Lords Sitting of 9 February 1998

Preamble
The House met at half-past two of the clock: The LORD CHANCELLOR on the Woolsack.
Prayers—Read by the Lord Bishop of Chichester.

Abortion Legislation
Lord Stallard Lord Stallard asked Her Majesty's Government:
What plans they have to introduce changes now or in the lifetime of this Parliament to the existing abortion legislation.
The Minister of State, Department of Health (Baroness Jay of Paddington): My Lords, the simple Answer to my noble friend is none. We have made it clear that any changes to the Abortion Act should be initiated by individual Members of Parliament and that decisions would be made on the basis of free votes in both Houses.
Lord Stallard: My Lords, I am grateful to my noble friend for that Answer. Is she aware that my Question was prompted by reports of an interview with the Secretary of State for Health on about 19th January when he said that he would welcome a change in the law to make early abortions easier to get? As we already know that he has the support of 16 out of 20 members of the Cabinet, we would be grateful for the Minister's assurance that the Government have no plans for a change in the law.
Baroness Jay of Paddington: My Lords, I am grateful to my noble friend. The views expressed by the Secretary of State for Health were his personal views. The Government's position is as I stated in my Answer.
The Earl of Lauderdale: My Lords, does the Minister agree that the rights of the individual, as enshrined in the European Convention on Human Rights, begin with the rights of the foetus?
Baroness Jay of Paddington: My Lords, as I have said, every noble Lord and every Member of Parliament is entitled to his or her personal views on the subject. If it came to a question of renewed legislation, I am sure that we would have animated discussions on the matter which the noble Earl has raised.
Baroness Masham of Ilton: My Lords, may I ask the Minister how many abortions are carried out each year and whether some people use them as a form of contraception?
Baroness Jay of Paddington: My Lords, it is difficult to say whether anybody would use abortion as a form of contraception. I suspect that for most women involved in a termination of pregnancy it is a difficult and often tragic decision to take and that probably, if
854
appropriate contraception had been available, they would have been happy to use it. That is one of the reasons why the Government are very much in favour of the fact that this week is National Contraception Week and why we are supporting the voluntary organisations involved in it. The total number of abortions for 1996 was 177,495.
Lord Hunt of Kings Heath: My Lords, may I declare an interest as president of the Family Planning Association? Does my noble friend agree that the current provision of abortion services in the NHS is extremely variable in terms of access and quality? Does she see the new health improvement plans to be developed by health authorities as a way in which those services could be improved in the future?
Baroness Jay of Paddington: My Lords, my noble friend is aware that one of our primary concerns in the NHS White Paper is to make more even the provision of all services across the NHS. I am aware that there are great differences in people's experiences in different parts of the country—not only with regard to abortion but in the whole area of reproductive health.

Beef Assurance Scheme
2.40 p.m.
Baroness Anelay of St Johns: My Lords, I beg leave to ask the Question on the Order Paper standing in the name of my noble friend Lord Clanwilliam. I have been specifically requested to do this. The House will wish to know that my noble friend was taken ill this morning, but he made arrangements for my name to be included on the Order Paper in due time.
The Question was as follows:
To ask Her Majesty's Government what progress they have made with the Beef Assurance Scheme to provide a register of beef herds that have not been exposed to BSE.
The Parliamentary Secretary, Ministry of Agriculture, Fisheries and Food (Lord Donoughue): My Lords, without a live test for the disease it is not possible to provide a register of herds which have not been exposed to BSE. The Beef Assurance Scheme was introduced for herds with a very low risk of BSE in order to allow beef to be sold from animals between 30 and 42 months of age. The scheme now has 82 members.
Baroness Anelay of St Johns: My Lords, I thank the Minister for that Answer. What steps are the Government taking to let consumers know about the Beef Assurance Scheme and to encourage the major supermarkets to use beef from the scheme?
Lord Donoughue: My Lords, the scheme is devised for a specialist niche market. It is for herds which are raised naturally. It is not the Government's view that it is appropriate for a major marketing exercise. It is for

855
members of the scheme to market it. On the whole, beef from the scheme is marketed locally and we believe that that is the right approach.
Baroness Nicol: My Lords, did my noble friend happen to hear an item on this morning's "Today" programme which indicated that a junior researcher had identified a spongiform difficulty in cows in Kent 18 months before BSE was formally identified? If that report had been acted upon, would it have made the problem any less?
Lord Donoughue: My Lords, I saw the report and I thank my noble friend for drawing it to our attention. Of course, what was reported occurred under the previous administration and we do not have access to the details. However, we are conscious of the terrible cost that has arisen—the cost to taxpayers, the most terrible trouble for farmers and many difficulties for a new regime inheriting the situation. That is why we set up the commission of inquiry under Lord Justice Phillips. I should like to encourage anyone who believes that he or she may have evidence which would be helpful in explaining the sad programme of events to submit it to the commission.
Lord Mackie of Benshie: My Lords, I understand from the Minister's earlier reply that the scheme in question has no connection with the attempt to get the European ban lifted. What progress is the Minister making with the Commission? It is apparent to everyone apart from the Commission and its scientists that the precautions taken in this country probably make British beef the safest in Europe.
Lord Donoughue: My Lords, it is our view that the way to get the ban lifted is to demonstrate to Europe and the world what we believe; namely, that our beef is the safest in the world. For that reason we have introduced all the controls that have been introduced, not all of which have been popular with the noble Lord. We believe that that is the way to get the ban lifted. As the noble Lord said, the Beef Assurance Scheme had nothing to do with the ban; it was in existence to provide an extra market in the domestic market.

Algeria: EU Discussions
2.45 p.m.
Lord Avebury Lord Avebury asked Her Majesty's Government:
What steps they are taking, as holders of the presidency of the European Union or otherwise, to assist in stopping the massacres in Algeria.
The Parliamentary Under-Secretary of State, Foreign and Commonwealth Office (Baroness Symons of Vernham Dean): My Lords, we believe that in order to achieve anything in Algeria we must keep the Algerians engaged in political dialogue, discuss our points of view with them and discuss their concerns and requirements. My honourable friend the Minister of
856
State for Foreign and Commonwealth Affairs, Derek Fatchett, led an EU troika mission to Algiers from 19th to 20th January 1998. The mission's report led to the conclusions that my right honourable friend the Foreign Secretary announced after the General Affairs Council on 26th January. These have given us a sound base on which to build. Future meetings of EU partners will discuss next steps which we hope will lead to a reduction in the conflict in Algeria.
Lord Avebury: My Lords, is the Minister aware that according to the Algerian ambassador, who was good enough to see me for over an hour on Friday afternoon, the reason that the troika was not successful in persuading the Algerian authorities to invite the rapporteurs on torture and extra-judicial executions was their belief that a resolution of the Commission of Human Rights was necessary before any such invitation was issued and that they would go to the commission this year with a statement, following which it would be possible to discuss the terms and conditions of such a visit? Further, will the Minister seek to persuade the Algerian authorities that that is the wrong way round and in order to arrive at a conclusion on these dreadful massacres that have taken place the commission first needs the advice of the rapporteurs, and if they cannot visit Algeria they should seek to report to the commission on such evidence as is available from such exiles, journalists, and any NGOs with an interest in the matter?
Baroness Symons of Vernham Dean: My Lords, I cannot accept that the troika mission was as great a failure as the noble Lord appears to suggest. We were able to express our concerns and sympathy with the suffering of the Algerian people. We also extended an invitation to the Algerian Foreign Minister, Mr. Attaf, to visit the United Kingdom during our presidency. He accepted that invitation in principle. As to the rapporteurs, as I informed the House when this matter was last discussed the Algerians' minds are not closed entirely. They wish to review the position at the meeting in Geneva on 16th March. We shall continue to press them in the intervening period and at that meeting to accept the presence of the special rapporteurs. I agree with the noble Lord that it is important to have an impartial view as to what is happening in Algeria.
Lord Judd: My Lords, does my noble friend agree that there is widespread hope that progress can be made on 16th March but that if progress is not made and the Algerian Government are not more forthcoming in their co-operation it may be necessary to consider conditionality in the context of economic and social relationships with Algeria in order to encourage them? Are such contingency plans being made? Can my noble friend assure the House that in the meantime because of the dreadful situation in that country particular care will be taken on the issue of Algerian asylum seekers in this country?
Baroness Symons of Vernham Dean: My Lords, we take very great care on the question of asylum seekers given the appalling position in Algeria at the moment.

857
We know that the violence continues. Historically, that violence seems to escalate during the period of Ramadan, and it is violence that we continue to deplore. The noble Lord asks about our hopes at the meeting on 16th March. We hope that that meeting will succeed in bringing forward a resolution of this issue, but there are other opportunities. EU parliamentarians are in Algiers at the moment and no doubt they seek to persuade the Algerians on this point. A number of noble Lords will be aware that a deputation of Algerian women parliamentarians is to visit me in your Lordships' House next week. We are able to put forward a number of points of persuasion before we need to address the further questions that the noble Lord has raised.
Lord Moynihan: My Lords, in her Answer the Minister referred to the Minister for Foreign and Commonwealth Affairs who has stated that the scope for international action is limited and that this is an internal problem. Given the Government's ethical foreign policy, does the Minister agree with Mary Robinson, the UN High Commissioner for Human Rights, who has said:
"I cannot and do not consider [the situation in Algeria] to be an internal situation",
and that human rights have no borders when such violations occur and the international community has a responsibility to end such violence?
Baroness Symons of Vernham Dean: My Lords, the actions of Her Majesty's Government show that we agree that this is a matter upon which all interested parties who wish for the good of Algeria must agree. That has been demonstrated not just by my honourable friend's visit when he led the troika last month but by my right honourable friend's statement after the GAC which made it clear that during our presidency we should continue to take this matter seriously, and to address it on every possible occasion, including the visits of parliamentarians of which I have already notified your Lordships.
Lord Wright or Richmond: My Lords, will my noble friend comment upon a story in yesterday's Observer, which claimed to carry an interview with a former Algerian security officer resident in London who claimed to have given the Observer details of torture facilities in Algiers? The article went on to invite the Foreign Office to contact the Observer if it wished to have further details of those claims.
Baroness Symons of Vernham Dean: My Lords, Her Majesty's Government wish to know about all such allegations in detail. I hope that anyone who knows about anything approaching torture facilities in Algeria or indeed in any other part of the world will make it their business to ensure that that FCO is kept abreast of such appalling developments.
Lord Grenfell: My Lords, does the Minister agree that the true value of these parliamentary exchanges is not so much that they are likely to produce solutions to the present problem, which I do not believe they will,
858
but that in the longer term they will help foster the development of democratic institutions and practices in Algeria so that those who hold strongly differing views will find democratic rather than violent means of resolving their problems.
Baroness Symons of Vernham Dean: My Lords, I agree with my noble friend's suggestion. I hope that all of us who meet the women parliamentarians from Algeria next week—I understand that Members of the Opposition and the Liberal Democrats are doing so—will take every opportunity to make those points to them.
The Earl of Winchilsea and Nottingham: My Lords, I hope that the Government will ignore some of the articles that have appeared in some British newspapers, which, for some reason, seem to misrepresent and malign the position taken by the Algerian Government on some of the appalling atrocities that we have seen. They imply that in some way the Algerian Government condone or stand aside and let these things happen. Nothing could be further from the truth. They also accuse Algeria of being governed by a military junta. I think that Algeria—
Noble Lords: Question!
The Earl of Winchilsea and Nottingham: My Lords, surely that is not true. It is an elected government.
Baroness Symons of Vernham Dean: My Lords, Her Majesty's Government are of course aware of the allegations that the Algerian Government are somehow implicated in the killings. There is no substantive, credible evidence to confirm those allegations. However the situation would have been helped if, when the troika visited Algeria last month, it had been allowed to visit the scene of the massacres so that it could have satisfied itself on some of those important points. We must wait to see what evidence emerges. I return to the original point made by the noble Lord, Lord Avebury: were we to see the UN rapporteurs in Algeria, we would at least have objective advice about the extent of anyone's alleged involvement.
Lord Avebury: My Lords, as the UN rapporteurs will not be allowed in, at least until after the commission has met on 16th March, and the time necessary to make the arrangements has elapsed, does the Minister agree that the rapporteurs should make an analysis of the evidence that is currently available? That includes the statements made by the former torturer who claims also to have witnessed mass murders. Could not all that evidence be brought together by the special rapporteurs so that it could be presented to the commission on 16th March to enable it better to make a decision?
Baroness Symons of Vernham Dean: The question that the noble Lord asks is essentially a matter for the UN rapporteurs. Her Majesty's Government's position remains the same. We shall encourage the Algerian

859
Government to accept the special rapporteurs. I hope that other governments will be doing the same in Geneva on 16th March.

Missing Persons Helpline
2.54 p.m.
Baroness Ludford Baroness Ludford asked Her Majesty's Government:
Whether they will provide public funding for the National Missing Persons Helpline.
The Parliamentary Under-Secretary of State, Home Office (Lord Williams of Mostyn): My Lords, the Government acknowledge the excellent work carried out by the Missing Persons Helpline, particularly in supporting the families of people who go missing. Tracing missing persons, particularly those considered to be vulnerable or those who may have been victims of crime, is, however, primarily a police task. Individual forces have in place operational procedures for tracing missing persons. There is also a central information gathering and exchange facility in respect of vulnerable persons who have been missing for more than 28 days, those whose going missing merits particular attention, and unidentified corpses. This is the Police National Missing Persons Bureau and it is funded by the Home Office. Future arrangements for missing persons are being reviewed, but there are no plans at present to extend funding to the helpline.
Baroness Ludford: My Lords, I thank the Minister for that reply. Will he keep the question of public funding under review in the light of a number of factors? The first is that the free help the National Missing Persons Helpline gives to the statutory services such as the police and coroners is increasing all the time and is overstretching its already limited voluntary resources. That help is complementary to the police National Missing Persons Bureau. Secondly, police chiefs have made numerous tributes saying that work would not exist but for the helpline; and, thirdly, the work is now entering a European scale, and, as I said, is overstretching the resources. Will he keep the door open?
Lord Williams of Mostyn: My Lords, in respect of the European dimension, we are taking forward within the EU discussions about the setting up of or improving of national co-ordinating points dealing with missing persons and unidentified corpses. The organisation to which the Question refers received a grant of £105,091 from the lotteries board fairly recently. I agree that this is a co-operative effort. The work of the organisation is of course done in co-operation with the police to a certain extent. The future of missing persons provision is under review. Obviously we shall take into account EU proposals on the role of the helpline.
Lord Naseby: My Lords, as the House will understand, the Government may not wish to put extra
860
funds into this deserving charity. Is there not an opportunity for the Government to take an initiative through some of their agencies, such as local government, the health service and social security, to give extra practical help to this worthwhile charity?
Lord Williams of Mostyn: My Lords, that point is well made: one can assist in ways other than outright financial donation. I am happy to tell your Lordships that the helpline is holding a seminar in April/May of this year. It has the support of the police. Representatives from other EU states have been invited. Obviously the type of questions that the noble Lord has identified will be discussed at that seminar.
Lord Thomson of Monifieth: My Lords, I reinforce what my noble friend said when pleading with the Minister to keep under review the question of further help for the helpline. I declare an interest as a former chairman of the Suzy Lamplugh Trust. Is he aware that I can remember the time when the helpline was just two dedicated, unpaid women. They have remarkable achievement behind them, and they deserve every possible support.
Lord Williams of Mostyn: My Lords, it is indeed a remarkable achievement. Mary Asprey and Janet Newman began the organisation in 1992, really, as the noble Lord said, on their own initiative. The helpline now has over 80,000 calls a year, and obviously helps an enormous number of people. We believe—I hope that your Lordships endorse this—that there is a place for voluntary, charitable organisations in this country. It is a noble tradition of long standing. There is equally a place for public funding of the type which I have described. Home Office funding to the police bureau is £85,000 a year. It is co-operation which is the key, and not necessarily the donation of further public funds, which are rather tight at the moment.
Baroness Turner of Camden: My Lords, is my noble friend aware that approximately 100,000 families are likely to contact the helpline during the next 12 months and without the money that is needed to continue the work it will be severely undermined? Could not further consideration be given to this worthwhile cause?
Lord Williams of Mostyn: My Lords, the figure of 100,000 is in accord with the figure of 80,000 contacts made during the past year. We recognise that the issue is extremely important. I have not closed the door to further funding, but I have said that such funding as there is goes to the police bureau. There is a place for voluntary organisations as well as state-funded organisations. In the past, this important work was undertaken by some Sunday newspapers and other organisations working in the field. I am not

861
unsympathetic to the cause, but, as I tell your Lordships regularly on such occasions, I have no open chequebook.
Lord Campbell of Alloway: My Lords, would the Minister be in favour of funding only the telephone bill? Eighty-thousand telephone calls are a lot, and perhaps further consideration can be given to that small measure of assistance.
Lord Williams of Mostyn: My Lords, I heard a whisper from my noble friend Lord Mason sitting behind me. It was, "Ask British Telecom". Obedient creature that I am, I offer that advice.
Lord Monkswell: My Lords, my noble friend in his Answer mentioned the police having responsibility for missing vulnerable people. Can he give the House an explanation of how the police define "vulnerable" people?
Lord Williams of Mostyn: My Lords, under the operational independent control of the chief constable, each police force approaches the matter slightly differently. It is easy to think of people who may have mental disabilities, children, the disabled and the lonely. Each chief constable will give operational internal directions to his relevant officers about how to deal with the scale of priorities in this area.
Baroness Hamwee: My Lords, will the Minister accept that many of us have sympathy with his point that there is a place for public sector contributions and for charitable voluntary contributions? However, will he also accept that some voluntary contributions become of a scale where public sector involvement is not only appropriate but essential? The term "partnership" is much used to describe the relationship between the various sectors. Will the Minister further accept that unless both sectors show that they are prepared to be active and useful partners the whole operation may fall away?
Lord Williams of Mostyn: My Lords, of course I accept the principle for which the noble Baroness contends; it underpinned my earlier answers. There is partnership between the police, the Home Office and the helpline. I mention the April/May seminar. In May or June, the police staff college at Bramshill is holding a two-day seminar on trafficking in human beings and the sexual exploitation of children in Europe. That is an aspect of tackling this serious problem. The helpline has been asked to contribute. That is an example of partnership in action as opposed to public fund donation. The two have a part to play.
Lord Bruce of Donington: My Lords, there are many funding priorities. Is the Minister aware that I am able to communicate to him places where
862
funding can be avoided in far greater sums than are involved in the necessary service to which the Question refers?
Lord Williams of Mostyn: My Lords, when I die I shall think of the noble Lord and when they cut my heart open Europe will be there!
Lord Skelmersdale: My Lords, irrespective of whether Europe will be there, does the Minister recall that in the NHS there is a great deal of contracting between medical charities and health authorities? Is there not an opportunity for the strategic services to contract with the helpline for the kind of service it can provide?
Lord Williams of Mostyn: My Lords, I am sure that that is the kind of issue which the review will take into account.
Baroness Nicholson of Winterbourne: My Lords, may I congratulate the Home Office, through the Minister, on its work in co-ordination with the helpline? Will the Minister bring the Foreign and Commonwealth Office into play, too, because, with regard to paedophilia and child prostitution in Eastern Europe, perhaps the know-how fund and such sources of expertise will be valuable in assisting the helpline to train workers in Romania and other countries where such dreadful incidents occur?
Lord Williams of Mostyn: My Lords, should it be required, I am more than happy to engage the willing co-operation of the Foreign and Commonwealth Office. Happily, my noble friend Lady Symons is sitting next to me and has heard the question and the answer. One must sometimes draw a limit; one cannot go on endlessly. One thinks of particular categories of missing persons; apparently, the last two young Conservatives were recently seen catching the ferry from Dover!
Lord Calverley: My Lords, does the Minister agree that the work of the Salvation Army also plays a big part in respect of missing persons? Can he assure the House that the records held by the police, the National Missing Persons Helpline and the Salvation Army are combined in order that all three agencies can use them?
Lord Williams of Mostyn: My Lords, I am more than happy to pay tribute to the work of that exemplary organisation, the Salvation Army. I take my text from its experience. It draws its funds often in the most unlikely circumstances—public houses and so forth—by selling War Cry and soliciting donations. That is an example of what I referred to earlier. I accept the noble Lord's comments about the operation of databases. It is a practical utility which can be achieved without too much expenditure of public money.
Baroness Ludford: My Lords, the Minister feels able to keep open his door to public funding. Does he agree that that would be appropriate during the UK Presidency

863
of the European Union when a people's Europe is the theme and fighting crime, including crime against people, is the goal of the Government?
Lord Williams of Mostyn: My Lords, yes.

Audit Commission Bill [H.L.]
3.7 p.m.
The Lord Chancellor (Lord Irvine of Lairg): My Lords, I beg to move that this Bill be read a second time.
This is the second consolidation Bill which I have brought before your Lordships this Session. The Audit Commission was established by Part III of the Local Government Finance Act 1982. Its main purpose then was to audit the accounts of local authorities. Since 1982, it has been given additional functions and its powers have been extended to cover other public bodies. The most substantial change was in 1990 when it was given responsibility to audit the accounts of health service bodies. The 1982 Act has been amended so extensively that the Law Commission has undertaken a consolidation.
The Bill consolidates Part III of the 1982 Act and sections of the Education Reform Act 1988, the National Health Service and Community Care Act 1990 and the Local Government Act 1992. My right honourable friend the Deputy Prime Minister has consulted the Audit Commission, government departments and other bodies about the Bill. None has raised any objection.
We support the valuable work of parliamentary draftsmen and the Law Commission in bringing the statute book up to date and making it easier to follow. I commend the latest proofs of that work to the House. If your Lordships are content to give the Bill a Second Reading it will be referred to the Joint Committee on Consolidation Bills in the usual way. I beg to move.
Moved, That the Bill be now read a second time.—(The Lord Chancellor.)
On Question, Bill read a second time, and committed to the Joint Committee on Consolidated Bills.

Petroleum Bill [H.L.]
3.9 p.m.
The Lord Chancellor: My Lords, I understand that no amendments have been set down to this Bill on re-commitment and that no noble Lord has indicated a wish to move a manuscript amendment or to speak in Committee. Therefore, unless any noble Lord objects, I beg to move that the order of re-commitment be discharged.
Moved, That the order of re-commitment be discharged.—(The Lord Chancellor.)
On Question, Motion agreed to.

Public Processions (Northern Ireland) Bill [H.L.]
3.10 p.m.
The Parliamentary Under-Secretary of State, Northern Ireland Office (Lord Dubs): My Lords, I beg to move that the Commons amendments be now considered.
Moved, That the Commons amendments be now considered.—(Lord Dubs.)
COMMONS AMENDMENTS
[The page and line refer to Bill (101) as first printed by the Commons.]
COMMONS AMENDMENT
1 Clause 2, page 1, line 16, at end insert ("and protest meetings")
Lord Dubs: My Lords, I beg to move that the House do agree with the Commons in their Amendment No.1. It may be helpful if I speak also to Amendments Nos. 3, 4, 5, 6, 11, 12 and 13.
The amendments reflect considerable discussion both here and in another place about the need for balance in the Bill. I know some have suggested this Bill is aimed exclusively at the traditions of one side of the community. The Government do not believe that that is the case, but have recognised the strength of feelings the issue arouses, as well as the wide degree of support expressed for the balancing measures introduced by the Government during the Bill's passage through this House.
After considerable reflection, the Government put down further amendments during the Bill's progression through the Commons. They introduce a notice requirement for those organising protest meetings against public processions, and extend the coverage of the code of conduct to deal with the conduct of those participating in protest meetings as well as processions.
The amendments are not simply designed to address perceptions of the Bill, however. The Government believe they are useful in their own right. I do not think anyone could object to the introduction of a notice requirement for protest meetings. It is clearly important that the police and the commission have as much information as possible in dealing with possibly contested parades.
We have not chosen to go so far as to put protest meetings under the jurisdiction of the commission. For one thing, that would represent a major increase in the commission's workload; but nor do we think it is necessary.
The police already have sufficient powers to deal with protest meetings under the public order order. When they pose a problem, as they sometimes do, it is usually a public order one which the police are in the best position to deal with.
There will however be close co-operation between the police and the commission. The new clause provides for the commission to receive copies of the notice as soon as it is handed in to the police. I am confident the police

865
and the commission will be able to co-ordinate any actions necessary to minimise the difficulties which a contested public procession and related protest meeting might cause.
Similarly, the Government have recognised the weight in the arguments put forward both here and in another place about the need for a code of conduct for counter-demonstrators as well as marchers. A code of conduct could be useful in itself. In addition, for the sake of balance we think it is important that when assessing any past breaches of the code of conduct by marchers, the commission should also be able to take account of the behaviour of counter-demonstrators, for example to judge the level of provocation there may have been.
These measures were discussed during the Bill's passage through this House. No doubt some of your Lordships feel these amendments could have been made at an earlier stage. However, I am confident that they will be supported. I beg to move.
Moved, That the House do agree with the Commons in their Amendment No.1.—(Lord Dubs.)
Lord Cope of Berkeley: My Lords, the Minister has rightly anticipated the general support for the amendments in this group. The amendment with which we are dealing, Amendment No. I, requires the commission to keep itself informed of protest meetings. I should have expected it to do that in any event but it is no had thing to have that provision on the face of the Bill.
The next two amendments in the group introduce the code of conduct in relation to protest meetings. I am sure that that is right, too. As the Minister stressed, it is extremely important to achieve the right balance with this Bill. In my view, as I said before at earlier stages, the balance of the Bill was not right when it came before us originally and this measure helps to correct it. By extending the requirement to have a code of conduct applying to protest meetings, we are improving the balance of the Bill and it is right that we should do that.
The main new clause introduces the requirement to give notice of protest meetings relating to public processions. I believe that 14 days' notice is the right period to choose. Clearly there needs to be 28 days' notice in relation to public processions and the 14 days is to follow after that.
The only difficulty is in connection with the definitions of what is a "related protest meeting". The Government have tried to tackle that, particularly with Amendments Nos. 11 and 12. So far as I can see, they have not made a bad fist of it. However, I was rather surprised that it took two bites at the cherry as it were. The matter is complicated because the definition of "related" is in a different clause from the definition of "protest meeting". But I do not complain too much about that. It is helpful to have that new clause and those provisions generally in the Bill.
Our consideration of the matter has not been made easier by the speed with which the amendments have been brought before your Lordships' House. Last week there was an indication that we should be dealing with
866
these matters today but the papers were not available when the House rose at the end of last week. They did not become available to noble Lords generally until this morning. That is an unsatisfactory way in which to try to unravel the complexities of the wording of this matter. This House is a revising chamber but it needs the opportunity to consider words in order to get the revisions correct.
However, I am quite sure that the thrust of the amendments is right in order to improve the balance of the Bill.
On Question, Motion agreed to.
COMMONS AMENDMENT
2 Page 1, line 21, leave out ("mediate, or")
Lord Dubs: My Lords, I beg to move that the House do agree with the Commons in their Amendment No. 2.
This amendment would remove from the face of the Bill references to the Parades Commission engaging in direct mediation, while retaining references to its power to "facilitate mediation".
In introducing this amendment, the Government have taken account of the strong feelings expressed both here and in another place that there might be a clash for the commission engaging both in direct mediation, and in being the ultimate decision maker on contested parades.
Facilitating mediation will of course be a prime responsibility of the commission, and a lot of good work has already begun to that effect. The commission will seek to encourage dialogue through a network of "authorised officers" who will seek to encourage local agreement.
I am sure that the Parades Commission will learn from its experience on the ground both last year and in the coming marching season. The amended power will still be flexible enough for them to put what they see as best practice into operation.
Moved, That the House do agree with the Commons in their Amendment No. 2.—(Lord Dubs.)
Lord Cope of Berkeley: My Lords, I am not sure that there is as much difference as has sometimes been represented between engaging in and facilitating mediation. If people are gathered around a table discussing a particular matter and trying to arrive at a conclusion, the point at which it goes from facilitating mediation to being mediation seems to me could give rise to difficulties.
Nevertheless, the amendment cleans up the wording a bit without interfering too much with what we all want to see the commission achieve—that is, mediation to assist people to arrive at agreement about how parades can properly take place.
Lord Cooke of Islandreagh: My Lords, I believe that the amendment is probably more important than it may seem. For the commission to have been responsible for the mediation at the same time as carrying out the determination would, I believe, have been quite impossible. Perhaps I may speak also to the amendments in general. Although we have had only a very short time

867
to study them—in my case, only about an hour—I recognise that, together, they make a considerable improvement and will reduce the difficulties which will arise from the Bill as it is enacted in Northern Ireland.
On Question, Motion agreed to.
COMMONS AMENDMENTS

3 Clause 3, page 2, line 10, after ("procession") insert ("or protest meeting")

4 Page 2. line 12, at end insert ("or protest meeting")

5 After Clause 6, insert the following new clause—

ADVANCE NOTICE OF PROTEST MEETINGS RELATED TO PUBLIC PROCESSIONS

(".—(I) Where notice has been given under section 6 in relation to a public procession, a person proposing to organise a related protest meeting shall give notice of that proposal in accordance with subsections (2) to (4) to a member of the Royal Ulster Constabulary not below the rank of sergeant by leaving the notice with him at the police station nearest to the place at which the meeting is to be held.

(2) Notice under this section shall be given—

(a) not later than 14 days before the date on which the meeting is to be held; or

(b) if that is not reasonably practicable, as soon as it is reasonably practicable to give such notice.

(3) Notice under this section shall—

(a) be given in writing in such form as may be prescribed by regulations made by the Secretary of State; and

(b) be signed by the person giving the notice.

(4) The form prescribed under subsection (3)(a) shall require a person giving notice under this section to specify—

(a) the date and time when the meeting is to be held;

(b) the place at which it is to be held;

(c) the number of persons likely to take part in it;

(d) the arrangements for its control being made by the person proposing to organise it;

(e) the name and address of that person;

(f) where the notice is given as mentioned in paragraph (b) of subsection (2). the reason why it was not reasonably practicable to give notice in accordance with paragraph (a) of that subsection; and

(g) such other matters as appear to the Secretary of State to be necessary for, or appropriate for facilitating, the exercise by the Secretary of State or members of the Royal Ulster Constabulary of any function in relation to the meeting.

(5) The Chief Constable shall ensure that a copy of a notice given under this section is immediately sent to the Commission.

(6) A person who organises or takes part in a protest meeting—

(a) in respect of which the requirements of this section as to notice have not been satisfied; or

(b) which is held on a date or at a time or place which differs from the date, time or place specified in relation to it in the notice given under this section.

shall be guilty of an offence.

(7) In proceedings for an offence under subsection (6) it is a defence for the accused to prove that he did not know of, and neither suspected nor had reason to suspect, the failure to satisfy the requirements of this section or (as the case may be) the difference of date, time or place.

868

(8) To the extent that an alleged offence under subsection (6) turns on a difference of date, time or place it is a defence for the accused to prove that the difference arose from—

(a) circumstances beyond his control:

(b) something done in compliance with conditions imposed under Article 4(2) of the Public Order (Northern Ireland) Order 1987; or

(c) something done with the agreement of a member of the Royal Ulster Constabulary not below the rank of inspector or by his direction.

(9) A person guilty of an offence under subsection (6) shall be liable on summary conviction to imprisonment for a term not exceeding 6 months or to a fine not exceeding level 5 on the standard scale, or to both.")

6 Clause 7, page 5, line 14, leave out ("or any previous procession") and insert ("or any related protest meeting or in relation to any previous procession or protest meeting")
Lord Dubs: My Lords, I beg to move that the House do agree with the Commons in their Amendments Nos. 3 to 6.
Moved, That the House do agree with the Commons in their Amendments Nos. 3 to 6.—(Lord Dubs.)
On Question, Motion agreed to.
COMMONS AMENDMENT
7 Clause 10, page 7, line 14. at end insert ("and")
Lord Dubs: My Lords, I beg to move that the House do agree with the Commons in their Amendment No. 7. It may be helpful if I speak also to Amendments Nos. 8, 16, 17, 18 and 19.
Amendments Nos. 7 and 8 remove the Secretary of State's duty under Clause 10 to consult the Public Order Committee of the Police Authority for Northern Ireland before making an order prohibiting a public procession. Amendments Nos. 16, 17, 18 and 19 are consequential. These amendments reflect the setting up of the Parades Commission and the changing responsibilities of the police authority as a result of the Police Bill which is at present being considered in the other place.
There are two main reasons why it is no longer necessary for the Secretary of State to consult this committee. The first is that establishing the Parades Commission has provided a forum for the sort of community representation work in this area which formerly fell to the police authority.
The establishment of the Parades Commission will lead to extensive consultation taking place across the community in relation to contentious parades and we hope that it will lead to a more brokered local accommodation. Where the Parades Commission has to issue a determination on a parade it will do so in full knowledge of the views of all sides of the community. Clause 10(5) will require the Secretary of State, where practicable, to consult the commission before making an order prohibiting a parade; and the commission will, as a result of its consultation exercise, be well placed to advise the Secretary of State of the community's views of the parade in question. In the circumstances, we believe that consultation with another body with community representation responsibility is no longer necessary.

