Competition Bill [H.L.]

HL Deb 25 November 1997 vol 583 cc946-90

8.32 p.m.

House again in Committee on Schedule 10.

[Amendment No. 242 not moved.]

Lord Haskel moved Amendment No. 242A: Page 79, line 12, leave out ("6") and insert ("1").

On Question, amendment agreed to.

[Amendments Nos. 243 to 246 not moved.]

Schedule 10, as amended, agreed to.

Clause 53 [General restrictions on disclosure of information]:

Lord Kingsland moved Amendment No. 246A: Page 26, leave out lines 30 and 31.

The noble Lord said: The amendment deals with the confidentiality and immunity from defamation provisions in the Bill. Clause 53(1) sets out the general rule that information which has been obtained under the Bill's provisions relating to the affairs of a particular individual or undertaking and which has been disclosed in the course of investigation will be treated as confidential. That provision matches the general rule in the European Community.

However, Clause 53(1) subjects that general rule to very wide exceptions. I would draw the Minister's attention in particular to subsection (3) which says that subsection (1), which is the general rule, does not apply to a disclosure of intbrmation…facilitating the performance of any relevant functions of a designated person". If the Minister looks at subsection (4) of Clause 53, he will see that the definitions of "relevant functions" and "designated person" are given in Schedule 11. If the Minister then turns to Schedule 11, he will see that both definitions cover virtually every competition provision on the statute book operated by nearly every person who is authorised to oversee the application of those provisions.

We are talking about very wide exemptions. In particular, bearing in mind Clause 58 of the Bill, they do not conform with the jurisprudence of the competition authorities in the European Community. The Minister will be aware that the competition rules are contained in Regulation 17 (1962). He will be aware that information which is required as a result of an application of Articles 11, 12, 13 and 14 of that regulation can only be used for the purpose of the relevant part of the investigation.

The Minister will also be aware that the European Court of Justice and the European Court of first instance have extended that rule to Articles 2, 4 and 5 of Regulation 17 to which I have just referred. He will also be aware that any information falling under those articles of that regulation which is passed on to member states also obliges those member states to respect that rule. In my submission, in order to meet the requirement in Clause 58—namely, that the Bill respects the jurisprudence of the European Community in general and the European Court of Justice in particular—the exemption contained in Clause 53(3) will, at least in respect of that paragraph, have to be substantially modified and narrowed. I beg to move.

The Deputy Chairman of Committees (Lord Ampthill)

No doubt Members of the Committee, and certainly noble Lords on the Opposition Front Bench, are aware that if this amendment is agreed to it will pre-empt Amendment No. 246B.

Lord Haskel

Clause 53 prohibits the disclosure of information obtained under the Bill, except with consent or for the particular purposes specified in the legislation. It states that unlawful disclosure of information will be a criminal offence. As drafted, Amendment No. 246A would prevent all disclosure of information for the purposes of functions under the Bill, except with consent.

The amendment would delete the gateway for disclosure for information contained in subsection (3)(a)(ii). The noble Lord mentioned subsection (3)(a)(i), and I am not quite sure of its relevance. The gateway to which I referred enables disclosure of information obtained under the powers in Part I of the Bill to the persons listed in Schedule 11 and for functions listed in that schedule. The noble Lord says that the exemptions are very wide. I am not sure that we agree with that. This provision enables, for example, disclosure of information between the Director General of Fair Trading and the Competition Commission to assist the commission to hear appeals. It also enables the director general to include relevant information in his published decisions or his draft decisions. The Committee will therefore readily see that without this gateway the new regime would be unworkable.

We have already debated the principle of concurrency at length and I do not see the need to rehearse these arguments again now. However, I shall deal with the question of disclosure of information between the regulators and the Director General of Fair Trading. The first point to make is that enabling disclosure of information between the regulators and the director general is clearly necessary for the principle of concurrency to work. The different authorities need to be able to exchange information on cases in order to determine which is best placed to deal with potential infringements of the prohibitions and to ensure that there is no unnecessary duplication of work between them.

The gateway which this amendment would remove also enables information obtained under the Bill to be used in relation to different regulatory functions. This is standard practice in the UK regulatory environment. There are, for example, similar provisions in the Fair Trading Act, the Competition Act, the Restrictive Trade Practices Act, the utility statutes, the Financial Services Act and the Companies Act, to name but a few. Clause 53 therefore provides gateways for the disclosure of information obtained under the Bill between the Director General of Fair Trading, the utility regulators and the other regulatory authorities listed in Schedule 11.

I make no apologies for this. The noble Lord thinks that the provisions are rather wide, but they are necessary. Information may be disclosed only in order to assist the recipient to perform his statutory functions. If one of these regulators has evidence of a potential infringement of, say, a licence regime supervised by another regulator, it would be quite wrong to require him to keep the information to himself. We need to ensure that the different regimes work coherently and efficiently together.

The noble Lord referred to EC information. We do not believe that the EC precedent in this respect is relevant to UK circumstances. There are not the equivalents of the utilities regimes and regulators at EC level. It is important that the UK regulatory regime viewed as a whole operates in a coherent and sensible fashion. Preventing the disclosure of information between regulators, and its use for different statutory functions, would frustrate that objective.

I wish to correct an earlier statement. The noble Lord was absolutely right to refer to Clause 53(1).

If I may summarise my remarks, this amendment attacks the principle of concurrency—we have given that question a good airing—but also risks undermining the coherent and efficient co-existence of the utility regimes with general competition law. I hope that the noble Lord will accept this argument and see fit to withdraw his amendment.

8.45 p.m.

Lord Kingsland

First, I wish to thank the noble Lord for his elucidation of this part of the Bill. I thank him also for bravely correcting his earlier assertion.

In looking at the text it seems to me—notwithstanding the point that the noble Lord makes about concurrent responsibilities and the need for regulators and other regimes to see what information the director general has—that the drafting of this provision goes way beyond what he has said. In my submission, as the provision is drafted it would remove any restriction on the director general to disclose this information to anyone.

Lord Haskel

This is a complex area. Perhaps the best course would be for me to write to the noble Lord about it.

Lord Lucas

I wish to make a point in support of my noble friend. It seems to me that the way this provision is drafted gives all these designated persons listed in Schedule 11 access to the immense powers which are contained in this Bill and which they do not have under their own Acts. Effectively it enormously enlarges the powers of these regulators, because if information is produced using the enormous investigative powers under this Act, it then becomes available to the regulators and it therefore becomes a channel, which they did not have before, through which to obtain information and effectively to act in ways which Parliament had not allowed them to do. If that is to be the case, it requires the closest scrutiny. I would much prefer to see this clause drafted more narrowly so that the kind of information which these Schedule 11 designated persons can obtain has not been obtained by means which they would not normally have access to under their own regulations.

Lord Haskel

But this clause prohibits the disclosure of information obtained under the Bill except with consent or for the particular purposes specified in the Bill. As I said at the beginning, unlawful disclosure of information will be a criminal offence. Surely that is a safeguard.

Lord Kingsland

I am grateful that the noble Lord is prepared to take the trouble to write to me on this matter. However, I hope that before he writes to me he will reflect again on the points that I have made, not just with respect to the breadth of the interpretation to which I believe the words used in the clause are subject, but also the wider issue of the EC law. If Clause 58 means what it says, in my submission the confidentiality ingredients of the Bill cannot go wider than those contained in EC law.

The Minister has already spoken on this matter and I do not wish to weary him with the prospect of having to respond again. In writing his letter to me I should be much obliged if he will cover that point too. In the meantime, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Lord Fraser of Carmyllie moved Amendment No. 246B Page 26, line 31, at end insert ("other than those of the Director General of Telecommunications under the Telecommunications Act 1984").

The noble and learned Lord said: In view of the offer by the noble Lord to write to us about this matter I think I would be labouring the point if I were to address any argument to him now. This matter depends not only on the argument which has already been addressed to the Committee by my noble friend, but also carries further the argument we addressed earlier this evening about the separation between the regulatory and competition functions of the Director General of Telecommunications. I suggest that the noble Lord needs to say nothing more to me than, "Yes, he will", if I invite him to add, when he writes to my noble friend, the response he would otherwise have provided to me on the Floor of this Chamber. I beg to move.

Lord Haskel

Yes, I will.

Lord Fraser of Carmyllie

I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Lord Kingsland moved Amendment No. 247: Page 26, leave Out lines 32 and 33.

The noble Lord said: In moving the amendment, I wish to speak also to Amendment No. 248. The amendment again deals with the issue of confidentiality under Clause 53(3). We are not considering subsection (3)(a)(i) but subsection (3)(a)(ii) which provides for, facilitating the performance of any functions of the Commission in respect of Community law about competition". in the context of subsection (3)(d), which is required to meet a Community obligation". Is there some overlap between those two provisions? If not, what is the distinction between the two?

Amendment No. 248 refers to subsections (5) and (6) of Clause 53. It is intended to be a probing amendment to find out what the Minister has in mind. Subsection (6) states, 'specified' means specified in an order made by the Secretary of State". In what circumstances does he envisage the Secretary of State making that order? I beg to move.

Lord Lucas

Perhaps I may raise a point on subsection (3)(a)(ii). One of the dangers in this and the previous subsection is that once the information is released to other parties without guarantee by them that they will respect the confidentiality in their turn, it is effectively releasing the information to the world. I know that the Commission keeps confidences sometimes, but under the regulations set out in the Bill it would have no obligation to keep confidences. It would not be bound by anything in the Bill, unless we have a requirement in the Bill that anyone receiving information will express themselves bound by the confidentiality provisions contained in the Bill.

The clause continues to worry me. I shall appreciate it if at the very least the noble Lord, Lord Haskel, will "copy me in" on his letters.

Lord Haskel

I can promise that we shall copy the noble Lord in on the letters. We dealt with confidentiality on the last amendment. It is a criminal offence to misuse such information. I turn to the question of European law. The amendment deletes subsection (3)(a)(ii) which enables information to be disclosed to the Commission to help the Commission perform its functions under European law. We believe that it is right to give the director the power to help the Commission to enforce Community competition law. After all, this law is directly applicable in the UK too. If the UK authorities have information about possible contraventions of EC competition law, is it right that they should have to keep the information from the Commission? Surely they should be free to give this information to the Commission. If they had to withhold the information from the Commission, the result would be that the Commission would have to duplicate the work by the UK authorities. The Commission would have to use its own investigation powers to obtain the information. All that would create a lot more work. Frankly, that outcome would be contrary to the sensible dovetailing of the UK and the EC regimes that we intend to achieve, a point which the noble Lord, Lord Kingsland, raised earlier.

Clearly, we need to be able to disclose information to the Commission where that is required to meet a Community obligation in order to ensure that we are able to meet our duties under the EC treaty.

We considered carefully whether the power in subsection (3)(a)(ii) was needed in addition. We concluded that it was, partly because of the experience under the Fair Trading Act. This is because, as I said, there may be circumstances where it would be sensible and right for the director to give to the European Commission information about a case which he has obtained under his powers in the Bill. While there may be situations in which the UK's Community obligations would require the director general to provide the information, that may not always be the case. Further, it would not always be clear whether there is a Community obligation to provide particular information. We do not wish to place the director at risk of committing the criminal offence in making disclosures about which I spoke earlier. On the one hand, unlawful disclosure of information is a criminal offence under the Bill. On the other hand, if the director got the judgment wrong, the UK might find itself in breach of its Community obligations. I am sure that Members of the Committee do not want that to be the case.

On Amendment No. 248, the noble Lord, Lord Kingsland, asked about subsections (5) and (6). These enable the Secretary of State to specify additional persons and purposes to whom and for which disclosure is to be permitted. However, this power is exercisable by order subject to annulment by either House. So there is some protection to deal with the noble Lord's concerns. The purpose of the power is to ensure that there is sufficient flexibility in the Bill to respond to development in regulatory and competition policy without need for fresh primary legislation. I hope that that explanation will satisfy noble Lords.

Lord Lucas

The noble Lord has not addressed in the slightest the point that I raised. In case the Box has not had time to send an answer, the question is this: does the duty of confidentiality under the Bill extend to the Commission if the Commission is given information obtained under the Bill? If it does not, there should be provision in the Bill to ensure that it does.

