which is known as Ofgas. However, when it comes to the regulation of the water industry, the consumer committee or council—I forget its correct title—is part of the organisation of the regulator; namely, Ofwat, which, as I recall, the noble Lord does not find quite so satisfactory.

I find the new clause which the noble Lord is proposing slightly odd because it refers to the type of model of consumer organisation which in those other areas the noble Lord has not previously thought the most desirable. The new clause states that the director—that is, the Director-General of Fair Trading— shall establish an office of the consumer representative". That suggests that it is part of the Office of Fair Trading. The noble Lord will correct me if I am wrong.

I would question the value of the new clause on certain other matters. First, in Section 2 of the Fair Trading Act, which is the governing Act of 1973 which set up the Office of Fair Trading and that of the director general, two general duties are specified. One is pro-competition and relates to examining any business matters which might adversely affect competition, and the other, which is given equal importance, is the duty to review the economy to see whether there are any practices which are adverse to the consumer's economic interest. The director general's office contains two main policy divisions. One is concerned with competition policy and the other with consumer affairs. Therefore, in a sense, the Office of Fair Trading, unlike the organisation of the regulatory bodies for the gas, electricity and water industries, already has a consumer affairs division.

I wonder also whether the new clause is suitably worded. It refers to, an office of the consumer representative". We all like to be representative, but we cannot make someone "representative" simply by calling him such. It is a little difficult to imagine an official of a government agency, such as the Office of Fair Trading, being thought of as a representative of the consumer. I was hoping that the noble Baroness, Lady Wilcox, a former distinguished chairman of the National Consumer Council, would be in her place because—I hesitate to say this—even the NCC would not really claim to be "representative". It is a body that is appointed by appropriate Ministers.

Be that as it may, there is a choice to be made in these matters. A government official, such as the Director-General of Fair Trading—and he has a consumer affairs division—ought to consult with consumer organisations to do the various things which the noble Lord, Lord Ezra, has specified as necessary if he is to carry out his functions under this new Bill. Choice is involved as to whether the director should go direct to the Consumers Association, the National Consumer Council and the various more specialised consumer bodies which now exist, or whether he should have the consumer's point of view filtered to him through some official or some part of his own office. As I see it, that is what would happen if we were to accept the new clause in its present form.

Without, I hope, overdoing it, although I greatly sympathise with the objective of the noble Lord, Lord Ezra, who wants to ensure that the consumer's interests are well understood by those who will make decisions under the Bill and that industry and consumers are consulted about the carrying out of these functions, I am not sure that this device is the best way of achieving that objective.

Baroness Oppenheim-Barnes

I apologise for arriving a few moments late and not hearing the noble Lord, Lord Ezra. I have, however, had the pleasure of hearing the noble Lord, Lord Borrie. In the absence of my noble friend Lady Wilcox, who was my distinguished and committed successor at the National Consumer Council, I must apologise to the NCC for saying that I am very much against this type of amendment, although not so much on the grounds that were put forward by the noble Lord, Lord Borrie, who has recommended the existing bureaucracy and the way in which it works in the interest of consumers. The more he explained it the more bureaucratic it sounded. I do not blame him for that because it was our legislation that created the Office of Fair Trading.

The noble Lord, Lord Ezra, spoke about placing a poultice on to the bureaucracy (if such a mixed metaphor can be used). That is not the point at all. This Bill is near to my heart. When I dealt with these matters at the Department of Trade I certainly intended to do this. My point is far more revolutionary than either of the suggestions that have been put forward. The noble Lord, Lord Borrie, knows what I am about to say.

I believe that the whole Bill and the criteria within it should relate only to the consumer interest and not the public interest. The public interest is too diffuse and all kinds of considerations come into decisions that may or may not be in the consumer's interest. If this is a Bill to protect consumers then the basic criteria throughout should relate solely to the consumer interest. A decision would have to be made as to what was and what was not the consumer interest. I do not believe that business or industry would have anything to fear from it. Industry knows that good consumer practices mean good business. One rarely finds among successful businesses bad consumer practices, for the simple reason that they do not pay. I do not believe that business has anything to fear from those much simplified criteria. I hope that the noble Lord will be able to take a sympathetic look at this matter when he comes to reply.

3.30 p.m.