869
Secondly, the changes that the Police Bill will bring about in structures governing policing mean that the police authority will no longer have responsibility for day-to-day resource issues. Resource issues would of course have been one of the main reasons for consulting the committee of the police authority under the old system. That is not to say that the police authority will have no interest in the policing of public processions and counter demonstrations. Indeed, the chief constable will remain accountable to the authority for the policing of such controversial events on the ground.
I believe that these amendments represent a significant improvement over existing legislation in terms of the information which would be available to the Secretary of State about the views of the community on a contentious parade, in circumstances where she is considering making a prohibition order.
Moved, That the House do agree with the Commons in their Amendment No. 7.—(Lord Dubs.)
Lord Cope of Berkeley: My Lords, as the Minister said, the amendments anticipate the Police Bill with which we shall deal in due course. When these amendments and those like them were discussed in another place, the view was expressed—I believe correctly, although it was expressed rather more strongly than I would have done—that the cutting out of the police authority from this particular loop would expose the RUC a little more politically. I am sure that that is not what we would wish to do. However, in any event, it seems to me that the Secretary of State and the RUC, especially in cases where a procession is actually being banned, will be in the front line in such disputes. We discussed that aspect during the earlier stages of the Bill. Therefore, I am content for the amendments to be put in place.
On Question, Motion agreed to.
COMMONS AMENDMENT
8 Page 7, line 15, leave out from ("Constable") to end of line 18
Lord Dubs: My Lords, I beg to move that the House do agree with the Commons in their Amendment No. 8.
Moved, That the House do agree with the Commons in their Amendment No. 8.—(Lord Dubs.)
On Question, Motion agreed to.
COMMONS AMENDMENT
9 Clause 11, page 7, line 40, after ("court") insert ("or other body or person")
Lord Dubs: My Lords, I beg to move that the House do agree with the Commons in their Amendment No. 9. The amendment deals with the Secretary of State's powers under Clause 11 to make an order introducing a registration scheme for bands. Clause 11 provides that, should the Secretary of State make such an order, the scheme to be introduced would be court-based. The amendment would increase the Secretary of State's flexibility in that it would provide that an order made
870
under Clause 11 could provide for applications for registration to be made either to a court or to such other body or person as may be specified in the order.
Noble Lords will recall the debate that we had in Committee about the issue of bands. I pointed out that the North report recommended that the Government "give active consideration" to a registration scheme for bands and suggested that a court-based scheme along the lines of the scheme for clubs in Northern Ireland might be appropriate. As I explained in Committee, the Government consider that the commission should have sufficient power to deal with the mischief caused by some bands. It will be able to impose conditions on parades which may cover which bands may take part in the parade, or set conditions as to their conduct.
Clause 11 should, therefore, be viewed as very much a reserve power. However, if it did transpire that it needed to be activated, it makes sense for the Secretary of State to keep her options open as to the type of registration scheme which would he most appropriate, court-based or otherwise.
Moved, that the House do agree with the Commons in their Amendment No. 9.—(Lord Dubs.)
Lord Cope of Berkeley: My Lords, the amendments are diminishing in importance. However, this one about the registration of bands is most interesting. Certainly, the Government do not intend immediately to register bands, but they are taking power to enable them to do so. At the time of the earlier discussion on the Bill in this House, the only thing that the Government seemed certain about was that if they did do that then it should be done by the courts. Now they have decided that they are not even certain about that aspect. Indeed, I am only slightly surprised that they have not deleted the clause from the Bill. I believe that that would still enable them to introduce such a scheme by order under other legislation. Nevertheless, they have decided to leave it in, and I shall not argue the matter any further.
On Question, Motion agreed to.
COMMONS AMENDMENT
10 Clause 16, page 10, line 27, leave out ("or other")
Lord Dubs: My Lords, I beg to move that the House do agree with the Commons in their Amendment No. 10. The amendment refines the meaning of a band in the public processions Bill. It has the effect of restricting the meaning of a band to cover only those playing musical instruments, rather than the strange "other instruments" mentioned in the previous draft. I hope that we are not creating too big a loophole for the creation of dustbin lid bands or possibly the skiffle bands, which some noble Lords may remember from the dim and distant past. Where legislative provision is meaningless or unclear, this Government have no hesitation in dispensing with it.
Moved, That the House do agree with the Commons in their Amendment No. 10.—(Lord Dubs.)
Lord Lyell: My Lords, I wonder whether the Minister can assist me. Apart from bagpipes and flutes,

871
can the noble Lord say what other instruments are classified as being musical? I missed this discussion during the earlier stages of the Bill, so can the Minister give me some indication as to what is defined as music? Noble Lords will be aware that people have differing views in that respect. To myself, a Scot, and to those in Northern Ireland bagpipes are most attractive, while flutes may be equally attractive to one section of the community in Scotland. Can the Minister give me and my noble friend Lord Cope some assistance in that respect?
Lord Cope of Berkeley: My Lords, no one with the name Johnny Cope is going to argue about whether or not bagpipes constitute music; indeed, that would be much too dangerous ground for me to cover. As far as I am concerned, the amendment is something of a relief; otherwise, the courts might have been in danger of registering a group of klaxons or something of that nature. I support the amendment.
3.30 p.m.
Lord Dubs: My Lords, I do not think that I shall be tempted too far down the path that the noble Lord tried to lure me down. Does the noble Lord wish to intervene?
Lord Lyell: My Lords, I apologise for saying, from a sedentary position, "feel free". The afternoon is ours but I shall wait.
Lord Dubs: My Lords, I still do not wish to be tempted too far or I might get into difficulties. I do not think the noble Lord would want that to happen. I should have thought that in any commonsense approach bagpipes and flutes are clearly the kind of instruments played by bands.
On Question, Motion agreed to.
COMMONS AMENDMENTS

11 Page 10, line 38, at end insert—
(""protest meeting" means an open-air public meeting (within the meaning of the Public Order (Northern Ireland) Order 1987)—

(a) which is, or is to be, held—

(i) at a place which is on or in the vicinity of the route or proposed route of a public procession; and

(ii) at or about the same time as the procession is being or is to be held; and

(b) the purpose (or one of the purposes) of which is to demonstrate opposition to the holding of that procession on that route or proposed route;").

12 Page 11, line 2, at end insert—
("(IA) For the purposes of this Act a protest meeting is "related" to a public procession if the purpose (or one of the purposes) of the meeting is to demonstrate opposition to the holding of that procession on its route or proposed route.")

13 Clause 18, page I I, line 25, at end insert ("or protest meeting")

Lord Dubs: My Lords, I beg to move that the House do agree with the Commons in their Amendments Nos. 11 to 13.
872
Moved, That the House do agree with the Commons in their Amendments Nos. 11 to 13.—(Lord Dubs.)
On Question, Motion agreed to.
COMMONS AMENDMENT
14 Page 11, leave out lines 33 to 36
Lord Dubs: My Lords, I beg to move that the House do agree with the Commons in their Amendment No. 14, which removes a privilege amendment.
Moved, That the House do agree with the Commons in their Amendment No. 14.—(Lord Dubs.)
On Question, Motion agreed to.
COMMONS AMENDMENT
15 Schedule 1, page 12, line 16, at end insert
("(3) The Secretary of State shall so exercise his powers of appointment under this paragraph as to secure that as far as is practicable the membership of the Commission is representative of the community in Northern Ireland.")
Lord Dubs: My Lords, I beg to move that the House do agree with the Commons in their Amendment No. 15.
I am sure that this House will agree that it is desirable that the Parades Commission should be representative of the community in Northern Ireland. While this Government have sought balance in the existing commission and will continue to do so, we are also legally obliged to appoint on merit. There cannot be a quota for certain parts of the community. We must appoint on merit first of all.
However, following the provision in the Police Act relating to the Police Authority, this amendment has the effect of making it a duty for the Secretary of State to ensure that the Parades Commission is, as far as is practicable, representative of the community in Northern Ireland. I believe this is a useful amendment.
Moved, That the House do agree with the Commons in their Amendment No. 15.—(Lord Dubs.)
Lord Cope of Berkeley: My Lords, this is an important amendment in that it declares the necessity for the membership of the commission to be representative of the community. We always thought that it would be in general terms, but it is a good thing that it should be written into the Bill in this way. My only question—which was raised in another place but which I do not think was answered entirely—is whether the amendment would have the effect that no one from another part of the United Kingdom or elsewhere could be a member of the commission because he or she would not be representative of the community in Northern Ireland? It is difficult to think that someone from elsewhere in the United Kingdom could be regarded as being representative of any part of the community in Northern Ireland, although that is not impossible. However, I would not like to think that was so, particularly as I understand the present chairman of the Parades Commission does not live in Northern Ireland.
Lord Dubs: My Lords, the noble Lord has posed a question and indeed he has answered it. The chairman

873
of the Parades Commission is not a Northern Ireland resident. It would be quite proper for the Parades Commission to have among its membership people who are not from Northern Ireland. However, in so far as they come from the six counties, it is appropriate that one should attempt to seek balance, subject in the first instance to having achieved appointment on merit.
On Question, Motion agreed to.
COMMONS AMENDMENTS

16 Schedule 3, page 15, leave out lines 23 to 26

17 Schedule 4, page 16, line 25, at end insert—
("1970 c. 9 (N.I.).
The Police Act(Northern Ireland) 1970.
In Schedule 1, paragraph 15(2) to (4).")

18 Page 16, line 31, column 3, at end insert—
("Article 5(2).")

19 Page 16, line 36, column 3, at end insert—
("In Schedule I, paragraph 4.")

Lord Dubs: My Lords, I beg to move that the House do agree with the Commons in their Amendment Nos. 16 to 19.
Moved, That the House do agree with the Commons in their Amendment Nos. 16 to 19 1.—
On Question, Motion agreed to.

Competition Bill [H.L.]
3.33 p.m.
Report received.
Clause 1 [Enactments replaced]:
Lord Morris of Manchester Lord Morris of Manchester moved Amendment No. 1:
Page 1, line 14, at end insert—
("( ) Paragraphs 5 to 9 of Schedule 13 make particular transitional provision in relation to the Restrictive Trade Practices Act 1976 and the Resale Prices Act 1976.").
The noble Lord said: My Lords, while it has never involved any financial benefit to me personally, I have an interest to declare in the debate and it is one in which I take pride. My interest is that of a recent former President of the Co-operative Congress, the highest honour the British co-operative movement can bestow. Moreover for 33 years in another place I was a co-operatively-sponsored Member of Parliament for my native city. Thus the concern expressed by National Co-operative Chemists about the issues addressed by my amendments to this Bill is of particular importance to me. I am grateful to them as well as to David and Sue Sharpe and Justine Keil of the Community Pharmacy Action Group for their invaluable help.
I want also at the outset to pay tribute to my right honourable and noble friend Lord Graham for all his work on these issues at the Bill's Committee stage. He is temporarily abroad and, while he has been away, I have heard the excellent news of his having been made a fellow Privy Counsellor. Naturally I look forward very much to his return when I can congratulate him on the award and, as it were, welcome him aboard.
In Opposition we on these Benches gave our backing to community pharmacy, whose future depends very much on this Bill, because it was the right thing to do. It is still the right thing to do and I was heartened to hear the statement in another place by my right honourable friend the Secretary of State for Health on 27th January 1998 when he said that, we (the Government),
"want to retain as many local community pharmacists as possible".—[Official Report, Commons, 27/1/98; col. 131.]
The Competition Bill provides the means of helping us to do just that.
The amendments I have tabled have two purposes: first, to ensure that the Director-General of Fair Trading cannot proceed with litigation under the old Act. It is unfair and wasteful and indeed could involve pharmacists in double jeopardy to fight under an Act that is more than 30 years old just when Parliament is discussing a new competition regime. Thus my amendments call for proceedings by the Office of Fair Trading to be stayed for a period of two years, so that regulations needed to give effect to the new Act can be brought into force. In the unlikely event that the new Act does not commence within two years then, of course, the director-general can resume proceedings.
Secondly, my amendments seek to ensure for resale price maintenance (RPM) on over-the-counter medicines a minimum five-year period of transition before it can be tested by the Director-General under the new Act. I cannot emphasise too strongly the central importance of staying, for a limited period, the legal proceedings now commenced under the old law. Community pharmacists are not looking for an indefinite exemption. But at the very least they should be allowed an opportunity to develop their role in the Government's healthcare agenda and RPM should stay in place while there is a proper analysis of the pharmacy market and the full implications of ending RPM are known.
Community pharmacy plays a key role, not just in the provision of medicines, but in a wide range of primary healthcare services which are crucial to the communities they support. Pharmacists give free advice on common health problems 1 million times a day. They provide a 24-hour emergency cover and on-call services. They dispose of unwanted medicines and provide drug addict care. They keep a product range of 2,000 items: far more than any supermarket would ever stock. But the future of community pharmacy is now under threat. If this Bill abolishes RPM on over-the-counter medicines it could precipitate the closure of thousands of pharmacies as more and more businesses become no longer viable, and the threat of that happening is made more urgent and more serious by the Director-General of Fair Trading having sought leave to end RPM through court action.
Mendes France said that to govern is to choose and at the heart of today's debate is a crucial choice of public policy—that between access to medicines and the advice that small community pharmacies offer on the one hand, and a slightly lower cost of those medicines on the other. We cannot have both and must choose; hut as we do so let it be acknowledged that prices in Britain today are among the lowest in Europe. Let it be clearly

875
understood too that if RPM on over-the-counter medicines goes, thousands of local pharmacies will face closure at a time when independent researchers state that perhaps as many as 3,000 are already barely viable. They clearly would be among the first to close if RPM goes.
The Office of Fair Trading's own investigations have found that 36 per cent. of those surveyed would switch their purchases to Asda and other chains, and away from community pharmacy. It is said, much to its credit, that paradoxically your Lordships' House is often the most reliable barometer of public opinion in this country. So what do the public think? In a MORI opinion poll conducted only three weeks ago they were asked whether they would prefer to pay slightly more for medicines, around 6p to lop per week, to keep their local pharmacy open or see RPM go. Overwhelmingly they supported RPM as a means of safeguarding access to medicines and primary care advice. Seventy per cent. believe access is more important than price. And let no one be in any doubt who will suffer most if chemists close. They will be the people who use local chemists most. They include elderly and disabled people, mothers with young children and people with no access to a car. Believe it or not, they are a majority of the British people and they deserve all the protection we can give them.
What use is it to them if the supermarket on the edge of town is loss leading on a few products if they cannot get there? In any case, supermarket shelves cannot offer the advice or care on which they so often depend. Supermarkets do not build close relationships with customers or keep their medical records. Nor do they refuse to sell products that could harm the individual customer. But pharmacists are bound by a code of professional ethics, which means that they have to refuse to sell what may be harmful.
In an important statement today, the medical, pharmacy and nursing professions state:
"We firmly believe that medications should not be treated in the same way as ordinary articles of commerce and should be purchased for the most part only where advice from an appropriately qualified health professional is available".
Medicines are not like other products. This has been recognised also by government which is why, for example, a limit has been imposed on the size of packets of Paracetamol to prevent people overdosing.
From the evidence that I have seen, we do not have too many pharmacies in the UK. Nor are they charging too much. A further independent study by National Economic Research Associates has shown that large supermarket retailers enjoy substantially higher gross margins than their smaller competitors; that the UK is not over-provided with pharmacies compared with the average for the European Union; that UK pharmacy margins are the lowest in the EU; that our over-the-counter prices are among the lowest in the EU; and that far from being unusual, price controls for over-the-counter medicines are found in a large number of EU countries.
It is no exaggeration to say that this Bill can determine the fate of community pharmacy in this country. The public service it provides makes its cost an undoubted bargain for British consumers, not least, as I know my noble friend the Minister recognises, for the most needful and vulnerable among them. Moreover, the service it provides does not cost the Treasury a penny; but if RPM goes and pharmacies close, then the health service and ultimately the Treasury will have to pick up the cost. The case for protecting community pharmacy is socially and morally of high importance. It is in my view unanswerable. I beg to move.
3.45 p.m.
Lord Newton of Braintree: My Lords, I support the noble Lord, Lord Morris of Manchester, in the concerns he expressed. In doing so, I should mention the fact that I am an adviser to the Royal Pharmaceutical Society of Great Britain many of whose members clearly would have a strong interest in the matter. It is a particular pleasure to join forces with the noble Lord over those concerns. Although he and I have been on opposite sides for many years, either at the other end of the building or in this House, we have more often than not been on the same side of the argument—even if I was sometimes restrained from making that as clear as I might have wished.
The noble Lord has set out his case clearly and comprehensively and I shall not take the time of the House merely to reiterate the facts and figures he gave and the points he made. However, I observe that I believe he has made points which cannot be, and I hope will not be, lightly dismissed.
As he indicated in the course of his remarks, what we have here is something with which I became familiar over many years as a member of Her Majesty's former government—a classic case of the need to balance different objectives of public policy between which there is a quite powerful tension. It is of course a proper objective to seek to ensure competition, to encourage efficiency and thus to restrain or reduce prices in this or any other field. But it does not follow that that is an end which can be pursued in all circumstances without regard to other objectives of public policy—in this case the desirability of a strong and viable network of community pharmacies. That has certainly become no less desirable in the light of the recent White Paper—the Health of the Nation—and the Green Paper, with the emphasis which both place on the importance of primary care.
There is to my mind an obvious parallel from the field of social security, which I know even better. Potentially there is no doubt whatever that there are large administrative savings, and in that sense efficiency gains, to be made from the much wider adoption of automatic credit transfer into people's bank accounts, and a move away from the weekly payment of benefit to the monthly payment of benefit. In itself that can be seen as almost obviously desirable. But whenever we looked at that over a long period, we came to the conclusion that the effect on another aim of public

877
policy—namely, the maintenance of sub-post offices, especially rural sub-post offices—meant that, to put it mildly, great caution was required.
In my view that is true in this case also. I should be surprised if that view was not shared by current health Ministers, as I am sure it would have been in the previous administration. Indeed, I know that the present Secretary of State has expressed his concerns, as the noble Lord mentioned.
I hope very much that the points raised by the noble Lord will he given most careful consideration by the Minister when he responds.
Viscount Waverley: My Lords, we should not give way to cavalier supermarkets, which often pay scant regard to the consequences. What briefing has the Minister received from the Department of Health? That is the department from which we need to hear an all-encompassing, well thought-through strategy. Until that happens, we should reject this piecemeal approach. Until the Government devise a strategy that protects the public, so that guaranteed, convenient primary care is secured in such a way as to relieve pressure on our beleaguered National Health Service, the present arrangements should stand. We should be strengthening the role of pharmacies, not undermining them.
I wish to put one further question to the Minister. What has changed since the courts decided in the 1970s that similar moves to those proposed in the Bill were against the national interest? We should support the amendment.
Lord Campbell of Alloway: My Lords, I support the amendment. I was involved professionally, as counsel, in one of the monopoly reference cases concerned with pharmaceutical goods. I accept that the day may come when, as a matter of policy, the supermarkets will oust the pharmacies, grocers, butchers and everything else. But that day has not yet come.
I wholly support the spirit of the amendment. The only problem is that it is so drafted as to include many aspects other than pharmacy and the sale of products in local pharmacies. I therefore ask the Government to consider the introduction of a special measure of interim safeguard in whatever terms, albeit for a period of time, at least to hold the position of pharmacists, for the reasons given, so that they may supply the needs of the public and avoid being scattered, with unemployment and all the misery pertaining to it.
Lord Jacobs: My Lords, I remain troubled that the consumer interest is so seldom supported in either House. In this case it seems that the Community Pharmacy Action Group has been very active indeed. Its objective is simply to protect the profits of pharmacies (chemists' shops) in the interests of the community. The group has sent out 14 pages of closely-worded argument to explain how strong its case is. It has even apologised to every Member of this House that it was unable to contact each one of your Lordships individually. It mounted a very strong lobbying campaign. However,
878
there is no lobbying or campaigning on the part of the consumer groups. Someone has to speak for them, and I shall try to do so.
The action group claims that the poorest members of society will lose out if RPM is abolished and the prices of branded non-prescription medicines are reduced. It argues that even if prices are reduced by as much as 20 per cent., there will be nowhere within reach for the elderly and mothers with young children to go. Consumer groups, however, do not appear to have supported the amendment or to have said anything about it. It may be that their resources are more limited, or they are not as well organised as this particular pharmacy group.
Pharmacies are basically the distribution arm of the great pharmaceutical companies. If we look at the pricing policy of such companies, it is recognised that they usually charge very heavily for medicines that are under patent. I agree with that approach as they have to fund all the research and development. But just look what happens when medicines that have been under patent for 16 years become free of patent. There is an illness from which I am sure none of your Lordships suffers. It used to be called gout. The charge for the best known branded medicine for treating this condition is £42 per 100 tablets, and one has to take one tablet a day. If I sound like a sufferer, it is because I am. As every pharmacist will agree, the generic product is identical in quality, purity and performance. The charge is £5.50 per hundred tablets. That suggests that not only the pharmacists but the pharmaceutical companies are in a sort of friendly pact to keep prices as high as possible. That cannot be in the interests of the community.
There is, however, a valuable role that some community pharmacies play. They give advice in certain areas to individuals. Some deliver medicines to old people who are unable to get out. So I accept that pharmacies play a good role. If RPM is abolished perhaps the Government should consider the possibility of compensation to those who carry out those special roles in the community. The present situation should not be left as it is, since everybody pays higher prices.
My 40 years of business experience has taught me that, if you have to choose a business from scratch, you should first try to find a monopoly—preferably of a product with an inelastic demand—in other words, however high the price is, people have to have the product. That is to some extent true of medicines. If you cannot find a monopoly—and these days they are very few and far between, I am glad to say—then you should find a product with resale price maintenance. Then you have only to concentrate on giving quality and service and you know that your profits are assured.
A street near to my office in London is about 300 yards in length. There are four chemists' shops in that street, one every 75 yards. If that does not tell noble Lords the position of profitability in the pharmaceutical industry, I do not know what does. It is not high demand that produces four shops in that short distance; it is the fact that for a relatively small turnover they can make very good profits.

879
RPM is great for business, but generally speaking it is bad for the consumer. I agree that prices in this country may be favourable compared with those in the rest of Europe. But nobody mentions the United States—for the very simple reason that in the United States the medications that one buys are significantly cheaper. There is no resale price maintenance.
These matters are likely to be considered by the Restrictive Practices Court. Therefore, I recommend that the amendment is rejected and that we leave it to others with more time on their hands to evaluate the issue more carefully.
Earl Howe: My Lords, I spoke in Committee in favour of the amendment tabled by the noble Lord, Lord Graham. I do the same today in support of the noble Lord, Lord Morris. I agree with everything that the noble Lord said. It would be crazy if, as a result of this Bill, we put in jeopardy a community service which is every bit as much a part of primary patient care as is the GP's surgery.
My noble friend Lord Newton is right to draw attention to the need to balance the benefits of different aspects of government policy. This amendment stands absolutely four-square with the Government's wider health objectives. I hope that the Government will respond to the strength of feeling that is in evidence on this issue.
Lord Milverton: My Lords, I support the amendment. It seems crazy to disband pharmacists. One can go into a pharmacy and receive excellent advice. I am afraid I cannot accept the argument from the Liberal Benches; I accept far more the argument put by the noble Lord, Lord Morris of Manchester, and by my noble friend Lord Newton. I hope that the Minister will accept it—or, if he does not, that he will take it back, re-examine it and consider an even more thorough provision.
Lord Desai: My Lords, there are problems with this amendment. My mind is not yet made up but I wish to highlight the problems. The argument from my noble friend Lord Morris is that the community pharmacy gives a bundle of services, one of which is selling drugs. He suggested that because there are all the other services, we ought to subsidise them by having resale price maintenance. I sympathise with that argument but I also feel that to the extent that we can unbundle some of the services, we ought to do so.
If the community pharmacy gives primary healthcare services, advice and so on, could the Government not find a way of making payments for those services, while not having resale price maintenance? There are a number of medicines which people can take without having to seek advice from anyone. Those drugs at least should be available without resale price maintenance because taking advice and receiving primary care are not relevant. It might be possible to lift resale price maintenance from some medicines and not others; that is a technical matter with which I am not familiar. However, to the extent that those services are bundled
880
up, it is always a bad idea to link an extra price to other services. If we want other jobs to be done, then they ought to be covered specifically by other devices.
To the extent that we can spread the benefit of lower prices, we ought to do so. If the community pharmacists have other functions to perform, we ought to find ways of paying them for it, but so far as possible we should not mix the two things.
4 p.m.
Baroness Ludford: My Lords, I find myself very much in sympathy with the views expressed by the noble Lord, Lord Desai. The idea of retaining resale price maintenance in one sector troubles me, as an economic Liberal and former employee of the Competition Directorate of the European Commission.
However, while I also agree to some extent with my noble friend Lord Jacobs, perhaps I should point out to him that I have a briefing from the National Council of Women of Great Britain which expresses support at least for the objectives of the amendment. I am identifying a common view on the objectives of the amendment, while some of us are concerned about the means. The need to maintain the valuable community service, including the enlarged community service, through the provision of primary care and advice is something I very much support. As a councillor in an inner city ward, I know that it is not only in rural areas that there is concern about the loss of independently owned pharmacies. There are many elderly people in areas like mine, densely populated areas, who are only mobile to the extent of being able to walk a few hundred yards to their local pharmacy. So there is great concern.
I should welcome hearing from the Minister whether he has considered other means of reaching the objective of helping local pharmacies to stay in business. It may perhaps be through a means which I mentioned at Committee stage, the uniform business rate or enabling local authorities to help. I realise that there is a problem in that it means public moneybeing sought, whereas at the moment the services are cost free, at least to the Treasuryand to public resources, because the price is being paid through the retail mechanism. I do not know how to solve that. My hesitation is that I am unhappy about doing so through resale price maintenance in one sector.
Lady Saltoun of Abernethy: My Lords, perhaps I may bore the House for a minute or two with an example of the kind of thing which the Bill may lead to. I live near the village of Braemar in Aberdeenshire. For 20 years we had no chemist in the village, the nearest was 17 miles away in Ballater. A prescription from the doctor had to be put in a locked box and sent down to Ballater on the bus. The medicine had to be put in the box and returned on another bus. Then you had to go and collect it. Sometimes that meant you did not get your medicine until late evening or even the following day.
Last summer, after 20 years without one, we got a chemist in the village. But just across the road is a small supermarket—very small, but one of a large chain. If

881
that supermarket can undercut our chemist on such staple items as aspirins, indigestion mixture and so forth, it may very well be that our chemist will no longer find his business viable. He might have to give up. Then we would be back to having the nearest chemist 17 miles away. I think that probably Braemar is not the only village in the country where that kind of situation obtains. So I support the noble Lord, Lord Morris of Manchester, very heartily in his amendment.
Lord Fraser of Carmyllie: My Lords, I am grateful to the noble Lord for returning to the subject on Report. We have already discussed it at earlier stages of the Bill. As my noble friend Lord Newton said, it would appear that here are two government policies in conflict. That is self evident. However, at Second Reading, the noble Baroness. Lady Jay, when asked what was the attitude of the Department of Health, said that the department was neutral on it. I find that an astonishing proposition, particularly now that the Minister for Health himself—and the noble Lord quoted it—said in another place:
"We want to retain as many local community pharmacists as possible and to encourage trained pharmacists to make a greater contribution to the national health service than they are making at present".—[Official Report, Commons, 28/1/98; col. 131.]
He said later at the same column:
"We want to maximise the convenience of all potential users of pharmacies, and to encourage and extend the contribution that trained pharmacists can make".
I say to the Government that I regard that as an excellent policy. If they wish to pursue it, I have no doubt that on this side of the House we would give them warm support for greater involvement of pharmacists in relieving the load on so many GPs who are too frequently burdened with requests for advice when patients could obtain the advice adequately and satisfactorily from their local pharmacists.
That is where the conflict lies. It seems absurd not to face up to it. I do not know what the noble Lord intends to do, but it would not be our proposal at this stage to seek to divide the House. Apart from anything else, the way this has been put together makes it an incomplete package. There are later amendments to another schedule and that might be a point at which we could examine the matter further, if necessary.
I hope that we can obtain from the Minister a firmer indication of how the conflict will be resolved. I notice with considerable interest that there is an Early Day Motion in another place which is signed by no fewer than 94 Members of Parliament, of whom 86 are Government Back-Benchers. So the idea that this is simply a matter that has been stirred up from this side of the House is not the case. The signatories to the Early Day Motion have indicated exactly what I understand to be the problem They say that they further note:
"that the loss of RPM [retail price maintenance] on OTC [over-the-counter) medicines could lead to the closure of many independent community pharmacies, an outcome which would seriously undermine the Government's health strategy and increase the burden on GPs; and the Motion calls on the Government to ensure that a nation-wide network of community pharmacies remains in place to serve the needs of all the community, in particular the elderly, the infirm and mothers with young children".
882
Perhaps I may say to those 86 Labour Back-Benchers that it seems to me that they have a good solid point to make. I do not expect that the noble Lord will be in a position to indicate now where the Government stand on this. But I hope that before we return to the matter another day on Report or on Third Reading. we can obtain a clear indication of a resolution of the problem. I hope that it is clear to the Minister, not only from the contributions made in your Lordships' House at Second Reading, in Committee and now on Report, but also from the concerns expressed by a wide section of Members of Parliament, that the Government should recognise that this conflict must be resolved. There is a real concern that community pharmacies should be maintained throughout the country. It is not only extremely important for places like Braemar to have a local pharmacy, the issue is far wider than that. I hope that the Government will at long last seek to resolve it.
The Minister of State, Department of Trade and Industry (Lord Simon of Highbury): My Lords, first, I thank my noble friend Lord Morris of Manchester for standing in for my noble friend Lord Graham and for putting the arguments so clearly and convincingly. In response to the noble and learned Lord, Lord Fraser, I say at once that we know that this matter will be returned to at a later stage of Report and I shall therefore confine myself to the principles involved in the issue.
This is a matter to which we have given careful consideration and we are mindful of the importance attached to it by a number of interested parties. The Bill does not of course provide for the abolition of resale price maintenance of over-the-counter medicines as has been suggested at times by the press. That is not its purpose. An agreement maintaining resale prices would in due course come to be assessed against the Chapter 1 prohibition and the exemption criteria in the Bill, as would any other agreement. Nor do the Government dismiss the arguments that have been advanced seeking to demonstrate that resale price maintenance in this sector is in the public interest. We have always understood the important role that community pharmacies play.
The issue is not whether resale price maintenance of over-the-counter medicines should be abolished; the issue is whether the arguments should be looked at again. After nearly three decades, the director general decided that the arguments should be reassessed and sought leave of the Restrictive Practices Court. It is entirely reasonable that the matter should be capable of being reviewed. It would be wrong for us to use the Bill to stop this legal process. It would also be wrong to prevent the arguments from being looked at again. Indeed, we heard a number of important arguments put forward forcefully by, among others, my noble friend Lord Morris. However, as we heard today and in Committee there are forceful arguments on both sides, some put forward by my noble friend Lord Desai and some from the Liberal Democrat Benches by the noble Baroness, Lady Ludford.
We are clear that resale price maintenance ensures access to healthcare on the high street—and on many village high streets as far away as Braemar. Those are

883
important issues. We know that independent pharmacies would close if it was merely a matter of repealing price maintenance. We know that access and choice are important—more important than price to 70 per cent. of those people asked. We heard from the noble Viscount, Lord Waverley, from my noble friend Lord Desai, from the noble Baroness, Lady Ludford, and, finally and most convincingly, from the noble and learned Lord, Lord Fraser, that pharmacists have a crucial role to play in developing and delivering the Government's healthcare policy with an emphasis on self-medication.
It is not my purpose today to decide the health policy; my purpose is to look at the Competition Bill. It is not for me to reject or even to take a view on the forceful arguments put both for and against resale price maintenance on this category of product. Let me emphasise again that the issue we are debating in relation to the Bill is not whether resale price maintenance is a good thing and should continue; it is whether the arguments should be capable of being looked at again at this stage. Let me add a further point. For the Restrictive Practices Court to look again at the same issue it would need to be satisfied that the test is met that there is prima facie evidence of a material change in the relevant circumstances since its last decision. That seems an entirely proper process. I do not believe that it is right to use this Bill to cut across the judicial process now started.
If the Restrictive Practices Court were to find again, as it did in the 1970s, based on forceful arguments, that resale price maintenance for over-the-counter medicines is in the public interest, we recognise that there is a case for providing generous transitional arrangements before the Chapter I prohibition applies. It would be wrong for the arguments to be capable, even in principle, of re-examination at the moment the prohibition comes into effect. We agree that if the court maintains the exemption for over-the-counter medicines it is right that there should be a five-year transitional exclusion from the Chapter I prohibition from the date the court proceedings reach a conclusion. That is, of course, likely to be some time off given the nature of the extended reviews.
Furthermore, there is a case, as my noble friend Lord Morris outlined, to remove the ability that the director general would have to propose to terminate the transitional exclusion early should the court find in favour of the continuation of resale price maintenance for OTC medicines. As my noble friend Lord Morris pointed out, that point was raised in Committee by my noble friend Lord Graham of Edmonton and, as mentioned by the noble and learned Lord, Lord Fraser, we shall return to the matter.
I appreciate that there will need to be further debate. But that further debate should come when we reach Schedule 13. In the meantime, given the seriousness we attach to this matter, I hope that my noble friend Lord Morris will be prepared to withdraw his amendment at this stage.
4.15 p.m.
Lord Morris of Manchester: My Lords, I am grateful to my noble friend the Minister for the care he has taken in replying to the debate. Overwhelmingly, those who took part did so supportively of the amendment. The principal critic was the noble Lord, Lord Jacobs. He was corrected by his noble friend Lady Ludford about the mistake of thinking that consumer groups are not working with the Community Pharmacy Action Group.
Adding to what the noble Lady said, I can inform the noble Lord that the Patients' Association; Scope. formerly the Spastics Society; as well as the National Council of Women, among other organisations which work closely with consumers, are supporting the amendment. As my noble friend the Minister said, we shall be returning to these important issues later. Meanwhile I was encouraged by his reply. He recognised that a transition period of at least five years is extremely important; and I ask him to think very carefully about my point concerning double jeopardy before we come to take a definitive decision on 19th February.
In the light of what my noble friend said, and in keeping with the general feeling on both sides of the House not to divide at this stage, I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Clause 2 [Agreements etc. preventing, restricting or distorting competition]:
Lord Fraser of Carmyllie Lord Fraser of Carmyllie moved Amendment No. 2:
Page 2, line 21, at end insert—
("( ) Subsection (I) applies only if the agreement, decision or practice has, or is likely to have, a significant effect on competition within the United Kingdom.").
The noble and learned Lord said: My Lords, in moving this amendment, I return to a point that was raised in Committee. We believe it correct that the word "significant" should be included and that the wording of the provision should be explicitly confined in that way. That is how the prohibition was originally drafted in the 1996 draft Competition Bill and it enjoyed widespread support in the business community.
However, when I raised this last time round not only the Minister but the noble Lord, Lord Borrie, pointed out to me that, according to the jurisprudence of the European Union, the scope of Article 85 was limited to arrangements which had an appreciable effect on competition and that, accordingly, it was not necessary to include the word "significant". I beg to differ. It still seems to be desirable both for industry and business more generally, but also to ensure that a large number of unnecessary notifications are avoided. That would be a worthwhile result. My understanding is that because of the wide interpretation of Article 85 adopted by the European Commission, the outcome in practice has been a significant number of unnecessary notifications, causing delay. At times the Commission has almost reached the point of being unable to cope.
The further argument which I understood to be addressed to me last time round by the Minister (at col. 259 of the Official Report) was that this would be at variance with what goes on in Europe, that we must be Euro-treu and that we must not put in things which cause our law to develop in a way that is not compatible with emerging European jurisprudence. However, over the weekend I was whiling away my time reading through Dutch competition law. The noble Lord may be impressed to know that I discovered that Article 6 of Dutch competition law is exactly the same as our Clause 2. It reflects the language of Article 85. But Article 7 of the Dutch code says that the Article 6 prohibition shall not apply to agreements, decisions and concerted practices if no more than eight undertakings are involved in the relevant agreement, or if no more than eight undertakings are involved in the relevant association, but that one tests against the combined turnover of the undertakings. They define it in terms of such small sums as 10 million Dutch guilders or, in certain other cases, as low as 2 million Dutch guilders. Further, it is said that, by general administrative order, Clause 1 may be declared inapplicable to categories of agreement which are,
"of clearly minor significance from the point of view of competition".
So, even if within the DTI the view is that it is undesirable to express in domestic legislation nothing more than what is to be found in Article 85, that same approach has not been taken in The Hague. I should like to avoid spending future weekends reading through the competition law of other countries to discover whether they have restricted themselves rigidly to the wording of Article 85 or have, in their own way, sought further additions to give some explanation and some proper context for the application of Article 85 within the domestic context.
I urge the Minister once again to consider putting back into what was the original draft the word "significant". I beg to move.
Lord Campbell of Alloway: My Lords, I support the amendment. Significant effect on competition is measured by turnover. That surely must be right. The amendment restricts the jurisdiction to that of our courts within the United Kingdom. This is the very area where problems of claim of extra territorial jurisdiction arise, particularly as regards the United States of America. It is right, surely, not only to avoid an overlap with the jurisdiction of the Commission but also any possible assumption of extra-territorial jurisdiction, which is not the intent of the Bill, as I understand it.
Lord Borrie: My Lords, perhaps I may point out in response to the noble Lord, Lord Campbell of Alloway, that Clause 2 as it stands is concerned only with agreements between undertakings and so on which may affect trade within the United Kingdom. Furthermore, while the turnover point he mentioned may well be relevant, it depends on the particular market. There are local markets for a number of local goods and services—for example, buses—where the turnover of the company may be quite small but where a restrictive agreement or cartel between companies which is
886
restrictive of competition should be prohibited even though it is small scale compared with major industrial concerns.
I am mildly surprised that the noble and learned Lord, Lord Fraser of Carmyllie, has returned to this matter and mildly surprised that his weekend has been upset by his perusal of Dutch law, which, so far as he described it—I bow to his very recent knowledge of it—does not seem to be that helpful to us in the UK at this time. I am surprised that he has returned to this matter since the Committee stage because it seems to be generally accepted that the European jurisprudence, which is incorporated into the Bill though Clause 58, says that anything that does not have an appreciable effect on competition—which I think we can all interpret as meaning almost the same as significant—is not prohibited by Clause 2. As the noble and learned Lord has not added any new arguments, except ones I did not perhaps entirely follow from the Dutch law, I am surprised that he has returned to wanting to pursue what is really not necessary.
At various points of the Committee stage we discussed the work of the Director General of Fair Trading, sometimes in conjunction with the other regulators who have a role under the Bill, dealing with telecommunications, gas, electricity and so on. He is going to produce what the Minister, I think for convenience, called guidelines under Clause 50. We shall come to that clause later on. The fact is that the Director General of Fair Trading accepts his educational role—his role in giving guidance to industry, big and small—as to the effect of the prohibitions and the effect of the new law. Therefore, I do not think it is necessary to add to the wording of the clause what the noble and learned Lord has suggested.
Lord Ezra: My Lords, in spite of what the noble Lord, Lord Borne, has just said, the aspect of the matter that worries me is the large number of apparently unnecessary notifications which find their way to the Commission as a result of the interpretation of the wording in Article 85. If that were to happen over here it would not only be massively to the disadvantage of enterprises but it would clog up the work of the OFT and the other regulators. That aspect has seriously to be considered. I should be interested to know from the Minister how he feels that in practice this will develop if the amendment is not adopted.
4.30 p.m.
Lord Kingsland: My Lords, the noble Lord, Lord Ezra, has made the point very well. Even with the discipline of the expression "appreciable" in European jurisprudence, the European Commission is still over-faced with the amount of notification with which it has to deal. So the inclusion of the word "significant" would act as a very important discipline which would tend towards the de-bureaucratisation of our own system.
I have one further observation to add. I know at Committee stage the Minister placed great emphasis on the importance of our being consistent with European jurisprudence and practice. But that ought not to be fatal