The same argument applies to people specified in Schedule 11 who receive information under the Bill. It does not appear obvious that they are bound by the confidentiality provisions under the Bill. As they are UK entities, perhaps they are. But the Commission surely is not, because it is not subject to the Bill. Therefore there is need for the safeguard that information given to the Commission will be treated confidentially.

Lord Haskel

I am sorry if I did not address the noble Lord's question. If the information is given to the Commission, as the noble Lord, Lord Kingsland said, it will be subject to European law which will restrict its disclosure by the Commission.

Lord Lucas

Perhaps the noble Lord would like to specify exactly which sections of European law will provide that function, and exactly how that function will be exercised. What action would an aggrieved party be able to take were information that he had given to the director disclosed by the Commission? I am sure that the noble Lord will be able to write a letter to me on that subject.

Lord Haskel

I am not sure that I need to write a letter. The European law under which this is done will surely be Articles 85 and 86 which are the items we are debating.

Lord Kingsland

In considering the various answers given by the noble Lord to my amendments on Clause 53, I must confess to being extremely unhappy about them. Despite the firmness of his response to me, I hope that the noble Lord will reflect nevertheless on what he and I have said. Bearing in mind the context of European Community law, and the European Convention on Human Rights which is about to be incorporated in our law by this Government, on sober reflection on the clauses, does he really believe that they conform with those international obligations? I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendment No. 248 not moved.]

9 p.m.

Baroness Nicol moved Amendment No. 249:

Page 27, line 8, at end insert— ("( ) Subsection (3) shall not apply to disclosure of information by a person other than a person who is party to an agreement which offends against the Chapter I prohibition or Chapter II prohibition.").

The noble Baroness said: I must remind the Committee that I have declared an interest as chairman of the All-Party Retail Group.

The purpose of my amendment is to safeguard commercially sensitive information which is provided by innocent third parties. None of the very interesting debates so far has covered particularly the interests of innocent third parties which may emerge during an investigation. The amendment reflects a concern that the British Retail Consortium has in relation to the Bill and the sweeping powers that it gives to the director general to order the production of documents considered relevant to the investigation. As the Committee knows, the director general can require persons to give an explanation of the documents. By virtue of those provisions, a director could obtain a considerable amount of commercially sensitive information provided by third parties who are not party to the agreement or course of conduct which infringes either of the prohibitions.

Although Clause 53(1) provides for such information to remain confidential, as we heard several times from my noble friend, Clause 53(3) permits disclosure in a wide range of circumstances. The amendment would require the exception in Clause 53(3) not to apply to commercially sensitive information provided by innocent third parties. Those arguments also apply to Clause 63, which we shall debate later and to which I have not tabled an amendment. I hope that the Minister will take these arguments on board in relation to Clause 63 as well, so that we need not return to the matter on Report. I beg to move.

Lord Graham of Edmonton

I hope that the Minister will listen sympathetically to the points made. I, too, declare an interest as an officer of the All-Party Retail Group; I also declare my Co-operative interests, which are registered. I do not speak directly on behalf of any of those interests.

It is undesirable that information given in the strictest confidence in order to assist the director to reach a view should then appear, be referred to and be publicised by the director in his findings. I can well imagine people considering exactly to what extent they are prepared to disclose information to the director. They may well think twice. Not being party to the action and acting as good citizens they are in the position of knowing that anything they say—not at their own discretion but at the discretion of the director—could find itself in the public domain.

The Committee is well aware of the extreme sensitivity of commercially sensitive information. It is right and proper that the director should have power to seek it. But in exercising his discretion, the director ought also to recognise that the free flow of information given by good citizens may well dry up unless an undertaking is given. Information given by people innocent of any charge (that does not mean to say that others are guilty) who are trying to do what is best may find that the information that they have given, which is not only helpful to the director but might be helpful to a great many of their competitors, appears publicly in print. Perhaps the Minister will recognise the point that we are making.

The amendments may not be well enough drafted to take care of the precise point. However, if the Minister will indicate that he has sympathy with the point made, I am sure that my noble friend will be very happy to be collaborative.

Lord Haskel

I assure my noble friends that I have sympathy with the point that they are making. The issue of innocent third parties is a very difficult one. I fully appreciate the concerns that businesses have over the confidentiality of commercially sensitive information. However, at the same time it is important that the operation of the new legislation is transparent. We have tried to take great care in balancing those two imperatives.

The Bill contains two clauses to protect information obtained under the new regime. Under Clause 53 it prohibits the disclosure of any information obtained under the Bill except to specified persons for specified purposes or with consent. Criminal sanctions attach to unlawful disclosure.

Clause 54 imposes duties on the Secretary of State and the Director General of Fair Trading in relation to that information where disclosure could damage the legitimate interests of businesses or individuals. The clause requires the director general to have regard to the need to protect such confidential information and the extent to which disclosure of such information is necessary to achieve the purpose for which disclosure is proposed.

Therefore, before disclosing information obtained under Bill, the director general will have to give careful consideration to the factors set out in Clause 54. He will have to balance the need for disclosure against the public interest and the significant harm which innocent third parties might suffer. He will need to take a long, hard look at how necessary it is to do so.

Schedule 8 provides that the tribunal rules may provide for a tribunal to sit in private when information of the kind to which Clause 54 applies is being considered. The provisions in relation to appeals also provide for a tribunal to apply Section 54 in respect of its written decisions if they are to be published. So there are clear safeguards to protect innocent third parties and to protect confidential and commercially sensitive information.

At the same time, however, it would be wrong absolutely to forbid the disclosure of confidential information even where it was provided by firms which had not infringed the prohibitions. It may, for example, be necessary to disclose information so that an undertaking which is accused of having infringed the prohibitions is aware of the case against it. Further. it may be needed to make reasoned decisions understandable. Reasoned decisions will be a key part of the transparency of the new regime and will be an important indicator for business as to the application of the prohibitions.

Disclosure of information may also be important to facilitate civil actions by third parties to obtain redress under the prohibitions. Firms and individuals who have been harmed by infringements of the prohibitions ought to be able to obtain redress. We believe that, where the director has information which would help them to do so, he should be able to release it to them. That would again be subject to the test in Clause 54.

I sympathise with my noble friends for raising this important issue but I assure them that there are protections within the Bill. I hope that my explanation will satisfy their concerns and that they will be able to withdraw the amendment.

Lord Graham of Edmonton

I am grateful to the Minister for the care he has taken in giving an explanation. However, I have been told that it has come as a shock to third parties to find information which they gave in confidence appearing in public print. In other words, they assumed, wrongly, that the information that they gave in confidence would remain confidential.

The Minister tells us that there are careful checks and balances and that it is a matter of judgment as to how much is disclosed. Is there within the mechanism a procedure whereby the director who intends to disclose confidential information would advise a third party of his intention before the information was published? To that extent, the person would be forewarned and might be able to take some measures to militate against it.

I am sure that some individuals would think twice about willingly responding, or responding 100 per cent., to an invitation to disclose frankly all that they know. We do not want to get into a situation where people are hedged in with potential actions, inquiries, tribunals and appeals. I hope the Minister wants something which is seen to he fair.

I do not think that the general public—whom, after all, we represent—and business would think it fair that something given in all innocence and in confidence should be revealed without their having the opportunity to reflect or to withdraw the information. Many people will say things in confidence that they would not be prepared to see in public print. That may well condition the veracity and integrity of the information. I hope that when my noble friend responds she may say that the matter ought to be revisited.

Lord Haskel

This is indeed a very difficult issue. I should have thought that, if a third party were involved in an investigation, they would receive some kind of notice that the information would be disclosed. I understand that the Bill does not provide for that and I think we should reflect on the point about disclosing to third parties if information which they provide is to be disclosed.

Baroness Nicol

I am greatly encouraged by my noble friend's last sentence; before I heard that, I was feeling distinctly uneasy. The point arose because, even under existing legislation, problems have been caused to third parties in this kind of investigation where information has not been treated as confidential by those to whom it was disclosed. I am grateful for the ray of hope contained in my noble friend's final sentence and I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 53 agreed to.

Schedule 11 agreed to.

Clauses 54 and 55 agreed to.

Clause 56 [Findings of fact by Director]:

On Question, Whether Clause 56 shall stand part of the Bill?

Lord Graham of Edmonton

Can the Minister confirm that findings of fact made by the director in decisions resulting from complaints would benefit from this clause?

Lord Haskel

I thank my noble friend for raising that point. I confirm that it is the Government's intention that Clause 56 should apply to findings of fact made by the director in all decisions. It should not be limited to decisions resulting from a notification for a decision. The Government intend to bring forward an amendment at Report stage to address this point.

As I explained to the House on 17th November, third parties have a right of private action. Our clear intention in framing this Bill is that third parties may seek injunctions or damages in the courts if they have been adversely affected by the action of undertakings in breach of the prohibitions. This is an important element of the regime. There is no need to make explicit provision in the Bill to achieve that result. Third party rights of action under the domestic regime are to be the same as those under Articles 85 and 86.

Clause 56 has been included in the Bill in response to comments made in the consultation process. There were calls for measures to ensure that private actions in the courts should work as far as possible in tandem with the application of the prohibitions by the director.

Therefore, for example, parties who have obtained a decision that their agreement is not restrictive of competition will not have to prove again findings of fact made by the director if there were ever court proceedings attacking the agreement under the prohibition. Such facts could not be contested in such court proceedings. The court does, however, have a discretion to require the facts to be established in the normal way.

In explaining the private right of action under the Bill, I hope now to have answered one of the questions posed by the noble Lord, Lord Lucas, at the end of the second day in Committee. I should also like to take this opportunity to answer his second question, as to whether a minor allegation of error of fact would trigger, in his words, the full "panoply" of a commission investigation. In such a case, it would be the alleged error of fact which would be re-examined. It would not have to involve a re-hearing of the entire case. Paragraph 3(1) of Schedule 8 provides for the appeal to be determined by reference to the grounds of appeal.

More generally, I believe that there are adequate powers in the Bill to safeguard against unmeritorious appeals. As we said last Monday, the competition commission may reject an appeal because there is no valid ground of appeal. In addition, paragraph 7(2) of Schedule 8 would enable vexatious appeals to be dismissed. Paragraph 8 of Schedule 8 is also relevant. It would enable the competition commission to demand "up-front" security before allowing an appeal to proceed. In other words, we intend the tribunal to have the ability to require an appellant to "put his money where his mouth is". That could be very sobering for someone with weak grounds of appeal. I believe that these powers, together, will provide an adequate safeguard against unmeritorious appeals.

9.15 p.m.

Lord Graham of Edmonton

I am grateful to the Minister. I never realised that such a little question would bring such a big answer and, in the same way as I support the Co-operative movement, the dividend is much appreciated.

Lord Lucas

I too thank the Minister for his unexpected answer to a question which, for the moment, I had forgotten I asked.

Clause 56 agreed to.

Clause 57 [Interpretation]:

[Amendments Nos. 249A and 250 not moved.]

Lord Simon of Highbury moved Amendment No. 251:

Page 28, line 37, at end insert— (""the EEA Agreement" means the Agreement on the European Economic Area signed at Oporto on 2nd May 1992 as it has effect for the time being;").

The noble Lord said: This amendment has already been debated. I beg to move.

On Question, amendment agreed to.

Lord Fraser of Carmyllie moved Amendment No. 252: Page 29, line 5, leave out from second ("premises") to end of line 10.

The noble and learned Lord said: Amendment No. 252 seeks to limit the interpretation or definition of what are "domestic premises". Without unduly repeating what has been previously said as we have gone through the earlier stages of the Bill, our view is that this is an excessive power. It goes too wide. It is not available to EU level and the ECJ has already recognised that fundamental rights exist in respect of the inviolability of the home.

I ask the Minister to reflect on this: at any time while he was a senior executive or indeed the chairman of BP, can he think of any place where he put down his weary head at night which could not have been included within the description of premises also used in connection with the affairs of an undertaking? That description is so wide that, should the noble Lord take home a briefcase full of papers and sit in front of his television set with his briefcase open looking at his papers, it would be permissible to enter those premises.

I suggest that, before we return to this matter on Report, the draftsman should look at it again to see if he can secure a more narrow definition of what are "domestic premises". I understand the circumstance where people have an office attached to their home, in which case it may be desirable to enter it. But it seems to us to be an extraordinarily wide definition and it ought to be restricted in some way. I beg to move.