Baroness O'Cathain

Having listened to my noble friend Lady Oppenheim-Barnes, I remain unpersuaded that the National Consumer Council's suggestion that has been so well articulated by the noble Lord, Lord Ezra, should be thrown out. Even if one had a consumer interest in the Office of Fair Trading one would have the National Consumer Council, plus the consumer associations if necessary. They have a long pedigree, working extremely hard and diligently for the consumer. They are grounded in reality. They are close to the consumer and always have the consumer interest in mind. It would have been better had the Bill focused completely on the consumer. If I recall correctly, my noble friend said that it would have been better if it had dealt with the consumer interest rather than the public interest because many matters in the public interest might not necessarily be in the consumer interest. However, in the end we have the responsibility of guarding the public interest rather than just the consumer interest. I do not believe that they necessarily conflict but there is a point to be considered here.

Further, I hope that the director general gives weight to this suggestion. Both the National Consumer Council and the Consumers Association are large organisations. They have shown an openness and willingness to have a dialogue with industry. Compared with single issue groups, which tend to be politically motivated and do not necessarily speak for consumers as a whole, I believe that there is merit in getting these organisations more closely involved within the Office of Fair Trading. It is fine to say that a public servant should have responsibility for consumer interests. I do not believe that any public servant can have the same experience vis-à-vis the consumer interest as the NCC and CA.

Lord Haskel

At the risk of disappointing my noble friend Lord Peston, who is not in his place, instead of quoting Adam Smith perhaps I may quote my right honourable friend the President of the Board of Trade, Margaret Beckett. In her foreword to the consultation document published with the draft Bill in August she said: Effective and fair competition is essential to ensure value and choice for customers". The whole purpose of this legislation is to protect competition more effectively than we do at the moment. This will benefit UK competitiveness and, as Margaret Beckett has emphasised, it will benefit the consumer.

I say to the noble Baroness, Lady Oppenheim-Barnes, that this is a Bill concerned with competition. The consumer's interests are at the heart of this legislation. As my noble friend Lord Borrie has said, the Director General of Fair Trading must take full account of the impact on consumers in assessing whether behaviour is anti-competitive. I hope that that reassures the noble Baroness, Lady O'Cathain. The same applies under the new Bill when the director is considering whether to grant an exemption from the Chapter I prohibition. Indeed, the exemption criteria set out in Clause 9 expressly require that consumers should enjoy a fair share of the benefits. The ultimate objective of the Director General of Fair Trading's work as a competition authority is to benefit consumers. In his annual report the director describes the aim of the OFT as to protect the economic interests of consumers in the UK by safeguarding effective competition. I am therefore sure that the interests of consumers will be constantly at the forefront of the director's mind.

My fundamental objection to Amendment No. 198 is that it appears to undermine these principles. A discrete consumer representative within the OFT would be a permanent question mark over the director's willingness and ability to take proper account of all the relevant factors, particularly the consumer's interests. I have no wish to undermine the director's role in this way. Moreover, if consumer interests were to be given special representation in the OFT, would not other interest groups such as trade union interests also have a case for separate representation? More prosaically, a discrete office would require additional resources within the OFT, and it would add another layer to the decision-making process. In short, I do not think that it would be right for a body charged with the enforcement of the prohibitions to incorporate specialist interest groups. But we believe that it is absolutely crucial that the consumer has a clear voice under the new regime. The Bill ensures that this will be the case. We believe it is an essential part of a fair and transparent system that there is recourse to effective appeal. We have extended this right under the Bill to consumers.

We have therefore ensured that third parties with a sufficient interest will be able to appeal to the tribunal against decisions by the director. We have gone further to ensure that organisations representing affected consumers will be able to appeal on their behalf. There is nothing in the Bill to prevent people being appointed to the appeal tribunal panel and sitting on tribunals to hear appeals on the basis that they have a particular expertise in consumer matters. We are also including provision in Clause 56 of the Bill to facilitate private actions in the courts by those harmed by breaches of the prohibition. All of this is in the new Bill. The interests of the consumer are at the heart of the new prohibitions and the enforcement and appeal arrangements under the Bill will ensure that the consumer has a clear voice in their application.

I hope that what I have said will satisfy the noble Lord, Lord Ezra. Knowing that he is indeed a champion of the consumer, I hope that he will feel able to withdraw his amendment.