887
to a change of heart because there are other areas in this Bill where he has not been consistent over incorporating European practice. I am thinking particularly of the area of remedies and procedures where, as I understand it, he is proposing to adopt solutions which differ widely from those included in Regulation 17.
Lord Simon of Highbury: My Lords, we have reflected most carefully on the arguments advanced during the first Committee day by the noble and learned Lord, Lord Fraser, and the noble Lords, Lord Ezra and Lord Campbell, in support of the same amendment we are now debating.
I think we are all agreed that the UK competition regime should concern itself only where the anti-competitive effects of an agreement are significant or appreciable. We appear to be debating those two words yet again.
The case law of the European Court of Justice clearly establishes that Article 85 only applies where there is an appreciable effect on trade and competition. Furthermore, UK courts, in interpreting EC competition law, have clearly held that an agreement is only caught by Article 85 where there is an appreciable effect on competition. Take the example of the High Court in Society of Lloyds v. Clementson. The court concluded that to the extent that the central funds arrangements of Lloyds had the effect of restricting competition its impact on competition was not "appreciable" and therefore was not caught by Article 85. The UK courts are therefore used to applying the EC appreciability test in EC cases which come before them. The governing principles clause will require the same interpretation for the UK prohibition of anti-competitive agreements.
So, what of the argument, suddenly, that we should insert an explicit significance test for clarity and the avoidance of doubt? The court seems clear. I am very much in favour of clarity. But an explicit appreciability test here would increase, rather than reduce, uncertainty. Article 85(1) contains no express appreciability test. By departing from the language in Article 85(1), we would create the impression that we were trying to depart from established European principles. That was the point made by the noble and learned Lord, Lord Fraser. We should be Euro-treu, if that is the word that I heard him use. It might have helped him over his thoughts at the weekend if, in his mind, he had been able to capture that famous aphorism that I learnt when I lived in Holland. I have only changed it very slightly. In matters of competition the fault of the Dutch is giving too little and asking too much. Had the noble and learned Lord had that, he might have been able to re-position the statement.
I remain concerned that an express significance test might inadvertently create so high a threshold for action that we could impede the effective tackling of anti-competitive agreements. I believe that this is the most important issue. The secondary issue is that the lack of clarity could give rise to even more work rather than less. I agree with the noble Lords, Lord Kingsland
888
and Lord Ezra, who said that that is what we are trying to achieve with the translation through Article 85 of the European jurisprudence into the UK base.
I do not believe that the director will have interest in applying the prohibition where there is no appreciable effect on competition. I believe that my noble friend Lord Borrie has made clear, and it is helpful, that the director's guidelines will specifically address the question of appreciability. That will certainly provide additional comfort for business. So on the grounds of clarity and of the law base already being understood in this country—and we have that evidence—and on the grounds that we should not always learn from the Dutch, I remain convinced that we should not insert an explicit significance test. Therefore, I urge the noble and learned Lord to withdraw the amendment.
Lord Fraser of Carmyllie: My Lords, I cannot say that I am entirely persuaded by the argument. I am surprised that the noble Lord, Lord Borrie, found difficulty with my argument because it is a fairly simple one. The argument advanced at Committee stage was that we can do nothing to Article 85 and that we must not circumscribe it in any way as it appears in our domestic law. The simple point I was making is that a year ago, when confronted with the same issue, the Dutch had no difficulty whatever in adding a significant circumscribing of Article 85. If the noble Lord wishes to see it it runs to about two and a half pages.
More importantly, I believe that we shall have to return to this matter because I do not believe that we have yet had a full enough answer to the point that my noble friend Lord Kingsland and the noble Lord, Lord Ezra, raised. With this amendment we are seeking to ensure that business understands what is expected of it in terms of notification. It seems to us that it is desirable that it understands that as clearly as possible, not only for its own purposes but also for those who have to deal with the notifications that the number is reduced to the sensible minimum. From past experience the Commission's problem, as we see it, is that it has been seriously over-burdened with unnecessary notifications. What really lies behind our amendment is an attempt to reduce that burden. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Lord Fraser of Carmyllie Lord Fraser of Carmyllie moved Amendment No. 3:
Page 2, line 24, leave out subsection (4) and insert—
("( ) Any decision or provision of an agreement which is prohibited by subsection (I) is void, but this will not affect the remaining provisions of any such agreement.").
The noble and learned Lord said: My Lords, this is an even shorter amendment. The wording of Clause 2(5) might be read as indicating that the whole of any agreement would be void. This amendment is designed to ensure that should there be a specific anti-competitive part of it it should be severed but the rest of the

889
agreement can stand. The amendment tries to eliminate that problem. I do not believe that the argument needs further elaboration. I beg to move.
Baroness Nicol: My Lords, I hope that my noble friend will be able to accept the amendment. I raised this concern at Committee stage. In response my noble friend said,
"The application of the prohibition to a contract should not always lead to the entire contract being void".
He went on to say,
"The best way to avoid such a possibility is to mirror the language of Article 85(2)".—[Official Report, 13/11/97; col. 267.]
I withdrew the amendment, but I said that I would take advice and might return to it. I have since been advised that there is still some concern that the English courts may not apply what is known as the blue pencil test and that therefore there might be difficulty caused which we would hope to avoid. I hope that my noble friend will look kindly on the amendment.
Lord Kingsland: My Lords, the Minister will have no difficulty this time with the restrictions of European practice because I believe that the approach of the European Commission and, indeed, of the European Court of Justice, is to take the view that, as far as the techniques of civil ability are concerned, it is a matter for each member state to adopt such techniques as are typical in its own law.
Lord Ezra: My Lords, this amendment, which I support, is in line with the intention of the previous amendment; namely, to make clear to enterprises where they stand on the matter. As has been pointed out, it is reasonable that enterprises should know where they stand if part of an agreement deals with a prohibited aspect but the remainder does not. In practice, it would probably be all right, but I believe that a point of this importance should be stated on the face of the Bill.
Lord Simon of Highbury: My Lords, as the noble and learned Lord, Lord Fraser, noted, we debated a similar amendment on the first Committee day, tabled by my noble friend Lady Nicol. As I said then, I think we are all agreed that the application of the prohibition to a contract should not always lead to the entire contract being void. This is the result under Article 85. The European Court of Justice has held that it is only those elements of an agreement which are prohibited under Article 85 which are void, leaving the question of the enforceability of the remaining provisions to national laws to determine. That point was clearly put by the noble Lord, Lord Kingsland. How do we achieve the same result for the UK system? I remain convinced that the best means is to mirror the language of Article 85(2) of the EC treaty, which deals with the consequences of an agreement being caught by the EC prohibition. This is what we have done in subsection (4).
This principle of European Community law will apply to the interpretation of the Chapter I prohibition as a result of Clause 58. Whether the infringing elements are severable from the agreement as a whole so that what is
890
left is enforceable is a matter for the general law of contract applicable in England and Wales. Scotland and Northern Ireland.
So, if we are clear that we do not want the whole contract to be automatically void, what is the harm, you may ask, in expressly providing so. As I said in Committee, we consulted on the basis of language very similar to that set out in the amendment and we received comments from legal practitioners that it would displace normal UK rules of severance and prevent the normal rules of severance applying, with the possibility of severing "offending" parts of whole "provisions". Moreover, by not copying out the words of Article 85(2) it would risk divergence from EC law. A different type of severance test might develop from that applied by the UK courts in applying Article 85. This in turn could create burdens for business by having to deal with two subtly different types of severance test under the EC and UK prohibitions.
Copying the language of Article 85(2) means that the courts will look to EC law for the meaning of the provision as to voidness. Having decided what provisions of the agreement are void the court will then apply the rules in the relevant domestic law to decide what the effect of those provisions being void may he on the enforceability of the remaining provisions of the agreement.
The relevant test of severance in English law is whether, after severing the void terms, that alters entirely the scope or intention of the agreement or removes the heart and soul of the agreement. If the answer is no, the remaining provisions of the agreement will remain enforceable. I am satisfied of the clarity of that, after taking legal advice. Therefore, I urge the noble and learned Lord, Lord Fraser, to withdraw the amendment.
Lord Bruce of Donington: My Lords, may I ask the Minister to clarify a point about my understanding of his position? If the European Court of Justice comes to a decision that part of the activities ought to be prohibited, but the remainder remains free of the judgment, do I understand the noble Lord's position to be this: because the remainder has been, as it were, ignored by the European Court of Justice, our courts nevertheless have to have regard to the fact that the Commission might not (and perhaps unofficially) agree with the Court's opinion and our courts therefore have to follow an Act of Parliament on the supposition that the Commission might act to prohibit the activity and, in order to remain within the ambit of Articles 85 and 86 of the Treaty, they should leave it at that and merely follow it so that the whole activity is barred? Is that the noble Lord's position?
4.45 p.m.
Lord Simon of Highbury: My Lords, for clarification, the point that I was making, and which I now repeat for my noble friend, is that European law may speak to voiding part of the contract. If it does not void the whole of the contract, it looks to the national

891
law base to decide whether any other parts of the contract not voided by the European judgment will be voided by the national court.
Lord Fraser of Carmyllie: My Lords, even if I have failed to persuade the Minister to incorporate this amendment in the Bill, following our exchange I am confident that I have secured that his words on the matter will be repeatedly quoted in courts of law in the future. With that satisfaction, I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
[Amendment No. 4 not moved.]
Clause 3 [Excluded agreements]:
Baroness Wilcox Baroness Wilcox moved Amendment No. 5:
Page 2, line 41, leave out from ("exclusions)") to end of line 42.
The noble Baroness said: My Lords, in moving Amendment No. 5, I should like to speak also to Amendment No. 67. I return to an issue that I raised in Committee: the way in which the Bill deals with professional rules. As with other parts of the economy, the professions must be properly scrutinised to make sure that they do not indulge in anti-competitive practices. History has shown that some rules, such as advertising and fee-setting, can be anti-competitive and need monitoring.
When we last debated the issue, I pointed to an issue of current concern with the Office of Fair Trading: the legal profession and multi-disciplinary practices. Solicitors' rule books have prevented them entering into agreements with other non-solicitor professions, such as accountants. They prevent fee-sharing with non-solicitors and restrict the work of solicitor employees. At the same time, however, the commercial pressures on law firms have been growing with the larger firms of accountants (such as Arthur Andersen, Price Waterhouse and Coopers & Lybrand) expanding and developing their own international network of law firms.
I suggest that the legal profession here could be under commercial pressure for another reason. The extension of conditional fees and the decline of legal aid, as announced by the Lord Chancellor last autumn, could result in significant changes to the way in which the legal profession operates. Some of the smaller legal firms may need to find new ways of operating to survive in an increasingly commercial world. Multi-disciplinary practices could be a way forward for them if the Law Society were to change its rules.
In many ways, the Bill will result, I believe, in a considerable improvement in the competition system. It will be simpler, more consistent and more streamlined. However, it is not when dealing with professional rules. Therefore, would it not be more straightforward, clearer and more consistent with the Bill's overall approach if all the professions were brought within the overall scope of the Chapter I prohibition, as my amendment proposes? Why should surveyors, for instance, be treated differently from estate agents?
I agree with the noble Lord that not all professional rules have competition implications—indeed, some professional rules exist for the protection of the public—
892
but if professional rules were to be treated as part of the prohibition, could not the professional bodies apply to the Director General of Fair Trading for their rule books, or even parts of their rule books, to be exempted from the prohibition under Clause 4? Professional rules could then be treated in the same way as other agreements subject to the prohibition. I suggest that those professions who produced acceptable rules would have nothing to fear. Surely, such a system could work alongside the other systems of approval of professional rules.
This is a point of principle which is about ensuring that different parts of the economy are treated in the same way with regard to competition law without singling out certain parts for special treatment. One hopes that it is also about maintaining consistency and clarity in the way in which the new system will operate to the benefit of all. I beg to move.
Lord Bruce of Donington: My Lords, I rise to speak in support of Amendment No. 17 which is very much on the same point as that dealt with by the noble Baroness, Lady Wilcox. The essence of this Bill—I shall touch on certain ambiguities when I deal en passant with the definition provisions clause, Clause 58—is that it prohibits a whole series of activities and removes the prohibition as far as concerns those not covered by it. Everything is prescribed unless it is exempted.
Clause 3(1)(d) refers to professional rules that are dealt with in Schedule 4. Schedule 4 exempts certain professional services from the operation of the prohibition provided for in earlier clauses of the Bill. One sees set out various matters: the services of barristers, the provision of medical or surgical advice, the services of nurses et cetera. I should like to refer to one extraordinary provision that deals with accountants. I declare an interest as a practising accountant. When one looks at accounting and auditing, the definition is:
"The making or preparation of accounts or accounting records and the examination, verification and auditing of financial statements".
Apparently they are not prohibited. But there are many engaged in the accounting profession who do not come within that particular definition. I cite my own firm which is now one of the larger ones that deals mainly with taxation matters. Am Ito assume that in the course of the normal expansion of the firm, particularly in the field of taxation, even though it may achieve a position of some dominance that the commission may not like, it will nevertheless be quite in order for it to go ahead? The whole matter is a little ambiguous. If one can be precise about dentists, nurses, architects and so on, one can at least have some degree of precision about the accounting profession.
It is for this reason that I have tabled Amendment No. 17 which adds to Clause 3 of the Bill immediately after subsection (5):
"(6) The Secretary of State may at any time by order amend Schedule 4, with respect to the Chapter 1 prohibition. by adding one or more professional services to the list set out in Part II of that Schedule",
a summary of which I have just rendered to your Lordships. The amendment also adds the following subsection:

893
"(7) The Secretary of State must keep the list of professional services set out in Part 11 of Schedule 4 under review".
That seems quite logical. If one is dealing with matters of such importance as the complete prohibition of an activity it is up to the Secretary of State, if necessary with the aid of the professions concerned, to keep that matter up to date and to ensure that the members who are subject to their own professional disciplines are not thereby disadvantaged.
I sincerely hope that this will find favour with the Government. It is not a very onerous responsibility for the Secretary of State to keep in touch with the various professional bodies to make quite sure that they are not disadvantaged in their own country. That seems to be a normal thing to do. I hope that in the normal way the Government will accept the amendment. However, in my experience over the past 20 years or so it is very rare for any government to accept amendments at Report stage unless they have been specifically solicited by the Government themselves. This is a very convenient administrative apparatus that has become enshrined by the passage of time in the proceedings of your Lordships' House. But I should have thought that this would have been sufficiently significant.
The real reason that the Government are not prepared to accept the amendment is that there may be a possibility, nay a probability, that we shall be in conflict with Community law. I hope to be in a position perhaps in five years' time, God willing, to tell your Lordships, "I told you so five years ago".
I should like to refresh your Lordships' memory of this matter because this did not appear to be adequately emphasised in Committee. Since the other place pays perfunctory attention to matters of detail of this kind, I venture to acquaint your Lordships with the contents of the definition clause that governs this particular part of the Bill. I refer to Clause 58. I trust that your Lordships will forgive me if I read this because the provision is quite incredible when taken in conjunction with the law as we formerly understood it in this country. The provision reads:
"(I) The purpose of this section is to ensure that so far as is possible "
—that is a nice precise term to which I have no doubt British law is well accustomed—
"(having regard to any relevant differences between the provisions concerned)"—
that is a lovely little sentence, is it not? It goes on:
"questions arising under this Part in relation to competition within the United Kingdom are dealt with in a manner which is consistent with the treatment of corresponding questions arising in Community law in relation to competition within the Community".
What a lovely text to incorporate into British law, which is normally interpreted by reference to the letter of the law, not various inferences that may be drawn from generalities that refer to it. I invite your Lordships to listen to the following:
"(2) At any time when the court—
that is a British court—
"determines a question arising under this Part, it must act (so far as is compatible with the provisions of this Part and whether or not it would otherwise be required to do so) with a view to securing that there is no inconsistency between—
894

(a) the principles applied, and decision reached, by the court in determining that question; and

(b) the principles laid down by the Treaty and the European Court. and any relevant decision of that Court, as applicable at that time in determining any corresponding question arising in Community law".

I leave it to others, notably the noble and learned Lord, Lord Ackner, whom I am pleased to see here, to solve that ambiguity for us. It is of course a load of nonsense. There is no question of trying to get British law and British courts, which rely mainly upon the letter of the law and precedents under the statutes, to begin to accept the generalities of Community law—so-called—which relies largely upon its recitals and preambles. Cannot we at least have recourse to our own law which we can respect and enforce rather than endeavour to merge it in some mysterious way, outlined in Clause 58, which blurs the line in making any question of law in this country properly enforceable and leaves it open to good and honest ridicule?
5 p.m.
Lord Howie of Troon: My Lords, your Lordships will be pleased to learn that I do not intend to follow my noble friend in his interesting and labyrinthine speech.
A noble Lord: Why not?
Lord Howie of Troon: My Lords, because I do not know enough about it. When he said that five years from now he would be able to tell us, "I told you so five years ago", he was under-estimating his position, because he will be able to say not five years ago, 10 years ago, 15 years ago, but probably 25 years ago. if not more. I do not wish to irritate him. I wish to suggest to my noble friend the Minister that he oppose the amendment.
When I came into the Chamber I was surprised to hear the matter raised again, because we had a brief discussion of it in Committee. At that time I thought there was some confusion about the nature of the professions as against the nature of business. I have to declare an interest of a sort. As a chartered civil engineer I am bound by the rules of the Institution of Civil Engineers, and the professional rules of the Engineering Council, or at any rate I was while I practised. I still hold them in my heart, having ceased to practise.
In Committee we tried to draw to the noble Baroness's attention the fact that professions are not the same as businesses. She naturally wishes to put everything into the straitjacket of the business community, as if everything were a public liability company, to be bound by the same rules and to work under the same conventions. Professions are not like that. As she partially admitted, the rules of a professional body are, to a large extent, directed towards the protection of the public. They are mainly concerned to ensure that the person who offers a professional service is, first, fully qualified to offer that service. That is different from the business community where no such obligation exists. That is the key difference between those two functions.

895
I do not want to go on, because we have had a fairly lengthy debate on this short amendment. During our previous debate I remarked to the noble Baroness that if she wanted to find out the difference between business and the professions in detail she should turn her attention to a well known book called The Acquisitive Society, written by R. H. Tawney in 1923, where the matter is gone into in great detail. Tawney proposes that the business community adopt the rules and regulations of the professions rather than the other way about, as has been suggested here.
I know that I shall be told that a number of things have happened in the business and professional worlds since 1923. That is true. A number of professions have gone down the route that the noble Baroness would like to see. Some of us do not like to see it. I assume that as the noble Baroness has tabled the amendment again she did not take my advice, go to the Library and read R. H. Tawney. I suggest that she do it now. The kind and polite thing to do would be for her to withdraw the amendment. That would be much appreciated in the professions. If she does not feel inclined to do that, I hope that my noble friend will kick her into touch.
Lord Lyell: My Lords, I support what the noble Lord, Lord Bruce of Donington, said on Amendment No. 17. I, too, have to declare an interest. I am a non-practising member of the Chartered Accountants of Scotland. The Minister will be interested to know that much of my apprenticeship was spent under the green and yellow banner, which I think occupied him until recently. The firm Traneby will not be unknown to the Minister.
There was much merit in the opening remarks of the noble Lord, Lord Bruce, especially when he referred to paragraph 11 of Part II in Schedule 4. The definition in that paragraph is narrow. The noble Lord tempted me, and I suspect your Lordships, to look at the other services performed by accountants and others. For that reason, I strongly support the noble Lord, Lord Bruce.
Even with all the training that I received in Scottish commercial and other law, the noble Lord, Lord Bruce, lost me when we came to Clause 58. I was fascinated. I wonder what the Minister has been able to do to his noble friend, because I ask the Minister to agree that the noble Lord, Lord Bruce, has been turned into something of a tabby cat this afternoon. I do not know what persuaded the noble Lord, Lord Bruce, to be so succinct and brief. I was expecting considerably more in line with what happened in Paris on Saturday or at Lansdowne Road. All the same, I was impressed by his opening remarks in relation to Amendment No. 17. I shall desist from commenting on the amendment moved by my noble friend Lady Wilcox. Will the Minister reply to the opening remarks of the noble Lord, Lord Bruce?
The Earl of Buckinghamshire: My Lords, I support Amendment No. 17, tabled by the noble Lord, Lord Bruce. I do so despite the fact that I had the good fortune in my maiden speech some years ago on the Insolvency Bill to follow him. I do not wish to risk the
896
ire of my noble friend Lady Wilcox by supporting the amendment. Her amendments will make it unnecessary for the amendment of the noble Lord, Lord Bruce, or mine on the actuarial profession, to go through.
So far as I can see, without the amendment there is no power for the Secretary of State to amend the list of professions, which would then accordingly require primary legislation. If the answer from the Minister is that primary legislation is not required, and we can rely on Clause 58 to do the job, I should be glad of that confirmation.
I have a number of concerns about Clause 58. Does the Minister consider that Clause 58, as currently drafted, is in direct conflict with Clause 2 as it presently stands?
Viscount Bridgeman: My Lords, I, too, support the amendment moved by the noble Lord, Lord Bruce of Donington. A number of amendments make special pleas for various professions. Again, I declare an interest as a member of the Institute of Chartered Accountants of Scotland. The advice from my own profession is intertwined between audit accountancy and taxation work. More generally, I support in particular my noble friend Lord Buckinghamshire. It is a waste of time for an amendment to have a primary legislation effect. All these professions are organically growing and secondary legislation—orders—would be most helpful in this context.
Lord Haskel: My Lords, the noble Lord, Lord Lyell, was brave to call my noble friend Lord Bruce of Donington a "tabby cat"—
Lord Lyell: My Lords, I did not say that he was neutered.
Lord Haskel: My Lords, it is not a phrase which would have come to my mind. I shall speak to Amendments Nos. 5, 17 and 67. We discussed the question of whether Schedule 4 should stand part of the Bill on the first day of Committee. I am sorry that the noble Baroness, Lady Wilcox, was not convinced by our arguments at that stage. Perhaps I could try and re-formulate them and explain the provisions for competition scrutiny of professional rules under the Bill. Schedule 4 to the Bill is not in any sense a licence to introduce anti-competitive rules. We shall discuss amendments to the schedule later. For those professions whose services were exempted under the Restrictive Trade Practices Act, the Government do not believe that it would be right to subject their professional rules to the procedures in the Bill.
We believe that it would be unwarranted to apply processes designed primarily for private sector business to the quasi-public law processes of drawing up and enforcing professional rules. I think that my noble friend Lord Howie of Troon put this well in Committee when he said that he opposed competition at the design stage. But it is only the design stage. Far from excluding from the director's scrutiny those rules which professional bodies do draw up, Schedule 4 requires him to retain a copy of each designated professional rule and to

897
maintain a list of them. I draw that requirement to the attention of my noble friend Lord Bruce. Paragraph 5 of the schedule places him under a statutory duty to keep the list under review and to advise the Secretary of State whether he considers,
"that, with a view to restricting the exclusion provided by this Schedule, some or all of the rules of a particular body should no longer be designated"—
that is to say, to enjoy the benefit of exclusion. The price, therefore, which must be paid for exclusion at the design stage is that the director is required to review the rules and consider whether the exclusion is justified. I hope that that answers the point raised by my noble friend Lord Bruce. The Secretary of State has certain obligations.
If there are competition concerns there must of course be some mechanism for addressing them. One would hope that a professional body would have regard to any criticisms the director may make and consider whether its rules should be amended. If not, and if after consulting any relevant Minister, the Secretary of State considers that the exclusion should end, the Bill will enable her to revoke the designation of a professional rule and bring it within the Chapter I prohibition, subject to affirmative resolution by your Lordships and another place.
Thus, the Bill will ensure that any competition concerns to which professional rules give rise will be addressed, but in a focused and targeted way, without subjecting the professions' rule-making and enforcing processes as a whole to the procedures in the Bill. I hope that on reflection the noble Baroness will see that this is in no sense letting the professions off from the requirements of competition law. If there are competition concerns about professional rules I assure her that the Bill will enable them to be addressed.
The noble Baroness asked about solicitors' rules. Unlike, say, the profession of barrister, solicitors' rules are, we believe, statutory ones. They are a requirement of the law. As such, they are not "agreements" and would not therefore ever be prohibited under Chapter I.
The noble Baroness also asked about multi-disciplinary practices involving solicitors. I think there is some confusion about this. Section 66 of the Courts and Legal Services Act 1990 abolished the section of the Solicitors Act 1974 which, in effect, prevented solicitors from entering into partnership with persons who are not solicitors, but without prejudice to the Law Society's ability to make rules on such matters. Such rules would in all likelihood be statutory. They would have nothing to do with Chapter I of the Bill, which is about a prohibition of agreements.
The noble Baroness also asked about professional rules. They are not necessarily the same as the normal run of agreements that businesses may enter into. Their purpose is to protect the public. They have attached to them disciplinary arrangements which often involve some judicial process and under which penalties can be severe. They are often subject to approval by Ministers or members of the judiciary. In these ways, they are a form of quasi public law.
898
I turn to Amendment No. 17 and the points raised by my noble friend Lord Bruce of Donington. In the first place, it is clear that the amendment would enable the scope of the exclusion in the Bill to be widened, and it would therefore potentially provide for a wider exclusion of professional rules than that provided under the Restrictive Trade Practices Act.
Given the ambition of this legislation to provide a thorough and effective reform of competition law—and the fact that we have, as I have explained, narrowed the existing exemption of professional services under that Act—I do not think that that would be appropriate. Perhaps I may again recall that some noble Lords have expressed some concerns about the width of the existing exclusion, never mind increasing the exclusion.
However, perhaps more importantly, I do not see a case on procedural grounds for excluding professions which have hitherto been subject to competition law in the shape of the Restrictive Trade Practices Act. Those professions must have had to accommodate that law, and I do not see why their procedures cannot accommodate the new law. The unique point about the professions on the list in Schedule 4 is, of course, that they have not been subject to the Act.
The Government have reflected on the point raised in Committee by my noble friend Lord Bruce of Donington and the noble Lord, Lord Skelmersdale, but have concluded that it would not be right to provide the Secretary of State with a power of this kind.
My noble friend Lord Bruce was displeased with Clause 58. The purpose of the Bill is to make British competition law consistent with Community law. Competition law must be relevant in all countries. Clause 58 explains that rather well. It must be consistent, and that is what the clause provides.
I hope that my noble friend will understand the reasons for that and will feel able to withdraw his amendment. I hope that the noble Baroness will understand the reasons that I have explained about the professions and will also agree to withdraw her amendment.
The Earl of Buckinghamshire: My Lords, before the noble Lord sits down, he has not answered the question as to whether primary legislation is required under the amendment proposed by the noble Lord, Lord Bruce of Donington, and also whether Clause 58 is in conflict with Clause 2, making it inoperable.
Lord Haskel: My Lords, the purpose of Clause 58 is to put Clause 2 into effect.
Lord Bruce of Donington: My Lords, I am sorry but not surprised that my noble friend has declined to accept my amendment. There is a large difference between us. For my part, as an inhabitant and citizen of the United Kingdom, I do not wish such provisions as there are—and generally speaking, British law is good—to be subject to the generalities which emanate from time to time in Community law, so-called.

899
There must be a choice. I am under no illusion that there will be massive support in this place for the amendment.
Baroness Farrington of Ribbleton: My Lords, unfortunately, as my noble friend is not the mover of the amendment, he does not have a right of reply at this stage.
Baroness Wilcox: My Lords, I thank the Minister for his explanation and for the time which he has taken on this matter. I raised this issue, perhaps expressed differently, in Committee. For me and for consumers, it is a point of principle about ensuring that different parts of the economy are treated in the same way with regard to competition law without singling out parts of it for special treatment.
That is the second time I have said that and I apologise for repeating myself. However, that is possibly the most important thing that I have said. It relates to singling out certain parts of the economy to be treated differently. The noble Lord, Lord Howie, talked with nostalgic affection of his club—the civil engineers. I have worked for seven years representing the ordinary consumer, the ordinary man on the Clapham omnibus, the single person very often trying to stand against such professional organisations. The noble Lord talks of professional organisations with pride and of the business community with contempt. I have been part of the business community, as has my family before me, for many years. We talk about free and honest trade. We talk about the rogues being found out and other such matters openly, in the marketplace. We do not have anywhere to run and hide.
I feel as emotional about this subject as the noble Lord did talking affectionately and, as he said, nostalgically, about his club. I shall not ask him to go off and read any reference books, although no doubt, if I took the time, I could do so. However, those parts of the business community which do not enjoy that protection must stand up and face the Office of Fair Trading. That is no bad thing.
I am sorry that it is the second time that I have had to raise this issue with the Minister. This is a good and open Bill which tries to make it easy for ordinary people to understand quite what competition and anti-competitive practices mean. I know that today we shall not get any further on this matter.
Lord Howie of Troon: My Lords, I do not wound easily but I wish the noble Baroness would draw a veil over the word "contempt". That is not my view of the business community.
Baroness Wilcox: My Lords, of course I shall withdraw that word if the noble Lord finds it offensive.
I return to the amendment. I shall not press the matter to a Division. I am sorry that the Government are not able to make that small adjustment which brings everybody together under the same administration. However, I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Lord Fraser of Carmyllie Lord Fraser of Carmyllie moved Amendment No. 6:
Page 2, line 42, at end insert ("or
(e) Schedule (Exclusion for Vertical Agreements) (exclusion for vertical agreements)").
The noble and learned Lord said: My Lords, the Minister may think it somewhat churlish of me to return to the matter of vertical agreements so shortly after he was courteous enough not only to write to me on the matter but also to send me an extremely interesting report. However, I should like to have it placed on the record exactly where we stand in relation to vertical agreements and their exclusion from the Bill.
As far back as September we knew that it was the Government's view that many if not all of those vertical agreements should be excluded. But we are now into the month of February and we still do not have the outcome of the Government's deliberations on that exclusion. It is important that we discover exactly what is being proposed.
I recognise that the Government have set up a task force and have included a number of organisations and individuals who are extremely knowledgable on the subject and there must be some cause for optimism that that task force will come forward with some solutions.
However, I hope that there will be some chance that we shall see the outcome of those deliberations before the Bill leaves this House. It is not simply a matter of our own interest, but there is a view that once the matter leaves this House it leaves the last Minister who has any real understanding about competition policy, and we should wish to have that Minister's observations on what is being put forward and his explanation before the issue moves to the House of Commons. It is extremely important that that should be done.
Secondly, real concern is building up about particular interests, not only in the drinks trade but covering a wide range of activities, which are wondering whether they are to be excluded and what is proposed. The Minister will be very familiar with off-shore oil engineering in the North Sea and the Crine arrangements. Those are extraordinarily elaborate integrated arrangements. I have even had queries about whether some of those agreements might be caught if there is not a properly explained exclusion.
I hope that the noble Lord can give some indication of where matters stand. I simply leave it to him with this observation that the report of the analysis prepared by Professor Whish and Dr. Bishop is extremely good and interesting. However, it raises not only questions about which horizontal or vertical agreements may be excluded and how those exclusions might be framed but also a very interesting set of observations as to how frequently, within the European Union, Article 85 has not been used to handle vertical agreements but has been used to forward the arrangements which are to be found in relation to single market integration. It would appear that it has been used more frequently for that purpose than for the more obvious vertical agreement problem. In my view, that will undoubtedly lead us into some very interesting debates when we get to Clause 58. However, unlike the noble Lord sitting on the Benches