Lord Borrie

A few weeks ago it was reported that the President of Iraq, Saddam Hussein, was putting into his private palaces a number of weapons of destruction, no doubt with the aim of ensuring that they would not be subject to inspection by United Nations observers and certainly would not be attacked from the air at any time in view of the fact that there were women and children in those palaces.

That may seem a long way from our discussions today but Saddam Hussein is certainly not the only person who would wish to hide in domestic premises or put in domestic premises material which might be important evidence for an inquiry made under the Bill, in accordance with the provisions we discussed earlier, by the Director General of Fair Trading or his officials. It would seem to be quite a crazy hobbling of the powers of the director general if the only premises which could ever be investigated were those 100 per cent. used for trade, industrial or commercial purposes.

What the clause allows for is an investigation of domestic premises which are in part used for business purposes or where documents relevant to, perhaps, anti-competitive practices or cartel agreements are to be found. To accept the amendment moved by the noble and learned Lord would be to restrict the powers of investigation and simply encourage people not just to leave their briefcase but regularly to leave on a semi-permanent basis any documents of any materiality relating to malpractice in relation to competition.

Lord Lucas

Given the breadth of the way the clause is drawn, I would be intrigued if the Minister could give the Committee an example of a domestic premise which might be excluded. If, as is my understanding, the dog kennel is possibly the only part of a building which is likely to be excluded under the clause, why is the clause here at all?

Lord Simon of Highbury

I have acknowledged before in these debates the concern about the strength of the investigation powers in the Bill. I can only underline again the words carefully used by my noble friend Lord Borrie. The Bill would allow entry to any premises during an investigation. But "premises" does not include domestic premises unless

1. "(a) they are also used in connection with the affairs of an undertaking, or
2. (b) documents relating to the affairs of an undertaking are kept there".

It is true that on one's travels one is likely to take a briefcase. I agree with the noble and learned Lord on that. But I do not want to be dragged into this. I would never have taken any documents that would ever have caused me to have a moment's guilt. I want to put that on the record since it was nearly put on the record that I might have done.

Seriously, the Government have considered carefully the case for these powers. They have not been included in the Bill lightly. We are, as my noble friend Lord Borrie reminded us, talking here about the secrecy which is needed to operate cartels or to engage in anti-competitive practices. In particular, individuals may strive to keep relevant documents and information out of the hands of anyone investigating what would normally be considered to be a business site. That is how these things are organised.

In the debates on the Bill I have stressed the need for strong powers to enable the director to get access to information. I think my noble friend Lord Borrie would confirm that one of the key reasons why the current regime is unsatisfactory—I think that that is universally acknowledged—is that the director does not have these powers currently. I fear that in accepting the amendment that would be stepping back into an ineffective regime. It would signal to those concerned who are prepared to go to the limit in order to make these cartels effective that an investigation process was in place which could be easily defeated by the simple expedient of asking someone to take papers home and put them there for a period of time. On that basis I believe that the power is justified. I urge the noble Lord to reconsider and to withdraw the amendment.

Lord Fraser of Carmyllie

I find that a rather unsatisfactory answer. What I really object to is that a rather phoney libertarian exception is being offered here. Page 29, line 5 of the Bill states, 'premises' does not include domestic premises". It continues by saying, unless— (a) they are also used in connection with the affairs of an undertaking". I hope that the noble Lord was being lighthearted and appreciated that I offered no imputation of his conduct while he was chairman of BP. I am absolutely certain that there could scarcely have been a night when he did not take home with him papers in connection with the affairs of the undertaking of which he was chairman. If that is what the Government want to do and if they are going to say, "We consider this to be such a problem that we are going to allow people to enter premises of all types and in all circumstances" then they should say so. There should not be this rather false idea that domestic premises are to be excluded. With this particular definition it seems to me that the government advisers are saying that if one has papers relating to a cartel when one goes home, one should leave them in the motor car. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Lord Simon of Highbury moved Amendment No. 252A: Page 29, line 13, leave out ("in paragraph 1 of Schedule 10") and insert ("by section 52").

On Question, amendment agreed to.

Clause 57, as amended, agreed to.

Clause 58 [Principles to be applied in determining questions]:

Lord Kingsland moved Amendment No. 253: Page 29, line 20, leave out from ("that") to end of line 25 and insert ("all those having functions under this Part discharge those functions so as to ensure that so far as is possible questions arising under this Part are dealt with and determined in a manner which is consistent with the treatment of corresponding questions arising in Community law").

The noble Lord said: In moving this amendment I shall speak also to Amendments Nos. 254 to 257. The purpose of these amendments is to clarify the nature of the relationship between Part I of the Bill and European Community law. Clause 58(1) is more preambular in content rather than dealing with a specific obligation. The amendment seeks to rectify that situation.

In particular Amendment No. 253 deals with a number of concepts which seem excessively vague. The expression "compatible" is not explained; nor is the expression "corresponding questions". A need for consistency is rehearsed, but consistency between what differing regimes?

There are four particular matters to which I wish to draw the attention of the Committee. First, the expression, "to decide matters with a view to securing consistency" seems to us to be much better stated by the expression, "to ensure consistency." That makes the obligation absolutely clear.

The expression "corresponding questions" is too vague. Why not simply say that "The application of Part I must conform with the jurisprudence of the European Court of Justice in relation to Article 85 of the Treaty"? That is what I understand is being said.

In our submission the Bill must make it plain when Parliament intends to take a different approach from the European Community and Article 85. The expression used in the Bill is "incompatibility", but we believe that that is too loose-limbed; in other words, where the Minister is asking the Committee to accept that we differ, he ought to say so. The principles of European Community law comprise certainty, non-discrimination. objectivity and proportionality. Those principles ought not just to be enshrined in the substance of the law relating to the competition regime; they ought also to infect the way in which it is drafted. I beg to move.

9.30 p.m.

Lord Simon of Highbury

I shall respond to Amendments Nos. 253 to 257 as a group. Indeed, in responding to the amendments of the noble Lord, Lord Kingsland, I think it would be helpful, first, if the noble Lord will bear with me, to explain the purpose of Clause 58 and how it is intended to operate.

The purpose of the governing principles clause is to ensure as far as possible that the UK and EC prohibitions are interpreted and develop consistently with the EC competition law system. This is of critical importance in minimising burdens on business. The problems for business in having two similar, but in their detail different, prohibitions interpreted according to two different bodies of case law could be very burdensome.

The clause will, subject to one qualification I shall discuss further, require those determining questions under Part I to avoid inconsistency with Community law. They are also to have regard to the decisions and statements of the Commission. This will also apply to interpretation of the rules made by the DGFT under Clause 49. This importation extends not only to the substantive law but also to the general procedural safeguards developed under EC law; for example, the right against self-incrimination. That right developed by the European Court of Justice in Orkem v. Commission will be available to individuals who are asked by the DGFT for an explanation of a document under the powers in Clauses 26 to 28.

However, this principle of Community law importation will apply only to the extent that the provision of Community law in question is not inconsistent with the provisions of the Bill or the rules made by the DGFT under Clause 49. Let me give an example of a departure on the face of the Bill. Clause 29 confers a greater degree of legal professional privilege against production of documentation than exists under EC law. This is deliberate. Indeed, such an approach has wide-ranging support in this House as we debated earlier.

In making the procedural rules, the DGFT is not obliged to secure that there is no inconsistency with EC procedural law since he will not be "determining a question" under Part I. The Bill provides that the rules made by the DGFT are not to come into effect until they have been approved by order made by the Secretary of State. These orders are to be subject to annulment by a resolution of either House.

That was by way of a general introduction and I turn now to the specific amendments tabled by the noble Lord, Lord Kingsland. I must start by saying that I believe that there is much common ground between us. I have considered the alternative language proposed, but I still feel that our objectives are best served by the clause as it is drafted—despite the excellence of the proposals. Let me try to explain why.

Turning first to Amendments Nos. 253 and 254, it is quite right that business should be granted as much certainty as possible about the application and interpretation of the prohibitions. The governing principles clause forms a central plank in achieving this objective. We have been clear on the face of the Bill where we are departing from the EC model; for example, the UK appeal system is clearly different from the EC system since appeals are not limited to the narrow judicial review-type grounds applicable to European Commission decisions.

Outside these specific areas of departure, business can look to the EC system for the interpretation of the prohibitions. I believe that the language in subsection (2) requiring the director and any court or tribunal to act with a view to securing that there is no inconsistency with Community law is a sufficiently tight test. It meets our objective of ensuring that the UK and EC prohibitions remain on parallel tracks.

I do not believe that the test should be made yet tighter as proposed by the noble Lord, Lord Kingsland. It is not possible to create an exact copy of the EC system. EC competition law has certain elements which cannot simply be transposed into the domestic system. For example, the Community objective of ensuring a common internal market for 15 different national states simply does not make sense in a purely domestic context. Therefore, those applying the prohibitions must be able to produce a sensible translation of the EC rules into the domestic system. This explains the reference to consistency between questions arising in relation to "competition within the UK" which correspond to those arising in Community law in relation to "competition within the Community". Once again I emphasise that the language in subsection (2) is very tight, and rightly so. In addition, those applying and interpreting the prohibitions must always act with the purpose set out in subsection (1) in mind; that is, consistency with the EC approach. Subsections (2) and (3) must therefore be read as a package together with the purpose in subsection (1). Finally, to put the matter beyond doubt the duty on the director or UK court or tribunal under subsection (2) is to apply not only the principles applied in a corresponding question but also any relevant decision of the Court.

Amendment No. 257 seeks to give precision to the meaning of corresponding questions of Community law. However, I consider this to be far too narrow a definition. By way of example, I refer to the study prepared by Professor Whish which I mentioned when we debated Clause 9. I have placed copies in the Library of this House. As Professor Whish has noted in the study on the breadth of Article 85(3), the exemption criteria are interpreted against the backdrop of the underlying principles and objectives contained in the EC Treaty. Treaty objectives such as those to protect the environment contained in Article 130 may be relevant in considering whether an exemption can be granted. If we adopted the narrower definition proposed, the director might not be able to grant an exemption in respect of a type of agreement which the Commission would have had power to exempt. Such a definition could therefore lead to divergence with EC law and, worse still, prevent the director from exempting restrictive agreements which had worthy countervailing benefits.

As for the question of importation of the general principles of Community law such as the principle of proportionality, I can confirm to the noble Lord that it is our clear intention that they are included within the principles applied by the European court referred to in this clause. I am advised that this is the effect of the clause as drafted and that there is no need for specific reference to them.

I turn now to Amendment No. 255 which deletes the reference to the relevant EC principles and decisions being those applicable at the time the UK decision is being taken. The reference to "as applicable at that time" is to make clear that if there is a decision of the European Court which conflicts with the latest interpretation of the point by the UK courts, those applying the prohibition must follow the EC interpretation. It is also the case that if, as can happen, the jurisprudence of the ECJ changes over time it is the latest decision which prevails. We cannot rely on the European Communities Act to achieve either of these results because we are borrowing, not applying, EC law. Amendment No. 255 might therefore force the courts and the director to apply the prohibition inconsistently with the EC approach and thereby defeat the very objective of the governing principles clause.

Finally, I deal with Amendment No. 256 which makes the Secretary of State subject to the governing principles clause. We did not apply Clause 58 to the Secretary of State simply because we considered that she did not have functions under the Bill where it would be relevant and right to apply EC law. For example, the power of exclusion under Clause 3 might often involve doing something different to EC law. That is the main purpose of the clause. We want to have the right, for example, to exclude vertical agreements. The Bill provides for that by secondary legislation. I know that the noble Lord, Lord Kingsland, pressed for such an exclusion to be on the face of the Bill and, as I said, I shall reflect most carefully on that point. However, in the event that such an exclusion is written into the Bill there will remain a need to vary or fine-tune it by secondary legislation and make further exclusions as appear necessary.

Our view is that the exercise of exclusion powers would not be "determining a question" for the purpose of Clause 58. However, applying the clause to the Secretary of State could cast doubt on the way she could exercise that power. That is a detailed response to a matter where I started by saying that there would be a lot of common agreement. I hope that in the light of that explanation the noble lord, Lord Kingsland, will reconsider his amendment.