Lord Ezra

I thank the noble Lord for his considered reply. I am however a little concerned about its main drift, which emphasised the possibilities of an appeal. The whole point of the amendment is to get in before one has to appeal against a decision which appears to be unsatisfactory. I find it difficult to understand why the Government resist the idea of a consumer advisory body. It may be that it should not be placed within the OFT as proposed; it may be that such a body can be placed elsewhere, perhaps with the competition commission. As the noble Lord, Lord Borrie, suggested, perhaps it can be set up independently, for it to be consistent with other proposals that have been made, to be consulted during the formulation of decisions reached by the director general.

I am a little worried that the emphasis should be put on appeal being available to the consumer interests rather than on consumer interests being brought into the decision-making process. Can the noble Lord, Lord Haskel, comment on that matter?

Lord Haskel

The appeal is a failsafe mechanism to which consumers can resort if everything else goes wrong. Prior to that there are all the safeguards which I explained in my response. The Director General of Fair Trading has a special department within his office for looking after consumer interests and the appeal is a failsafe process at the very end of the line.

Lord Ezra

I would like to think very carefully about this matter. In the meantime I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Schedule 9 [Director's Rules]:

Lord Kingsland moved Amendment No. 199: Page 67, leave out lines 44 and 45.

The noble Lord said: This amendment refers to a matter which the Opposition raised on the second day of the Committee stage. We tabled amendments to Schedules 5 and 6 which proposed removing the power of the director general to convert unilaterally an application for guidance into an application for a decision. To be consistent with that, we have to do the same thing in relation to this schedule. That is the reason for wishing to excise paragraph (c) at the bottom of page 67.

The Minister will note that in paragraph (b) the director, having issued the guidance, can thereafter relieve a company from either the impact of Chapter I or Chapter II prohibition. However, paragraph (c) is much more onerous because it concerns a company which, having requested guidance, suddenly finds half-way through consideration of that request that the director has decided to convert it into a full-scale application. Not only does that situation offend the Opposition's sense of sportsmanship; it also breaks the principle that, all things being equal, if an investigation is started by the director there is a proper procedure which includes warning the potential victim that the director is going to undertake the task. That is the spirit in which the amendment is tabled. I beg to move.

Lord Haskel

I speak to Amendment No. 199 together with Amendment No. 200. Amendment No. 199 relates to the director's ability to convert an application for guidance into an application for a decision. The noble Lord referred to the Opposition's sense of sportsmanship. I refer the noble Lord to my earlier response when I gave a solemn and binding undertaking to reflect upon the issue.

Lord Kingsland

I thank the noble Lord for reminding me that he agreed to reflect upon the matter. I wonder whether his reflections have yet matured.

Lord Haskel

I am afraid that my reflections have not matured. We have been reflecting on the further amendments. The result of our reflections will be put forward at the next stage of the Bill.

Lord Kingsland

In thanking the Minister for that reflective reply, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Lord Kingsland moved Amendment No. 200: Page 68, leave out lines 34 to 47.

The noble Lord said: The amendment corresponds to a previous amendment to Clause 10 which sought to delete subsections (5) to (8) which gave the director power to cancel an EC exemption. This power, which is reflected in our further amendment to a different part of the Bill, contradicts what we understood to be the fundamental principle behind the Bill, namely, that our domestic provisions should dovetail with the European provisions in such a way that the minimum burdens are imposed upon British industry in order to enhance competitiveness. If these provisions dovetail and if they reflect the same kinds of obligations, we do not understand why, if the EC has granted an exemption, we should second guess them. I beg to move.

Lord Haskel

The issue of dovetailing with EC regulations will arise later in the debate. Can we leave that question until we debate the whole matter on later amendments? Amendment No. 200 relates to a discussion we had on the first day of Committee in relation to Clause 10 concerning the director's ability to impose conditions with respect to parallel exemptions or to cancel them. I made it clear then that the director should be able to take action against an agreement which was exempt.

If the noble Lord withdraws the amendment we can perhaps deal with the issue of dovetailing when we discuss the later amendments.

Lord Kingsland

I understand entirely what the Minister says. I am sure he will understand that we have to take the amendments as we find them. We have progressed through the Bill in an orderly fashion. I do not say that the Bill repeats itself because it is extremely well drafted, but it deals with the same issue in a number of different waysthe circumstances I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Schedule 9 agreed to.

Lord Haskel

My Lords, I beg to move that the House do now resume.

Moved accordingly, and, on Question, Motion agreed to.

House resumed.

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