901
immediately behind the Minister, I do not propose at this stage to go into the complexities as to what is and what is not excluded from that clause. I merely mention it because it is most important for us to find out exactly what the Government propose to exclude; otherwise it will have an effect not just on the issue of vertical agreements but will, in turn, also affect our understanding of some other very complicated provisions in the Bill. I have already indicated that I shall not be pressing my amendment today. Nevertheless, I beg to move.
5.30 p.m.
Lord Simon of Highbury: My Lords, before turning to any discussion on the detail of the amendment, which I believe will not be necessary at this stage, I should like to speak in more general terms about the approach to vertical agreements. As the noble and learned Lord, Lord Fraser, said, since we last discussed the issue in Committee we have continued our efforts to achieve a workable solution to the matter of vertical agreements.
My department has convened a vertical agreements task force, to which the noble and learned Lord referred, to consider the issue. We have experts from the CBI, OFT and MMC all working in the group. I am especially pleased that both the competition authorities and the business community are represented in that group, because I believe that it will be the only way of finding a workable solution.
As the noble and learned Lord also mentioned, we have also secured the services of Professor Richard Whish and Dr. Bill Bishop to assist the department and the task force in this work. Professor Whish is a renowned authority on competition law as well as a practising solicitor in the field. Dr. Bishop heads an economic consultancy specialising in competition issues. Their combined knowledge of the economics and law of competition makes them well qualified to assist us in seeking to crack what was referred to in Committee as "a conundrum". Indeed, despite the time taken, which has not been overlong considering the time that noble Lords opposite took to consider such matters without arriving at a conclusion, it is still a conundrum.
The initial work has been to consider the manner in which vertical agreements have been treated under Article 85 of the EC treaty. That is of crucial importance in allowing us to understand the nature of the issue, as it is European jurisprudence which will determine the interpretation of the Chapter I prohibition within the limits of the governing principles clause, which we have already discussed today. As the noble and learned Lord pointed out, any special treatment for vertical agreements must fit properly within that structure.
Therefore, the work is very important. The analysis of the Commission's formal decisions demonstrates that the overwhelming majority of cases in which the Commission has condemned vertical agreements have been on the basis that they conflict, as the noble and learned Lord remarked, with single market objectives. Of the 30 cases in which the Commission has imposed a fine against vertical agreements for breach of Article 85, in only one of these was it not acting wholly or predominantly on the basis of its single market objectives.
902
The study also illustrates that a substantial number of the judgments of the European Court of Justice and Court of First Instance relating to vertical agreements have concentrated on single market interests. The Commission's zeal to attack vertical agreements posing a threat to single market objectives has generally been upheld by the courts.
In a small number of cases the Commission has found vertical agreements which do not raise single market concerns to be in breach of Article 85. Most of these are where the Commission has acted against resale price maintenance, although a few relate to cases where the Commission has found foreclosure of the market.
As I said in Committee when discussing the governing principles clause, single market objectives would not be imported into the interpretation of the Chapter 1 prohibition. Such questions cannot be said to be "corresponding", within the meaning of that term, in the governing principles clause to competition issues in a domestic system. As single market objectives are not relevant to the interpretation of the Bill, the analysis of the Commission's formal decisions indicates that the risk of purely "domestic" vertical agreements, to which Article 85 would not apply, falling foul of the Chapter I prohibition should be far lower than under Article 85. If agreements are caught by Article 85, there is of course nothing that we can do to validate them.
Therefore, that is an important factor which the task force will have to look at and consider. However, it is also clear that the absence of single market objectives from the interpretation of the Chapter I prohibition is not an all-embracing panacea. In particular, the report analyses the informal practice of the Commission in relation to vertical agreements. That includes, for example, cases which are settled without the need for the Commission to take a formal decision. Here, it cannot be said that the majority of the Commission's interventions are invariably based on single market issues. Although these cases do not strictly have any legal force, they are indicative of the Commission's policy stance with respect to a particular type of agreement.
Many have been critical of the way that the Commission has extended the application of the prohibition. The matter has not been directly tested in the European Court. However, under the Bill the director and the courts must have regard to Commission statements in applying the prohibitions.
There remains a case therefore for special treatment of vertical agreements under the Bill to avoid the burden of unnecessary notification and to ease the so called "straitjacket" which existing European block exemptions impose. Of course, it remains important not to provide a loophole for seriously anti-competitive agreements to escape nor, equally important, to make things worse by drawing an arbitrary line which led those outside it to feel that they had to notify. That would simply add another straitjacket to what is already there.
However, the nature of the analysis of Professor Whish and Dr. Bishop is to emphasise that any special treatment may be more in the nature of an "avoidance of doubt" provision. Such provisions are always difficult. They can create more doubt than they remove. However, clearly we

903
will have to think carefully about what they say. The task force will, therefore, continue its work. The case analysis prepared by Professor Whish and Dr. Bishop has, as the noble and learned Lord said, provided an interesting and important step forward.
While we are debating the issue of exclusions, I should also like to raise the treatment of land under the Bill. I can tell your Lordships that I have placed in the Library of the House a discussion document which sets out how we think such an exclusion might be framed. My officials have discussed the issue with interested parties in the property field. It is clear from the document that the issue raises difficult conceptual problems, but I hope that it will be possible to bring forward a suitable amendment on Third Reading or, perhaps, even in another place.
The aspect upon which I shall probably not satisfy the noble and learned Lord is that of a timetable. As I said, my department continues to work very closely with the CBI and the regulators in order to try to solve the conundrum in relation to vertical agreements. I sincerely hope that we will be able to bring forward some form of special treatment for vertical agreements. I know and understand quite fully that that would be widely welcomed.
However, for all the reasons of which I believe we are all fully aware, the provision must be very carefully thought through. The difficulties that I have highlighted in the discussion to date, given the way that the Commission and the Court have proceeded, are matters which the task force must consider very carefully. The task force is certainly the best route for devising a workable solution for treatment of vertical agreements under the Bill. However, I cannot at this stage say that we have reached a firm conclusion about timing. With that perhaps not totally satisfactory reply, I urge my noble friend and the noble and learned Lord, Lord Fraser, to withdraw the amendment at this stage.
Lord Fraser of Carmyllie: My Lords, I have certainly achieved my objective in obtaining a full and helpful statement from the Minister as to where we have reached in the deliberations on finding an exclusion for vertical agreements. For that I am extremely grateful to him. I suppose I did not expect to get a clear indication of a precise timetable from him, but I repeat that if it were to prove possible to bring forward an amendment on an exclusion for vertical agreements at Third Reading I give him the clear assurance that he would receive no complaint from us that it had appeared rather late in the passage of the Bill through this House. We would certainly prefer at least to have a look at it before the Bill moves to another place. I thank the noble Lord not only for what he said about vertical agreements but also about land. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Lord Simon of Highbury Lord Simon of Highbury moved Amendment No. 7:
Page 2, line 45, leave out from beginning to second ("or") and insert ("providing for one or more additional exclusions").
The noble Lord said: My Lords, Amendment No. 7 is a technical amendment. I speak also to Amendments Nos. 8 to 16 and 25, 26 and 27.
I hope it will be acceptable to noble Lords that some of these amendments refer to amendments introducing new exclusions which we will come to later. This group has a unity, however, in that all the amendments concern the powers to amend and remove some of the exclusions in the Bill and to provide for new exclusions and their amendment or removal. They reflect the development of our thinking, as we have been drawing up those exclusions, as to the powers the Secretary of State may need to deal with future exclusions and any amendment of some of the existing ones.
The new proposed exclusions for agreements cleared under Section 21(2) of the RTPA and for agriculture agreements contain a power for the director to clawback the exclusion in respect of a particular agreement in certain circumstances. This is not a new concept for the Bill, as paragraph 4 of Schedule 1 already empowers the director to clawback particular agreements from the merger exclusion. The utility of such a provision has, however, become more apparent as we have been working on new exclusions. Such a power should enable us to give greater comfort and certainty to business by providing somewhat broader exclusions than we might otherwise be prepared to contemplate because we can be confident that anti-competitive agreements which do not deserve to be excluded can still be addressed. I would expect, for example, that any exclusions in the land agreement that we discussed earlier would contain such clawback power, but would be framed more widely under these circumstances than would have been possible before. Because any exclusions which we provide under the Clause 3 powers may need to contain a clawback provision, Amendment No. 16 puts beyond doubt that that would be within the scope of the powers.
Any additional exclusion in Schedule 3 will, of course, be subject to the limitation in subsection (4) of the clause, which presently provides that the powers may be exercised only if it appears to the Secretary of State that agreements which fall within the new exclusion do not in general have an adverse effect on competition or, if they may have that effect, are best considered under Chapter II of the Bill or the Fair Trading Act. Noble Lords will note that the "in general" only applies to the first limb of this test. However, if the Secretary of State were to make an additional exclusion with a clawback power it would be clear that she or he contemplated that at least some agreements within the exclusion might need to be considered under the Chapter I prohibition. Amendment No. 16 therefore relaxes the limitation a little by providing, in respect of the second limb, that the Secretary of State may provide an additional exclusion if agreements within it "in general" are best considered under Chapter II or the Fair Trading Act.
Amendments Nos. 12 and 14 enable the proposed new exclusions for Section 21(2) agreements and agricultural products to be amended or removed under Clause 3. Amendment No. 13 similarly enables the present

905
exclusion of coal and steel agreements from the Chapter I prohibition to be amended or removed and Amendment No. 25 makes the corresponding provision in respect of the exclusion from the Chapter II prohibition. The reason for this is that although the European Coal and Steel Community Treaty is due to expire in 2001 and we intend the exclusion automatically with it, we now consider a power to amend the exclusion to be sensible to provide flexibility, for example, in dealing with any transitional provisions the Community might make.
We think that the concept of adding, amending or removing "a case" which runs through Clauses 3 and 19 could have led to uncertainty as to the scope of the powers. Amendments Nos. 7, 8, 9, 10, 26 and 27 make clear that the powers are to provide for certain additional exclusions and to amend or remove provisions in certain existing exclusions and in additional exclusions. I am sorry for the technical nature of my remarks. I hope that I have explained the position as briefly and as succinctly as possible. I beg to move.
On Question, amendment agreed to.
5.45 p.m.
Lord Simon of Highbury Lord Simon of Highbury moved Amendments Nos. 8 to 16:

Page 3, line I, leave out ("case") and insert ("provision").

Page 3, line 5, leave out from beginning to second ("or") and insert ("providing for one or more additional exclusions").

Page 3. line 6, leave out from ("any") to ("added") in line 7 and insert ("provision— (i)")

Page 3, line 9, leave out ("which falls within") and insert ("included in").

Page 3, line 9, after ("1") insert ("or 1A").

Page 3. line 9, after ("1") insert ("or 6").

Page 3, line 9, after ("1") insert ("or 6A").

Page 3. line 13, leave out from ("or") to ("best") and insert— ("(b) are, in general,").

Page 3, line 14, at end insert—
("( ) An order under subsection (2)(a) or (3)(a) may include provision (similar to that made with respect to any other exclusion provided by the relevant Schedule) for the exclusion concerned to cease to apply to a particular agreement.").

The noble Lord said: My Lords, with the leave of the House, I beg to move Amendments Nos. 8 to 16 en bloc.
On Question, amendments agreed to.
[Amendment No. 17 not moved.]
Clause 17 [Enactments replaced]:
Lord Fraser of Carmyllie Lord Fraser of Carmyllie moved Amendment No. 18:
Page 10, line 11, after ("practices)") ("and those provisions of the Fair Trading Act 1973 relating to the investigation of a structural or scale monopoly").
The noble and learned Lord said: My Lords, we dealt with this matter rather more broadly at Committee stage. Those who followed it then, and who follow it now, will appreciate that it is a rather more restrictive proposal relating only to structural or scale monopolies. Although I cannot say there were many issues on which I secured
906
much agreement from the noble Lord, Lord Borrie, at Committee stage, at least when we discussed scale monopolies he said,
"As regards scale monopolies, the case is less strong".—[Official Report, 13/11/97; col. 299.]
It is not just less strong; I think that the noble Lord in his heart of hearts knows perfectly well that it is a non-existent case.
The retention of these provisions in addition to a wide-ranging prohibition based on Article 86 would, in our view, quite clearly give the director-general excessive powers. The argument that this additional power of investigation and remedy is necessary on the basis that there might in future be problems which the prohibition cannot solve is, in our view, extremely tenuous. These provisions have not to date been extensively used or shown to be indispensable and could easily be relinquished if a prohibition is introduced.
The Minister will appreciate that these scale monopoly provisions are deeply unpopular in industry, and rightly so. There is only one argument for the retention of this power once the new prohibition is in place. The best argument that I have heard advanced for it is that at least we know how it works. That is the argument of bureaucracy. There is no point in retaining this additional power. I have no doubt that the Minister appreciates that this could be immediately dispensed with if the Article 86 prohibition is to be incorporated into our law. It would certainly avoid unnecessary duplication. Even if the Minister does not like my drafting, I invite him to give some signal that he, too, realises that the issue of scale monopolies is not one that needs to be retained as a specific way of dealing with the problem. I beg to move.
Lord Borrie: My Lords, the noble and learned Lord, Lord Fraser of Carmyllie, referred to my comments in Committee that there was a less strong case for keeping the scale monopoly reference provisions than the complex monopoly reference provisions. I did indeed say that. I am delighted that he is no longer opposing the continuation of the complex monopoly reference provisions because they are a useful reserve power for the Director General of Fair Trading across the whole of industry. I am glad that the provision will be retained in the Bill without further opposition from the noble and learned Lord.
I believe that there is a case, to which the noble and learned Lord did not refer, for retaining the scale monopoly reference provisions. The provisions are to be found in the Fair Trading Act. As a result of a reference to the Monopolies and Mergers Commission under that Act it is possible for a structural remedy determined and recommended by the commission to be put into place if the Secretary of State accepts it. A divestment from the monopoly would be used when competition was required to be put in place as a result. There are no structural provisions in the Competition Bill. It would be a pity to lose that possibility by getting rid of the power to make scale monopoly references.
It is true that over the years in the United Kingdom divestment as a remedy for competition problems has been used rarely. I have identified that in the past 20 years there have been only four cases where divestment has

907
been used. Those were in the cases of domestic gas appliances; razors and razor blades; roadside advertising; and beer. In only the razors and razor blades case was there clearly and solely a scale monopoly. It is clear, therefore, that there has not been a great deal of use in this country of the divestment powers in cases which are solely scale monopolies. Nonetheless it is a useful power, and in the unknown world into which we go with the new Bill and the new prohibitions it is not a power which should be thrown aside lightly.
I advance one further reason for retaining the power of the director general to make scale monopoly references. It is the problem of a scale monopolist with high profit margins. The European Union jurisprudence—as we have said many times, it is incorporated in the Bill via Clause 58—suggests that high profit margins alone are not sufficient to create an abuse of a dominant position. It is not clear therefore whether or not Clause 18 of the Bill will apply where a scale monopolist is enjoying over a long period high profit margins at the expense of the public or the consumer. That may suggest that at least an inquiry should be made in the public interest by the Monopolies and Mergers Commission if the director general thinks it appropriate in the circumstances.
I believe that there is a case for keeping scale monopoly references alongside the new powers and prohibitions in the Bill. For the noble and learned Lord to describe those powers as excessive, as he did a few moments ago, is a rather excessive use of language, if I may say so. All that is involved is an inquiry into whether or not something should be continued in the public interest. That is surely a power we should retain.
Lord Kingsland: My Lords, I disagree profoundly with the noble Lord, Lord Borrie. I understand from the Minister that one of the main objectives of the regime is to have as light a touch as possible to enable British industry to be competitive and as free as possible from bureaucratic constraints. It is conceivable that former public utilities will now face not two, but three, disciplinary regimes: the regime of the regulator; the regime of the Director General of Fair Trading; and the regime of the former Monopolies and Mergers Commission which will now become the competition commission. I submit that this is highly undesirable. I hope that the Minister will look again at his apparent determination to continue with complex and scale monopolies.
Lord Campbell of Alloway: My Lords, the noble Lord, Lord Borrie, opposes the amendment on the ground that the law is not clear and therefore should be allowed to continue to be unclear, whereas my noble and learned friend's amendment clarifies the law so that we know where we are. I should have thought that there was something to be said for a clear law that would let us all know where we were. The subject is complicated enough without encouraging want of clarity.
Lord Simon of Highbury: My Lords, I am grateful to the noble and learned Lord, Lord Fraser, for prompting another interesting debate on the subject. I am grateful for the contributions we have had.
908
It is important that we review why the scale monopoly provisions are there in the first place. These provisions enable impartial investigation of markets in which a single company has a significant market power, and enable, if matters are found to be contrary to the public interest, wide ranging remedies to be imposed. There is a case—my noble friend Lord Borrie put it eloquently to us—for retaining the powers to investigate situations where it is fundamentally the structure of the market, and not any specific abuse, which is the problem. In these circumstances the scale monopoly provisions enable the more flexible imposition of structural remedies, including, as the noble Lord, Lord Borrie, said, the divestment of part of a business.
The new prohibition on abuse of market dominance will replace these provisions in large part. This is what we said in our consultation document in August. The provisions will be very much a reserve power. Nevertheless, we should not discount the possibility that they may prove of value as the only real means of remedying a market in which structural factors inhibit free competition.
In the utility sectors, for example—they were mentioned by the noble Lord, Lord Kingsland—full competition is developing, but it is not yet fully established. It is not inconceivable that there will be cases in which the more flexible powers available under the scale monopoly provisions to enable structural remedies to be imposed could prove necessary in order to protect or promote competition. I recall the noble and learned Lord, Lord Fraser, himself saying in the debate in Committee, at col. 301 of the Official Report of 13th November, that if there are gaps to be filled then they should be filled.
We cannot rule out the possibility of important gaps appearing in the future. I hope that the noble and learned Lord, Lord Fraser, will consider what I have said, in particular about the reserve nature of those powers considering the specific gaps to which I have alluded, and which he recognised as important. I hope that he will withdraw his amendment.
Lord Fraser of Carmyllie: My Lords, I have heard the Minister advance arguments with a greater degree of conviction than he did in answering this brief debate. If I noted his remarks correctly, he said that we must not discount the possibility that it might prove useful at some point in the future.
The provision is not necessary. I do not withdraw from the word "excessive". I believe that there is excessive duplication. The noble Lord might have read on from what said at col. 301 of the Official Report. I said:
"For the sake of UK business",
and we should regard it from that standpoint and not only from the standpoint of those who have the duty to administer the law,
"we should not have unnecessarily heavy regulations and any duplication must be kept to the bare minimum. In our view, it is probably highly unnecessary to retain this set of complicated legislative provisions at the same time as introducing the two prohibitions".
That remains our view. I am bound to say that I am not persuaded that it is a necessary part of the armoury that is required. I shall not press the matter at present; however,

909
I indicate to the noble Lord that we are not much persuaded by the argument. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
6 p.m.
Clause 18 [Abuse of dominant position]:
Lord Kingsland Lord Kingsland moved Amendment No. 19:
Page 10, line 14, after ("undertakings") insert ("which carry on business in the United Kingdom").
The noble Lord said: My Lords, I shall also speak to Amendments Nos. 21 and 23.
I believe that this is one of those rare areas where the Minister and the Opposition Front Bench are in agreement—though I suspect that the Minister will disabuse me of that belief when he rises to reply.
The issue is one of drafting. Our concern is to make sure that the true nature and scope of the geographical market is taken into account in relation to a particular practice of a particular industry. As Clause 18 is drafted, it looks as though a market which is genuinely, say, European or genuinely, say, global, is to be artificially limited to the United Kingdom alone. We believe that the recasting of Clause 18 by the Minister, while helpful, does not make that point clear. The purpose of the amendments is to make it crystal clear. I beg to move.
Lord Simon of Highbury: My Lords, I am grateful to the noble Lord, Lord Kingsland, for raising this issue again. He may be surprised to hear that I do not think there is anything between us in terms of substance.
I explained in Committee how we intend Clause 18 to operate in relation to the relevant geographic market for assessing dominance. Indeed, your Lordships' Committee accepted two amendments on that same point. In moving those amendments I explained that it was our intention that Clause 18 is not read as limiting the geographic market to the United Kingdom. There may well be circumstances in which the relevant market includes—but is wider than—the United Kingdom.
This House decided in the case of Pepper v. Hart that reference can be made to statements in Hansard in certain circumstances to clarify the meaning of legislation. We believe that the amendments we made to this clause in Committee met the point about which the noble Lord is concerned. However, should the courts consider that the meaning of Clause 18 is ambiguous in this respect, they will be entitled to look at the statement I made. I believe that the noble Lord and I are at one as to what the effect of the clause should be on this point. I hope that my remarks will satisfy the noble Lord on the wording of the clause, and I ask him to withdraw the amendment.
Lord Kingsland: My Lords, I am most grateful to the noble Lord for that statement. In those circumstances I am very pleased to withdraw the amendment. I beg leave to do so.
Amendment, by leave, withdrawn.
The Deputy Speaker (Lord Murton of Lindisfarne): My Lords, if Amendment No. 20 is agreed to, I shall not be able to call Amendment No. 21 because of pre-emption.
Lord Kingsland Lord Kingsland moved Amendment No. 20:
Page 10, line 14, leave out from ("undertakings") to end of line 26 and insert ("in a dominant position which is carried out with the intention of eliminating a competitor or of substantially lessening competition within a relevant market including the United Kingdom shall be prohibited.").
The noble Lord said: My Lords, this amendment is not an area where the Minister and ourselves are in agreement. It relates to the definition of "the prohibition". In our submission it is important to include the intent of the competitor in making a decision as to whether or not a particular prohibition has been breached.
I understand that the Minister does not accept this approach, and that one of the reasons is that the jurisprudence of the European Community does not incorporate "intent" into the definition of the prohibition. However, the Minister will be aware that it is his intention to give the Director General of Fair Trading considerably greater investigatory powers than the European Commission has in examining the activities of a particular company. In those circumstances, does he not think that it would he perfectly within the capacity of the Director General of Fair Trading to determine whether or not there was a particular anti-competitive intent in the minds of those who directed the company that was being investigated? I beg to move.
Lord Desai: My Lords, it was not clear whether the noble Lord was also speaking to Amendment No. 22, or whether he intends to speak to that amendment separately.
Lord Kingsland: My Lords, Amendment No. 22 raises a different point. I should prefer to wait.
Lord Desai: My Lords, Amendment No. 20 is a good stab at defining the problem more clearly than is currently the case under Clause 18. It is the effect that such behaviour is likely to have on competition about which we are worried, not merely the problem of dominant position in general.
When I look at the way in which the amendment is framed, I wonder how intentions can be proved. Perhaps the noble Lord means, "which could have the effect of' eliminating competition, or "which is likely to have the effect of eliminating competition. Some such phrasing might have been better. However, I entirely agree with the motivation behind the amendment, and I support it.
Lord Simon of Highbury: My Lords, I have to agree with the noble Lord, Lord Kingsland: this is an amendment in relation to which there is profound disagreement between us on the underlying principle. The first amendment seeks to replace the prohibition in the Bill which is modeled on Article 86 of the Treaty, with a very different prohibition.

911
The first thing to note about this new prohibition, as the noble Lord correctly pointed out, is that it is limited to conduct carried out with the intention of committing an abuse. While I can see, as my noble friend Lord Desai pointed out, that this idea is superficially attractive, it has two serious defects. The intention of the Bill is to prohibit conduct that has anti-competitive effects. An abuse may be the effect of conduct on the part of a dominant company without being the intended result. Even more seriously perhaps, this amendment would require the director to demonstrate intent every time before an abuse could be stopped.
I have to say that that seriously risks driving a coach and horses through the prohibition. My noble friend Lord Desai would like to find a way of easily proving intent. All I can say is that it is one thing to show the result of conduct on competitors; it is quite another to establish the intention on the part of an undertaking in pursuing that conduct. The first thing that any would-be abuser would do would be to make sure that there was absolutely nothing incriminating as to its intention. Nothing would be committed to paper. Without written evidence, such as meeting notes, or perhaps incriminating statements in strategic terms, intent is extremely difficult, if not impossible, to demonstrate. The undertaking concerned will claim that there were other reasons for the conduct complained of. The director could then find himself unable to act through the conduct observed. It could have a very serious impact on all competitors. One could be aware of that, but nobody would be able to move because there would be no proof of intent. The prohibition, as we understand it, would be toothless.
But there are several other difficulties with the new prohibition. If the Bill were to be changed as proposed, the governing principles clause could not apply to the new prohibition. The alignment with Article 86 would be lost. So what would be the effect of the new prohibition?
If we ditch the EC treaty model in the way proposed, there will be two effects. First, very many of our businesses would have to deal with two different prohibitions of abuse, one at domestic and one at EC level. We think that that would be more burdensome. Secondly, the application of the new prohibition will be entirely uncertain too. No one will be able to look to EC case law as a guide to the application of the domestic prohibition. That would basically be more confusing for the business community.
I used the expression "a coach and horses". It is extremely difficult to conceive how we could accept the amendment, because even if we do not accept the "coach and horses", what is meant by "substantially" in this context? If the threshold lets off lots of abuses, would that be a good thing? Surely an abuse is an abuse, even if it is only small players who are harmed. It is a serious hurdle under EC principles to show that conduct is an abuse. Once that hurdle is crossed and an abuse of dominance has
912
been demonstrated, our belief is that it should be stopped. I hope that the noble Lord will acknowledge those points and see fit to withdraw the amendment.
Lord Kingsland: My Lords, I have noted the Minister's complete intransigence on the point and in those circumstances I am a realist. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
[Amendment No. 21 not moved.]
Lord Kingsland Lord Kingsland moved Amendment No. 22:
Page 10, line 26, at end insert—
("( ) Conduct described in this section shall not constitute such an abuse unless—

(a) dominance is used to facilitate the abuse; and

(b) dominance in one market—

(i) is the cause of the abuse in that market, or

(ii) is the cause of the abuse in another market and, as a result of that abuse, that dominance is strengthened.").

The noble Lord said: My Lords, very telegraphically, this amendment arises out of the consequences of a decision by the European Court of Justice called Tetra Pak II. The decision involved the manufacture of UHT milk cartons. In those circumstances, the company was held to have a dominant position. It also supplied a related market for packaging in non-UHT milk, ordinary pasteurised milk. Although it was held not to have a dominant position in that market, nevertheless the disciplines of the European Community were imposed on it, as if it had a dominant position. That, in my submission, seems a highly unsatisfactory decision and one that in all the circumstances ought not to be followed in the United Kingdom. That is the background of the amendment. I beg to move.
Lord Simon of Highbury: My Lords, it is correct that EC case law shows that in certain circumstances Article 86 may apply where an undertaking is dominant in one market and commits an abuse in a different, neighbouring market. The relevant jurisprudence will be imported into the interpretation of Clause 18 via the governing principles clause.
The noble Lord says that he does not like this particular piece of jurisprudence. I do not think it would be sensible to pick and choose which individual EC cases we wish the director and the courts to look to. The noble Lord referred to Tetra Pak. We are aligning ourselves with the EC system, for all the reasons that we have debated at length before. I am sure we shall continue to debate them. In the case to which the noble Lord referred, the court found that in all the circumstances, an undertaking's dominance in one market enabled it to commit predatory behaviour in another neighbouring market. It is not for me to comment on the wisdom of the court's judgment. But I am clear that there is no justification here for rewriting our prohibition and departing from the Article 86 model as a consequence.

913
Under those circumstances, I hope that the noble Lord will acknowledge the point and withdraw the amendment.
Lord Kingsland: My Lords, I wish to thank the Minister for his reply, which was all that I expected. I give him notice now that when it comes to Amendment No. 58 I shall hold him to everything he said about conforming with EC law. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
[Amendment No. 23 not moved.]
Lord McNally Lord McNally moved Amendment No. 24:
After Clause 18, insert the following new clause—
ABUSE OF DOMINANT POSITION BY NATIONAL NEWSPAPER

(".—(1) Any conduct on the part of one or more national newspaper undertakings which amounts to an abuse of a dominant position is prohibited if it may reduce the diversity of the national newspaper press in the United Kingdom by reducing, retarding, injuring or eliminating competition.

(2) Conduct may, in particular, constitute such an abuse if it consists in

(a) any of the forms of conduct specified in section 18(2);

(b) other action which may reduce the diversity and independence of the national newspaper press;

(c) imposing selling prices below marginal cost of production on a persistent basis.

(3) In this section "dominant position" means holding a substantial degree of market power in the national newspaper market in the United Kingdom.

(4) The prohibition imposed by subsection (1) is referred to in this Act as "the press diversity prohibition".").

The noble Lord said: My Lords, a great deal of press comment has been made in recent days about the observations of the noble and learned Lord on the Woolsack, Lord Irvine, about the possible need to restrict the right of press reporting in certain areas. Freedom of the press is important; indeed, it is an essential ingredient of a free society. But if freedom of the press can be imperilled by restrictive laws, it can also be threatened by restrictive ownership.
This amendment has one intention and one only: to promote the framework of fair and transparent competition in our newspaper industry, with the intention of sustaining diversity, quality and choice. It does make a distinction between newspapers and other goods and services because we believe that newspapers are different from tins of beans. They are not only a product, they are, as I have said, an essential ingredient for a functioning democracy.
My amendment is signed by noble Lords from all parts of the House. It is, I understand, going to be resisted by the Government. I find that a curious position for the Government to take. The amendment is in no way a wrecking amendment. It is designed to clarify and strengthen competition in an important sector. Although it is not a full harmonisation with EU law, neither are other parts of the Bill. In addition, other EU countries have non-harmonised laws to protect the diversity of their press. Most curiously of all, the amendment is full square with the position taken by the Labour Party when in Opposition.
Three-and-a-half years ago, on 20th July 1994, in another place, Mr. Robin Cook—then spokesman on competition policy—said at col. 445 of the Official Report:
"there are two requirements from our media if we are to have a healthy democracy. First, we should have a variety of newspapers and, secondly, those papers should contain a diversity of views".
He also said at col. 444, referring to Mr. Rupert Murdoch:
"A … proprietor who insists that his editors preach competition is currently practising unfair competition. A proprietor who, through his newspapers, preaches the supreme virtue … of consumer choice is now acting in a way that is calculated to restrict consumer choice in the newspaper industry".
Those words were true three-and-a-half years ago, they are even more valid today.
But let me make it clear that the amendment is not aimed at any single individual or any particular newspaper group. Some of my best friends write for The Times. If, as last Saturday, they publish 15 year-old photographs of me, I shall still continue to read it! The amendment seeks to create competition, which would be followed as much by David Montgomery, Tony O'Reilly or Conrad Black as Rupert Murdoch. Perhaps, as importantly, it will provide the fairness in competition which would make it possible for newcomers to enter the market. One of the great things about the 1980s was that the work—some of it done by Mr. Rupert Murdoch—that removed restrictive practices from the newspaper industry, that brought in new technologies, allowed newcomers to enter the newspaper industry. We saw both the Independent and Today launched during that time. But in recent years, because of predatory pricing, we have seen competition replaced by anarchy, where our national newspapers are invited to compete only to see who bleeds to death first.
I say that this amendment is aimed at no specific company; but it would encourage a thorough investigation of the policy and strategy of News International. What is Mr. Murdoch up to with his price-cutting policy which has cost him tens of millions of pounds over the past four years? Nye Bevan asked us, "Why look in the crystal ball when you can read the book?" We know from the initial competition between British Satellite Broadcasting and Sky that Mr. Murdoch is not afraid to sustain large losses over a long period in order to see who blinks first.
The pricing policy of The Times does not make sense unless it is to clear the field of two major competitors—the Independent and the Telegraph; indeed, the Independent may be the only accidental casualty in the cross-fire between The Times and the main target, the Telegraph. In crude business terms, a broadsheet field cleared of major rivals with the prospect of perhaps a 2-million circulation would be extremely good business for The Times and its owner. But what is good business for Mr. Murdoch is not necessarily good sense for a healthy democracy or for a diverse and vigorous press.
It is difficult to anticipate ministerial replies tonight. There have been several over recent days. We have been told that this is merely a "belt and braces" amendment. If that is so, why do not Ministers indulge us? Surely a belt and braces amendment is better than ministerial

915
trousers around their ankles if they get this wrong. We have been told that it prevents us from harmonising with European law. But as I pointed out, European law allows protection of bi-nationals, and how we protect the diversity of our press is a national responsibility.
I want to make it clear tonight that I intend to press this issue to a Division. I know that taking on a government against a three-line Whip is no easy task, so I make two appeals. The first is to Ministers to think again before they tarnish rather than strengthen the Bill. The second is to the House at large. We are increasingly asking ourselves, "Why are we here?" I submit that there is no greater justification for an advisory and revising second Chamber than to champion the cause of a free and diverse press.
When Robin Cook tried three-and-a-half years ago to act in exactly the way that I am trying to act tonight, the then Director General of Fair Trading, Mr. Carlsberg, rebuffed him with these words,
"At times there is a fine line between aggressive price competition and predatory pricing".
Quite so. This amendment draws that line more clearly and distinctly than does the general Bill. It gives powers that are special because the diversity of press ownership is special. Accepting this amendment will make it a better Bill and a stronger Bill. If the amendment is carried, instead of losing titles, we will be opening the door to newcomers; instead of consolidation of power, which is already reaching dangerous and unacceptable proportions, we shall be encouraging pluralism and choice. I commend the amendment to the House. I beg to move.
Lord Borrie: My Lords, in rising to support Amendment No. 24—indeed, my name is attached to it—I must declare an interest as a non-executive director of the proprietors of the Independent and the Independent on Sunday newspapers. Because of that interest I seriously considered whether I ought to attach my name to the amendment. I concluded that, particularly because of my involvement over many years with the workings of competition policy as Director General of Fair Trading, it would be perverse were I to refrain from demonstrating clearly on this occasion my commitment to strengthening the provisions of the Bill dealing with conduct amounting to an abuse of a dominant position.
News International, publishers of The Times, has been engaged in a price war in the daily newspaper market since September 1993 when it slashed the price of The Times from 45p to 30p. Since then it has engaged in a persistent policy of predatory pricing—that is, selling below the marginal cost of production—thereby distorting competition and seriously damaging not just the Independent but also the Daily Telegraph and of course creating a climate in which any potential competitor is seriously deterred.
News International holds a substantial degree of market power in the United Kingdom national newspaper market and is able, for long periods, to cross-subsidise its loss-making newspaper sales from its
916
highly profitable operations in satellite television. News International's price cutting tactics have taken a variety of forms in the past four-and-a-half years. It has not been a short-term marketing or promotional exercise but a permanent feature of the market place. Recent manifestations, as your Lordships will know, include selling The Times on Mondays for 10p as from September 1996, raised last month to 20p, and selling Saturday's edition with several sections and a magazine at 20p. Estimates I have seen of the Saturday edition show costs of production of 90p per issue, offset by advertising revenue of about 40p. Until there is some sort of official investigation into the accounts of News International, it is impossible to know the extent of its current loss making, let alone the totality of its losses over the past four to five years.
Only last week, in a letter to the Guardian, the director of corporate affairs at News International—Miss Jane Reed—did not deny the allegation that The Times lost considerable sums of money last year. In a carefully drafted sentence she wrote that,
"the current pricing policy of The Times is leading to profitability for the first time in living memory".
At the Committee stage of this Bill, my noble friend Lord Haskel, for the Government, responding to concerns expressed by each of the four whose names appear on Amendment No. 24, sought to argue that the broad provisions of Clause 18—it is still Clause 18 in the Bill today—which in effect incorporate Article 18 of the Treaty of Rome into our law and prohibit conduct amounting to an abuse of a dominant position, are themselves sufficient to cover predatory pricing tactics. My noble friend said that,
"such practices carried out by a dominant undertaking may constitute an abuse under Article 86 of the treaty, depending on the particular circumstances of the case".—[OfficialReport, 13/11/97; col. 313.]
It is my belief that the Minister was right to be cautious as to whether Clause 18 of the Bill, as it stood then and as it stands today, covers the kind of conduct about which we are concerned in the newspaper market. As he admitted, the clause merely provides a framework against which the competition authorities—the Director General of Fair Trading and the competition commission—will assess whether or not any specific conduct is prohibited. In any case, those authorities are independent and autonomous. They cannot be directed by Ministers as to whether any specific conduct is a breach of Clause 18. Moreover, the principles of European Union law, which are in effect brought into our law through the Bill by Clause 58, are not at all clear as to whether Article 86 necessarily applies where dominance exists in one market but there is an abuse in another.
My noble friend Lord Simon of Highbury, on another amendment earlier today, made some points on this matter. It seems clear that News International is dominant in the satellite TV market. But the abuse through cross-subsidy has its anti-competitive effect in another market—the newspaper market. If one examines European Union case law, emphasis has been given—the Minister himself said this in response to a debate on another amendment a short time ago—to whether the