Lord Kingsland

I am relieved to hear that the noble Lord did not apply this section to the President of the Board of Trade because he thought that she was above the law. I thank the noble Lord for his response. However, I would like to probe one passage in the text to see whether I have understood the spirit, if not the letter, of his reply. In the penultimate sentence of Clause 58(2) there is the expression "with a view to securing that there is no inconsistency between". Am I right in thinking that as a result of his reply, that expression can be taken to be the equivalent of the expression "to ensure consistency?"

Lord Simon of Highbury

I admit to the noble Lord, Lord Kingsland. that they seem to be saying very much the same thing.

Lord Kingsland

I am much obliged. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendments Nos. 254 to 257 not moved.]

Lord Fraser of Carmyllie moved Amendment No. 257A:

Page 29, line 43, at end insert— ("( ) When adjudicating upon the application of the Chapter I and Chapter II prohibitions, the Director or a regulator shall be regarded as a court or tribunal for the purposes of Article 177 of the Treaty and may make requests to the European Court for preliminary rulings as provided for in that Article.").

The noble and learned Lord said: All we are hoping to have confirmed for us is that when adjudicating upon the application of either Chapter I or Chapter II prohibitions either the director or a regulator shall be regarded as a court or a tribunal for the purposes of the important Article 177 of the Treaty and will accordingly be in a position to make requests to the European Court for preliminary rulings as provided for in that article. If the Minister's answer is that they will be able to do so, I shall immediately withdraw my amendment.

9.45 p.m.

Lord Simon of Highbury

I am able to confirm.

Lord Fraser of Carmyllie

That is the most satisfactory answer the Minister has given all evening. I am pleased to beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 58 agreed to.

Clause 59 agreed to.

Clause 60 [Power to enter premises: Commission investigations]:

Lord Fraser of Carmyllie moved Amendment No. 258: Page 30, line 38, leave out ("A justice of the peace") and insert ("The President of the Tribunal").

The noble and learned Lord said: At the risk of irritating some Members of the Committee this amendment relates to the deletion of the words "A justice of the peace" and the insertion of "The President of the Tribunal". This is a theme that we have explored previously. I hope the Government appreciate that in the circumstances of this complicated legislation we feel that it would be appropriate to upgrade the status of those to whom application should be made. So long as we are confident that the Government are appreciative of our desire to return to this point at the next stage of the Bill, I hope that the Minister will feel able to deal with it briefly.

Lord Haskel

I can deal with the matter briefly. As the noble and learned Lord will recall, on 17th November I undertook to consider the amendment to provide for the issue of warrants by a High Court judge rather than the president of the competition commission tribunal. I see no reason to go over the same ground again. The same principle applies. We will consider it within the same context.

Lord Fraser of Carmyllie

I am grateful to the Minister. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Lord Haskel moved Amendment No. 258A: Page 31, line 2, leave out ("prevented from doing") and insert ("unable to do").

The noble Lord said: For the convenience of the Committee I shall speak also to Amendments Nos. 261 A and 263A. These are amendments to ensure that Clauses 60 and 61 reflect the corresponding provisions relating to investigations under the domestic regime. It is a matter we have already debated. I beg to move.

Lord Lucas

I should like to know whether the new phrasing incorporates the old one; in other words, if I am standing at the door of the offices and preventing the poor man from coming in, presumably, if he were to push past me, he would be able to get in. However. he chooses not to do so. So he is able to do so, but chooses not to do so. I am preventing him. I am not sure that the new wording is an improvement on the old. I appreciate the attempt that is being made to turn the active into the passive but the word "unable" begs the question whether an official, who is able but chooses not to, will find that this clause no longer applies to him, whereas the previous clause would have done.

Lord Haskel

It will apply, because the purpose of Amendment No. 261A is to ensure that not just the commission official who is being obstructed but any other commission official who has been authorised to conduct the investigation can carry it out and can be named on the warrant.

On Question, amendment agreed to.

[Amendments Nos. 259 to 261 not moved.]

Lord Haskel moved Amendment No. 261 A:

Page 31, leave out line 20 and insert— ("(c) any official of the Commission authorised for the purpose of the Commission investigation,").

On Question, amendment agreed to.

[Amendment No. 262 not moved.]

Clause 60, as amended, agreed to.

Clause 61 [Power to enter premises: Director's special investigations]:

[Amendment No. 263 not moved.]

Lord Haskel moved Amendment No. 263A: Page 31, line 44, leave out ("prevented from doing") and insert ("unable to do").

On Question, amendment agreed to.

[Amendments Nos. 264 to 267 not moved.]

Clause 61, as amended, agreed to.

Clause 62 agreed to.

Clause 63 [Monopoly investigations: general]:

Lord Haskel moved Amendment No. 267A: Page 33. line 6, leave out ("subsections (2) and (3)") and insert ("subsection (2)").

The noble Lord said: In moving this amendment, I shall speak also to Amendments Nos. 267B to 267G, 269A to 269E, 271A to 271C, and 276A and 277A. My remarks also cover Amendment No. 209A, which is a consequential change to Schedule 10 flowing from these amendments. These amendments relate in substance to Clauses 63 to 65 of the Bill.

The Government's amendments are intended to achieve four goals: first, to remove redundancies resulting from the Bill as currently drafted; secondly, to clarify the intended scope of the powers; thirdly, to maintain consistency between the Director General of Fair Trading's powers to require information under the Fair Trading Act and those of the Monopolies and Mergers Commission, or the competition commission as it will become; fourthly, to reflect changes already made to the investigation and enforcement powers provided in Clauses 26, 27 and 41 in relation to the prohibitions.

I shall go through these changes briefly. Amendment No. 267D repeals Section 44(2) of the Fair Trading Act. We have concluded that the powers in Section 44(2) will become redundant with the introduction of the wider powers provided by Clause 63.

Amendment No. 271A repeals Section 45 of the Fair Trading Act. As with the previous amendment, we have concluded that the investigation powers in Section 45 will become redundant with the strengthening of the powers under Section 44. The amended Sections 44 and 45 would therefore be duplicatory. While this would not be unworkable, it would not be good legislation.

The Committee will, I am sure, appreciate that with the deletion of Section 45 of the Fair Trading Act, Clause 64 of the Bill becomes redundant. Clause 64 was intended to enhance the powers provided for the director under Section 45. As a result of the amendments I have tabled, therefore, we propose that Clause 64 should not stand part of the Bill.

Amendments Nos. 267B and 269A are intended to clarify that the director may use the investigation powers provided by Clause 63 to help him to decide whether he should either make a monopoly reference or propose undertakings in lieu. The powers are not intended to be limited to when the director is deciding one or other of these things. It was always the intention that this should be the case, but it is clearly important that the drafting of the legislation is not ambiguous on the point.

Amendments Nos. 267E to 267G and 269E are needed to make the powers provided by Clause 63 consistent with those provided in relation to the prohibitions. They are analogous to changes we had previously made to the prohibition powers but which we had not had time to reflect in Clause 63. So Amendment No. 267F deletes the power to search for documents, which is a change we made in light of the consultation responses, in relation to the powers of entry without a warrant when investigating suspected infringements of the prohibitions. Amendment No. 267G replaces the power to require persons to produce such information as the director may require, with the requirement to provide an explanation of documents. Amendment No. 267E enables the director to specify categories of document that he requires to be produced. That is in line with the power in Clause 26. And Amendment No. 269E amends the sanctions and the defences provided in relation to non-compliance in line with those in Clause 41.

Amendment No. 269B provides, with Schedule 10, paragraph 1, that the amendments made to the director's powers under the FTA also apply when those powers are being exercised concurrently by the regulators. Amendments Nos. 271B and 271C amend the MMC's Fair Trading Act powers to require information and documents to maintain alignment with the director's powers.

Finally, Amendments Nos. 267A, 267C, 269C and 269D are consequential changes to Clauses 63 and 65. Amendments Nos. 209A, 276A and 277A are consequential amendments in Schedules 10, 12 and 14 and in the Long Title of the Bill.

Perhaps I may now return to the purpose of these clauses. The powers of investigation currently provided under the Fair Trading Act are widely agreed to be unsatisfactory. The changes introduced by the Bill are needed to ensure that the director's powers under the FTA are adequate for him to establish quickly and effectively what action needs to be taken.

In particular, we consider that the director should be able to require the production of relevant information on due notice, as provided for in the Bill. We also believe that the director general should have a right of entry in pursuing his enquiries under the Fair Trading Act, although, as I have said, we do not believe that this should extend to a right of forcible entry. It is also right that parties under investigation should be under a statutory duty to give all reasonable assistance to the director general in carrying out his functions.

In short, these clauses put right a widely recognised weakness in the Fair Trading Act regime. They fit within the Government's overall determination to establish a modern and effective system of competition law. The amendments that I have tabled tidy up various loose ends in the clauses. I beg to move.

On Question, amendment agreed to.

Lord Haskel moved Amendments Nos. 267B to 267G:

Page 33, line 7, leave out ("taking any") and insert ("determining whether to take either").

Page 33, line 15, leave out subsection (4).

Page 33, leave out line 21 and insert ("For subsection (2) substitute—").

Page 33, line 26, after ("documents") insert ("or (ii) any document which falls within a specified category,").

Page 33, leave out line 35.

Page 33, line 39, leave out from ("premises") to ("as") in line 40 and insert ("to give the Director such explanation of the documents").

On Question, amendments agreed to.

[Amendments Nos. 268 and 269 not moved.]

Lord Haskel moved Amendments Nos. 269A and 269B:

Page 34, line 37, leave out ("taking") and insert ("determining whether to take").

Page 34, line 43, at end insert— ("(6) The amendments made by this section and section 65 have effect in relation to sectoral regulators in accordance with paragraph 1 of Schedule 10.").

On Question, amendments agreed to.

Clause 63, as amended, agreed to.

Clause 64 [Investigations: complex monopolies]:

On Question, Whether Clause 64 shall stand part of the Bill?

Lord Fraser of Carmyllie

I must record this first minor victory in the course of the Committee stage of the Bill. I congratulate the Government on shooting our fox.

Clause 64 negatived.

Clause 65 [Enforcement]:

Lord Haskel moved Amendments Nos. 269C to 269E:

Page 35, line 28, leave out subsection (2) and insert— ("(2) Omit subsections (1) and (2).").

Page 35, line 32, leave out ("44(3) or 45(4)(b)") and insert ("44(2)").

Page 35, line 37, at end insert— ("(5) If a person is charged with an offence under subsection (4) in respect of a requirement to produce a document, it is a defence for him to prove—

1. (a) that the document was not in his possession or under his control; and
2. (b) that it was not reasonably practicable for him to comply with the requirement.

(6) A person who intentionally obstructs the Director in the exercise of his powers under section 44 is guilty of an offence and liable—

1. (a) on summary conviction, to a fine not exceeding the prescribed sum;
2. (b) on conviction on indictment. to a fine.

(7) A person who wilfully alters, suppresses or destroys any document which he has been required to produce under section 44(2) is guilty of an offence and liable—

1. (a) on summary conviction, to a fine not exceeding the prescribed sum;
2. (b) on conviction on indictment, to imprisonment for a term not exceeding two years or to a fine or to both." ").

On Question, amendments agreed to.

Clause 65, as amended, agreed to.

Clause 66 [Services relating to use of land]:

10 p.m.

Lord Haskel moved Amendment No. 270: Page 35, line 40, at end insert ("made by statutory instrument").

The noble Lord said: This amendment relates to Clause 66. I am aware that Members of the Committee opposite have given notice of their intention to oppose the Question that this clause stand part of the Bill. It may therefore be helpful if—

Noble Lords

No, we shall not.

Lord Haskel

In that case, I beg to move.

On Question, amendment agreed to.

Clause 66, as amended, agreed to.

The Viscount of Falkland moved Amendment No. 270A:

After Clause 66, insert the following new clause—

TRADE MARKS, NAMES ETC: UNFAIR COMPETITION

(" .—(1) Any of the acts and practices referred to in sections (Trade marks, names etc: confusion) and (Trade marks, names etc: damage to goodwill or reputation) of this Act shall constitute an act of unfair competition and shall be actionable as such.

(2) In an action for unfair competition under this Act all such relief by way of damages, injunctions, accounts or otherwise shall be available to the plaintiff as is available in respect of the infringement of any property right.

(3) Nothing in this Act affects any of the laws relating to passing off or malicious falsehood or to the protection of any intellectual property right.").

The noble Viscount said: In moving Amendment No. 270A I wish to speak also to Amendments Nos. 270B, 270C and 270D. I speak on behalf of my noble friend Lord McNally, who has important business tonight at the Liberal Democrat ball. I hope that I am not a Cinderella on this occasion because if I am dragged off to the ball I shall go reluctantly.

These amendments tackle the problems of manufacturers and retailers when they are faced with look-alike products which have been placed on the market by competitors. Look-alike products seek unfairly to gain market share, usually but not exclusively for retailers, through copying the packaging of a brand leader. They cause confusion among consumers and thus represent unfair competition.

The Committee will know that the issue has been raised in the Chamber on other occasions, most notably during the passage of the Trade Marks Bill. At that time the then government urged that the problem might be resolved by the changes made by that Bill. However, the measures introduced at that time have proved inadequate. Unfair competition has continued and the year 1996 in particular saw a rash of look-alike products launched onto the market, which included Tesco's assault on Kellogg's products and Asda's Puffin biscuit which is clearly modelled on the Penguin biscuit which is familiar to the Committee. In addition, the Nestle company spent many millions of pounds entirely repackaging its brands to escape from the ever closer mimic brands being launched by its competitors.

We feel that no one can deny that look-alikes represent unfair competition and that they are a competition issue. The adoption of a close imitation of another's trade dress to boost sales surely cannot be fair competition. As well as being a blatantly parasitic practice which distorts effective competition between competitors, it also damages consumers directly. A recent poll by NOP showed that 41 per cent. of consumers believe that look-alike packaging indicates that the product probably has the same origin as that of the brand.

The Department of Trade and Industry appears not to know who is responsible for the issue. After quite adamantly informing brand owners during the passage of the Trade Marks Act in 1994 that this was a competition issue in 1994, my noble friend understands that the department has recently told the British Brands Group that this is, after all, not a competition issue and that it should be dealt with by trade mark law. Amendment No. 270A establishes the notion that unfair competition will be actionable in the same way as any infringement of property rights. Amendment No. 270B tackles the problem of confusion. It outlaws unfair competitive practices which are likely to cause consumer confusion, in particular in relation to the products and services of another.

Amendment No. 270C prohibits practices which will dilute the good will and reputation of an enterprise. Look-alikes copy the general trade dress and appearance of brands, seeking to suggest that they have the same qualities and values of the brand being copied and that the product shares its origins. By using look-alike packaging and product identification, some products trade on a reputation which has been established by leading brands over a number of years—a reputation built on continued positive consumer experience of those products. Amendment No. 270C would prevent such parasitic trading on brand goodwill and reputation.

We believe it essential that the Government accept that this is a significant issue. Current legal remedies have failed. Brand owners through the British Brands Group have expressed their concern about the lack of legal protection under current laws. There is ample evidence of consumer confusion about the origin of look-alike products. My noble friend's past included a period working for the British Retail Consortium. My noble friend Lord McNally would not be party to any measure which damaged the ability of retailers to compete vigorously with own-label products against brands. That would be normal and acceptable. But look-alikes are not a legitimate business practice. Other European countries have laws against the use of look-alikes, and that does not inhibit the growth of own-label products. We seem to be the odd ones out in Europe in not giving protection to consumers and brand manufacturers, many of whom are major inward investors, against unfair business practices of this kind.

In the absence of effective remedies through trade mark law, passing off or competition law, we ask that the Government use this Bill as an opportunity to tackle these problems.

Recent governments of both hues have been looking at this issue for some time. There seems now little excuse for inaction on the ground of lack of forewarning about the issue. The United Nations World Intellectual Property Organisation has produced model law on the issue, on which these amendments are based, which are being considered by the DTI Standing Advisory Committee on Intellectual Property. However, we have yet to learn the department's response. Brand owners have been pressing Ministers for some time on the issue and would like to see some action. I hope that the Minister will prove forthcoming in his response. I beg to move.

Baroness O'Cathain

This issue has been running and running. I wish to make two points. The National Consumer Council does not seem to have as much concern as the noble Viscount expressed. Indeed, a recent survey by the Consumers' Association confirmed that customers are not confused by look-alikes. I think that we all realise that most customers consider price. Mechanisms are already in place for resolution of the issue. I do not deny that there was a period when this sort of thing occurred. But the industry supports the Standing Advisory Committee on Intellectual Property's contention that the Trade Marks Act 1994 needs time to work. There are mechanisms for the registration of distinctive signs and packaging. Tort provides measures for the passing-off issue.

As I am sure the noble Viscount knows, a strong, informal relationship between manufacturers and retailers has resulted in a code of practice. I believe that the issue should not be dealt with in this Bill. The mechanisms under the Trade Marks Act 1994 should be given time to work.

Lord Borrie

There is no doubt that it is a difficult question. There is the matter of what is fair and unfair competition. For many years as Director General of Fair Trading I laboured under the disadvantage that people would often make complaints to me ending with the question, "Is this fair?" When I studied the Fair Trading Act, there was no definition of fairness. Indeed, there was mention of the word "fair" or "fairness" in only two places: one was in the title of the Fair Trading Act; and the other was in the title of the office which I held, the Director General of Fair Trading. Otherwise there was no mention of, and no powers to deal with, what people might call fair or unfair trading. What is anti-competitive under the Bill, as indeed has been anti-competitive in terms of previous legislation, has never gone as wide as anything that could be regarded as unfair.

Yet the noble Viscount has a point in pushing the amendment; namely, that if customers are confused between two goods, one produced by one manufacturer, another produced by a different manufacturer, and they are made to look alike in terms of packaging, an anti-competitive practice may arise out of the confusion and certainly a form of conduct that might be regarded as reprehensible.

However, it does not automatically follow that, because goods look fairly alike in the way they are presented by way of their packaging, that is necessarily anti-competitive or even unfair. Many consumers, when searching in the supermarket for a packet of cornflakes or a particular form of liquid, will be looking for a certain type of package, because that is the way in which, over the years, that particular article has been packaged. It is in a bottle of a certain shape, or a certain type of cardboard package, indeed with a certain colour. If any manufacturer were to produce a bottle or package of an entirely different colour, that would not be competitive or very successful.

There are certain cues which a consumer has in his or her mind when shopping which prompt him or her to look for packaging of a certain type. It is what tells a customer that that is the product that he or she seeks. Part of the penalty of success, as in the case of, for instance—if I dare use the name of one manufacturer—Kellogg's is that anybody who wants to produce cornflakes. in order to make any kind of impact on the market, will almost certainly have to produce cornflakes with a package that looks rather like the Kellogg's packet. So there is a certain inevitability in there being a look-alike package. That is the difficulty in the case made by the noble Viscount.

However, I am tempted to say, since the previous speaker quite properly declared an interest as a director of Tesco, that I have examples in front of me of which Tesco ought to be ashamed. The packaging is not merely similar to the packaging of well-known manufacturers but is so incredibly similar that I do not believe it is entirely a matter of chance—or is entirely a matter of "cue", as I mentioned. The noble Baroness said that there may have been a problem in the past, but not at present. I hope that she is right. I hope that the information I have received from the British Brands Group is not entirely up to date and therefore there is no need for any change in the law. In any case, I agree with the noble Baroness that I do not believe that this is the appropriate Bill for the introduction of any such change. The law of trade marks, the law of passing off and so on, is far more appropriate than this particular vehicle.

10.15 p.m.

Lord Graham of Edmonton

As the noble Baroness said, we have discussed this matter before. My noble friend Lord Borrie quoted Kellogg's. This is a cereal that will run, and run, and run! While we do not welcome having to be here at a quarter-past 10 at night, the noble Viscount has done the Committee a service—although I think that going over the top or being too precipitate puts the issue out of court.

We in this House are great believers in taking careful note of committees of some standing and authority. I am told that the Standing Advisory Committee on Intellectual Property recently indicated that in its view it was too early to take a decision on this point—not that there may not be a case or that there are not things which need to be put right. I do not rest on the argument that this may not be the right Bill. If there were a general view that something needed to be done, this would be the right Bill.

I am indebted for background information to the British Retail Consortium, which has a direct link with the All-Party Retail Group, of which my beloved Co-op is a part. It has not advised me directly, but we all have our own experience. I am bound to say that in Edmonton, or in Loughton, where I live, they do not talk of little else but this issue. However, this is undoubtedly an issue to those in the trade who aim to expand their sales and their profits. Whether it is looked upon by the general public with humour, ridicule or interest is a difficult balance.

I understand where the noble Viscount and the organisation to which he referred are coming from. They refer to damage as included in the dilution of good will and reputation which precludes the necessity of demonstrating consumer confusion. I am not at all certain about it. These people firmly believe in fair competition but the nexus that motivates them is the desire to drive their competitors out of business. That is how they become bigger. They are not in the business of retaining what one might call a perfect market; they are in the business of becoming bigger, fatter, more profitable and more loved by the public. Therefore they ought not to be too upset at competition that I would call maybe a little shady, maybe a little on the margin.

We know all about the trademarks legislation in this country. We also know that the design of packaging is already governed by a number of factors to ensure that passing off is very difficult. Standard EC sizes, acceptability, technology, protection, portability, ease of opening and storage all condition what one can and cannot do. With regard to this aspect of competition one needs to look at the register of marks that we already have. The category of unregistered marks has also been raised. I do not believe that there should be no differentiation between the quality or acceptability of goods which are registered and those which are unregistered. If there were no difference, it would prove a disincentive to anybody—manufacturers or producers—to register a trademark. At one time a trademark was a very limited thing, almost a logo. Now there is a range of things which can be included in a trademark.

In what it has said tonight, the Committee is not denying that there is an area which needs to be teased out. As the noble Lord said with regard to the recent Trade Descriptions Act, a run was given in. This is a further one. No doubt the matter will come back again. In the meantime, my suggestion is to keep taking the tablets but be sure of where you get them from.

Lord Fraser of Carmyllie

Perhaps I may make a few remarks in support of the noble Viscount on the clauses he proposes should be added to the Bill. I am bound to say that this is a serious matter and your Lordships' Chamber would not do a great deal of good or enhance its reputation if we were to attempt to conclude discussion on it this evening. If the noble Viscount wishes to return to it at a later stage, I signal to him our support for such an approach.

I shall be interested to hear about one technical matter from the Government Benches. If there is an argument on their part that the inclusion of such clauses within the Bill would be beyond it, it would be helpful to know that now. I shall be surprised if that is the case, given the fact that Amendment No. 270A refers to the action of unfair competition. In such circumstances it ought to be permissible for such clauses to come within the Bill.

All I wish to say at this stage is this. With my noble friend sitting behind me and the noble Lord sitting opposite, I generally agree that the British Retail Consortium provides your Lordships with sensible, helpful briefing. However, on this occasion it does not seem to me to be the most satisfactory briefing that I have ever received from that organisation, for this reason. It seems to me that the BRC is prepared to undertake the risk of confusing the issue of own brands with look-alikes. Nobody would suggest that supermarkets or anyone else should not avail themselves of the opportunity, often if not invariably, of providing own-brand goods at a price cheaper than better known brands—Kellogg's cornflakes or whatever it may be. But I am not prepared to accept that there is no distinction between the issue of own-brand goods and look-alikes.

The noble Lord, Lord Borrie, clearly has in his possession a set of photographs which I too possess. I shall not detain the Committee with them at this stage, but from looking at the photographs, it is not simply a matter of providing the product in the type of packaging which gives the customer a cue to the range of goods within which it is dealing. It is pretty conclusive, even from a superficial examination of the photographs, that the intention must be to try to convey to people that it is the same product. If that is not the intention, then legislation should be put in place to ensure that people are never misled.

With those few remarks, I simply indicate to the noble Viscount that we should leave the matter now. But it is an important issue. It affects some important companies in this country and we should not dismiss their concerns lightly.

Lord Haskel

I begin by saying to the noble Viscount that he should listen to the advice he receives from the Department of Trade and Industry. It is good advice. It is advice that works. The advice from the Department of Trade and Industry was that either the Trade Marks Act 1994 dealt with the problem that he raised or the common law tort of passing off could be used. Those avenues have proved effective.