917
two markets have to be "neighbouring" or "related", or the abuse must be in a market that is "ancillary" to the market where dominance exists. There is surely no way in which Ministers can reassure the House that the broad provision in Clause 18, eked out by such European Union case law as there is through Clause 58, will lead to a conclusion by the Director General of Fair Trading that the distortion of competition evident in the newspaper scenario I have described is prohibited.
Indeed, it seems inconsistent for Ministers to assert that Clause 18 covers the ground adequately, while accepting and maintaining, as they have done, that it is for the Director General of Fair Trading, the competition commission and the courts to determine specific cases.
The Government believe that it would be wrong—I am relying on what was said at the Committee stage—for the Bill to have a specific provision dealing with one industry or product. I leave aside the fact that there are many exemptions in the Bill dealing with specific industries and products. There is agriculture; there is civil aviation; and there are other professions. What is being suggested in the amendment is that there should be a special provision dealing with the newspaper market.
I would not suggest that the legislation should try to deal specifically with all the possible abuses that might arise in all possible industries and in all circumstances in the future. Legislation must be for the general. But this amendment does not deal with any product. It does not deal with beer, or buses, or building materials, each of which industries have featured in the concerns of the UK competition authorities over the years. They may be important industries—they are important industries—but competition and diversity and choice in those industries are not as vital to democracy as they are in the media.
In the principal competition legislation, the Fair Trading Act 1973, there are specific provisions over several sections dealing with mergers and takeovers in the newspaper industry. Why are those special provisions there for the newspaper industry? They are there for the simple reason that mergers and further concentrations of ownership in the newspaper industry can seriously reduce the availability of choice and diversity of opinion that a range of newspapers helps to ensure. The continued availability of a range of newspapers and a diversity of news and views is surely at risk not just from mergers but from the persistent tactic of price-cutting by a newspaper group with pockets deep enough to enable it to go on doing that year in and year out from another business to the extent that other newspapers are either eliminated or badly crippled in the service they can provide to their readership.
This amendment is designed to strengthen and clarify the Chapter II prohibition in Clause 18 in the field of newspapers. 1 hope that Ministers will see their way to accepting the value of Parliament making the law more
918
certain rather than leaving the competition authorities and the courts to wrestle with this matter and to wrestle with an uncertain message over the years to come.
Lord Mishcon: My Lords, before my noble friend sits down, I wonder whether for me personally he will kindly clarify one thing. Why does not Clause 18(2)(a) cover the position that he has just been talking about?
6.30 p.m.
Viscount Trenchard: My Lords, I should like to speak briefly in support of the amendment tabled in the names of the noble Lords, Lord McNally and Lord Borne, the noble and learned Lord, Lord Ackner, and my noble friend Lord Astor, who is unable to be in his place today. My noble friend has asked me to apologise to your Lordships for his unavoidable absence and to speak on his behalf in support of this amendment, which I believe has widespread support on all sides of the House.
I should have thought that what has been going on in the newspaper industry is precisely the kind of abuse of a dominant position which the Bill is intended to prohibit. On Saturdays and Mondays the Independent and the Daily Telegraph suffer a damaging circulation fall as a result of the predatory pricing policy which The Times has maintained consistently for some four years. As noble Lords may have seen if they watched BBC Television's "On the Record" yesterday, Mr. Alistair Darling, now Chief Secretary to the Treasury, tabled in another place on 5th July 1994 an Early Day Motion that,
"reaffirms the belief that the newspaper industry is not only an important business but also a vital organ of the democratic process, and further believes that predatory pricing with the intention of forcing rivals out of the market will reduce choice and undermine competition".
It was signed by 81 MPs, of whom I believe 79 are Labour Party members, including Mr. Nigel Griffiths, the Minister responsible for competition. In fact I believe that 21 of the signatories to the Motion are members of the Government. The noble Lord, Lord McNally, has already reminded us of the words of Mr. Robin Cook at the same time. Speaking in support of the intention of the Motion, he said in another place on 20th July 1994 that he unequivocally did not want to see an increase in the market share of News International.
The Government are not doing in office what they proposed in opposition. In the absence of anti-competitive agreements or abuses such as those which this Bill is intended to prohibit, I would tend to side with those who would protect the rights of undertakings to charge what they will for their products and services. However, this Bill is intended to tidy up competition law and, inter alia, prevent the abuse of a dominant position, whether or not it is financed by cross-subsidy.
As I believe the noble Lord, Lord Simon, has acknowledged, the Government themselves are not clear that the Bill will actually catch the kind of consistent and sustained predatory pricing that has been and is being perpetrated in the newspaper industry. In a

919
democracy, competition, plurality and diversity in the press are of the utmost importance, as your Lordships are well aware. That was recognised in the Fair Trading Act 1973, which provided a specific regime for the press, and for very good reasons. That legislation is not being repealed, and for the sake of consistency and clarity the Competition Bill should therefore also provide a specific regime for newspapers.
Today's Guardian editorial states:
"Today's amendments are intended to import elements of the US Sherman anti-trust legislation to outlaw predatory pricing and to put the onus of monitoring newspapers back with the Office of Fair Trading".
The Government are opposing this amendment even though it simply reflects what the Labour Party itself was saying before the election. I understand that a spokesman for the Department of Trade and Industry has said that the amendment would create more difficulties in the market place. I should like to ask the noble Lord the Minister to explain why he thinks that is so.
Your Lordships' House has an opportunity this afternoon to protect and preserve the richness and diversity of our national press for which we are admired throughout the world. I hope that noble Lords, without regard to narrow and temporary party advantage, will support this amendment and thereby assist the Government in their declared aim of strengthening and clarifying competition law.
Lord Harris of High Cross: My Lords, I cheerfully declare my interest as an independent national director of Times Newspapers Limited. We own The Times, the Sunday Times and three excellent specialist supplements. At the outset of my remarks I hope to spread a little light on what may increasingly become a rather shady debate. Of course, I yield to no one in my concern for a free, diverse national, regional and local press. Unlike some noble Lords who have already spoken, I rejoice that Britain can boast of an unrivalled, lively, vigorous and varied choice of daily, weekly, and monthly newspapers and journals.
The situation in this country could not be further from the fevered imaginings of a press monopoly and the survival of democracy that obsesses the supporters of this amendment. As a regular reader of The Times and the Daily Telegraph, like millions of other readers, I am grateful to be getting better value for my money now than before the competition that so agitates the noble Lord, Lord McNally, and others.
The amendment is no doubt great fun if you like that kind of thing. It provides a field day for Liberal Democrats and sundry other malcontents, to let off steam against Rupert Murdoch whom I persist in regarding as the saviour of what we used to call Fleet Street. If we leave aside personal and political opportunism, I believe that support for this amendment, even when it is most earnestly well intended, as by my noble and learned friend Lord Ackner, is nevertheless fundamentally misguided. In brief, criticism of The Times strategy is founded on a myopic view of markets that is at once too narrow and too short-term.
920
All this impassioned rhetoric and moral indignation starts from a factual error. It proceeds via a couple of logical inconsistencies and takes in a number of economic fallacies, before arriving at a primitive commercial misconception. I shall return to this charge in a moment, but first, I fear, a very brief history lesson.
I became a non-executive director of Times Newspapers in 1988. I was able to witness the steady decline in The Times circulation to about 350,000, which was even below the Guardian. It was falling further behind the Daily Telegraph, which, with 1 million circulation, had been the market leader in broadsheets since the 1930s. Pray note: that dominance was achieved through the time-honoured fashion of well-judged price cutting!
In the 1980s and, indeed, for most of its recent chequered history, The Times made losses—that is to say, it was sold below cost. But no one complained so long as its circulation was falling. Indeed, the paper nearly went bust several times. It was rescued first by Northcliffe in 1908, then by the Astors in 1922 and by Roy Thompson in 1966. By 1980 huge losses brought the paper to the very brink of closing. Of the potential buyers, Rupert Murdoch was chosen as the best guarantor of its survival as an independent paper.
In 1993 The Times reached its lowest ebb. The entrepreneurial decision was in effect to relaunch an improved paper. Judging that the cover price of broadsheets had risen far too high and far faster than inflation, a long-term strategy was launched, led with price cutting, which this sour amendment now calls into question.
What really angers the critics is that this bold, competitive strategy has been so spectacularly successful. Now, four or five years later, The Times' circulation has doubled from 350,000 to around 700,000, thereby enabling advertising revenue, which is a major source of income, to more than double. The result is that The Times has moved from chronic losses to break-even. Price cutting was reinforced by a massive increase in editorial spending and increased quality and quantity of The Times followed, under competitive pressure, by the Daily Telegraph. Not least, the lower prices of both papers due to direct price cutting by The Times and special offers by the Daily Telegraph, have increased the total market for broadsheets by no less than 14 per cent.
So, in conclusion, perhaps I may summarise the reasons for rejecting the myopic arguments advanced by supporters of a mischievous amendment artfully dragged into a reform of the general law on competition. It starts with a factual error that there is cross-subsidisation from other businesses to finance price cutting. That is plainly untrue since in 1993 The Times was already financing large and increasing losses, which have now been stemmed and indeed eliminated, to produce a highly profitable business. I can give an assurance that not one penny piece of this tainted Sky TV money has been necessary to help finance that particular strategy.
We come to the first logical inconsistency: the claim that The Times abused a dominant position. In 1993 The Times was in terminal decline. It was the challenger

921
rather than the top dog. In the economic text books predatory pricing means cutting the price to destroy competition and then recouping the losses by exploiting the monopoly position in today's broadsheet papers. There is nothing in the Sherman Act, frequently bandied around, or in any other anti-trust law, that would condemn the pricing strategies of The Times.
Another inconsistency is the claim that selling below cost was unfair and even sinister. The truth was that for all those early years of huge losses The Times was in effect selling below cost. How can what was acceptable for decades from a declining enterprise, selling below cost, suddenly become unacceptable from a reviving enterprise?
There is the further inconsistency that competition, it is said, may be legitimate against a stronger rival, but not if a smaller player might be hurt. This amendment is equivalent to writing in a clause that says, "Competition is fine, but don't be beastly to the Independent".
I approach the conclusion of my remarks and refer to what I believe are economic fallacies. One position taken by critics of The Times is that competition is a fine and necessary thing, but not if it drives prices down too far. Alternatively, there is the opposite thought: price is the only determinant and dimension of competition and therefore has some special taboo. The truth is that improvements in the quantity and quality of The Times have contributed powerfully to its outstanding success in the market place.
Another economic fallacy is that lower prices succeed only by taking—snatching—business from other customers. That is obviously not true in this case because the effect of competition has been that the total market for broadsheets has increased by some 14 per cent. Only the Independent has gone down.
Finally, I come to the commercial misconception that the calculation of profit or loss in a large business can sensibly be made over a year or two in a business with chequered fortunes in this case going back over 200 years. It is now in profit for the first time in living memory.
The reality before us in this amendment is of a massive, orchestrated campaign of special pleading for the Independent in which BBC TV on Sunday intervened in a quite disgracefully partisan way. Yet at its peak the Independent had a circulation of approaching 400,000. I remind your Lordships that in 1993 the circulation of The Times was down to 350,000. The Independent is owned by two powerful groups. Why cannot they learn from the success of The Times? If they cannot do so, another buyer is in the wings, ready to try his luck in the competitive market place with the Independent. The defenders of the Independent have no business coming to this House and trying to rig the market to protect their special interest.
Lord Murray of Epping Forest: My Lords, when moving the amendment, the noble Lord, Lord McNally, referred to Mr. Murdoch's impact on Fleet Street. The noble Lord, Lord Harris, seemed to ask us to award Mr. Murdoch some brownie points for what he did in
922
that context. Let us give Mr. Murdoch what credit he deserves in that regard. There is no doubt that some of the practices in Fleet Street were indefensible—and we said so at the time. Many of them were defended by appeals to freedom and to the right of trade unions concerned to do almost whatever they wanted. I acknowledge that it was right to set some bounds on their freedom to act.
However, it is a pity that Mr. Murdoch was necessary to sort out the consequences of a long history of poor and weak management in Fleet Street. I once told Mr. Murdoch that Fleet Street employers had got the unions that they deserved. His reply to me was—I winced when he said it—"Yes, Mr. Murray, and now the unions have got the employer that they deserve". It was right that some limits should be set on the power of the employees to take the action that they did and to use—and, indeed abuse—their power.
However, it is true that in the reaction to what may well have been the excessive regulation of some industries, as was the custom in Fleet Street, competition has now become elevated to the level of a moral imperative. It is seen as a cure-all for all sorts of conditions and ills.
However, the threat to our press—there is a threat—illustrates that competition is not in itself an automatic and inevitable guarantee of social well-being. In some cases, boundaries and limits to competition have to be set and enforced. It is right that each case should be judged on its merits, but I believe that competition law should state clearly—not merely imply or hint—that in the case of the press, those limits need to be set and enforced in the interests of us all.
Lord Desai: My Lords, the noble Lord, Lord Harris, said something about malcontents. Having been a signed-up malcontent more or less since I was born, I have to speak in support of this amendment.
I should like to deal first with the case outlined by the noble Lord. When moving the amendment, the noble Lord, Lord McNally, said that the amendment applies as much to Mr. Murdoch as to Mr. Montgomery, Mr. Black or any other newspaper proprietor. The amendment would apply to the newspaper industry and to whoever in it engages in predatory pricing. There are difficulties with the economics—the noble Lord, Lord Harris, illustrated some—and in discerning exactly when predatory pricing is operating. If, as has been said, Mr. Murdoch has not engaged in predatory pricing and can prove so to the Director General of Fair Trading, that would be fine under the amendment. This is a belt-and-braces amendment which could only prove his case. Therefore, the noble Lord, Lord Harris, should support the amendment because if it were passed and Mr. Murdoch's case were proved, he would be doubly virtuous. He would then be unassailable—but perhaps that is not an appropriate word to use in the British political context. I do not know what the noble Lord is complaining about.
There is a difference between selling at below cost when one's business is going down because one cannot help doing so, and selling at below cost when one has

923
the ability to sell at above cost because one has a market, but one is pricing in that way not only to secure one's own market, but to eliminate someone else. I know that the distinction is a difficult one to make and that lawyers will have a bonanza with all this. Economists never get any money from such things; only lawyers do that.
There are precedents in American law, such as the Reder Turner clause which sets out the conditions under which predatory pricing can be identified. There are two components. The first is the relationship between price and marginal cost. The other relates to a point which the noble and learned Lord, Lord Fraser, identified when moving Amendment No. 20 which he then withdrew with the leave of the House. In that connection, my noble friend did not like the word "intention". I tried to explain that if we removed the word "intention", but stated instead, "would be likely in the opinion of the director general to have the effect of eliminating a competitor" rather than "intending to eliminate a competitor", we would remove the problem. That would have implied that if a firm was making persistent losses when it was in a position to avoid doing so—that is an important caveat—predatory pricing would have occurred.
For a long time, British competition law has been very lax about this. We have believed in laissez-faire which has meant that we have allowed monopolies to remain monopolies. We have not been active in that area. However, both American and Australian law have actively enforced competition. There can be no more competitive society than the United States of America, as I am sure the noble Lord, Lord Harris, will agree. If the United States has such laws to forbid predatory pricing, what harm could there possibly be in our adopting such rules?
Once again, I urge noble Lords to remember what the noble Lord, Lord McNally, said: this is a belt-and-braces amendment. If we include it in the Bill, we strengthen Clause 18 which is not clear at present. The inclusion of the amendment would settle this issue by putting the matter in the hands of the Director General of Fair Trading who is an independent authority. There would then be careful examination of the records and issues such as power in related industries would also have to be considered. I was glad that my noble friend rejected Amendment No. 22, which was moved by the noble Lord, Lord Kingsland, because I believe that dominance in related markets is very germane to the issue. That is why, unlike the noble Lord, Lord Harris, I urge noble Lords to accept that this is a harmless amendment. We would do no harm by passing it. The cause of truth would be supported by it—and not only one, but every, newspaper owner who could possibly think of reducing diversity would be punished. What better amendment could there be?
The Earl of Stockton: My Lords, I should declare a mild interest in that between 1964 and 1974 I was an employee of the Daily Telegraph. We have been here before, have we not? Those of your Lordships who participated in our debates on the Broadcasting Act will
924
find many of the arguments, personalities and defences entirely familiar. Some of the personalities have changed a little. Instead of the noble Viscount, Lord Whitelaw, now the noble Lord, Lord Harris, goes in to bat for News International. But he also makes the claim that the success of The Times is due in part to its enormous quality. I do not believe that that is a pattern that is familiar to most noble Lords. It seems to have had a most unhappy history. I believe that the phrase is "dumbing down". We saw that happen in the case of the Daily Mirror in the face of competition from the Sun. Under Cecil King the Daily Mirror was one of the great educational and inspirational journals of this country. That was dumbed down by competition from News International. We have seen it happen in the case of both the BBC and some of the independent television companies. They have been dumbed down by competition from Sky. I believe that we should reject the argument of the noble Lord, Lord Harris, on that ground alone. But whether it be television, books or newspapers, surely one of the duties of this House is to resist any reduction in choice, be it in the name of Murdoch, Maxwell or, dare I say, even Macmillan.
7 p.m.
Lord Judd: My Lords, I believe that history will record that the noble Lord, Lord McNally, and the co-sponsors of this amendment have tonight done a profound service for our democracy. I support that thesis for two reasons. First, I hope that noble Lords on the Government Front Bench will understand the anguish on these Benches about the issues at stake in this amendment. Many noble Lords believed that we were emerging in human affairs from a period of political history dominated by ideology into a more creative period when rationality, reason and values would prevail. Those of us who aspired to that hope realised that the essence of good governance, as it had always been, was to try to bring together the disciplines, excitement and enterprise of the private sector with the overriding responsibility of democratic government to intervene for the common good.
The second reason why some noble Lords have been anguished by the issues raised in the amendment is that, coupled with the argument put so well by the noble Lord, Lord McNally, democracy cannot be better than the quality of the information on which it functions. It cannot be better than the diversity and vigorous debate in the media about the issues that face the nation. I do not believe that I speak only for myself when I say that when the Government, whom I greatly applaud, put their hand to the tiller in the cause of the reinvigoration of our democracy they must break free of the technocratic approach which is that the reinvigoration of democracy can be achieved by structural changes alone. The reinvigoration of democracy will be achieved by the quality of analysis, advocacy and debate. I am saddened that there should be any degree of uncertainty at this stage of our deliberations about the commitment of the Government whose approach to a democratic system geared in the fullest sense to the challenges of the 21st century I wholeheartedly support. They should make clear beyond doubt that one of their highest

925
callings and greatest responsibilities is to ensure that whatever else happens in our affairs, the quality, diversity and richness of our media are admired and envied by the world as a whole.
Lord Rees-Mogg: My Lords, it is a pleasure to have the opportunity to support the Government this evening. I always like to support the Government whenever I can. I find that surprisingly I am often able to do so in this House. I join in the expressions of interest on various sides. I write for The Times. I have not consulted The Times on this matter, and I have had no business connection with The Times since 1981. Nevertheless, the connection is there. I also have a connection, which matters a good deal to me, with the Independent. I was one of the founder writers at the Independent and worked there for six years. I was very proud of doing so. I believe that the Independent was an admirable addition to the broadsheet press of Britain. I very much hope that it will survive.
However, as the survival of the Independent is regarded as an intrinsic part of this amendment, two questions must be asked. First, are we talking about the survival of the Independent or the survival of the Independent in its present ownership? One can fairly say, although I am sure that some would deny it, that the other four managers of broadsheet newspapers in London regard the management of the Independent, taking into account the twin proprietors, as the least effective of the body of five. I do not believe that in the event that the present ownership, which is basically the Mirror and Irish Independent, decided that it had had enough, that would lead to a closure of the Independent; nor should it. I believe that it would probably fall into other more supportive and effective hands.
Recently, we have suffered the loss of a brilliant editor of the Independent in Andrew Marr. He is a first-class journalist and a man of the highest quality. He was lost because he was not supported. He has been replaced by a seven-day-a-week editor—all experience is that seven-day-a-week editing seldom works—who in my view is a less interesting journalist, although I make no general criticism of her editing of the Independent on Sunday. We are saying that we must have an amendment to stop the Independent being sold. The best thing that could possibly happen to the Independent from the point of view of its competitiveness is that it should be sold.
I should like to analyse what the amendment would achieve. We are making laws. It is perfectly all right for people to have a jig around the question of whom they like and do not like in the British press. But we are making law and trying to get it right. When one considers the terms of the amendment one finds it extremely difficult to believe that subsection (2)(c) is superior to Clause 18(2)(a) of the Bill as it stands. The proposed subsection (2)(c) provides:
"Conduct may, in particular, constitute such an abuse if it consists in … imposing selling prices below marginal cost of production on a persistent basis".
I spent 20 years trying to deal with the problem of newspaper pricing. During those 20 years when the Thomson family owned The Times and I was on the
926
board of either the Sunday Times or Times Newspapers as far as I can remember we never thought that revenue from sales could be separated from the likely consequences to revenue from advertising. We never asked ourselves, "What is the marginal cost?", and we must get a bit more than that. Neither on the Sunday Times nor on The Times did we usually manage to achieve that. I have not gone back and looked up all the figures, but I can remember a time in the early 1970s when it would have been so difficult to achieve a profit on one's marginal cost that the cost of the newsprint itself was approximately equal to the cover price that we were obtaining.
This is not a viable rule, and it never will be a viable rule, for a number of reasons. It is not viable because of the fluctuations in newsprint cost. Newsprint is an extremely volatile commodity, which sometimes comes up virtually to the value of the whole newspaper itself as sold. It is not viable for another reason: it would stop one enlarging one's paper; it would also stop one increasing one's advertising take. That is a real difficulty. A big paper has a higher run-on cost than a small paper.
A paper which has advertising and publishes extra material editorially has a higher run-on cost than a paper which does not publish much editorially and does not have any advertising. We should be saying that if you ran a successful paper with a lot of advertising that meant you had to push the price up. That makes no sense at all. One can see the extreme example which arises with the free sheets. Those are excluded from the amendment, because it refers only to national newspapers. The principle of the free sheet is that you give away the newspaper and make the whole of your revenue from the advertising. The principle of the free sheet is entirely reasonable. You create greater quality in a newspaper by expanding its services and its advertising. The effect of the amendment would be to cut across the whole of that process in an arbitrary way.
There is a final point that I should like to make. It is the market leader which does not want to have price competition. The market leaders are the Sunday Times—a paper which is controlled by Mr. Murdoch—and the Daily Telegraph—a paper which is controlled by Mr. Conrad Black. Those papers have an immense advantage from having the largest circulation. They dominate their market. They are the papers in relation to which newcomers to the market, or people trying to bring a paper from low in the market to high in the market, have to have a pricing option in order to compete. We should therefore be excluding newcomers to the market, which is the one thing we have been told would be benefited by the amendment.
7.15 p.m.
Lord Ackner: My Lords, during the 21 years that I served as one of Her Majesty's judges, the courts' supervisory jurisdiction—judicial review—has become greatly developed. That jurisdiction is invoked whenever there is an abuse of power. When I listened to the debate in Committee, I intervened becausewhat

927
I had heard described seemed to me to indicate a grotesque abuse of power—grotesque because it seemed to strike at the very fundamentals of democracy.
In a democracy one expects to find a vigorous diversity and choice of news and opinion. That abuse of power was striking at the freedom of the press and the freedom of speech by ensuring, if successful, that the diversity would cease, and what the public would have would be the disadvantages of the exercise of a monopolistic power which deprived the everyday reader of the choice to which he was entitled.
Those freedoms to which I have referred are of course not the prime interest of Mr. Murdoch. His interest is not in freedom, but in personal power—power that gives control over the news and opinions which the public read, by the simple process of killing off, by unfair competition, those who wish to offer a choice.
There have been references to the attitude of the Government when in opposition. Quite clearly, a government, when they come to power, are entitled to a volte face when they so desire, but that tends to have an effect on the integrity of the decisions when in government if they do so. It is generally accepted that the abuse alleged, if correct, should not occur, either now or in the future. In those circumstances, why on earth should there be any objection to the amendment?
It has already been pointed out that what is relied upon by the Government as making the amendment unnecessary is open to argument. Why should there be a potential argument on a matter so obviously requiring a remedy as this? The only resistance is, "This is unnecessary". I am bound to say that I am not persuaded that that is the case. I, and the greater part of the public, will say, "It is not a question of it being unnecessary; it is merely the result of a government in power, intent on remaining in power, and intent on doing nothing which may prejudice that prospect", and accordingly ceasing to have the courage to do that to which they aspired when in opposition.
Lord Peston: My Lords, I have no animus against News International. I take The Times, albeit I take it for the crossword and the obituaries, but at least that is better than nothing. If I were not speaking in your Lordships' House, I should be sitting in front of my television set watching Crystal Palace play Wimbledon on Sky Sports 2. So I have no problems with News International.
I support the amendment, much more as a matter of principle than because of any ad hominem argument that might be put forward. I do not see myself as part of any conspiracy to save the Independent. Indeed, until the remark was made I had no idea that that was what the debate was about. I thought that we were debating the Competition Bill, and especially misuse of dominant position and related matters, which is what I am going to talk about.
What the noble Lord, Lord Harris of High Cross, said, seemed to bear no resemblance to serious economics—a subject which I have studied and taught for many years. However, this is a matter of serious economics and deserves analysis.
928
I am a passionate believer in competition. I believe that in practice competition is the best, almost the only, way of protecting consumers. Therefore, I do not wish to see the limitation of competition. If I had had the opportunity to participate more in the Bill I would have criticised it more strongly for not doing enough for competition. Therefore, in suggesting a special arrangement I speak as one totally committed to the competitive process as the best way of protecting consumers.
We are talking about predatory pricing and the abuse of dominant position. Therefore, we are not talking about competition as known and advocated by Adam Smith or anyone else in the following 200 years. The type of predatory behaviour we are discussing does not succeed by meeting consumer demand. As a matter of technical economics, that is not its objective. It depends on who survives. In technical terms it is known as a game of survival. A well-established theorem in economics is that the winner of a game of survival is the person with the deepest pockets. It is not the person who best satisfies the consumer; it is the person with the largest war chest. That is why such predatory pricing is perhaps legal when it could be made illegal. It is not anti-competitive behaviour; it is anti-competitive pricing.
I echo a remark made by my noble friend Lord Borne. The issue is not simply about competition between existing participants in the market; potential competition is equally damaged by predatory pricing. Anyone thinking of entering the serious newspaper business would immediately reflect on what they have observed during the past few years; namely, the ruthless predatory pricing coming from one specific source.
Anyone looking at the situation can see what is happening. The only two people who seem unable to see what is happening are the director general and the Minister. The rest of us can look and see what is happening in the industry; that is, predatory pricing to drive out competitors. That is what is happening and one would like to see it stopped.
My next point was made by my noble friend Lord Borne and by my noble and learned friend Lord Ackner. There are two possibilities. The first is that we do not need predatory pricing and without peradventure the newspaper industry is covered by Clause 18. Secondly, given that we can all see predatory pricing, we can assume that the moment the Bill becomes law the director general, knowing that he has the powers, will immediately intervene and deal with the matter.
The real point before us, made by my noble friend Lord Borne and by the noble and learned Lord, Lord Ackner, is that there is, to put it mildly, doubt as to whether the powers exist and can be employed. My noble friend Lord Haskel, when replying to the issue on the previous occasion, left us, to put it mildly, uneasy. He did not say categorically that without a shadow of doubt the powers exist and can and will be used. He used more moderate, careful language, such as "may", "maybe", "perhaps" and so forth.
The noble Lord, Lord McNally, says that he is determined to divide your Lordships' House on the matter. I hope that that decision is premature because

929
I believe that there are other possibilities. I am not in the confidence of the Government and therefore I do not know that the amendment will be rejected. I do not know that my noble friend the Minister will say that he does not like the wording and will come back on Third Reading with wording which will meet our demands. Therefore, I believe that my noble friend the Minister would be foolhardy to reject what he has heard from all sides of the House in favour of the amendment.
I, too, am worried about the phrase "marginal cost" in subsection (2)(c), but that is technical. We might be able to produce a better amendment. However, I shall regard the Government as foolhardy if they reject the amendment and make us divide your Lordships' House. I plead from my position on this side of the House. If my noble friend says that he cannot accept the amendment for one reason or another but that there is still time left to come back with another amendment and, more to the point, that he will meet with noble Lords proposing the amendment and come up with something which does the job, I shall be satisfied. I would be unable to support a simple rejection from my noble friend saying that he wants nothing to do with the amendment and that he is perfectly happy. If he is perfectly happy, I can say only that I am not.
Lord Marlesford: My Lords, I rise to speak against the amendment. I declare an interest as an independent national director of Times Newspapers Limited. I was fascinated by the comment of the noble Lord, Lord McNally, that newspapers are different from tins of baked beans: rather like, "New Labour is different from old Labour". Perhaps tonight when we have the vote I shall have a vicarious interest in seeing the relative strength of Blair's babes and old Labour.
The noble Lord, Lord McNally, also expressed the view that Mr. Murdoch is waiting—there has been no doubt in the debate as to who the enemy is—to destroy the competition. He mentioned the Telegraph. Perhaps I may remind your Lordships of two figures. When the price war began—it is a price war—the circulation of The Times was some 350,000 and the circulation of the Telegraph was just over 1 million. The circulation of The Times is now pushing 800,000 and the circulation of the Telegraph is still over 1 million. I sympathise with the Independent, for which there has been a great deal of pleading. The Independent is a fashion. It was an agreeable fashion, like the Spice Girls, but fashions come and go and sometimes they just wither away.
I was interested to hear the noble Lord, Lord Borne, who was once a keeper of the conscience of competition, tell us that he was worried about being perverse. I believe that his worry was almost justified. He was not correct—and I am surprised that he should make such a mistake—in saying that the losses of The Times were being subsidised by the television company. They are not. At all times, the price-cutting strategy has been financed from within News International Limited, which is a profitable company.
I particularly enjoyed hearing the noble Lord, Lord Murray of Epping Forest, because I am always reminded that at one time he was one of the most powerful people in the country. He referred
930
nostalgically to the battle of Wapping. I was not sure whether he regretted the outcome of the battle of Wapping. However, I thought it strange that he then told the unions that they were the victims of weak management. Who was the victor of the battle of Wapping and what kind of management was that? Was it weak management?
We are talking about the need for more competition. We are talking about a cash flow which in newspapers comes from both circulation and advertising. I believe that what has been done for The Times has been to the benefit not only of The Times and Mr. Murdoch but the country as a whole. It is interesting to know that the circulation of broadsheets in this country during the period we are discussing increased by 14 per cent. We probably have a larger choice of national newspapers than any other country. I hope that in the vote which we are told is to follow no one will decide to vote for the amendment merely because he or she believes that they do not like Mr. Murdoch, especially if they have never met him.
7.30 p.m.
Lord Barnett: My Lords, before the noble Lord sits down, as a director of The Times—and I assume that there are no more left—will he give the House an assurance that it never occurred to the board of The Times that what was being done would put out of business other newspapers?
Lord Marlesford: My Lords, I was never present on an occasion when that was discussed and I have been a director of The Times from the time that the new price-cutting strategy was brought into force. What was intended was to increase the circulation and thus the advertising revenue of The Times and enable it to survive.
Lord Fraser of Carmyllie: My Lords, I rise very briefly because it seems to me that the mood of the House—given the fact that the noble Lord, Lord McNally, has indicated that he will wish to test the opinion of the House—is that I should rise now, if nothing else, to enable the Minister to follow me.
For those who have not participated in our discussions on the Competition Bill, I should explain the position from this Front Bench. Throughout we have sought to achieve a set of competition rules which can be applied generally across all sectors. We have not sought to advocate particular rules for particular sectors or utilities. To be credible, I hope that we can remain consistent.
Unlike others, I thought that the noble Lord, Lord Haskel, was sufficiently clear when he said:
"This Bill introduces stronger legislation on abuse of dominance … and also covers predatory pricing".—[Official Report, 13/11/97; col. 313.]
I believe that we should all agree that predatory pricing should be eliminated from our economic life. I say to the Minister that it would seem to be clearly incumbent on him now to satisfy your Lordships that predatory pricing is indeed covered by the provisions of the Bill.

931
There is undoubtedly a very real anxiety that predatory pricing should be eliminated. That is a matter that he must now take on and about which he must satisfy the House.
Lord Simon of Highbury: My Lords, I rise to my feet both cautiously and with some humility, given the fact that the noble Lord, Lord McNally, has his eyes on my trousers. I do not wish to start my remarks with any feeling of levity at all. As an individual I am all for diversity and choice and I wish to state clearly that I share many of the feelings expressed during the debate. I add my regard to that expressed by my noble friend Lord Haskel in Committee for those, led by the noble Lord, Lord McNally, who have brought this debate to the level that it has reached this evening. I recognise that.
I respond immediately to the invitation offered to me by the noble and learned Lord, Lord Fraser of Carmyllie, as to whether the Bill covers predatory pricing. Clause 18(2)(a) refers to,
"directly or indirectly imposing unfair purchase or selling prices or other unfair trading conditions".
That constitutes one of the key elements in judging an abuse. Therefore, we should have no doubts in our minds that that is clearly covered.
When we discussed similar amendments in Committee my noble friend Lord Haskel made the position absolutely clear and that has been repeated by the noble and learned Lord, Lord Fraser. But he explained something else too which I should wish to repeat now. It would be wrong for the Government to take a view on whether or not the particular actions of an individual company, which have been the subject of complaint, are anti-competitive.
Newspapers have a very crucial role to play within our society. The discussion has been very interesting and has touched on extremely important matters. But our position remains the same as it was when my noble friend Lord Haskel spoke in Committee. I hope that the House will understand why I say that.
At the risk of being simplistic, as the noble and learned Lord, Lord Ackner, pointed out, when in government one has always to be very careful in what one says about specific competition complaints. Notwithstanding, as I said, the outstanding quality of many of the contributions that we have had this evening, many have centred on a specific competition case.
More to the point, the purpose of the Bill is to establish, as the noble and learned Lord, Lord Fraser of Carmyllie, said, a clear legal framework under which the Director General of Fair Trading, the competition commission and the courts can assess individual cases. It is important that Ministers avoid trespassing on their territory. Therefore, the question of whether a specific practice in the newspaper industry or elsewhere is or is not anti-competitive is not a matter about which I can properly express an opinion. If the noble Lord, Lord McNally, feels that
932
his arguments in relation to a particular case are strong, he may take them to the Director General of Fair Trading.
Nevertheless, the amendment and the debate this evening raise issues of principle which I really do wish to address. The two prohibitions introduced by the Bill are general prohibitions intended to apply across the general economy. The basis of that approach is that the economic and competition principles they embody are common across the economy. We believe it is wrong in principle to have different prohibitions in different sectors. If we take predatory pricing as an example, the question of whether pricing is predatory turns on whether, for example, it has the effect of restricting or eliminating competition in the market. That is as true for the newspaper market as any other market.
Of course, subsection (2)(b) of the proposed new clause specifies that abuses can include other action which may reduce the diversity and independence of the national newspaper press. However, it is not at all clear what is meant by that. Would it cover an editor's decision to drop a particular columnist or a proprietor's decision to change his editor? It strikes me as being very difficult to extend the concept of abuse beyond the established economic principles covered by Clause 18 and Article 86. Prohibition is a very serious matter. There needs to be a clear framework in which business can operate. That seems to me to be absent from the prohibition proposed in the amendment.
For the same reason, we believe that it is wrong to adopt different definitions of dominance for different markets. Why should the test be different for newspapers alone? The economic principles underlying that market are the same as for other markets. Moreover, it is by no means clear how the test proposed in the amendment would be interpreted. How would the Office of Fair Trading and the courts interpret "substantial market power"? Once we move away from the principle of dominance, which is established in EC law, the application of the prohibition becomes more uncertain and that can lead only to confusion, unpredictability and unfairness.
I was asked by the noble Viscount, Lord Trenchard, to specify other ways in which the definitions within the proposed new clause prove difficult. I understand the desire to set out precise definitions of abuse in primary legislation. However, there are obvious difficulties in doing so and this amendment illustrates some of them.
I listened with interest to the immense amount of good advice from noble Lords who are economists. Many of them illustrated the difficulty in choosing a pricing basis. In purely theoretical terms, there may be a case for choosing the marginal cost of production as a bench-mark for predatory pricing. As has been said, in practice that is not always a workable measure.
Perhaps it would be a better bench-mark if we took average variable cost. I understand that many of the bases of European judgments take that to be a good

933
indicator. It is not a perfect formula. We know that in some circumstances pricing above average variable costs may be predatory; in other cases it may not be. The problem with the belt and braces approach in the amendment, to which noble Lords have spoken, is that that has to fit all sizes to be useful. Here we would have a problem of how to size the belt and the braces. In short, much will depend on the specific economic circumstances of the case in question. The whole basis of the Bill is that it is effects-based, and gets away from the form-based nature of much of our existing legislation.
In conclusion, I should like to comment briefly on the Government's commitment under the Bill; indeed, my noble friend Lord Peston put it very clearly and I totally agree with him. The Government's commitment is to enhance competition. Why? The answer is that that enhances choice and brings the consumer lower prices. Much of the debate tonight has centred on the restriction of choice and whether prices are too low. I have not yet seen the evidence of restriction of choice, although I do understand the arguments about how low prices could go and their particular impact. However, that is something to which I shall return in just a moment.
Your Lordships' House should be in no doubt that the Government take the issue of predatory pricing extremely seriously. That is why I took care to read Clause 18 and to study its particular impact. Predatory pricing is bad for competition and the consumer. This Bill meets the Government's commitment to introduce stronger legislation against abuses of dominance, including predatory pricing. It is also a fact that the director general has confirmed that the required powers are in existence now under the monopoly provisions of the Fair Trading Act 1973, to enable an investigation of the pricing practices of a company which supplies 25 per cent. of a given market if a case for a reference were to be established.
Clearly there is always scope for debate about the precise limits of powers. Looking at the competition regime overall, there is a balance to be struck between, on the one hand, wishing to cover explicitly every conceivable anti-competitive action and. on the other hand, avoiding undue burden and uncertainty for business by following Article 86 closely.
However, having said that, I believe that we would be going off course if we started down the path of prohibiting conduct where there is no dominance or of having a different prohibition for one particular sector. There is no case for using the Bill to target an individual sector of the market, or one particular company; it is a broad framework of competition for all companies in all markets. Despite the seriousness of the debate, I hope that the noble Lord understands the issues that are at play and that he will see fit to withdraw the amendment.
Lord McNally: My Lords, if noble Lords did not know what the Minister was saying so eloquently, he was saying: "Get lost". The clause proposes a particular
934
protection of the newspaper industry. For that very reason, the legislation of which the Minister is so proud could just as easily elicit the same response from the director general as Mr. Robin Cook received three-and-a-half years ago. I remind the House of that response:
"At times there a fine line between aggressive price competition and predatory pricing".
What I am asking the House to do this evening is to draw that line on predatory pricing.
Perhaps I may finish with one quote for the Benches opposite. It comes from Mr. Peter Kellner's article in the London Evening Standard, in which he said:
"Competitive markets do not happen by chance. They are social constructions that need to be carefully designed and stoutly defended. A defeat tonight for the Government might prove a blessing in the longer term".
Mr. Kellner is no enemy of Labour, neither am I. Let us all do the Government a favour by passing the amendment tonight. I wish to test the opinion of the House.
7.44 p.m.
On Question, Whether the said amendment (No. 24) shall be agreed to?
Their Lordships divided: Contents, 121: Not-Contents, 93.

Division No. 1

CONTENTS

Ackner, L.

Fookes. B.

Addington, L.

Freyberg, L.

Ampthill, L.

Geddes, L.

Annaly, L.

Geraint, L.

Annan, L.

Gilmour of Craigmillar, L.

Ashley of Stoke, L.

Greenway, L.

Avebury, L.

Grey, E.

Barnett, L.

Halsbury, E.

Beaumont of Whitley, L.

Hamwee, B.

Berkeley, L.

Harris of Greenwich, L.

Biddulph, L.

Hattersley, L.

Birdwood, L.

Hereford, Bp.

Boardman, L.

HolmPatrick, L.

Borrie, L.

Hooson, L.

Bridge of Harwich, L.

Howell, L.

Brookeborough, V.

Hylton-Foster, B.

Brooks of Tremorfa, L.

Jacobs, L.

Calverley, L.

Judd, L.

Carlisle, E.

Kimball, L.

Carnock, L.

Knight of Collingtree, B.

Castle of Blackburn, B.

Lawrence, L.

Chandos, V.

Lester of Herne Hill, L.

Chesham, L.

Linklater of Butterstone, B.

Clancarty, E.

Lovell-Davis, L.

Cox, B.

Lucas of Chilworth, L.

Craigavon, V.

Ludford, B.

Crook, L.

McConnell, L.

Currie of Marylebone, L.

Mackie of Benshie, L.

Dahrendorf, L.

McNair, L.

Darcy de Knayth, B.

McNally, L. [Teller.]

Denham, L.

Maddock, B.

Desai, L.

Mancroft, L.

Elton. L.

Mar and Kellie, E.

Evans of Parkside, L.

Methuen, L.

Exmouth, V.

Molyneauxof Killed, L.

Ezra, L.

Munster, E.

Falkland, V.

Murray of Epping Forest, L.

Fitt, L.

Napier and Ettrick, L.

935

Newall, L.

Shaughnessy, L.

Newby, L.

Shore of Stepney, L.

Nicholson of Winterboume, B.

Stokton, E. [Teller.]

Northesk, E.

Taverne, L.

Norton, L.

Taylor of Blackburn, L.

O'Cathain, B.

Teviot, L.

Ogmore. L.

Thomas of Gresford, L.

Park of Monmouth, B.

Thomas of Walliswood, B.

Perry of Walton. L.

Thurso, V.

Pesten, L.

Tope, L.

Plant of Highfield, L.

Tordoff, L.

Prys-Davies, L.

Trenchard, V.

Puttnam, L.

Tweeddale, M.

Redesdale, L.

Vivian, L.

Rochester, L.

Wallace of Saltaire, L.

Rodgers of Quarry Bank, L.

Waverley, V.

Russell-Johnston, L.

Wigoder, L.

St. John of Bletso, L.

Williams of Crosby, B.

Sandberg, L.

Winchester, Bp.

Sefton of Crarston. L.

Winchilsea and Nottingham, E.

Selkirk of Douglas, L.

Wise, L.

Sempill, L.

Young of Dartington, L.

NOT-CONTENTS

Acton, L.

Jay of Paddington, B.

Alton of Liverpool, L.

jeger, B.

Amos, B.

Jenkins of Putney, L.

Archer of Sandwell, L.

Kennedy of The Shaws, B.

Bassani of Brighton, L.

Kilbracken, L.

Baca L. Blackstone, B.

Lockwood, B.

Blease, L.

Lofthouse of Pontefract, L.

Brooke of Alverthorpe. L.

Lyell, L.

Burlison, L.

McIntosh of Haringey, L.

Caithness, E.

Mallalieu, B.

Camegy of Lour. B.

Marlesford, L.

Carter, L. [Teller.]

Mason of Barnsley, L.

Cledwyn of Penrhos, L.

Merlyn-Rees, L.

Clinton-Davis. L.

Milner of Leeds, L.

Cocks of Harteliffe, L.

Mishcon, L.

Davies of Coity, L.

Molloy, L.

Davies of Oldham, L.

Monkswell, L.

Diamond. L.

Montague of Oxford, L.

Dixon, L.

Nicol, B.

Donoughue, L.

Orme, L.

Dormand of Easington, L.

Paul, L.

Dubs. L.

Pitkeathley of Shulbrede, L.

Falconer of Thoroton, L.

Ponsonby of Shulbrede. L.

Farrington of Ribbleton, B.

Ramsay of Cartvale, B.

Gallacher. L.

Randall of St. Budeaux, L.

Gilbert, L.

Rees-Mogg, L.

Gladwin of Clee, L.

Rendell of Babergh, B.

Gladwyn. L.

Renwick of Clifton, L.

Gordon of Strathhlane, L.

Richard, L. [Lord Privy Seal.]

Gould of Pottemewton, B.

Sainsbury of Turville, L.

Grenfell, L.

St. John of Fawsley, L.

Hanworth. V.

Sewel, L.

Hardie, L.

Simon, V.

Hardy of Wath, L.

Simon of Highbury, L.

Harris of High Cross, L.

Stoddart of Swindon, L.

Haskel. L.

Stone of Blackheath, L.

Hayman, B.

Strabolgi, L.

Hogg of Cumbemauld, L.

Symons of Vernham Dean, B.

Hoyle, L.

Taylor of Gryfe, L.

Hughes, L.

Thomas of Macclesfield, L.

Hughes of Woodside, L.

Ullswater, V.

Hunt of Kings Heath, L.

Varley, L.

Irvine of Lairg, L. [Lord Chancellor]

Watson of Invergowrie, L.

Islwyn, L.

Wedderburn of Charlton, L.

Janner of Braunstone, L.

Whitty, L. {Teller.]

Williams of Mostyn,L,

Wolfson, L.

Resolved in the affirmative, and amendment agreed to accordingly.7.54 p.m.
7.54 p.m.
Lord McIntosh of Haringey: My Lords, I beg to move that further consideration on Report be now adjourned. In doing so I suggest that the Report stage should not be resumed before 9 o'clock.
Moved accordingly, and, on Question, Motion agreed to.

Video Recordings Act 1984
7.55 p.m.
Lord Campbell of Croy Lord Campbell of Croy rose to move, That this House take note of the proposal to appoint Mr. Andreas Whittam Smith as a designated authority under Section 4(4) of the Video Recordings Act 1984, in accordance with the proposal laid before the House on 18th December 1997.
The noble Lord said: My Lords, I shall explain the terms of the Motion. Under the 1984 Act the letter of appointment must lie on the Table of this House for 40 days. That period expires in a few days' time. It provides a rare opportunity for the House to consider how present arrangements in this field have been working. I should make it clear at the outset that I have no objection to the appointment of Mr. Andreas Whittam Smith and I wish him well. There is no time limit on this debate. We have been fortunate in being allotted the dinner break rather than the middle of the night. I hope that other speakers will tailor the length of their speeches accordingly so that we do not appear to misuse the time made available.
I shall concentrate on one matter, the computer game, Grand Theft Auto, as it is setting an alarming precedent. I first raised this in May last year in an oral Question when there had been reports that the game might be imported. In reply the noble Lord, Lord Williams of Mostyn, pointed out that because of its nature it would have to be submitted to the British Board of Film Classification, known in earlier days as the British Board of Film Censors. Towards the end of the year I heard that an 18 certificate had been awarded and I tabled further Questions. In sympathetic and courteous replies the noble Lord, Lord Williams, seemed to share my concern, drawing attention to the maximum penalties for supplying this game to someone under the age of 18—six months in prison or a £5,000 fine.
My worry is that the game presents the crime of stealing cars, and the associated offences, as normal pastimes adding an element of glamour too. This is especially unfortunate in Britain at this time. As your Lordships will know, there is too much car crime in this country and we have had the worst record in western Europe in recent years. The millions of car owners and their families are divided into two categories. The first is the large section who have had their cars stolen or broken into; the second consists of the remainder who are apprehensive about when their cars are to be stolen or attacked. The owners of vehicles in Britain may not yet recognise what a damaging disservice this game is inflicting upon them, although I understand that the motoring organisations do.
How is the game played? A detailed description appeared in the January issue of the magazine Playstation; the cover of which advertised the game with the slogan in capitals, "CRIME DOES PAY". To start playing you have to steal at least one vehicle, mugging the driver if necessary. You then embark on criminal missions including blowing up buildings—that is especially unfortunate in view of IRA atrocities of that kind—ferrying drugs, killing pedestrians and driving recklessly to escape from police chases.
The magazine asks prominently, "What would you like to steal today?" Regrettably there has already been a culture among some young people of stealing cars, or from cars, and of joy-riding often ending in death or injury as well as damage to property—and of course without licences or insurance. Several criminal offences are committed within that kind of "prank"; and appearing to glorify those activities is a damaging blow to law and order. The game is staged in three cities. One of them is named "San Andreas", and I hope that the Home Secretary and Mr. Whittam Smith have noted that infelicitous appellation.
The Government are limited in what they can do. The Classification Board does not operate under statutory authority for films; and final decisions as regards films are taken by local licensing authorities. For videos, however—and computer games are included in that category—the 1984 Act has given the board statutory functions. The board is designated by the Home Secretary as the authority to classify them.
The board is entirely independent of the Government and was originally established in co-operation with the film industry. Financially it does not receive subventions from the Government or the film industry, meeting its costs from fees for its classification work.
In the past the board's main concerns have been with sex and violence. That was to be expected in vetting films and videos for viewing. The public would be spectators, perhaps voyeurs. Computer games are different. Members of the public who play them become participants. They operate the controls and in this game are invited to carry out the criminal offences. They are not simply viewers of a video that shows a film.
I have already mentioned some of the crimes included in this game. Some involve violence; some do not. I do not think that there is any sex! However, a car can be stolen, and driven at high speed without licence or insurance, and with no violence other than minor damage to the lock, unless of course the escapade ends in a crash or accident. With such participant games, more emphasis now needs to be placed on criminal actions unconnected with sex or violence.
Classification is not working as intended. Very few adults will have been playing Grand Theft Auto. Very few adults know how to operate the consoles in which the game is staged. It is not feasible to arrest or charge parents for lack of responsibility inside their homes.
The Classification Board, in its latest report, recorded that a survey by the Policy Studies Institute confirmed the easy accessibility of 18 certificate videos to children; and that less rigour was exercised in video shops than
938
in cinemas, and little rigour, if any, in homes. The hoard also reported that video games had become much more violent.
The board took exception to one video game before Grand Theft Auto had appeared on the scene, and I commend its action. It was called Car-mageddon, and to score points a player had to run over pedestrians. The board characterised it as "killing for kicks". However, that game, somewhat amended, was then released without a board certificate of any kind but with a voluntary industry "rating" of 15. The appeals procedure, although independent, seems unsatisfactory because it is one-sided. Only the manufacturers or agents can appeal, not the public or organisations objecting to a product or its classification.
Proving the report's point on availability to teenagers, the Sunday Times on 4th January reported that one of its reporters accompanied a 15 year-old and an 11 year-old visiting several shops where the 15 year-old was sold all the 18 certificate games he asked for, including Grand Theft Auto, and the 11 year-old was refused in only two shops. That was despite the penalties for supplying them to under-18s.
The promoters of Grand Theft Auto have expressed opinions: that the game is simply a bit of fun, a lark and a laugh. I believe that that view is misplaced in the context that I am describing. I do not suggest that every teenager who plays will be adversely affected. However, if only a fraction, perhaps one-tenth, are influenced, this will be undoing the work in which some of us, in Parliament and outside, have been engaged to reduce car crime. In that connection, the British section of the European Secure Vehicle Alliance, chaired by my noble friend Lord Brougham and Vaux, has made a significant contribution.
In future, when citizens find that their cars have been stolen and driven around, with damage done, or injury, they can attribute some of the blame to this computer game; likewise when their motor insurance premiums are increased.
I recognise that the Government are not empowered to do much because of the statutory situation and the financial independence of the board in what is a self-regulating system. The Government want to be tough not only on crime but also on the causes of crime. For that, anticipation and prevention are necessary. I have noted the recently announced Home Office scheme for young offenders before they leave prison. It is even more important to protect young people in the first place before they drift into becoming offenders. They should certainly not be led into thinking that stealing is an acceptable pastime, together with the other criminal offences.
Of course cars are stolen or broken into by adult criminals as well as by young people. It is a cause of dismay to me when young people are tempted and slide into car crime. I have had personal experiences. On one occasion in Scotland when my car was stolen overnight from a public car park, the police retrieved it, damaged, some days later, from a gang of 15 and 16 year-olds. On another occasion in London, close to these Houses of Parliament, the side glass was smashed, in daytime,

939
and my overnight bag stolen. Passers-by saw the two culprits, boys of about 15, and chased them. The two got away, distributing the contents of my bag on the pavement as they ran, while trying to find something of value. The Westminster police later told me that there was an increase in such incidents at that time of year as it was the half-term break for schools—a very sad reflection, I suggest, upon our times. In both cases my vehicles were small, two-door cars especially adapted for me as a disabled driver, as I have been partially disabled since World War II. I should point out that disabled people are acutely deprived without a serviceable car when they are dependent upon wheels to take the place of their legs. Youths who start committing car crimes like that can slide later into housebreaking and burglary.
Before concluding, I should like to make a particular suggestion. Because computer games are very different from films, and from videos that involve viewing and not taking part, they should be in a separate category of their own. I suspect that provision was not made fully for games in the 1984 Act because such games were then in their infancy. I accept that such a change may take time and realise that primary legislation may be needed. I hope that the opportunity will be taken the next time a suitable Bill is being prepared. In the meantime, I trust that Mr. Whittam Smith, the new chairman of the board, will respond to the changing situation. I wish him all success. I beg to move.
Moved, That this House take note of the proposal to appoint Mr. Andreas Whittam Smith as a designated authority under Section 4(4) of the Video Recordings Act 1984, in accordance with the proposal laid before the House on 18th December 1997.—(Lord Campbell of Croy.)
8.10 p.m.
Lord Alton of Liverpool: My Lords, I entirely
concur with the remarks of the noble Lord, Lord Campbell of Croy. The noble Lord, Lord Williams of Mostyn, the Home Office Minister who will reply to the debate, knows that we had correspondence last year on the subject of computer games involving the type of cases that the noble Lord, Lord Campbell, has drawn to the attention of the House. There will be an opportunity during debate on the Crime and Disorder Bill, as I shall outline in a few moments, to address the sorts of points that the noble Lord so properly raised.
At the outset let me make three points. First, when Mr. Andreas Whittam Smith was appointed as president of the British Board of Film Classification I publicly welcomed his appointment, and I do so again this evening. He is a likeable, decent man, and will bring commitment and thoughtfulness to his work.
But the laying of this letter of designation under the terms of Section 5 of the Video Recordings Act 1984 gives the House a rare chance to reflect on the workings of the British Board of Film Classification and to comment on the circumstances on which Mr. Whittam Smith will endeavour to undertake his new duties.
940
Thirdly, although there is precedent for the will of the House to be tested, it is not my wish to divide your Lordships' House. Amendment No. 270 to Clause 87 of the Crime and Disorder Bill, tabled by myself and the noble Baroness, Lady Young, will provide the opportunity to test opinion, should that prove necessary. In the best traditions of the film industry, tonight's brief debate acts more as a trailer for what is coming shortly.
Our debate also has something of the air of unfinished business about it. Five years ago, in the aftermath of the death in Liverpool of a two year-old boy, James Bulger, the trial judge commented on the possible effect of video violence on the two boys who had murdered him. Before James's death I had taken cross-party initiatives in another place, seeking both tighter curbs on the video industry and greater protection for children. After a battle with the then Home Secretary, Mr. Michael Howard, but with a broad base of support—ranging from Mr. Ken Livingstone, Miss Clare Short, and Mr. Gerald Kaufman on one side, to 12 former Conservative Ministers on the other—oamendments were duly incorporated into the 1994 criminal justice Act. I recognise that in the present Home Secretary, Mr. Jack Straw, we have a Secretary of State who is alive to these issues and who is keen to get to the root of violence in contemporary society. I therefore have no doubt that Ministers in the Home Office will take these matters very seriously.
Five years ago, one of my chief concerns was the lack of public accountability of the British Board of Film Classification. That is the matter to which we return tonight, because it was left largely in abeyance. The then Home Secretary said that members of the public aggrieved by a decision of the BBFC could simply seek judicial review in the courts.
When, in 1996, the board allowed "Natural Born Killers" to be released on video for home viewing, a gutsy young woman, Yvonne Hutchinson, of Bradford, did indeed try to challenge the board. For a single mother without the infinite resources of the industry, it proved an impossibility. The recourse to law is not worth the paper it is written on. The industry knows that, and would prefer to keep it that way.
Section 4 of the Video Recordings Act 1984 charges the Secretary of State with the responsibility for ensuring that adequate arrangements are made for appeal against classification decisions. The procedure for appeals is laid out in a previous letter of designation. However, the 1984 Act requires only that provision be made for appeals by those submitting video works for classification. That makes the appeals system extremely one-sided and biased in favour of film, video and computer game producers. For example, although the BBFC recently refused to grant a certificate to the gratuitously violent computer game, "Carmageddon"— which, as we have heard, involves a driver playing a computer game which lets the driver run down, yes, defenceless pedestrians, the blind, and animals—the manufacturers were able to appeal and overturn the decision, despite the protests of groups such as the Automobile Association, which had no way of formally voicing their concerns. Other groups, such as the NSPCC, fall into the same category. On that occasion,

941
even James Ferman, the director of the BBFC, attacked the U-turn, saying that the game featured "gross violence".
It is my understanding that the mechanism for appeals could be expanded in the letter of resignation to allow others to appeal against the BBFC's classification decisions. That could also be done through primary legislation and with cross-party support. That is why the noble Baroness, Lady Young, and I have tabled the amendment to which I referred. It would require the Home Secretary to give others a right of appeal against the BBFC's decisions, in addition to the right that the film and computer games industries already enjoy. That would not give everyone carte blanche to appeal against any decision that the BBFC makes. Appeals could be made only on the grounds that the video work might incite viewers to antisocial behaviour, crime or disorder. The conditions under which an appeal would be made would also be set out by the Home Secretary in the letter of designation.
At the moment the only way in which an ordinary member of the public can appeal against a classification decision is through a judicial review, which is extremely costly and expensive for all those concerned, in terms of both time and money. Unless we change these things, Mr. Andreas Whittam Smith will continue to head up a board where monied interests can talk but children's interests are stifled. How can that be fair or right?
This is not a trivial matter. Let us consider the violent society in which we live and the violent culture in which our children are being reared. Violence in Britain and in America—where it is considerably worse—has become gratuitous and random. It is ingrained into the very fabric of society. Violent films such as "Natural Born Killers" and "True Lies" are typical box office hits. In "True Lies", Arnold Schwarzenegger throws a meat-hook into a man's stomach; hurls a pointed instrument at his torturer which sticks in the man's eye; breaks a man's neck with his bare hands; and a driver is shot through the head and blood spatters everywhere. Gruesome, violent death, mutilation and serial killing all become an art form which can be turned on or off at the flick of a switch. Is that really what we want our young people to see?
The entertainment industry seems to be in the throes of a passionate love affair with violence, embracing it at every opportunity. We are becoming emotionally deadened by the horrors that we witness and have come to accept violence as normal.
Let us consider the effect on women. According to a study for the Broadcasting Standards Council, women's fear of male violence can be reinforced, and even increased, by watching videos and television programmes that depict violence against women.
And let us consider the effects on children. The Professional Association of Teachers spoke to 1,000 teachers in different parts of the country when my amendment to curb video violence was before Parliament four years ago. The response of teachers does not support in the least the view that children are cynical sophisticates, able to reject those aspects of the adult world for which they are not ready. One teacher said by way of reply:
942
"I am very disturbed by the totally unsuitable films and TV programmes which are available to young children. They often talk of nothing else and revel in tales of blood, cutting off of limbs, disembowelling etc. This is the norm so that children who do not have access to this material often feel they arc missing out".
Increasing numbers of parents are using videos and video games as their electronic baby-sitter, allowing children to play with the games or to see violent videos so that they will not themselves be disturbed. Many parents simply do not seem to understand the harm which inappropriate entertainment can do.
More than 90 per cent. of the PAT respondents believed that children's emotional, social and moral development is being damaged, sometimes irrevocably, by what they see. Three-quarters of teachers also believe that there is a link between over-exposure to computer games and factors such as tiredness and inattention, heightened levels of aggression and a tendency to act out fantasies.
Commenting on the link between behaviour and viewing, the noble Lord, Lord Puttnam, wrote a letter to me which included a speech in which he rightly asked:
"what proof are we looking for? Does the railway company wait for someone to be killed by a train before fencing off the railway line?".
Just before last Christmas, 27,000 people sent a petition to Parliament calling for tighter controls. The common sense of parents—which well understands that children imitate what they see—is often the best yardstick. I say to your Lordships' House, as I conclude, that the advertising industry would not have spent, as they did, £4,000 million last year on advertising their wares on television if they did not believe that what people see has an effect on those who view it. Clearly it has an enormous effect.
In challenging the letter of designation. we can take some useful steps by enhancing parental rights and strengthening the position of the public, by putting it at least on the same footing as the industry. In so doing, we will be enabling Mr. Whittam Smith to do his job more effectively. When the amendments to achieve that are considered by your Lordships' House, I hope that they will be given a fair wind.
8.20 p.m.
Lord Merlyn-Rees: My Lords, I wish to speak briefly on two matters. I declare an interest in that I am president of the Video Standards Council. I am not a consultant or a lobbyist. During 35 years in Parliament I have been neither and I do not intend starting now. It is because I was concerned about violence that I went to the council and I suppose that as a former Home Secretary it was thought I might be of some use to it in the work that it does. The industry sets out in an admirable way to ensure that it carries out the classification terms of the various pieces of legislation, culminating in the 1994 legislation. As a whole, the industry tries extremely hard.
I heard tonight of the problems. Occasionally, I go down to the shops and it is difficult for the assistants in video shops to tell whether a girl is 12, 17 or 18. No Act of Parliament will put that right; there are innate problems with that.

943
The other problem is one with which the noble Lord, Lord Campbell of Croy, dealt: the issue of video games. They are in a quite different category. If one is asking for video games to be brought under the same aegis as videos, that is a different matter. We met the video games people who run a voluntary scheme. They come under the BBFC if parts of the game are a video in the normal sense of the term. It is a complicated business.
The aim of the industry is to maintain standards. The noble Lord, Lord Alton, said that there would be another occasion for discussion and this is not the time for it. I wish to suggest only one thing tonight: a better way of dealing with the issue. There is the matter of the Bulger case. God knows! it was a bad enough tale, but I do not believe that the judge made a direct connection between the Bulger murder and the boys seeing a certain video tape.
The problem of violence is real and we have touched on the difficulty with stolen cars and having one's family robbed in the street. I do not say that that is caused immediately by the children and young people having watched or played video games, or having watched a video tape. They are complicated matters and it is too easy to make a simple connection between the two.
I wish to make one suggestion. Over the weekend I have been reading the report of the British Board of Film Classification. It was late arriving. It is an annual report which makes interesting reading. It concerns the investigations that have taken place: the work undertaken; and so on. The noble Lord, Lord Birkett, is here tonight, and he was serving as acting president. He makes one point that:
"it is worth remembering that 1996-97, like any other year, produced a vast majority of films and videos which were uncomplicated and unproblematic. The Board sees roughly four thousand films, videos and video games every year. Most of them are aimed at a minority audience. Put all the many minority audiences together and you have contemporary British society."
What we see in contemporary British society we may not like. Sometimes I am glad that my children are well into adulthood and beyond; but I have grandchildren. What one sees on the BBC and ITV is under less control at certain times of the day than the video industry. There are means of dealing with those issues.
I received a note from Mr. Whittam Smith which states:
"I have asked that the 1997 annual report should be made available in April or May this year-6 to 7 months earlier than the 1996 report! If the appropriate select committees of the two houses of Parliament wished to examine the President and Vice-Presidents on the annual report. I would welcome the opportunity."
That is a much better way than having a short debate like this. No doubt it pleases us to have the chance to say something or to make a couple of amendments to another piece of legislation. A much better way is for the subject to go before a Select Committee which will bring people forward so that we can have a real discussion on the issues. That would be far more useful than amendments which will be defeated eventually by the use of the Whips. It is better to have a Select Committee investigate the matter.
944
There is a real problem; the solution is not as easy as many people suggest. The connections are not as simple as is made out. With the violent society in which we live, videos, films and the like are part of that society, not the cause of it—though in certain instances they might well be. I suggest to the Government—because only they can decide—that the subject is put before a Select Committee of this House. That Select Committee should question people and bring experts in and question them as well. That is a better way of doing it than a short debate of this nature.
8.25 p.m.
Lord Birkett: My Lords, I am and have been for some 12 or 13 years one of the vice-presidents of the BBFC, so I am very much concerned in this matter. I listened carefully to what the noble Lords, Lord Campbell of Croy and Lord Alton, had to say about video games. In particular, it is interesting that "Carmageddon" should have been mentioned. As noble Lords know, by and large, video games are exempt from classification by the BBFC unless they contain matters which mean they ought to be classified, such as scenes of violence.
That is exactly what happened in the case of "Carmageddon". We considered it and declined to give it a certificate in its present form. The matter then went to the appeals committee which, by, I think I am right in saying, a majority of three to two, overturned our decision. It does not behove me to complain about the appeals procedure or a higher court than mine. But that was not entirely helpful. The reason the decision was overturned was that the manufacturer of the game, like most manufacturers in these cases, maintained that the whole thing was a joke and it was not intended to be taken seriously, it was purely for fun. Of course, one can take that line even with something as potentially brutal as "Carmageddon". It was that line that triumphed in the end and it was not helpful to the case.
Nor is it helpful that young children are often able to watch videos which are classified for those over age 18. It is not so much that they can get them in the shops. In the last criminal justice legislation we brought a great deal of pressure to bear to ensure that the legislation was as tough as it could be on supplying over-18 videos to under-age youngsters. It is always easier in the cinema because a person may or may not be admitted.
The real danger is not so much in the video shops as in the home. As the noble Lord, Lord Merlyn-Rees said, in many cases there is no control whatever. Children of all ages can run games or videos for over 18s of all kinds because there is not enough parental control to stop them. I do not know how one copes with that problem, except by education.
Education is also to some extent the secret as to how children can come to terms with what they see on the screen. The noble Lord, Lord Alton, pointed out, from his research in schools and among teachers, that many children do not seem to be capable of coping with what they see on the screen. I believe that one of the reasons is that they are not properly educated in the media, what the media mean, how the media work, how videos work,

945
how films work and the nature of the animal—how videos are put together. There is a provision that all schools shall teach these things. It is part of the national curriculum. It is obligatory that media studies should be taught in schools. Last year, when we went into the matter, we were appalled to find that of all the Ofsted reports we could gather. not one commented on the subject in the schools at all, either for good or ill. Was it being done well? Was it being done at all? There was no mention of that by the Ofsted teams. We complained about that, and I hope that somehow the position can be improved. It seems to me that educating children in the media is one step, albeit a small one, towards protecting them from the more dire effects of the increase in violence.
I share with all speakers so far a distaste for an increasingly violent industry. Not by any means all of it, but certainly some parts of Hollywood have an increasing taste for violence and I regret that. The BBFC can control the violence in its wilder excesses, but it cannot control the media and the nature of film making in Hollywood, much as it would like to do so.
Reference has been made twice this evening to the Bulger case. I should remind noble Lords that in this Chamber the noble Earl, Lord Ferrers, in answering a debate on this subject, pointed out clearly that there is no police evidence that the video concerned was seen by the children involved. The judge made a reference to a video; it was not backed by any fact. So far as I know, there has never been a criminal prosecution for violence in this country where a video has been a major factor. Certainly it was not in the Bulger case. We asked particularly that police evidence on the subject should be repeated in this House and the noble Earl, Lord Ferrers, did so.
The film "Natural Born Killers" has become a much feared and in some cases a much disliked film—it is not a film that I liked. However, when considering whether or not to certificate it, there was an enormous amount of rumour that in the United States copycat killings based upon the movie were rife. Around 13 cases were quoted. The director of the BBFC took the trouble to talk to the police chiefs involved in those cases to discover whether or not there was anything in the rumour. In no case was there any evidence to suggest that. All the police chiefs in charge of those cases said that there was no connection between the film "Natural Born Killers", as a video or as a movie, and the crimes concerned. We took the greatest trouble over that because everybody is frightened of copycat killings; indeed, everybody is frightened of the effect that videos and films may have on people.
It is right that films and videos must have some effect upon their audience, otherwise, as the noble Lord, Lord Alton, said, why would anybody put them on the screens and why would advertisers pay all that money to advertise their products if it did not have any effect? The trouble is, rather like the noble Lord, Lord Merlyn-Rees, said, whatever the connection, it is not a simple one. Many people would love there to be a simple connection—violent videos, violent society; put
946
an equals sign between them and that sorts out the matter. Unfortunately, it is infinitely more complicated than that.
A piece of research came out recently, sponsored by the Home Office, suggested by ourselves and carried out by the University of Birmingham. It takes a group of violent offenders, a group of non-violent offenders and a group of perfectly innocent students who have not been in any trouble at all and examines the difference in their reactions to violent videos and movies. The interesting conclusion of that research is that it is not so much the effect of the video; it is the effect of the family background on violent offenders which triggers further violence. They may thereafter, indeed do by a large proportion according to this research, have much more liking for violent videos than the others, but it does not seem in any case to be the trigger. It is merely a concomitant of an already violent background. It is the family background that has infinitely more effect than any video in the world.
The whole question of appeal raised by the noble Lord, Lord Alton, is interesting. I shall consider and look at his proposals carefully; I have not seen them before. It is true that it is the industry which is allowed to appeal and it always appeals when we are either too strict or, in some cases, decide not to give a certificate at all. It is always the maker of the film who complains—and sometimes wins. On present scoring, the results are around 50-50 between those whose appeals have been successful and our decision of classification overturned and where our decision has been upheld. I like to think that, with an appeals committee, it is not too bad if one wins about half the time. If one wins all the time, it looks too autocratic and if one loses all the time, one is obviously getting it wrong. A record such as ours is nothing to be ashamed of.
I was extremely alarmed by the terms of the Motion tonight. I was pleased to hear the noble Lord, Lord Alton, say that he approved of Andreas Whittam Smith. I met him and he seems to be an amazingly good choice; he is an extremely civilised man. I add my wishes to those noble Lords who have spoken for his continuing success and good fortune in the BBFC.
8.36 p.m.
The Viscount of Falkland: My Lords, I too congratulate the noble Lord, Lord Alton of Liverpool, and the noble Lord, Lord Campbell of Croy, for thinking up such an ingenious device to get us here this evening and providing the momentum for what has been, unexpectedly so, a fascinating debate. I expected to disagree with some people quite violently. I have learnt a great deal and agreed with much of what each speaker said.
The debate is running somewhat wider than I expected. I too am glad that Mr. Whittam Smith is not the target of any criticism. He seems to have been widely received. I have not had the pleasure of knowing him personally, but I understand from Mr. Ferman and now confirmed by the noble Lord, Lord Birkett, that he is a highly suitable candidate to replace the noble Earl, Lord Harewood, in that position.