The noble Viscount mentioned the case Penguin v. Puffin. In that case Mr. Justice Walker found in favour of United Biscuits on passing off and an injunction was granted to restrain Asda from selling the Puffin biscuit in any get-up which amounted to a passing off of the Penguin biscuit. The legislation worked, so the advice from the DTI was probably sound.

Equally, the noble Viscount mentioned the Nescafe jar. Shapes are protected under the provisions of the Trade Marks Act 1994 and since the introduction of that Act there has been an increasing number of applications for shapes and trade dress. For example, the Nescafe jar is based on a registration for the shape of the jar and that is its protection. Invariably it takes time for brand owners to establish such marks as distinctive by use, but some delay is needed to ensure the quality and value of the trade marks registered.

The House debated this matter during proceedings on the Trade Marks Bill in 1994. On that occasion the House decided that the measure should not be included and that a full consultation had not taken place. Since that time opportunities to discuss unfair competition have arisen, notably before the Standing Advisory Committee on Industrial Property. The committee has considered the need for unfair competition legislation. Its members consist of organisations with a cross-sectorial interest in industrial property and its membership can be enlarged to address specific issues if that is the will of the committee. I draw the Committee's attention to the fact that this issue was touched on at the recent hearing of the Select Committee on Trade and Industry on 4th November. The president, when asked at the hearing whether she thought that further legislation was required in this area, replied: There is not a consensus yet that further legislation is required". Our problem with the amendments is that they would add a substantial new dimension to the Bill. This issue is really outside the scope of the Bill. The noble and learned Lord, Lord Fraser, asked me about this. I say to him that this matter is very different from the Bill as it is currently drafted. The Bill is primarily concerned with the introduction of prohibitions on anti-competitive agreements and abuse of a dominant position. The amendments tabled address a rather different concern. Indeed, Amendment No. 270C in particular goes well beyond providing protection for branded goods from look-alikes. It would create a new intellectual property right of an extremely wide scope. It would define unfair competition as any action or practice likely to damage good will and reputation, even when this did not cause confusion among consumers. The amendments would effectively make redundant almost all existing trade mark legislation because of the much larger range of activities that would be actionable than is currently the case.

In view of the implications the amendments imply, and on the basis of my explanation, I invite the noble Viscount to withdraw his amendment.

Lord Fraser of Carmyllie

Before the noble Viscount does whatever he wishes to do, perhaps I may say that I am a little surprised by the Minister's response. I carefully avoided using the word "scope". My understanding of the procedures of the House is that if the set of amendments had been outwith the scope of the Bill, that would have been communicated in one way or another and we might not have been permitted to debate it at all. I hope that the noble Lord will reflect on that point and that if there is a rather more refined argument than simply whether an amendment is within or outwith the scope of the Bill, we shall have that communicated to us.

The Viscount of Falkland

The hour is late. I shall take the advice of the noble and learned Lord and recommend that to my noble friend Lord McNally. We shall certainly come back to it again. I particularly note what the Minister said. I thank all noble Lords who have taken part in what has been a fascinating debate. I am glad that I was here and not at the Liberal Democrat ball. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendments Nos. 270B to 270D not moved.]

Lord Simon of Highbury

Because Clause 58 is central to the Bill, I wish to put something on the record. In my haste to respond quickly to Amendments Nos. 257A and 272F, to which the noble and learned Lord, Lord Fraser, spoke in place of the noble Viscount, Lord Trenchard, I said, in order to move on, that I confirmed. I believe that was my answer. I want to put on record that I confirm that we believe that the tribunal and the commission would come within the scope of Article 177 of the EC treaty but we do not believe that the Director General of Fair Trading or the regulator necessarily would. I believe that was the purpose of the amendment. I answered too quickly because I was thinking of the tribunal. I shall naturally write to the noble and learned Lord if he needs further information on that.

10.30 p.m.

Lord Fraser of Carmyllie

I say immediately to the Minister how much we appreciate his courtesy in returning to the matter so quickly. If he says only that they do not necessarily fall within the definition of being a court or a tribunal to enable them to seek a preliminary ruling under Article 177, we might engage in some correspondence about it subsequently.

Clause 67 [Regulations and orders]:

Lord Simon of Highbury moved Amendment No. 271:

Page 36, line 14, at end insert— ("( ) The power to make rules which is conferred by section 47 is exercisable by statutory instrument.").

The noble Lord said: This amendment corrects an omission in the Bill. Clause 67(1) provides that any power to make regulations or orders under the Bill is exercisable by statutory instrument, but that provision does not cover the rules the Secretary of State may make under Clause 47 with respect to appeals and appeal tribunals. The amendment provides that the power to make such rules is also to be exercisable by statutory instrument. I beg to move.

On Question, amendment agreed to.

Clause 67, as amended, agreed to.

Clause 68 agreed to.

Clause 69 [Crown application]:

On Question, Whether Clause 69 shall stand part of the Bill?

Lord Borrie

It seems particularly refreshing that a major Bill of this sort should be specifically said to bind the Crown. Have Her Majesty's Ministers any comment on that and is it something that we may look forward to as regards other major Bills?

Lord Simon of Highbury

I do not particularly want to generalise in responding to my noble friend Lord Borrie. The Government believe that it is right that the prohibition should apply to some bodies where they are acting as undertakings. They should not be treated differently from normal commercial undertakings in that respect. I should add that Crown bodies are already subject to Community competition law if they are undertakings. We are reviewing the extent to which it is necessary or desirable to have entry powers in relation to the Crown. I may wish to come back with an amendment on this matter at Report stage.

Clause 69 agreed to.

Clause 70 agreed to.

Schedule 12 [Minor and consequential amendments]:

Lord Simon of Highbury moved Amendments Nos. 271A to 271C:

Page 84, line 14, at end insert— ("( ) Omit section 45 (power of the Director to require information about complex monopoly situations).").

Page 84, line 14, at end insert— ("( ) In section 85 (attendance of witnesses and production of documents on investigations by Competition Commission of references under the Fair Trading Act 1973), in subsection (1)(b)—

1. (a) after "purpose", insert "(i)";
2. (b) after the second "notice", insert "or

(ii) any document which falls within a category of document which is specified, or described, in the notice,".").

Page 84, line 14, at end insert— ("( ) In section 85, after subsection (1), insert— (1A) For the purposes of subsection (1) above—

1. (a) "document" includes information recorded in any form;
2. (b) the power to require the production of documents includes power to take copies of, or extracts from, any document produced; and
3. (c) in relation to information recorded otherwise than in legible form, the power to require it to be produced includes power to require it to be produced in legible form, so far as the means to do so are within the custody or under the control of the person on whom the requirement is imposed."

( ) In section 85(2), for "any such investigation" substitute "an investigation of the kind mentioned in subsection (1)".").

On Question, amendments agreed to.

Lord Stanley of Alderley moved Amendment No. 272:

Page 84, line 17, at end insert— ("(6) In Schedule 7, Part II (which lists goods and services partly excluded from monopoly references), omit paragraph 12 (potatoes to which no process of manufacturer (other than dressing or dyeing) has been applied.").

The noble Lord said: This is a technical amendment, or at least I believe it is. The intention behind it is to ensure that the potato industry, as mentioned in Schedule 7 to Part II of the Fair Trading Act 1973, is open to the same level of competition as other parts of the agriculture industry.

As I understand it, the Director General of Fair Trading does not have the power to intervene with any non-competitive action under the 1973 Act in the case of the potato industry whereas he does, for instance, in the milk industry. It may be that most cases of possible non-competitive action would be subject to this Bill. However, it seems to me to be inconsistent to exempt the potato industry from the 1973 Act by itself and it could lead to misunderstanding and possible litigation.

I have a sneaking feeling that that inconsistency may have been aided and abetted by an amendment which the Minister's present Chief Whip and I moved during the passage of the Agriculture Act, for which I apologise profusely and also, I hope, on behalf of the noble Lord, Lord Carter. I beg to move.

Lord Simon of Highbury

I have been waiting for some help from my Chief Whip but I see that he is nobly on his Bench. I thank the noble Lord, Lord Stanley, for highlighting the treatment of certain forms of supply of potatoes under the Fair Trading Act. I agree that this treatment should be reviewed in the light of the fact that the potato marketing scheme has now been revoked. I will therefore reflect further on the position in conjunction with relevant ministerial colleagues.

There are already powers in the Fair Trading Act itself to remove the limitation on the director making monopoly references by secondary legislation. If it is to be removed, use of such power would be more appropriate than an express removal on the face of the Bill.

Of course, the Bill will introduce new powers to tackle anti-competitive practices; for example, if a potato seed grower were dominant and was abusing such a position it could be dealt with under the Chapter II prohibition. In addition, the Chapter I prohibition could apply to anti-competitive agreements in the potato sector. However, in applying the Chapter I prohibition, account would have to be taken of any exclusion which the Government might bring forward following the discussion of the amendment tabled by the noble Lord, Lord Stanley, on the first Committee day. As I said on 13th November, there is a good case for providing an exclusion based on EC Regulation 26/62. I also said that I would consider the matter between Committee and Report. That consideration will need to include whether or not to allow the exclusion to be brought to an end in individual cases if there were good reason to do so. Finally, of course the current special treatment of potatoes under the Fair Trading Act does not prevent a monopoly reference being made by relevant Ministers. I therefore invite the noble Lord, Lord Stanley, to withdraw his amendment.

Lord Stanley of Alderley

Yes, but not quite, in so far as I still think that paragraph 12 should be omitted in common with other provisions in the 1973 Act: otherwise we shall have confusion. If the noble Lord, Lord Renton, were here, I know that he would quote what I call his "rule" which is that if one matter is removed—I refer to the 1981 Act when we removed certain birds from the provisions—it is assumed that the others stay in.

Therefore, I very much hope that the Minister will recognise that the position with regard to the 1973 Act should be regularised. I hope that he will do that by statutory instrument. Indeed, I gathered from his remarks that that is what he will do. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Lord Simon of Highbury moved Amendments Nos. 272A to 272E:

Page 84, line 34, leave out ("19(2)(a)") and insert ("20(2)(a)").

Page 85, line 38, leave out ("paragraph (d)") and insert ("paragraphs (d) and (e)").

Page 85, line 40, leave out ("(p)") and insert ("(q)").

Page 85, line 41, leave out ("(q)") and insert ("(r)").

Page 86, line 46, at end insert— ("The Financial Services Act 1986 (c.60)

In Schedule 11 to the Financial Services Act 1986, in paragraph 12—

1. (a) in sub-paragraph (I), Omit "126";
2. (b) omit sub-paragraph (2).").

On Question, amendments agreed to.

[Amendment No. 272F not moved.]

Lord Simon of Highbury moved Amendment No. 272G: Page 88, line 20, leave out ("(6)") and insert ("(7)").

On Question, amendment agreed to.

Schedule 12, as amended, agreed to.

Schedule 13 [Transitional Provisions and Savings]:

Lord Graham of Edmonton moved Amendment No. 272H:

Page 90, line 13, at end insert— ("( ) On the commencement date continuing proceedings under the RPA shall automatically be discontinued").

The noble Lord said: In moving this amendment, I should like to speak also to the other amendments grouped with it. As colleagues will see, these relate to the interests of community pharmacists. At an earlier stage I spoke about the problems presented by the Bill. Although the matters that I raise now are not directly related to those problems, they still affect their interests.

I deal now with paragraphs 5, 8 and 9 of Schedule 13 relating to continuing proceedings. The purpose of this group of amendments is to ensure that the Bill minimises the risk of a community pharmacy facing the double jeopardy of both court proceedings under the Resale Prices Act 1976 (RPA) and proceedings soon after under the new competition regime to be established by this Bill. I cannot believe that that is the intention if the department and Minister on reflection see that that point has validity.

The provisions in paragraphs 5, 8 and 9 of Schedule 13 allow for court proceedings initiated by the Director General of Fair Trading under the 1976 Act begun prior to the commencement date of the new Bill to be continued after it comes into force. This provision made better sense when the initial Competition Bill was drafted by the previous administration, as it was then anticipated that proceedings in the Restrictive Practices Court would be well under way by the time this House considered proposals for a new competition regime.