947
The question of video games, as has been said, is a complicated one. When we discussed these matters in 1984 the video game was in its infancy, if it had even been conceived. I do not remember it forming part of our discussions at all at that time. The games are extremely worrying where violence is concerned. As the noble Lord, Lord Birkett, explained, the British Board of Film Classification only comes into play when an element of the game falls within its remit.
The whole matter of influence on children is important. I have a child under the age of 10 and am much concerned. I have older children who have been through the whole process of being bullied by me into going out into the garden rather than watching television, and into being made to read, some with more success than others. With my six year-old I am more concerned at the moment about comic strips than anything else. I notice with him—it was the same with me as I recall—that he is more disturbed by real events. Perhaps that is an indication—I hope so—of his good adjustment in life. I too was more disturbed by real events than fictional events depicted in a violent manner.
I recall that when I was young I saw several films which disturbed me a great deal. But nothing disturbed me as much as seeing a real fight in the street at the age of six or drunks in the street attacking each other. Perhaps the distinction between reality and fiction has been blurred. There is certainly more violence available in fiction today to all of us, let alone to young children, than was available when I was young and probably more than there was 10 or 15 years ago.
I return to the subject of the British Board of Film Classification which interests and concerns me. I have had several discussions with Mr. Ferman over the years because I have an interest in these matters. I have found him at all times to he a stimulating, interesting, responsible and helpful person to deal with. However, I have not always agreed with him. I went to see him in relation to the classification of a film which I felt should not have been given a "15" classification and he kindly asked me to lunch to discuss the matter. My concern was not that it was violent for adults but that it was violent for 15 year-olds and certainly for those under that age. I shall not mention the name of the film because I doubt whether any of your Lordships saw it but it involved a good deal of violence in prison by prison warders on offenders, homosexual attacks and the like.
I found great difficulty with his answer but he said it with the utmost sincerity. I think it has a great deal to do with the misunderstandings that can occur between a body like the British Board of Film Classification and interested parties, whether government or private individuals. He said, "I agree with you that it was violent and we may have been on the border line. But the one thing which turned us to give that classification was that at the end there was redemption." If an enormous amount of disturbing violence has occurred it takes a rather adult perception to be able to say at the end of it, "My goodness, that was sickening but certain people redeemed themselves at the end of the picture."
948
I thought it a complicated intellectual argument. He may have been right; he may have been wrong. But it seems to me that we have moved on from there and the fuss which has arisen is interesting.
As I understand it—the noble Lord. Lord Birkett, will no doubt rise to his feet to correct me if I am wrong—in recent times, since the change of government, Mr. Ferman has seen fit to introduce a new classification for videos, an R18. I understand that two videos—I hasten to say that I have not seen them and I would not want to see them—were allowed into the country but were restricted. They were only to be sold in sex shops, which are carefully governed by statute, and would not be sold in the normal way. The videos were of course inspected by Her Majesty's Customs and Excise and found to be against its "laundry list", its criteria as to whether videos are legal. They were adjudged to be illegal. However, they came in—"Bat Babe" and "Ladies Behaving Badly", not original, noble Lords may think, and I do not think the content was particularly original.
I had a talk with Mr. Ferman about the content of the videos. I did not wish to be invited to lunch to see them but he told me that there was a difficulty. He has done the job for more than 20 years. The body is accountable to Parliament under the Video Recordings Act 1984. The chairman is appointed by the Home Secretary but Mr. Ferman has been there for 22 years. He is a great expert in his job and he has seen great changes over the years in what is and is not acceptable.
With regard to the two films, I would probably have come to the same conclusion as the customs officers, being, as I am, in late middle age. What Mr. Ferman described to me as being in the films would have rung alarm bells with me. For example, he described them as being soft porn films but going towards the line between soft porn and hard porn. In one of the films there was some penetration. There was also the male erection, which is now deemed to be not so shocking as not to be seen by people provided there is a context of consent and what takes place is non violent and legal. I took his point absolutely. But, as the noble Lord, Lord Merlyn-Rees, said, these are complicated matters. We have changing times. We have the perception that activities of a sexual nature are not now so alarming as they were some years ago. We have to decide on objective standards of what is acceptable in our society by way of decency and so on. We need a great deal more time than we have this evening to discuss very complicated issues.
I have been talking about the sexual area. I am not even discussing violence. As far as I am concerned, violence is out. I do not mind about sex. I would not want my six year-old boy to see "Bat Babe" and "Ladies Behaving Badly" but I would not want any of my children of whatever age to see violence; and I agree that one sometimes sees violence on ITV and BBC. These are complicated issues.
However, what worries me—I hope the noble Lord who is to answer the debate will be able to give guidance on this point—is the way in which the Home Secretary intervened. He felt that he had been let down

949
by the two vice presidents of the British Board of Film Classification in not objecting to this new classification of videos, even though the videos were to be shown in restricted circumstances, and that he expected them to be the eyes and ears of the Government. I find it worrying that he should have expected that.
The great advantage of the British Board of Film Classification is that it involves intelligent people bringing objective views to difficult matters. They have done that successfully over the years. Their responsibility to Parliament is very little. They have to produce a report annually, but I do not think we have seen a report since 1996, which is curious. I see that the noble Lord, Lord Campbell of Croy, has a copy with him. Apart from that, they are fairly unaccountable. I agree that they need to be made more accountable. But accountable to whom? I do not want them to be accountable to the Home Secretary. I do not want them to be accountable to politicians of any kind. I want them to be more accountable to Parliament so that we can have the debates which the noble Lord, Lord Merlyn-Rees, has said are necessary. However, I do not want to see the Home Secretary, as it were, reducing the arm's length approach—we use this a good deal nowadays in lottery and other matters--which government have had previously with the British Board of Film Classification.
I have spoken for far too long but there is another matter on which I would appreciate a response from the noble Lord who is to reply. If government become more involved in these matters and we get what is effectively more censorship, although it may not be termed censorship. how will we stand with regard to our obligations under the European Convention on Human Rights? Article 10 of the convention provides for redress against the restriction by any state authority of the freedom to express ideas and to provide information. That includes ideas which shock, disturb and offend. That is another element in a very complicated area that will need to be dealt with, not necessarily in debates in your Lordships' House but including debates in your Lordships' House.
I do not envy the Government. I understand what they want to do. I understand exactly what the noble Lord, Lord Alton of Liverpool, wants to do, although he and I would probably not agree on the lengths to which we should go to protect children against all the materials which he described to the House tonight.
We have these obligations. Other countries seem to order their affairs in a different way so far as concerns sex. In France it seems that all systems are go and no one seems to complain. Pornography is regularly available. It is available on Canal-Plus at night. One night when I was at a film festival in France and could not sleep I turned on my television in the early hours of the morning. I turned it off within seven seconds. What I saw in seven seconds gave me the kind of nightmares that my small child now has as a result of whatever happened at school that day. Other countries too—Holland is an example—have adjusted themselves to a measure of freedom in this area. They have obviously concluded that the effect on children and the population as a whole does not require serious attention. We do not
950
share that view in this country. I certainly do not share that view as regards violence. It is a very serious question. I am very thankful that we have had the opportunity of discussing it. I look forward very much to the amendment to the Crime and Disorder Bill which comes to us in the middle of this month. Again, we shall not have enough time to develop a lot of very complicated issues which arise in this area.
My party is very concerned about striking the right balance. I believe that all parties are keen to do that, but they have different approaches. I hope that we can reach some consensus in your Lordships' House and that that will lead to some consensus in the country with the introduction of a proper approach to the whole business of violence and sex on television and video.
Lord Birkett: My Lords, before the noble Lord sits down, I rise not to tell him that he is wrong, as he invited me to do, because he is not, in the matter of the R18. I simply say that we believed at the BBFC that we were in step with the authorities—that is to say, Customs and the police. It turned out that we were not. It is plainly absurd that we should be out of step and the situation has been, as they say, "regulated" since then.
8.51 p.m.
Lord Skidelsky: My Lords, I am very aware of the passage of time and the shortness of the hour. I hope not to detain the House for too long. Despite the wording of the Motion of the noble Lord, Lord Alton, I am assuming that the two Motions together simply seek to provide an opportunity for considering how well the present classification arrangements are working.
Even this short debate has revealed a variety of opinions concerning the effectiveness of the controls currently in place and about the effects of some videos, colloquially known as "video nasties" as well as video games, on the character and behaviour of those, especially young people, exposed to them. My noble friend Lord Campbell of Croy and the noble Lord, Lord Alton of Liverpool, in powerful speeches have voiced concerns which are surely shared beyond this House. The gist of their arguments seems to be that certain videos do harm both to vulnerable individuals and to society by gratifying violence and by causing some people to commit illegal acts. The implication of their arguments is that there has been an increase in anti-social and illegal behaviour as a result of exposure to these filmic experiences.
My noble friend Lord Campbell of Croy makes a powerful point in emphasising the special character of participant games like Grand Theft Auto. Those noble Lords point to weaknesses in the present regulatory system and want it strengthened. The noble Lord, Lord Alton, seeks to amend the Crime and Disorder Bill later this week to allow rights of appeal against the classification of video works, although I am still not quite sure to whom he would extend that right of appeal. To extend it to any citizen in the land would create something which was quite unworkable.
Lord Alton of Liverpool: My Lords, I am grateful to the noble Lord for giving way. I would not extend

951
the right to every citizen in the land, but to designated organisations to whom the Home Secretary would be able to designate by letter in precisely the way that is being done this evening.
Lord Skidelsky: My Lords, I thank the noble Lord for that clarification. However, the noble Lords, Lord Merlyn-Rees, Lord Birkett and the noble Viscount, Lord Falkland, have been sceptical about any simple link between viewing behaviour and actual behaviour. The noble Viscount mentioned the dangers of censorship inherent in any tightening of the regulations.
Perhaps I may now develop one or two points of my own. It should be noted that the present regulatory system, which includes classification, banning and cutting, already implicitly accepts that screen violence may have an important effect on viewers, even if it cannot be quantified, because otherwise one would not have a classification system. The controls are naturally more rigorous for videos because of the much greater difficulty of controlling access.
Before proceeding to stronger regulation we have to be persuaded that there is a definite link between watching certain kinds of video film and certain types of criminal behaviour. We also have to be persuaded that even if such a link were established it would be desirable or possible to go beyond the present regime in denying households access to this material.
As regards the first point—I am not an expert in this area because I only repeat what I have read and I am sure that other noble Lords have read a great deal more than I have—it seems to me that the majority view of researchers is that the link between specific filmic material and behaviour is both unproved and unprovable. I shall not repeat what the noble Lord, Lord Birkett, has already said about this. I merely point to the well-known difficulty of separating the effects of an element such as violence, sexual depravity or stealing, from the context in which it appears and, just as importantly, the context in which it is viewed.
I wonder whether noble Lords believe that playing with toy soldiers in the past—I do not believe that children do so as frequently today—led to an increase in militaristic attitudes and to a greater desire to kill foreigners or whether playing cops and robbers or cowboys and Indians increased the level of violence in society. The noble Viscount has pointed to the decline in playground violence over the years and I can confirm that. Schools are much more peaceful places today than when I was at school. The general culture of society has become steadily less violent although that does not mean that we have not had an increase in certain types of violent crime.
I do not want to be complacent. The fact that one cannot prove an assertion does not mean that it is not true. In such cases one has to fall back on common sense and one's best judgment. I cannot believe that an unrelieved diet of video nasties or the kinds of games mentioned by some noble Lords, is good for either
952
individual character or society. Here the finger of suspicion points to households and their cultural setting which allow this diet to take place.
The noble Lord, Lord Birkett, referred to the report of Dr. Kevin Browne of Birmingham University which was commissioned by the Home Office. The one reasonably secure correlation brought out by that report is between criminal behaviour and domestic violence, family dysfunction and low intellectual ability. It is in such families that there is likely to be the least control over the viewing habits of young people and where screen violence is likely to have the greatest impact on behaviour since it is consistent with, rather than opposed to, the reigning cultural norms of those households.
But that is no argument for changing a regulatory system which works satisfactorily for the great majority. I agree with the noble Lord, Lord Birkett, in placing emphasis on education but, having said that, I am somewhat sceptical about how much good it would do in families particularly at risk.
My Lords, in this matter we have to balance the right of people in a free society to watch what they want with the scale of the social problem which such freedom may create. The British Board of Film Classification already operates the toughest censorship regime in Europe. It already removes more material from video films than many people find desirable. Apart from desirability, I am not sure that it is possible to toughen the regulations without creating a black market. The attempt to plug all the channels through which undesirable electronic material enters households seems to be a hopeless undertaking.
I very much welcome the suggestion that we should discuss these problems further in a Select Committee but, for the time being, I am not persuaded that we do not have about the right balance between freedom and regulation. Certainly, I have not heard anything tonight that convinces me that we ought to disturb that balance.
9 p.m.
Lord Williams of Mostyn: My Lords, I am grateful to both the noble Lord, Lord Campbell of Croy, and the noble Lord, Lord Alton of Liverpool, for raising this matter this evening and in particular for the approach of the noble Lord, Lord Campbell of Croy, who has rightly been concerned with various problems relating to video games. Time is passing and other noble Lords wish to resume their duties, so perhaps I may be brief. As the noble Lord, Lord Skidelsky, observed a moment ago, the problem of classification is that of drawing a balance between the right of the individual to receive material even when that material may be offensive to others, and the necessity to protect vulnerable people in our society.
That is the rationale behind the classification system. Both the noble Lord, Lord Campbell of Croy, and the noble Lord, Lord Alton of Liverpool, spoke about classification and the deficiencies of what happens in the home. I suggest that that is not an attack on the classification system because whatever the classification system one establishes, however rigorous or liberal, ultimately I cannot envisage any control by law which would make parents not allow their children to watch

953
inappropriate material. Added to that, one should not overlook the fact to which the noble Viscount, Lord Falkland, referred, that there are many programmes on the television late at night containing material such as we are considering. Happily, I am ignorant of it because I always go to sleep early—often in the middle of television programmes which seem to have a hypnotic and narcoleptic effect on me, quite unlike your Lordships' House, of course! A good deal more truly offensive material is shown on the television—it can be recorded, and frequently is—than is available on classified videos.
I should like to express my gratitude to all noble Lords, not least the noble Lord, Lord Birkett, for the generous and gracious tributes that have been expressed about the quality of Andreas Whittam Smith. It is gratifying to the Home Office that the selection made by the Home Secretary, after proper consultation and a degree of "Nolan-ing", is so well regarded.
The noble Lord. Lord Alton, will acquit me of any discourtesy if I do not consider now the amendments that he intends to move on another occasion to the Crime and Disorder Bill. I believe that then would be the proper occasion for such a debate.
One or two questions have been asked about the lack of efficient and effective controls on sales in video shops. That is certainly a mischief, but the noble Lord, Lord Merlyn-Rees, and Miss Lavinia Carey, the director of the British Videogram Association, and I recently spent a day together in the rain going round video shops—not the most enticing of opportunities, but quite informative because well-run video shops insist on proof of age. They train their staff properly and have such controls as make it virtually impossible for inappropriate sales to be made. They are perfectly well aware of the criminal sanctions and, perhaps more fundamentally, of the damage to their reputation that could follow. If there is evidence of criminal practice, it should be reported to trading standards officers who have the powers to prosecute in such cases.
The noble Viscount, Lord Falkland, asked me two questions. The first was whether the Home Secretary had expected the president and vice-president of the BBFC to be his eyes and ears. My right honourable friend did not suggest that. He said, reasonably, that he expected that if the board was intending to alter the R-18 classification—that is, restricted material only to be sold by licensed sex shops—he would expect to be consulted. There was a lack of consultation between the board, the police and Customs. Again, the noble Lord, Lord Birkett, generously said that there was a glitch in communications. He rightly said that measures had been taken to ensure that the board is involved more thoroughly in discussions with the police, the prosecuting authorities and Customs and Excise.
As the noble Viscount said, times have changed. Some centuries ago, the material available to his noble ancestor would have been books, and books alone, in his library at Great Tew when he rightly said,
"On rainy days. I pity unlearned men".
Most young people and children now do not derive their images, thoughts and entertainment from books. That is unfortunate, but we have to deal with it. The truth is that
954
society generally, in terms of what is available, is more violent and more sexually open. We have to deal with that. I believe that most of your Lordships have concluded that the balance is not too far wrong.
The noble Viscount also asked whether classification was consistent with Article 10 of the European Convention on Human Rights. I had hoped that after Third Reading of the Human Rights Bill last Thursday, I would not have to recite Article 10 ever again in my lifetime, but Article 10 is subject to the proviso—I paraphrase roughly from memory—that there can be restrictions on the freedom of expression where that is necessary in a democratic society. We believe that classification to protect the vulnerable is reasonably necessary in a democratic society, so that the Article 10 right to freedom of expression is not supreme.
The two noble Lords in whose names the Motions stand on the Order Paper have owned up and confessed this to be a device rather than a particular objective to ensure that Andreas Whittam Smith would not be the designated authority. It is useful to have such discussions on these occasions. The truth is that no human mind is capable of striking a perfect balance. The balance has to be adjusted periodically. My right honourable friend the Home Secretary decided that it was time that Mr. Whittam Smith should be appointed, that he had the necessary qualities of openness, decency, scruple and conscience to carry out these difficult obligations, and he therefore endorsed his appointment as president of the board. Currently there are two vice-presidents to be designated. One hopes that that can be done quite soon.
Even in the brief time since Andreas Whittam Smith took up his work in January of this year he has been willing to be open-minded and decisive. The noble Viscount is wrong to say that we have not seen a report since 1996. I believe that the document which the noble Lord, Lord Campbell of Croy, flourished was the most recent report to be laid but not until 27th January of this year. I agree with the noble Viscount that that is very late because it should be laid as soon as reasonably practicable after the end of a current year. It is very significantly out of date. That is a matter which Mr. Whittam Smith has already accepted. The Home Secretary believes it is very important that the annual report should be available to be laid before both Houses of Parliament as soon after the relevant chronological period.
I hope that I have covered all the concerns expressed by your Lordships. There will be another occasion to debate the question of appeals. All I say about appeals—I break my own self-denying ordinance—is that not everyone will take the same view as the noble Lord, Lord Alton of Liverpool, if appeals are open to all, because significant lobbies believe that the appeals system is far too restrictive and on appeal will therefore urge that cuts should be restored and that classification should be more liberally attended to. Therefore, I am not sure that the noble Lord would be happy if in all circumstances every conceivable interest were represented on appeals. However, that may be a dispute

955
for another day. I am most obliged to the noble Lord, Lord Campbell of Croy, and the noble Lord, Lord Alton of Liverpool, for giving us this opportunity.
Lord Campbell of Croy: My Lords, I am extremely grateful to all speakers who have taken part in the debate. I should like to make clear that for my part I was concerned with a single computer game. My argument was not concerned solely with violence. Car crimes can be carried out without any violence. However, they are exasperating to much of the population. The game to which I referred has been released for only two months or less, so there has been no time in which to try to relate it to any increase in those crimes.
The noble Lord, Lord Birkett, who has been a member of the Classification Board, confirmed my point that the promoters of these computer games took the attitude that they were just a joke. Where does it stop? Does it extend to burglary or mugging old ladies? Almost any offensive crime could be treated simply as a joke.
I am most grateful particularly to the noble Lord, Lord Williams of Mostyn, who has replied extremely carefully and fully to the questions that I have raised on this subject over several months. I commend the Motion to your Lordships.
On Question, Motion agreed to.
Lord Alton of Liverpool: My Lords, I should like to thank noble Lords for their contribution to the debate this evening. In particular, I thank the noble Lord, Lord Williams of Mostyn, for his reply.

Competition Bill [H.L.]
9.10 p.m.
Consideration of amendments on Report resumed. Clause 19 [Excluded cases]:
Lord Simon of Highbury Lord Simon of Highbury moved Amendments Nos. 25 to 27:
Page 10, line 40, leave out from beginning to second ("or") and insert ("providing for one or more additional exclusions;").
Page I I, line I. leave out ("case") and insert ("provision"). Page I I. line 2, at end insert—
("( ) The Secretary of State may at any time by order amend paragraph 6 of Schedule 3 with respect to the Chapter prohibition.").
The noble Lord said: My Lords, I beg to move Amendments Nos. 25 to 27 en bloc.
On Question, amendments agreed to.
Lord Fraser of Carmyllie Lord Fraser of Carmyllie moved Amendment No. 28:
After Clause 19, insert the following new clause
EXEMPTED CONDUCT
(" . The Chapter II prohibition does not apply to any conduct arising from the performance of an agreement which is exempted from the Chapter I prohibition in accordance with section 4.").
The noble Lord said: My Lords, when noble Lords considered the amendment in my name on the subject of vertical agreements I indicated that I was grateful to the Minister for providing me with a copy of the expert report on how the European Court and the Commission approached such matters. I do not depart from my gratitude to the Minister for that. However, after the dinner hour I am in a slightly more suspicious frame of mind. The suspicion underlying Amendment No. 28 is that if and when the Government bring forward a proposal that allows for exemptions or exclusions from the Chapter I prohibition on vertical agreements they may be a little relaxed about them because they will reassure themselves that in any event any matter of which they disapprove will be caught under a Chapter II prohibition.
With the insertion of a new clause, the amendment seeks to provide that the Chapter II prohibition does not apply to any conduct arising from the performance of an agreement which is exempted from the Chapter I prohibition in accordance with Clause 4.
I appreciate that in some respects the amendment is premature in as much as we have not seen what are the exclusions. I should like reassurance from the Minister that where such an exemption is allowed for, there will not be, as it were, a back door through which the conduct can be looked at in terms of a Chapter II prohibition. I do not believe that the argument needs any elaboration. If the Minister can give some reassurance that would be helpful. I beg to move.
9.15 p.m.
Lord Simon of Highbury: My Lords, we debated the issue of the relationship between the two prohibitions during the first Committee day in response to an amendment proposed by the noble Lord, Lord Kingsland. As I said then, the two prohibitions introduced by the Bill will operate hand in hand. Essentially they will have the same relationship to each other as do Articles 85 and 86 of the treaty. That relationship is well established and works satisfactorily in practice.
On the basis of EC jurisprudence, the director cannot grant an agreement an exemption under the Chapter I prohibition if in doing so he would be exempting something that appears to be prohibited under the Chapter II prohibition. There should be no specific provision in the Bill providing protection from the Chapter II prohibition for agreements which have obtained an individual exemption. Parties who have obtained an individual exemption will have the benefit of knowing that the director has had to take account of the Chapter II prohibition in assessing their agreement.
Of course an exemption cannot provide a blank cheque for any type of anti-competitive behaviour in the future. The relevant market might change materially in an unforeseen way, for example, and the agreement might become seriously harmful. Action against the agreement might then become possible either by withdrawing the exemption or under the Chapter II prohibition, but only of course if the relevant conditions and safeguards were met. It would be wrong to place

957
any legal bar on the fact of the Bill preventing action in such circumstances. I therefore invite the noble and learned Lord to withdraw the amendment.
Lord Fraser of Carmyllie: My Lords, I would not go so far as to say that it would be wrong to have such a legal bar, but as I said in my opening remarks, it would be curious to try to establish the relationship until we know what will be the scheme for exclusion or exemption. So I shall withdraw the amendment.
I hoope that the Minister will take the amendment as a shot across his bows. As he seeks to work out what would be the best arrangements for exemptions or exclusions for vertical agreements, I hope that he will understand that we shall be looking to see that there is as clear as possible an arrangement between the Chapter. I and Chapter II prohibitions. He offered some reassurance when he said that if an exemption were to be granted on an individual basis, whoever has the responsibility for granting it would have been required to look to see if there were any problem with a Chapter II prohibition. On that basis, I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Schedule 1 [Exclusions: Mergers and Concentrations]:
Lord Simon of Highbury Lord Simon of Highbury moved Amendment No. 29:
Page 39. line 26, after ("1973),"), insert ("or
(b) is directly related and necessary to the attainment of the result mentioned in paragraph (a),").
The noble Lord said: My Lords, in moving this amendment I shall speak also to Amendments Nos. 30 and 31. In Committee, the noble Lord, Lord Kingsland, suggested that ancillary agreements to mergers should be excluded from the Chapter II prohibition as well as the Chapter I prohibition. I was grateful to the noble Lord for raising the matter.
As I indicated at the time, we would not normally expect the entering into of restrictions ancillary to a merger to fall foul of the Chapter II prohibition. But I do not believe we can rule that out, and it is therefore right to provide an exclusion. Amendments Nos. 29, 30 and 31 have that effect. I beg to move.
Lord Kingsland: My Lords, is this a moment when I must thank the Minister for his kind concession? I am obliged to him.
On Question, amendment agreed to.
Lord Simon of Highbury Lord Simon of Highbury moved Amendments Nos. 30 and 31:
Page 39, line 34, after ("conduct") insert ("(either on its own or when taken together with other conduct)").
Page 39, line 35, at end insert ("or
(b) it is directly related and necessary to the implementation of the transfer.").
On Question, amendments agreed to.
Lord Simon of Highbury Lord Simon of Highbury moved Amendment No. 32:
Page 39, line 40, at end insert—

("(IA) If the Director is considering whether to give a direction under this paragraph, he may by notice in writing require any party to the agreement in question to give him such information in connection with the agreement as he may require.

(1B) The Director may give a direction under this paragraph only as provided in sub-paragraph (IC) or (2).

(1C) If before the end of such period as may be specified in rules under section 49 a person fails, without reasonable excuse, to comply with a requirement imposed under sub-paragraph (IA), the Director may give a direction under this paragraph.").

The noble Lord said: My Lords, in moving Amendment No. 32, I shall speak also to Amendments Nos. 33, 71, 160, 162, 163, 187, 188, 189, 190 and 220. The first two amendments explain the exclusion and clawback which we have put in place. They will be relevant, for instance, to issues under Clauses 21 and 22 which we discussed earlier.
Amendments Nos. 160, 162, 163, 187, 188, 189, 190 and 220 define information which is required by the director in making assessments of the provisions under Amendments Nos. 32 and 33 for the definition of clawback.
There is an artificial and unnecessary rigidity. It would be better if it were generally enabled to make a notification before any exclusion were lost. Amendment No. 71 provides a power for regulations to be made which would enable provision for that effect. They are all technical amendments. I beg to move.
On Question, amendment agreed to.
Lord Simon of Highbury Lord Simon of Highbury moved Amendment No. 33:
Page 39, line 41, leave out ("give a direction only") and insert ("also give a direction under this paragraph").
On Question, amendment agreed to.
Schedule 2 [Exclusions: Other Competition Scrutiny]:
Lord Simon of Highbury Lord Simon of Highbury moved Amendment No. 34:
Page 41, line 13, at end insert ("to the extent to which the agreement relates to the regulating provisions of the body concerned.").
The noble Lord said: My Lords, in moving Amendment No. 34, I speak also to Amendments Nos. 35 to 45 and Amendment No. 48. They are technical amendments to include the Financial Services Act within the scope of the Bill. They also cover a related provision for the European Economic Area in addition to the European Union. They provide a geographic extension. I beg to move.
On Question, amendment agreed to.
Lord Simon of Highbury Lord Simon of Highbury moved Amendments Nos. 35 to 45:
Page 41, line 14, at beginning insert ("Subject to subsection (2A)").
Page 41, leave out lines 19 to 21 and insert ("to the extent to which the agreement relates to the regulating provisions of the body concerned.

959

(2A) The exclusion provided by subsection (2) applies only if

(a) the body has applied for a recognition order in accordance with the provisions of this Act; and

(b) the application has not been determined.

(2B) The Chapter 1 prohibition does not apply to a decision made by—

(a)a recognised self-regulating organisation,

(b)a recognised investment exchange, or

(c)a recognised clearing house,

to the extent to which the decision relates to any of that body's regulating provisions or specified practices.

(2C) The Chapter 1 prohibition does not apply to the specified practices of

(a) a recognised self-regulating organisation. a recognised investment exchange or a recognised clearing house; or

(b) a person who is subject to?

(i) the rules of one of those bodies; or

(ii) the statements of principle, rules, regulations or codes of practice made by a designated agency in the exercise of functions transferred to it by a delegation order.").

Page 41. line 34. after ("provisions") insert ("or specified practices").
Page 41, line 45, leave out ("(3) and (4)") and insert ("and (2B) to (4)").
Page 42, leave out lines 2 to 11 and insert

("(a) in relation to a self-regulating organisation, any rules made, or guidance issued, by the organisation;

(b) in relation to an investment exchange, any rules made or guidance issued by the exchange;

(c) in relation to a clearing house, any rules made. or guidance issued, by the clearing house:

"specified practices" means

(a) in the case of a recognised self-regulating organisation, the practices mentioned in section 119(2)(a)(ii) and (iii) (read with section 119(5) and (6)(a)):

(b) in the case of a recognised investment exchange, the practices mentioned in section 1 19(2)(b)(ii) and (iii) (read with section 119(5) and (6)(b));

(c) in the case of a recognised clearing house, the practices mentioned in section 119(2)(c)(ii) and (iii) (read with section 119(5) and (6)(b));

(d) in the case of a person who is subject to the statements of principle, rules, regulations or codes of practice issued or made by a designated agency in the exercise of functions transferred to it by a delegation order, the practices mentioned in section 121(2)(c) above (read with section 121(4);").

Page 42, leave out lines 15 to 21.
Page 42, line 28, after ("body") insert ("to the extent to which it relates to the rules or guidance of that body relating to the carrying on of investment business by persons certified by it ("investment business rules")").
Page 42. line 29, leave out ("between undertakings").
Page 42, line 35, leave out from ("by") to end of line 37 and insert ("that body's investment business rules").
Page 42, line 39, leave out ("the agreement") and insert ("an agreement to which this section applies").
Page 43, line 36, leave out ("that Act") and insert ("the Competition Act 1998").
On Question, amendments agreed to.
Baroness Hamwee Baroness Hamwee moved Amendment No. 46:
Page 46, line 48, at end insert
("COPYRIGHT
Copyright, Designs and Patents Act 1988
The Chapter I prohibition does not apply to any agreements, decisions or practices relating to the licensing of copyright works where one or more of the parties is under the jurisdiction of the Copyright Tribunal pursuant to section 149 of the Copyright, Designs and Patents Act I988.").
The noble Baroness said: My Lords, in moving Amendment No. 46, I shall speak also to Amendments Nos. 61, 62 and 70. They were grouped with Amendment No. 4, which I did not move. I hope that I shall not confuse the House unduly by removing Amendment No. 46 from its place in the list.
I am briefed by British Music Rights, an organisation whose members consist of the Music Publishers' Association, the Alliance of Composer Organisations, the Performing Right Society and the Mechanical-Copyright Protection Society. I declare an interest in that I am a partner in a firm of solicitors which has a substantial practice in the entertainment industry.
The amendments are supported by the British Phonographic Industry. They are relevant to those who create and deal in copyright material. Although my briefing has come from the music industry, I am asked to say that the Publishers Association—that is the book publishers—wholeheartedly support the amendments concerned with copyright licensing.
Those who have briefed me fully understand and support the objectives of the Bill. However, they are concerned with the effect on their industry. They are concerned that the effect could be to stifle the industry with heavy-handed regulation, which I am well aware is quite the opposite of what the Minister is seeking to achieve. I have seen in the Official Report his use of the term "administrative overload" on a number of occasions.
I hardly need remind your Lordships of the success of the UK's music industry. Its creative success is being celebrated this evening at the Brit Awards by those who are probably in the middle of dinner and applauding the winners of those awards. Its creative success is translated into economic success and the music industry is a very substantial net earner of foreign exchange.
The economic and creative root of the music business is the right to control a copyright work. Some of the amendments in this group deal with the use of collecting societies. Those societies are a matter of convenience for more than one part of the sector. Collecting societies are helpful to individual creators and publishers. The administration, licensing and collection involved would be a mammoth task for individuals. The infrastructure which is provided by collecting societies is designed to support the very substantial number of medium and in particular small enterprises which flourish within the business.
I had not known, until I was briefed for this evening, that the great majority of the members of the Music Publishers' Association have businesses of less than

961
£500,000. Collecting societies are convenient for users as well as for the licensees. They help them to find the source of a licence and give them certainty about the terms; for example, the BBC seeking licences for short clips of music for a programme. The ease of doing that means cost savings in the system and those savings are passed on to members.
Finally, blanket licensing creates a bargaining position. The merits of collective licensing were considered by the Monopolies and Mergers Commission which reported in 1988 on the operation of Phonographic Performance Limited and other collecting societies. The report of the MMC stated:
"the continued existence of the bodies … has been endorsed in many different environments because the convenience they offer to both the owner and the user of copyright is unlikely to he matched by any other means. Decisions of the European Court of Justice and the EC Commission make clear that the existence of collective licensing bodies is compatible with Article 86 of the Treaty of Rome, although the manner in which the bodies' functions are performed must comply with the Article's terms".
Of course, that is understood.
Amendments Nos. 46 and 61 seek to disapply the Chapters I and II prohibitions where the Copyright Tribunal has jurisdiction. Under the Copyright, Designs and Patents Act, the Copyright Tribunal deals with disputes between copyright owners and those who wish to use copyright works and can make orders varying the terms of licence, settling certain royalties granting certain licences and so on.
The tribunal will continue and to that extent, this country is in a different position from that of our European partners. I understand that the tribunal is unique to the United Kingdom; or, to put the matter another way, those who are concerned with copyrights will, because of the continued operation of the Copyright Tribunal as well as the regime of this Act, will be subject to a double jeopardy. In such circumstances there is concern that the Bill, and in particular Clause 58, is insufficient to protect those who work in the industry. The Minister may say that the tribunal is not concerned with competition and that it is dealing with a parallel activity. However, because of the matters which can be referred to it, I would say that the effect is that it is concerned with competition.
Amendment No. 62 deals with recommendations by trade associations. I should say at once that I understand the dilemmas of referring to particular organisations within amendments. I would not seek to press the amendment, which deals in particular with the position of the Music Publishers' Association, although it is intended to be more extensive. That association has for years negotiated agreements with, among others, the Association of British Orchestras, which looks after professional musicians, the National Federation of Music Societies, which represents amateurs, and the BBC. It makes recommendations about the terms of agreements; but only recommendations. There is no obligation on members to accept those recommendations. However, in practice, for reasons of convenience to which I have alluded, most do take note of them.
Your Lordships will understand that, by its nature, music does not come in standard packages and it is helpful to have a body which works closely with representatives of users to find ways of making systems for hiring sheet music simpler and introducing certainty into the tariffs and pricing structure. The benefits to the amateur as well as the professional sector are also reflected in the benefits to the consumer—in this case the audience, the listener. Exempting recommendations by trade associations would, I believe, mean further streamlining administration and would, therefore, be in the public interest.
Amendment No. 70 refers to individual licensing. It seeks to bring individual licensing within the block exemptions. Perhaps I should say here that I hope the Minister can give us some words of assurance about block exemptions in this area. I well understand the Government's reluctance to attempt to write a UK-specific version of Article 85. I am not trying to challenge that approach tonight. Nevertheless, I hope that I shall receive some words of comfort this evening.
The creator of a work is the copyright owner and he has an absolute right to control the product of his creation. However, individuals find it very difficult to license and control their work, and especially to monitor its use. I am sure that a moment's thought will enable your Lordships to understand how hard it would be for an individual to ensure that he is paid for the use of a piece of music when it is not possible for him to listen, for example, to every radio station for 24 hours a day. Through my practice, I have had much experience of clients whose creativity goes hand in hand with a certain innocence about business matters.
Therefore, individuals and publishers will license collecting societies which manage copyright works. These are de facto monopolies, but they operate in the interests both of the owners and the users of the works. The amendment has been put forward because the industry is seeking certainty. For example, will all copyright agreements be notifiable? The cost and contractual uncertainty involved is another concern of the industry. The industry is also concerned because it understands that the European Commission at present processes to conclusion less than 60 arrangements a year and it has heard that the Office of Fair Trading does not anticipate being able to do better in that respect. There will be real resource problems if every contract needs notification. I suggest that the provisions would be a direct threat to the current cost structures. I believe that the exclusion regarding individual licensing of copyright works would be compatible with the Government's policy in respect of vertical agreements.
I appreciate that I have taken up a good deal of your Lordships' time, but this still feels like a rather swift canter through some of the areas of copyright which give rise to concern. I believe that this matter is viewed with concern by some in government. As I say, I hope that I may tempt the Minister to give some words of assurance tonight. I appreciate that he must have an appallingly crowded schedule given the number of areas covered by the Bill, but I hope that he can arrange a meeting with those in the music industry to discuss their