However, the Director General of Fair Trading has not yet commenced proceedings. It now seems somewhat onerous and oppressive to require a community pharmacy to face two sets of proceedings in quick succession, one under the old regime and another at the end of the transition period under the new regime. Supporters of RPM on over-the-counter medicines would prefer, if no specific exemption for the arrangement were included in the Bill, to move straight to consideration of the matter under the new regime at the end of the five-year transition period. This would avoid the unnecessary expense of fighting two sets of proceedings, the first under the 1976 Act, which all sides in this debate recognise is out of date, and the second under the new competition regime.

The Community Pharmacy Action Group, of which Co-op Pharmacy, with 400 branches scattered throughout the country, is an integral member, will fight both cases if necessary. However, it believes that it would make better sense to concentrate its efforts on fighting to protect a viable network of community pharmacies under the new competition regime rather than under a regime which the Government have signalled they no longer support. There are also resource implications for the Government in allowing lengthy and expensive court proceedings to be carried on by the Office of Fair Trading under an Act which is said to expire the moment those proceedings end.

I hope that the Minister will look closely at these amendments. They can easily be incorporated in the Bill and will go some way to reassure community pharmacies that the Government are alive to their concerns. They also recognise the change in circumstances since the initial draft of the Bill was published; that is, the fact that court proceedings have not yet commenced.

Within the second group are amendments directly related to the issues raised in the first group of amendments. In the preamble to the draft Competition Bill published in August 1997, the Department of Trade and Industry stated: We believe the following arrangements should benefit from a transitional period of five years. These are … agreements to the extent they relate to goods which at the time the prohibition conies into force are exempted under Section 14 of the Resale Prices Act 1976"; that is. RPM on OTC medicines.

The inclusion of an extended transition period for RPM on OTC medicines was in recognition of the fact that the arrangement had been explicitly sanctioned by the Restrictive Practices Court and had, already been investigated and favourably assessed against public interest criteria". A guaranteed five-year transition period under the new regime is essential if the community pharmacy is to adjust to changes in the current arrangements of RPM on OTC medicines. It is clear from the above statement that Ministers intend the five-year transition to he secure. However, the Bill provides the Director General of Fair Trading with the power to investigate the five-year transition period and bring it to an end prematurely. Putting this power in the hands of the director general, who has already indicated that he is not personally committed to RPM on REC medicines, only achieves the opposite of the reassurance that Ministers were clearly seeking to give.

The amendment would guarantee that the five-year transition period for RPM on OCT medicines could not be terminated early by a premature challenge from the director general.

I hope Ministers will consider the amendment favourably. The reassurance that is intended by the granting of a five-year transition will only be achieved if it is made clear that the transition period cannot be threatened. I am advised that, given the reassurance of a fixed five-year period, community pharmacies can work hand-in-hand with the Government to prepare for the challenges that lie ahead as the revolution in primary health care services continues. I beg to move.

Lord Fraser of Carmyllie

I need say little more than that at an earlier stage we indicated considerable sympathy for the position of community pharmacies, not least because in our view, as a matter of health policy, to allow for a special position for community pharmacies would meet the priorities that this. Government are continuing with in their development of primary care in the National Health Service. I do not think we need to consider this matter in any great detail at this stage, but it is one of the more important issues that has been raised during the Committee stage of the Bill.

10.45 p.m.

Lord Simon of Highbury

I listened with great interest to what my noble friend Lord Graham and the noble and learned Lord, Lord Fraser, have said. It is very clear that this is an important issue. We have already discussed it in general terms, and the arguments were well taken on the first Committee day. I do not intend to repeat our balanced arguments, but I would like to focus on the transitional arrangements for agreements, decisions and concerted practices which are the subject of proceedings before the Restrictive Practices Court under the Resale Prices Act 1967 at the commencement date. Under the Bill, if there are continuing proceedings—and as my noble friend has said the director has announced his intention to ask the court to review resale price maintenance in over-the-counter medicines so there are likely to be such proceedings—the transitional period will begin when the proceedings have been brought to a conclusion. The transitional period applies if the continuation of resale price maintenance is found to be in the public interest. I should, perhaps, add that if resale price maintenance were not found to be in the public interest there should be no entitlement to a transitional period. The Bill as drafted is not clear on this point and I believe that it should be amended accordingly. This is a matter which we will wish to return to on Report.

I note carefully the point made by my noble friend Lord Graham about the burden of subjecting the industry to two regimes in quick succession. However, I believe this concern is—subject to one point which I shall make in a moment—dealt with by ensuring that the traditional exclusion from the scope of the Chapter I prohibition commences after the conclusion of proceedings, assuming that the continuation of resale price maintenance is found to be in the public interest.

Although the director general has not yet sought leave to make an application to the court to review the exemption, the director has already announced his intention to initiate proceedings. In those circumstances I do not believe it would be right for me to intervene, in effect to say that nothing further should be done for the next six years when the transitional period would expire. That would be the result of the amendment.

I would, however, like to deal specifically with the issues raised by Amendment No. 275A, which would deprive the director of his ability to investigate during the transitional period certain agreements, decisions or practices and to issue a notice proposing a date on which the transitional period is to end.

I emphasise that that power which applies generally in the transitional period is intended to be a reserve one which we would expect the director to use in limited, serious cases only. Moreover, the power is subject to veto. The Secretary of State will be able to cancel the director's proposal to terminate the transitional period. The Secretary of State may, for example, consider that the competition concerns are not of sufficient gravity to outweigh the presumption that the transitional exclusion should apply and should be capable of being relied upon in normal circumstances.

While I am satisfied that that reserve power is right for the generality of agreements which are to enjoy a transitional period, I can see some force in my noble friend's concern that following a court ruling in favour of resale price maintenance for those medicines, that reserve power could in principle lead to it being looked at again at an early date. That is not my intention. I believe I should therefore reflect again carefully on whether retention of that power is appropriate in the case of resale price maintenance in over-the-counter medicines. In the light of that response, I hope that my noble friend will be able to withdraw the amendment.

Lord Graham of Edmonton

I am grateful to my noble friend. I listened carefully to what he said. It sounded hopeful. It is not that there is an open door, but I gather that my noble friend understands some of the points made. I will take advice from colleagues who will reflect upon what he has put on the record. Consultations can take place if necessary, and we may need to come back at a later stage. I am grateful to my noble friend; I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendments Nos. 272J to 274A not moved.]

The Viscount of Falkland moved Amendment No. 275: Page 91, line 14, at end insert ("or until the expiry of such agreement, whichever is the later").

The noble Viscount said: I speak on behalf of my noble friend Lord Ezra. The purpose of the amendment is to preserve the existing legal validity and prevent unnecessary uncertainty arising by correcting what otherwise would be retrospective legislation in respect of a number of contracts relating to the UK gas business.

The amendment will also avoid the unnecessary review and notification of those existing agreements thereby removing significant, unwarranted burdens on the industry and the Government. It is recognised in the UK and internationally that joint arrangements between competitors are necessary to allow the efficient development and production of petroleum resources. Companies form joint operating arrangements from their initial application for offshore petroleum licences to develop fields and transport gas to the shore.

Until the early 1990s British Gas was effectively the monopoly purchaser of gas. It insisted on joint sales contracts for those jointly owned fields. Those gas contracts, known as depletion contracts, are typically for the full life of a field and can last for over 20 years. The Gas Act 1986 recognised the special features of the gas industry and provided in a related exemption order for the exclusion of gas contracts from the notification and registration requirements of the restrictive trade practices legislation.

The Act and order covered both existing and new gas contracts of any description referable to offshore gas fields The Bill does not renew the current exclusion for gas contracts. Instead, in Schedule 13, it proposes a five-year transitional period of continuing validity for existing contracts. The loss of the Restrictive Trade Practices Act exclusion amounts to retrospective legislation. There will be several hundred contracts affected by the denial of the current exclusion since the majority of those will continue beyond the proposed five-year transition period. If companies have to apply for individual exemptions for such contracts, the burden on business and government will be immense. Companies will wish to make individual contract applications since the regime created by the new legislation; that is, the risk of such agreements being declared void and the scope for investigations and the potential for significant fines could not be ignored.

The amendment—to use my noble friend's term—will "grandfather" contracts already excluded under the 1986 exemption order from the provisions of the Bill until their expiry date.

I turn now to the position of new contracts which are also covered by the existing 1986 exemption order, as mentioned. Chapter I, Clause 6 provides for the possibility of block (or individual) exemptions, although it specifies neither conditions nor terms. In order to avoid the need for individual contract exemptions for new gas contracts, a block exemption would be the most appropriate method of ensuring certainty and continuing validity. Given the long-term nature of the gas business, such an exemption would need to be for a long period, certainly for no less than 15 years. I would therefore seek an assurance or statement from the Minister that the Government will be willing to grant a block exemption for gas contracts for a minimum 15-year period.

The breadth of the prohibition contained in Chapter I, Clause 2 does not include any "appreciability" test. That will create uncertainty over the status of all current and prospective joint contracting arrangements across the oil as well as the gas industry. Such joint arrangements are common worldwide and are entered into primarily to provide operational efficiencies. I would therefore also seek some assurance from the Government that the new prohibitory regime would only apply to such arrangements where there was an "appreciable" (and adverse) effect on completion.

In summary, to avoid wholesale uncertainty in an important United Kingdom industry, with the attendant burdens on that industry and government, I seek assurances in respect of the need for a long-term block exemption for new gas contracts and that the Government accept the need for an "appreciability" test in viewing joint arrangements in the oil and gas industry. I beg to move Amendment No. 275, which will have the effect of "grandfathering" existing gas contracts.

Lord Simon of Highbury

I am aware that Amendment No. 273 was not moved but Amendment No. 275 was moved. Before I turn specifically to the question of the gas industry, I should like to say a few words about the schedule.

Had both the amendments been placed before us, they would have given extended traditional exclusions from the Chapter I prohibition in respect of certain classes of agreement. It would be helpful to make some general points about that.

I turn first to those cases where agreements have been determined under Section 21(2) of the Restrictive Trade Practices Act not to be of such significance to call for investigation by the court. There is a good case for exclusion in that regard. As I have indicated already, we believe that an exclusion for the generality of agreements which have received directions under Section 21(2) is the right approach. However, I said that there is a possibility that there may be agreements which have received Section 21(2) directions but which turn out in practice to have anti-competitive effects. That is why I said an exclusion should be subject to a power for the Director General of Fair Trading to claw back the exclusion in certain circumstances. If that amendment had been before us, it would not have included this important protection.

For some time after the new regime is in operation it will be important for interested parties to be able to inspect the register of agreements and determine the status of agreements under it. Keeping the register is resource intensive. It would not be sensible to maintain it in perpetuity. At present, the Bill does not make explicit provision for the register: we will need to correct that omission on Report.

A second area where exclusion is merited is in relation to electricity and gas agreements from which the RTPA has been disapplied by the use of powers under the Electricity Act 1989 or the Gas Act 1986. In this area, Amendment No. 275 is relevant. Like Amendment No. 273, it would extend the exclusion of agreements in this category to the expiry of the agreement.

The Government's position is that a permanent exclusion is inappropriate. Unlike cases dealt with under Section 21(2) which have been examined and found not to contain significant restrictions, these other types of agreements may contain restrictions which are significant in effect but for other reasons are exempted. Those agreements need to be scrutinised under the new regime after an appropriate transitional period. We have set this at five years.

It has been put to us that exclusion of these existing agreements (under the electricity and gas Acts) does not cater for the natural evolution and change that are necessary for many of the key agreements in these sectors. I believe that this is a valid point. I therefore believe that we should improve our proposals in the area by continuing the current arrangements for scrutiny in orders which are made before commencement but providing for the effect to be disapplication of the Chapter I prohibition rather than the RTPA; and by providing a power to make new orders. I am prepared to come forward on Report with a government amendment to that effect. I believe that that will be welcomed by the industries concerned.

However, additional flexibility of that nature for a transitional period—which we have set at five years—makes it all the more important that in due course there should be a proper examination under the new prohibition. Neither of the two amendments would permit that additional flexibility.

Another area that we have already debated relates to the professions. Here the Government's position is that the wide-ranging exclusion of professional services should not be continued. Instead, we have proposed a narrow exclusion relating to professional rules. Here we have proposed in paragraph 5 of Schedule 4 a mechanism for withdrawing the exclusion if in an individual case there is good reason to do so.

I should also like to take this opportunity to mention two other areas of the schedule where minor amendments are, I believe, needed. First, the Bill currently provides that the director may give guidance in relation to an agreement made between Royal Assent and the coming into force of the prohibition of anti-competitive agreements. However, as the Bill is drafted, such guidance would not confer immunity from penalty. I believe that it should confer immunity and I expect to bring forward an amendment on Report to that effect. Secondly, consideration needs to be given to whether explicit provision is needed in the Bill to provide for orders by the restrictive practices court to lapse when the prohibition comes into force.

Finally, I turn to the issue of special arrangements for long-term gas purchase contracts. Gas purchase contracts which contain restrictions necessary, for example, to enable the efficient development of the field should in principle be capable of exemption if the exemption criteria are satisfied. The Bill provides for classes of agreement to be given block exemptions. Gas purchase agreements may well merit an early block exemption. I do not, however, see any need to make special provision for those agreements in the Bill. Consultation is under way with the industry. I believe that we need to await the maturing of that process.

For the reasons that I have given, I hope that Members of the Committee will feel slightly more widely instructed on Amendment No. 273 which was not moved. I also hope that the noble Viscount will see fit to withdraw Amendment No. 275.

11 p.m.

Lord Fraser of Carmyllie

Before the noble Viscount withdraws the amendment, perhaps I may express my sorrow that I did not move Amendment No. 273. Indeed, if I had known that the noble Lord would be in such a positive and constructive mode, I may have done so. However, I am grateful to him for his response and shall read carefully what he said. I also welcome the proposals that he made.

As regards the other amendments, I was most interested to hear the Minister's comments. I am sure that he will realise that I did not intervene because it might have been necessary for me to declare an interest. I shall nevertheless read what he had to say on that, also with keen interest.

The Viscount of Falkland

I thank the noble Lord for his complete and helpful response to the amendment which I moved. I am sure that his remarks will be scrutinised with great care by my noble friend Lord Ezra and he and other interested parties will no doubt consider the noble Lord's remarks and we shall return to the matter at a later stage as appropriate. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendment No. 275A not moved.]

Lord Graham of Edmonton moved Amendment No. 276:

Page 91, line 44, at end insert ("; or (c) any of the parties concerned have appealed to the Competition Commission within the 28 day period.").

The noble Lord said: Paragraph 10(3) of Schedule 13 gives the director general power to issue a notice terminating the transitional arrangements in respect of an agreement which the director general believes would, but for the transitional period, infringe the Chapter I prohibition. The transitional period will end in respect of that agreement on the date proposed in that notice unless the director general withdraws the notice or the Secretary of State cancels it. The date specified in the notice will be a date not earlier than 28 days after the service of the notice.

The amendment I move would suspend the operation of the director general's notice if a party to the agreement appeals to the commission, thus keeping the agreement in force and valid during the period of the appeal. I beg to move.

Lord Simon of Highbury

Schedule 13 provides for transitional periods to ensure a fair and orderly transition to the new prohibition based regime. For example, most agreements made before the Chapter I prohibition comes into effect would have a transitional exclusion from that prohibition for one year.

The purpose of paragraph 10 of the schedule is to ensure that the transitional period is not abused. As I argued in speaking to the amendments of my noble friend Lord Graham a few minutes ago, if a seriously anti-competitive agreement came to light it is not right that it should be allowed to continue unchecked. I note, incidentally, that the investigation powers in paragraph 10 do not include those of Section 27; nor do the offences provided for in Clauses 41 to 43 apply to them either. We shall need to correct those omissions at Report.

As I have said, the power to end the transitional period early is a reserve power for the director which we expect him to use only in limited, serious cases; and, as I also said, the Secretary of State has a power to veto the director's proposal to terminate the transitional period early. Amendment No. 276 would prevent the director from ending the transitional period early if any of the parties had appealed to the competition commission. I believe it is right that the Secretary of State rather than the competition commission should determine whether to over-ride the director's proposal to terminate the transitional period early. I have explained how I expect the power to be used.

However, any decision—which one might expect to follow the termination of transitional period—that the particular agreement infringed the prohibition or as to whether it merited an exemption would be appealable to the commission. This decision would be an assessment against the terms of the Chapter I prohibition. It is therefore appropriate that it should be appealable to the tribunal. The Bill provides that the rules that may be made under paragraph 13 of Schedule 8 may provide for a tribunal to suspend the effect of a decision of the director on an interim basis. Similarly, any interim measures under Clause 34 or directions under Clause 31 made by the director would be appealable to the competition commission.

I am satisfied that the combination of these measures provides the proper route for protecting the rights of undertakings alleged to have infringed the prohibition during the transitional period. I believe, however, that the amendment prompts a wider question relating to the expiry of the transitional period in normal circumstances, rather than in serious cases where early termination of the transitional period is at issue. I can see that there could be a case for the transitional period to be extended in cases where appeal has been made against a decision by the director—for example, an appeal against a decision to refuse an exemption. I shall review the provisions on the extension of transitional periods with a view to returning to the matter on Report. I therefore invite my noble friend to withdraw the amendment.

Lord Graham of Edmonton

I am grateful to the Minister for what he said. He is understanding and I believe that he has taken the point. In those circumstances, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Schedule 13 agreed to.

Schedule 14 [Repeals and Revocations]:

Lord Simon of Highbury moved Amendment No. 276A:

Page 94, line 13, column 3, at end insert—

("Section 45")

On Question, amendment agreed to.

Schedule 14, as amended, agreed to.

Clause 71 agreed to.

Clause 72 [Short title, commencement and extent]:

Lord Fraser of Carmyllie moved Amendment No. 277: Page 38, line 16, at end insert ("but does not extend to Scotland").

The noble and learned Lord said: This appears to be a small, innocuous amendment at the end of a long and complex Bill. However, it is clearly one of some considerable constitutional significance. When I reflect how over the summer months I worked on a referendum campaign, when the rest of the world was away with its bucket and spade, I have some temptation to hold the Committee for as long as it took me to discover some of the details of what was proposed for Scotland! However, even with the Chief Whip in his place, I shall not exercise that right too extensively. But it is our view that as we try to untangle and unravel what is proposed to be reserved, and what is to go to the Scottish parliament, every piece of legislation which comes before this House will be subjected to this separate and new form of scrutiny.

This is a particularly interesting Bill on which to start. I would accede immediately to the view that nothing was clearer in the Government's White Paper on Scotland's government than that competition law was to be reserved for Westminster. It would accordingly apparently follow that anyone who was in the least bit interested in where the division of future legislative or executive power lay would be able to set aside this Bill, once it is a statute, with no concern that any part of it would ever be within the powers of the Scottish parliament.

I believe—it is one of the matters with which we shall have to concern ourselves—that that happy hope will never be realised. There are extremely complicated provisions. I understand now that we shall not see the proposed Bill until at least Christmas and probably later. If the Chief Whip wishes to intervene I shall of course, as always, give way to someone of such a high and mighty office in Government. However, even if he cannot give us that information, we shall still wish to scrutinise these matters whenever the Bill arrives.

I can think of a number of matters where there will be political tensions over what is contained within the Bill. I shall not go over again the issues of community pharmacies. But if community pharmacies are an issue of some political sensitivity in England, they are an issue of keen sensitivity in Scotland and, from what was said earlier, in Wales. That is the kind of issue on which we shall have concern as regards the Scottish parliament. In dealing with such matters as small agreements, there will also be some keen interest in knowing whether the Scottish parliament will have powers. I turn at random to Clause 63(7)(a) and find a provision which relates to what is or is not required of an individual appearing before the Court of Session.

I wish briefly to focus on one issue. It is the issue of warrants. As noble Lords know, if there is one aspect of the Bill that has caused us concern, it is the warrants that are allowed for under its provisions.

Under one of the provisions, where warrants are granted in Scotland, they are to be granted by a sheriff. If we have indicated at this time that in the way the warrants have been put together they are far too extensive in their terms, it might be hoped that, even if there is a lack of libertarian zeal in this present Government, at one point a Scottish parliament might assert the right to restrict the powers of those who enter domestic premises or empty premises and so on. If we are dealing with warrants, that would undoubtedly fall within the power of a Scottish parliament—giving the Scottish parliament the right to restrict the circumstances in which a warrant is to be exercised.

If I am wrong in that, and if the circumstances in which warrants are granted and the basis on which they are issued are not to fall in future within the remit of the Scottish parliament, it is incumbent on the Government to make that clear at the earliest possible stage. Otherwise, if their genuine intention in this constitutional change is to strengthen the Union rather than weaken it, they should at least make clear where they believe powers are to lie.

Otherwise, I keenly fear that if the Scottish parliament believes it has a wide range of powers, and then subsequently discovers that it has no right to change or influence what is going on, far from there being a strengthening of our Union, the consequence of it all will be that separation will become a matter of inevitability. That seems to be the most obvious example in the Bill, in an area of policy which the White Paper quite specifically spells out as a matter to be reserved for Westminster. Nevertheless, even a brief examination of the Bill's provisions reveals that there is one key area in which there a real prospect of conflict with the proposed Scottish parliament.

I propose to leave the matter there for now. However, there are other aspects of the Bill—what falls within the remit of a Scottish parliament and what falls within the remit of Westminster—which I have no doubt could be explored at great length. I hope that the Government appreciate that we want these matters to be clearly and carefully analysed. However, the Chief Whip may go home to his bed now. I promise him that under no circumstances do I have any intention of dividing the House. I beg to move.

Lord Simon of Highbury

At this very late hour I do not wish to risk even a hint of division between two people who over three days of debate in Committee have spoken in a spirit of co-operation in an attempt to bring a good Bill before the House. I should like to thank the noble and learned Lord, Lord Fraser, and his team, and also the noble Viscount, Lord Falkland, and the noble Lords, Lord Ezra and Lord McNally. We have greatly appreciated the spirit in which the whole of the Bill has been debated and the way in which the arguments have been conducted. There is more to come, but we have enjoyed our opportunity for three days of debate.

Having laid all the roses on this large table, here come the thorns. I can appreciate the sentiment behind the noble and learned Lord's amendment. At this late hour, I think that there only two points to be made. I have always felt that one of the great benefits of the way that our countries within these islands have operated is that they have had a single market. I have often heard from the other side of the Chamber that even in Scotland they regard Europe as a single market in a more progressive manner than some of us south of the Border have been given to understand of late. I believe both of us understand that the impact of the Bill should be felt across Border, in toto, to enhance the qualities of the single market in these islands and indeed to enhance the qualities of the single market with our European partners. I know that that does not answer the questions of where all the legal niceties lie between who will and who will not issue warrants for going into what premises, and I am sure that we shall return to that point.

To finish on a high note, I celebrate our single market and its improvement and I celebrate our European market, in which I hope we shall play a greater part. With these fine thoughts to send us to bed, I hope that the noble and learned Lord will see fit on this occasion to withdraw the amendment.

Lord Fraser of Carmyllie

I shall certainly do so. The noble Lord will undoubtedly have recognised that my amendment was a device. Far from wishing this Bill not to extend to Scotland, I wish almost all legislation passed by Westminster in the years ahead to extend to Scotland without interruption by some small puppet organisation in Edinburgh.

If it is not seen by the noble Lord as being paradoxical, I join with him in celebrating what I regard as being the most successful political and monetary union in the history of the world. With those words, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 72 agreed to.

In the Title:

Lord Haskel moved Amendment No. 277A: Line 5, leave out from ("information") to the first ("to") in line 7 and insert ("which may be required in connection with investigations under that Act;").

On Question, amendment agreed to.

Title, as amended, agreed to.

House resumed: Bill reported with amendments.

Lord Carter

In moving the adjournment of the House, may I, as Chief Whip, congratulate noble Lords on all sides of the House on the extremely efficient and expeditious way in which they have conducted the Committee stage of the Bill, particularly today, with 43 groups of amendments, interrupted by a long government Statement. It is an example which I shall draw to the attention of other noble Lords on other Bills.

House adjourned at twenty-two minutes past eleven o'clock.