963
concerns. I am sure that would be extremely welcome as they wish to get this matter resolved satisfactorily. I beg to move.
Lord Fraser of Carmyllie: My Lords, I do not wish to add anything of substance to what has already been said by the noble Baroness. However, her suggestion as regards a meeting is a constructive one. I am certainly aware of the concerns that have been expressed and which she has so articulately spelt out. If those concerns could be met, I have no doubt that would be of considerable interest to the industry.
Lord Simon of Highbury: My Lords, I wonder whether I detected in the opening remarks of the noble Baroness, Lady Hamwee, that she might rather have been at the Brits award having an enjoyable evening than singing this song tonight. I appreciate the clear way in which the points were expressed. I do not intend to answer all of them tonight, but I certainly take seriously the invitation to meet and discuss some of the finer detail. I shall make one or two points. First, I should make it clear that copyright agreements are already subject to Articles 85 and 86 of the treaty. We need to bear this carefully in mind. Agreements made void by Article 85 cannot be made valid by an exclusion from a domestic provision.
Copyright, like other forms of property, can be abused. The European Court has sought to strike a proper balance in this area. I see no reason to depart from the principles established, and Clause 58 of the Bill will ensure that UK law follows the same path. Accordingly there is no reason to believe that the Bill would interfere with such agreements unless they are found to be appreciably anti-competitive and cannot satisfy the exemption criteria in the Bill.
I can assure noble Lords that the wording of Article 85 has been given a wide interpretation by the European Court of Justice, as the study prepared by Professor Whish—to which I referred earlier—demonstrates. This wide interpretation will be imported into the domestic system by virtue of the governing principles clause in the Bill, Clause 58. I see no reason why justified copyright agreements, even if they were restrictive in some respects, could not satisfy the exemption criteria in Clause 9 as they stand.
The noble Baroness has argued that the existence of the Copyright Tribunal in the UK provides a reason for our not following the position at European level. Amendments Nos. 46 and 61 would have the effect of excluding those matters which are within the jurisdiction of the Copyright Tribunal from the scope of both the Chapter I and Chapter II prohibitions. The role of the Copyright Tribunal is, however, different from that of enforcing competition law. Its role is to resolve disputes between copyright owners acting collectively and those who wish to use copyright works. In doing so, it is not required to apply a competition test, and therefore it would be wrong to see the Copyright Tribunal as a competition scrutiny regime. Moreover, I understand that the tribunal adjudicates on aspects of an agreement
964
or potential agreement as it affects the two parties to the agreement and not on any wider anti-competitive effects.
Amendment No. 62 achieves an effect which extends far beyond the sphere of music rights. It would exclude from the prohibition recommendations made by trade associations to their members so long as those reflect the terms of an agreement negotiated between the trade association and a third party; and it would apply across the economy. My view is that the effect of such an exclusion would be to open a loophole which would allow lawyers to frame anti-competitive agreements in a manner which would fall within the scope of the exclusion. This would significantly undermine the prohibitions.
I remain unconvinced that it would be desirable if the Bill were to afford any special treatment to the field of copyright or music rights, notwithstanding, as the noble Baroness says, the great importance of the industry in its competitive position for our UK performers and writers. It would certainly be wrong to exclude certain recommendations of trade associations as proposed by Amendment No. 62.
I refer to Amendment No. 70 and the question of exemption. Clause 9 of the Bill makes provisions to ensure that those agreements which have sufficient countervailing benefits will be eligible for an exemption. Amendment No. 70 would alter the exemption criteria in the Bill to add a specific reference to the facilitation of copyright works.
Criteria in the clause are already framed in a broad manner to allow for an exemption on the basis that an agreement improves production or distribution or that it promotes technical or economic progress. It is the fact that they do not mention any specific sector of the economy that is the strength of the criteria. Regardless of the sector, where agreements satisfy the criteria they will be able to benefit from an exemption.
Having given that rather brief response, I wish to underline again that I think there are technical matters within this wide-ranging issue of copyright relative to the Competition Bill that it would be wise for us to discuss. I hope that with that in mind at this stage the noble Baroness, Lady Hamwee, will be prepared to withdraw the amendment.
Baroness Hamwee: My Lords, these are issues which may be more conveniently dealt with at this stage of the Bill within the forum of a meeting. I shall not seek to respond to the Minister's answer save to say that the entertainment in your Lordships' House today has outshone anything that anyone could hope to be enjoying this evening at the Brit Awards. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Schedule 3 [General Exclusions]:
Lord Simon of Highbury Lord Simon of Highbury moved Amendment No. 47:
Page 47, line 14, at end insert
("Section 21(2) agreements
1 A.—(1) The Chapter I prohibition does not apply to an agreement in respect of which a direction under section 21(2) of the Restrictive Trade Practices Act 1976 is in force immediately before the coming into force of section 2 ("a section 21(2) agreement").
(2) If a material variation is made to a section 21(2) agreement, sub-paragraph (I) ceases to apply to the agreement on the coming into force of the variation.
(3) Sub-paragraph (I) does not apply to a particular section 21(2) agreement if the Director gives a direction under this paragraph to that effect.
(4) If the Director is considering whether to give a direction under this paragraph, he may by notice in writing require any party to the agreement in question to give him such information in connection with the agreement as he may require.
(5) The Director may give a direction under this paragraph only as provided in sub-paragraph (6) or (7).
(6) If before the end of such period as may be specified in rules under section 49 a person fails, without reasonable excuse, to comply with a requirement imposed under sub-paragraph (4), the Director may give a direction under this paragraph.
(7) The Director may also give a direction under this paragraph if he considers

(a) that the agreement will, if not excluded, infringe the Chapter I prohibition: and

(b) that he is not likely to grant it an unconditional individual exemption.

(8) For the purposes of sub-paragraph (7) an individual exemption is unconditional if no conditions or obligations are imposed in respect of it under section 4(3)(a).
(9) A direction under this paragraph

(a) must be in writing;

(b) may be made so as to have effect from a date specified in the direction (which may not he earlier than the date on which it is given).").

The noble Lord said: My Lords, this amendment is grouped with Amendment No. 217.
In Committee, my noble friend Lord Currie suggested that agreements which had received a direction under Section 21(2) of the RTPA should be given a permanent exclusion from the Chapter I prohibition, rather than the five-year transitional exclusion at present provided for in the Bill. I was grateful to my noble friend for raising the matter.
Many of the respondents to the August consultation document had emphasised the effort and cost that would be required to review such agreements, even after a five-year transitional period. This was the largest element of the non-recurring compliance costs in the compliance cost assessment on the Bill. I was therefore pleased to be able to say that we would bring forward an amendment at Report stage.
This amendment fulfils that commitment and provides an exclusion for agreements in respect of which at commencement a direction under Section 21(2) RTPA is in force. It includes the power for the director to claw back the exclusion in certain circumstances, as I said in Committee it would. It includes a power for the director to require parties to an agreement to provide information, of the kind that this House considered
966
earlier in relation to the mergers exclusion. And it provides that an agreement should continue to enjoy the benefit of this exclusion as long as there has been no material variation to it.
As a consequence of the exclusion Amendment No. 217 removes the existing provision for a five-year transitional period. I beg to move.
On Question, amendment agreed to.
Lord Simon of Highbury Lord Simon of Highbury moved Amendment No. 48:
Page 47, line 14, at end insert?
("EEA Regulated Markets
1B.—(1) The Chapter I prohibition does not apply to an agreement for the constitution of an EEA regulated market to the extent to which the agreement relates to any of the rules made, or guidance issued, by that market.
(2) The Chapter I prohibition does not apply to a decision made by an EEA regulated market, to the extent to which the decision relates to any of the market's regulating provisions.
(3) The Chapter I prohibition does not apply to

(a) any practices of an EEA regulated market; or

(b) any practices which are trading practices in relation to an EEA regulated market.

(4) The Chapter I prohibition does not apply to an agreement the parties to which are or include

(a) an EEA regulated market, or

(b) a person who is subject to the rules of that market,

to the extent to which the agreement consists of provisions the inclusion of which is required or contemplated by the regulating provisions of that market.
(5) In this paragraph?
"EEA regulated market" is a market which

(a) is listed by an EEA State other than the United Kingdom pursuant to article 16 of Council Directive No. 93/22/EEC of 10th May 1993 on investment services in the securities field; and

(b) operates without any requirement that a person dealing on the market should have a physical presence in the EEA State from which any trading facilities are provided or on any trading floor that the market may have;

"EEA State" means a State which is a contracting party to the EEA Agreement;
"regulating provisions", in relation to an EEA regulated market, means

(a) rules made, or guidance issued. by that market,

(b) practices of that market, or

(c) practices which, in relation to that market, are trading practices;

"trading practices", in relation to an EEA regulated market, means practices of persons who are subject to the rules made by that market, and which

(a) relate to business in respect of which those persons are subject to the rules of that market,

(b) are required or contemplated by those rules or by guidance issued by that market, or

(c) are otherwise attributable to the conduct of that market as such.").

On Question, amendment agreed to.
9.45 p.m.
Lord Kingsland Lord Kingsland moved Amendment No. 49:
Page 47, line 20, at end insert—
("(2) If the Secretary of State is satisfied that an undertaking provides services of the kind referred to in this paragraph he may, on the application of an officer of that undertaking, certify that in relation to that service a particular task is one to which this paragraph applies.
(3) A certificate issued by the Secretary of State in accordance with sub-paragraph (2) that a particular task is one to which this paragraph applies shall be conclusive evidence of that fact.").
The noble Lord said: My Lords, in moving this amendment I should also like to speak to Amendments Nos. 50 and 51. All these amendments relate to paragraph 2 of Schedule 3 to the Bill dealing with "general exclusions". The paragraph reflects exactly the words of Article 90 of the Treaty of Rome, referring to the concept of "services of general economic interest."
Amendment No. 49 seeks to add the Secretary of State to the list of those who can grant exemption from the prohibitions under Schedule 3, paragraph 2. Under the Bill as drafted, the only two who can grant those exemptions from the prohibitions are either the Director General of Fair Trading or one or other of the relevant sectoral regulators. The amendment seeks to add to that list the Secretary of State so that the Secretary of State has power to certify that a service is one of general economic interest to which the exclusion applies and would make such a decision (or certificate) conclusive evidence in any subsequent proceedings. It simply widens the category of persons who can invoke the paragraph.
Amendments Nos. 50 and 51 ought to be read in the alternative. Amendment No. 50 simply refers to the Director General of Telecommunications. Amendment No. 51 widens that category to all regulators in all the relevant regulated areas. What both amendments seek to do, either specifically in relation to the Director General of Telecommunications or generally in relation to all regulators, is to say that, in determining whether or not a particular service is one of general economic interest, and therefore caught by paragraph 2 of Schedule 3, the Director General of Telecommunications or all the sectoral directors are entitled to have regard to obligations imposed on them under their respective Acts—in other words, the obligations contained in the remits under their respective Acts. I beg to move.
Lord Simon of Highbury: My Lords, the "services of general economic interest" exclusion has been drafted to follow the terms of Article 90 so that EU jurisprudence can apply in this area. Whether services fall within this exclusion should be determined by the director, tribunal or court according to EU jurisprudence under the governing principles of Clause 58 in the same way that they determine other matters according to the principles of Clause 58.
Amendment No. 49 would make the question as to whether services fall within the ambit of this exclusion determinable by the Secretary of State. In our view, whether services fall within the exclusion should not be determined by the Secretary of State. The Bill confers powers to make competition decisions on the director, tribunal and courts, and that is the appropriate place. In
968
any event a determination of whether a task was one to which paragraph 2 of Schedule 3 applies would leave the question of how far the prohibitions necessarily obstruct performance of that task still to be decided.
It is worth noting that the Secretary of State does have a discretionary fall-back power of exclusion. the "public policy" exclusion power in paragraph 5 of Schedule 3.
But it is one thing to have a fall-back power to provide an exclusion in cases where there are exceptional and compelling reasons of public policy and quite another for the Secretary of State to get involved every time an undertaking wishes to claim that it should benefit from a general exclusion designed to attract the EU position. The Government would not wish the Secretary of State to have that role.
There may be licence requirements, for example, on common tariffs between urban and rural areas which might be considered to fall within the terms of this exclusion. But if they are strict requirements of the licence, they would in any event fall within the legal requirements exclusion.
The exclusion in paragraph 2 to Schedule 3 sets out a general principle to be interpreted when the need arises. If a company wishes to clarify that agreements or conduct do not infringe the prohibitions by virtue of paragraph 2, they can make a notification to the director for guidance or a decision.
As I have said, whether the exclusion applies is to be determined according to EU jurisprudence. I imagine that this House will turn to the question of regulators' statutory duties on the second day of the Report stage. But I see no reason why the position regarding duties should be different for decisions involving this exclusion, as Amendments Nos. 50 and 51 would provide. The test is whether undertakings are entrusted with services of general economic interest, not whether they should be so entrusted. In making decisions under the prohibitions, if the question arose, the director's and the regulators' role would be to determine whether (drawing on European jurisprudence) the undertaking was so entrusted. I therefore urge the noble Lord, Lord Kingsland, to withdraw his amendments at this stage.
Viscount Trenchard: My Lords, I wish to speak in support of Amendments Nos. 50 and 51.
A noble Lord: Order!
Lord Kingsland: My Lords, I am somewhat disappointed at the Minister's reply, although not entirely surprised. As he rightly said, these amendments anticipate a later debate on Schedule 10 and he will not be surprised to hear that in essence the points will re-emerge, the Minister might say under the guise of other amendments, but I shall say quite properly under other amendments. We can re-open the matter on the second day of Report. I beg leave to withdraw my amendment.
Amendment, by leave, withdrawn.
[Amendments Nos. 50 and 51 not moved.]
Lord Ezra Lord Ezra moved Amendment No. 52:
Page 47, line 28, at end insert
("O In respect of conduct by a regulated utility, the fact that conduct is in compliance with its licence and the statute under which its licence was granted or treated as granted shall be evidence that it does not constitute a breach of the Chapter q prohibition.").
The noble Lord said: My Lords, with Amendment No. 52 are grouped Amendment No. 53 in the name of the noble Lord, Lord Kingsland and Amendment No. 54 which is in my name.
This an important amendment. It is the successor to an amendment tabled at Committee stage which would have ensured that there would be a rebuttable presumption that behaviour that complied with the licence did not infringe the provisions of the Act. The new amendment is an attempt to do that by a simpler and more explicit means.
As the Bill is drafted, the regulators will exercise prohibition powers for their own industry concurrent with the powers of the Office of Fair Trading. In each of the regulated industries there are already detailed rules set out in the licences that each company must abide by. These licences cover price controls, customer protection and how a company may respond to competition. In the case of gas, the licences had parliamentary scrutiny as recently as 1995.
Despite the comments made by the Minister in Committee, there is little mention of the licences in the Bill, so behaviour that complies with the licence could then be questioned by the regulator as anti-competitive. Alternatively a licence agreed by one regulator could then be challenged by another. The amendment tries to get round the problem by stipulating that behaviour which complies with the licence should count as evidence that the Act is not being infringed.
A strong theme throughout Second Reading and in Committee was the concern about the way in which utility regulators exercise their powers under the Bill. That was recognised in Committee when the Minister agreed to,
"reflect strongly on the question of whether rebuttal is an appropriate concept as to the way that the guidance process may be undertaken".—[Official Report, 13/11/97; col. 335.]
The amendment simply states that the behaviour of a utility that complies with an existing licence provision should be counted as evidence that an abuse of a dominant position has not occurred. It is a simpler and more explicit version of the rebuttable presumption amendment previously put forward.
Currently there is little mention in the Bill of how the new provision should interrelate with existing licence conditions. Amendment No. 52 would provide some degree of consistency between the licensees and the new legislation by saying that if behaviour was permitted by licence, that would be counted as evidence that the behaviour was not infringing the Act. After all, the licence conditions are important. They cover areas such as customer protection, price control and how a company responds to the introduction of competition. It is essential that the utilities should be able to operate within the licence conditions which reflect the individual nature of the markets in which they are
970
active. They must not have the uncertainty of finding themselves in breach of a potentially conflicting set of rules. It would therefore be wrong for the regulators not to consider licences in exercising their new powers.
I should add that the licence conditions under which the utilities currently operate are designed in themselves to prevent abuse of market power; for example, condition 13 of the gas licence includes strict conditions to prevent anti-competitive behaviour by the dominant power. I beg to move.
Lord Simon of Highbury: My Lords, I am not sure how a court would interpret "compliance" in Amendment No. 52 as it stands and if it were to become part of the Bill.
Lord Kingsland: My Lords, I am sorry, I was slow in rising to promote Amendment No. 53 in my name, which is grouped with the amendment of the noble Lord, Lord Ezra. I can be brief. Amendment No. 53 in essence refers to the same issue.
The purpose of the amendment is to make it clear that action taken by holders of licences under the Electricity Act 1989, which they are required by their licences to take, would not infringe either the Chapter I or the Chapter II prohibitions. It is a specific example of the more general proposition so eloquently expressed by the noble Lord, Lord Ezra.
Lord Simon of Highbury: My Lords, where a licence permits something to be done or gives freedom to do something, can the behaviour be said to be in compliance with the licence? Indeed, can anything that is not inconsistent with the terms of the licence be said to be in compliance? That would clearly be unacceptable.
It is the Government's policy that the prohibition should apply in the regulated utility areas. That is to ensure that anti-competitive conduct can be dealt with. It was never the assumption that licence conditions could deal with all the competition concerns which can arise. That is why the regulated sectors are subject to the existing general competition law as well as to their own regimes of specific regulation. In these circumstances some interaction and overlap is inevitable.
I therefore understand the concerns about the interaction between licence conditions and the prohibitions that the noble Lord, Lord Ezra, raises, and indeed raised in slightly different terms in Committee, when I undertook to reflect carefully on whether rebuttal was an appropriate concept. The clear-cut case is where a company is specifically required to do something by a licence condition. It is clearly right that if a company is required to do something by law it should not be caught by the prohibitions for complying with that requirement. That is why we have provided, in paragraph 3 of Schedule 3, for an exclusion for compliance with legal requirements. In the utility sectors, such requirements imposed by licence conditions are imposed by or under the relevant enactment and hence are "legal requirements".

971
In this context, I should like to refer to Amendment No. 53 in the name of the noble Lord, Lord Kingsland. This amendment seeks to provide for a specific exclusion for agreements or conduct which are required under conditions in licences imposed by or under the Electricity Act 1989. However, as I have just indicated, the exclusion in paragraph 3 of Schedule 3 already applies to requirements imposed by such licence conditions. It is therefore not necessary to make further provision in this respect. This would not only be unnecessary duplication; it might cast doubt on whether requirements under other licensing regimes were excluded.
Returning to the amendment of the noble Lord, Lord Ezra, I agree it is tempting to think that there should also be some special provision for conduct that is in compliance with a licence regime. But we have to consider what the term "in compliance with" means in this context. It could be interpreted as ranging from something that was specifically approved, through areas where limits were set but companies are free to decide on their own conduct within those limits, to something that was simply not covered by a licence condition and therefore not forbidden. Within this range there is clearly scope for anti-competitive behaviour that is not in breach of an explicit licence condition. Where it occurs, I would want the prohibition to be applied as vigorously and as effectively as elsewhere in the economy.
The argument that conduct that is permitted by a licence condition should in some way be protected from challenge under the Chapter II prohibition comes most strongly into focus on price caps. I realise that a number of companies are concerned about a risk of challenge. But I do not believe that there is the realistic prospect of a successful challenge to the overall level of a price cap. The Director General of Gas Supply, for example, has told me, in the context of the processes and considerations involved in the setting of a price control, that she cannot envisage that there would be grounds for overall pricing at levels permitted by a price control to be challenged as a breach of the Chapter II prohibition. Nevertheless, if a company were still concerned about the risk of challenge, it would be open to it to make a notification to the regulator and obtain guidance.
While I do not believe that pricing up to the overall level of a cap would be open to challenge, pricing within the cap could still be an infringement of the Chapter II prohibition. I make no apology for returning to the example of predatory pricing which I quoted in Committee, and which we have discussed in another context today. It is perfectly possible for predatory pricing to take place, and yet for it to be said to be "in compliance" with a price control that sets a maximum level of prices. Indeed, where the price control is framed in terms of a basket of goods or services, it may be possible for predatory low prices on some products to co-exist with high prices on other products, with total revenue still within the cap. If such behaviour occurred, I would expect it to be tackled, and
972
I would not wish the company concerned to be able to deflect action on the grounds that it was in compliance with a licence condition.
I therefore believe that the right course is to provide for the legal requirements exclusion, as we have done. Beyond that I believe that the normal burden of proof should apply in respect of decisions as to whether the prohibitions have been infringed. The onus will be on the director, regulator, or a complainant to establish that the conduct complained of constitutes an infringement of the prohibitions. It should be for those making the decision (the director, tribunal or court) to determine what evidence is relevant to the decision. The terms of a licence condition may well be relevant.
I do not believe it would be right to include a provision that would be uncertain in its interpretation, risking unnecessary appeals to resolve it, that would at best have no real effect, but which could at worst make it more difficult to tackle cases of real abuse. I therefore urge the noble Lord, Lord Ezra, to withdraw his amendment.
Lord Ezra: My Lords, I am grateful to the noble Lord for the detailed response given to this important amendment. Nonetheless, I am somewhat disturbed by it. If, as I pointed out, the licence conditions include strict conditions to prevent anti-competitive behaviour by the dominant supplier, then it seems to me that observance of the licence conditions should be regarded as predominant in cases where such conditions apply. The trouble is that that must create uncertainty in the enterprise.
The noble Lord referred to notifications. Even though strictly in compliance with the licence, having regard to the fact that anti-competitive behaviour cannot be indulged in, would they nonetheless have to think of notifying under the Competition Act? That leads to a confusing situation of an additional administrative burden which should be avoided. If there is any weakness in the Acts under which these utilities operate, then those Acts should be corrected. We and they should know where we stand. While I have no intention of pressing the amendment tonight at this late hour, I would like carefully to reflect on the situation and I may well come back to it at the next stage. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
[Amendment Nos. 53 and 54 not moved.]
Lord Simon of Highbury Lord Simon of Highbury moved Amendment No. 55:
Page 48, line 7, at end insert?
("( ) An international arrangement relating to civil aviation and designated by an order made by the Secretary of State is to be treated as an international obligation for the purposes of this paragraph:).
The noble Lord said: My Lords, it may be helpful if I take this amendment separately. I shall take Amendments Nos. 56, 57 and 58 together and Amendments Nos. 59 and 60 together.
As I indicated in Committee we were continuing to review the extent of the exclusions set out in Schedule 3. Paragraph 4 of that schedule provides a power for the

973
Secretary of State to exclude agreements from the scope of the prohibitions if she is satisfied that it would be appropriate to do so in order to avoid a conflict with an international obligation of the UK.
As currently drafted, the term "international obligation" only covers formal treaties. It has been pointed out to us that this could be unduly narrow in the aviation sector. Inter-governmental agreements permitting flights between the UK and other countries are often not made as treaties. For example, they may take the form of memoranda of understanding. In practice, however, such agreements are honoured as if they were treaties. We therefore believe it right to make this limited extension to the scope of the exclusion-making power to cover agreements in the aviation sector made pursuant to such inter-governmental arrangements which fall short of treaty status. I beg to move.
On Question, amendment agreed to.
Lord Simon of Highbury Lord Simon of Highbury moved Amendment No. 56:
Page 48, line 30, leave out from ("agreement") to end of line 31 and insert (-which relates to a coal or steel product to the extent to which the ECSC Treaty gives the Commission exclusive jurisdiction in the matter.
( ) Sub-paragraph (1) ceases to have effect on the date on which the ECSC Treaty expires ("the expiry date").").
The noble Lord said: My Lords, in moving this amendment I shall speak also to Amendments Nos. 57 and 58. They are technical amendments to put the ECSC treaty into the right context as regards the treaty that governs the Competition Act. I beg to move.
On Question, amendment agreed to.
Lord Simon of Highbury Lord Simon of Highbury moved Amendments Nos. 57 and 58:
Page 48, line 32. leave out from ("apply") to end of line 33 and insert ("to conduct which relates to a coal or steel product to the extent to which the ECSC Treaty gives the Commission exclusive jurisdiction in the matter.
( ) Sub-paragraph (2) ceases to have effect on the expiry date.").
Page 48, line 35, leave out from first ("the") to end of line and insert ("ECSC Treaty; and
"ECSC Treaty" means the Treaty establishing the European Coal and Steel Community.").
On Question, amendments agreed to.
Lord Simon of Highbury Lord Simon of Highbury moved Amendment No. 59:
Page 48, line 35, at end insert—
("Agricultural products
6A.—( I) The Chapter I prohibition does not apply to an agreement to the extent to which it relates to production of or trade in an agricultural product and—

(a) forms an integral part of a national market organisation;

(b) is necessary for the attainment of the objectives set out in Article 39 of the Treaty; or

(c) is an agreement of farmers or farmers' associations (or associations of such associations) belonging to a single member State which concerns?

(i) the production or sale of agricultural products, or

974

(ii) the use of joint facilities for the storage, treatment or processing of agricultural products.

and under which there is no obligation to charge identical prices.

(2) If the Commission determines that an agreement does not fulfil the conditions specified by the provision for agricultural products for exclusion from Article 85(1) of the Treaty, the exclusion provided by this paragraph ("the agriculture exclusion") is to be treated as ceasing to apply to the agreement on the date of the decision.
(3) The agriculture exclusion does not apply to a particular agreement if the Director gives a direction under this paragraph to that effect.
(4) If the Director is considering whether to give a direction under this paragraph, he may by notice in writing require any party to the agreement in question to give him such information in connection with the agreement as he may require.
(5) The Director may give a direction under this paragraph only as provided in sub-paragraph (6) or (7).
(6) If before the end of such period as may be specified in rules under section 49 a person fails, without reasonable excuse, to comply with a requirement imposed under sub-paragraph (4). the Director may give a direction under this paragraph.
(7) The Director may also give a direction under this paragraph if he considers that an agreement (whether or not he considers that it infringes the Chapter I prohibition) is likely, or is intended, substantially and unjustifiably to prevent, restrict or distort competition in relation to an agricultural product.
(8) A direction under this paragraph—

(a) must be in writing;

(b) may be made so as to have effect from a date specified in the direction (which may not be earlier than the date on which it is given).

(9) In this paragraph—
"agricultural product" means any product of a kind listed in Annex II to the Treaty; and
"provision for agricultural products" means Council Regulation (EEC) No. 26/62 of 4th April 1962 applying certain rules of competition to production of and trade in agricultural products.").
The noble Lord said: My Lords, in moving Amendment No, 59, I should like to speak also to Amendment No. 60. Both are technical government amendments. As I said during the first Committee day, a good case has been made for an amendment along the lines of EC Regulation 26/62. This provides for special treatment under Article 85 for certain types of agricultural agreements, including agricultural co-operatives. I am most grateful to the noble Lords, Lord Lucas and Lord Stanley, and to my noble friend Lord Graham of Edmonton for raising the question of the treatment of agricultural agreements.
We are now proposing an exclusion from the Chapter I prohibition of anti-competitive agreements along the lines of EC Regulation 26/62 which covers certain agricultural agreements, including agricultural co-operatives. The exclusion is designed to ensure that agreements in the agricultural sector will be treated under the Bill in a similar way to how they are treated under EC competition law. This furthers our overall objective of seeking, so far as possible, consistency in the treatment of agreements under the EC and UK prohibition systems. Extending the exclusion beyond the scope of agreements covered by EC Regulation 26/62 would not be consistent with these objectives.
As is the case with the exclusions for mergers and agreements cleared under Section 21(2) of the Restrictive Trade Practices Act, the director general will have the ability to clawback individual agreements to be considered under the prohibition. However, such a clawback can be exercised only if the director general considers that the agreement is likely or is intended substantially and unjustifiably to prevent restrict or distort competition in relation to an agricultural product. This is a high threshold, but one which will enable the director general to take action against agreements causing serious harm.
The exclusion also provides a power for the director general to request information from the parties to an agreement which benefits from the exclusion. This is the same information-gathering power as applies to the exclusions for mergers and agreements which have been cleared under Section 21(2) of the Restrictive Trade Practices Act. We have discussed today in relation to those exclusions the reasons why the director general must have this information gathering power as part and parcel of the provision of such automatic exclusions. I beg to move.
Lord Stanley of Alderley: My Lords, I thank the Minister for tabling the amendment and explaining it so fully. I hope that the noble Lord will not accuse me of looking a gift horse in the mouth if I raise certain problems—at least the chief of which are fairly short.
I am not sure that I fully understand why the director general is being given all these powers which are not necessary in other types of business. Due to the speed with which the noble Lord produced the amendment—I very much welcome that—the agricultural co-operative movement has not really had the time to digest its possible effects—I stress that they are "possible" effects—and in particular how the courts might interpret it. What I do know is that if the noble Lord had not tabled an amendment, the co-operative movement would have been wiped out. That is why I thank him very much.
If events should prove the amendment to be seriously flawed—my lawyers always say that everything could be flawed—so making the future of agricultural co-operatives uncertain, I wonder whether the noble Lord would be prepared to take further steps to correct the matter. I am asking quite a nasty question here. I am most grateful to the noble Lord for tabling the amendment, but I wonder whether he is prepared to let his officials and those of the agricultural co-operative movement meet to discuss their particular problems. I think that they are in as big a muddle as I am.
To save time, perhaps I may break the rules of the House for a moment by thanking the noble Lord for the action that he has taken on my Committee-stage amendment to Schedule 12 on potatoes. As the government consultation period does not expire until 16th March—I am grateful to the noble Lord's officials with regard to this—I shall not move my repeat amendment at this stage of the Bill. I thank the noble Lord for his help on that also.
10.15 p.m.
Lord Simon of Highbury: My Lords, I appreciate the difficulty of the noble Lord, Lord Stanley of Alderley, in trying to get to the bottom of some of the technical points in the Bill. We find ourselves in very much the same position. Without making any commitment to extend the nature of the amendments that we have drafted, we are prepared to meet the NFU, the Federation of Agricultural Co-operatives and other interested parties to take the technical debate to a stage of greater clarity.
On Question, amendment agreed to.
[Amendments Nos. 60 to 62 not moved.] Schedule 4 [Professional Rules]:
Lord Teviot Lord Teviot had given notice of his intention to move Amendment No. 63:
Page 50, line 9, after ("(2),") insert ("and having consulted industry trade bodies,").
The noble Lord said: My Lords, due to a misunderstanding and following advice I do not wish to proceed with the amendment. My main amendment is Amendment No. 136 in Clause 39. I leave others, in particular my noble friend Lord Selkirk of Douglas and the noble Lord, Lord Howie of Troon, to move their amendments.
[Amendment No. 63 not moved.]
Lord Selkirk of Douglas Lord Selkirk of Douglas moved Amendment No. 64:
Page 50, line 25, leave out ("or solicitors") and insert (", solicitors and Notaries public").
The noble Lord said: My Lords, the amendment clarifies the terms of Schedule 4, Part II, paragraph 1, which details the legal professions whose professional rules are excluded agreements under Clause 3 of the Bill. The Bill strengthens competition law by bringing United Kingdom law more closely into line with the provisions of the Treaty of Rome. It recognises, however, that certain professional rules should be excluded from general competition law because of the value placed on self-regulation by the professions. That exclusion is achieved by Clause 3 and Schedule 4.
The Law Society of Scotland has concerns that the definition of the legal professional services in Schedule 4, Part II, paragraph 2, does not include the profession of notary public. Notaries public are clearly members of the legal profession. In Scotland notaries are governed by the Solicitors (Scotland) Act 1980 which provides for specific admission and removal procedures. A person can be admitted as a notary in Scotland only if he or she is qualified to be admitted as a solicitor. Most applicants for notaries public are admitted as solicitors at the same time. That dual nature renders it logical for notaries to be included in the terms of Schedule 4 to avoid the possibility that solicitor notaries are subject to two competition regimes, one as solicitor and the other as notary.
Notaries in Scotland are subject to the professional rules and regulations of the Law Society of Scotland, and that society is actively engaged in developing the specific regulation of notaries. For example, in February 1997 for the first time the Law Society of Scotland

977
published guidance on the activities of notaries. The society is of the view that the definition of "rules" in paragraph 1(2) of Schedule 4 covers that guidance. Common law regulation of notaries applies as well as regulation via solicitors' practice rules. The Scottish Solicitors Disciplinary Tribunal has upheld findings of professional misconduct against solicitors acting only in a notarial capacity.
Scottish notaries are also involved in the cyber notary project relating to electronic data interchange and the role of the trusted third party. The society is closely involved in the creation of a cyber notary association in the United Kingdom which would lead to further development of notarial protection with a requirement for notary specific rules to deal with that new environment. Accordingly, it is likely that within a very short period of time, professional rules and regulations relating specifically to notaries will need to be developed, rather than the current reliance on existing guidance on the common law, or on solicitors' regulations.
The Law Society would like, and would be grateful for, a guarantee from the Minister that all notaries public in the UK will be covered by the new law. The situation which applies to notaries public in England and Wales is somewhat different. In that jurisdiction, notaries are subject to the Court of Faculties under the Ecclesiastical Licences Act 1533. The most recent legislation relating to notaries in England and Wales is contained in the Courts and Legal Services Act 1990. They are also subject to rules enacted by the Master of the Court of Faculties.
In Scotland, on the other hand, notaries were nationalised as long ago as the reign of Mary Queen of Scots. Only in 1990 was the royal prerogative in relation to notaries given up. I move the amendment as I believe it is necessary for the avoidance of doubt and to ensure consistency of approach to the regulation of the legal profession. It has the support of the Society of Public Notaries of London, the Notaries Society of England and Wales, the College of Notaries in Northern Ireland and the Law Society of Scotland. It also has the support of the UK Notarial Forum which met last Friday in Dublin. I beg to move.
Lord Haskel: My Lords, as I explained a little while ago in speaking to the amendment of my noble friend Lord Bruce of Donington, who is not in his place, the Government consider that it is right to confine the list in Schedule 4 to those professional services which are exempted from the Restrictive Trade Practices Act by Schedule 1 to that Act. Your Lordships will not therefore be surprised to learn that the Government do not agree that notaries public should be added to the list in Schedule 4 to the Bill.
In the case of notaries, there are however two additional reasons why it would be inappropriate to add them to the list. First, there is a very substantial overlap between the profession of solicitors and that of notaries. As noble Lords will observe, solicitors are already included in the list, and it therefore seems to us to be somewhat supernumerary to add notaries. I recognise that that is an argument that can be deployed in support
978
of either side. However, my second point reinforces the case for saying that not only would the addition of notaries to the list be redundant; it would also be inappropriate.
The Chapter I prohibition bites on agreements between undertakings, decisions between associations of undertakings and concerted practices. It is not concerned with requirements imposed under statute, which is the basis of the regulation of notaries. Clearly, there is no need to exclude something which does not apply in the first place. That is not necessarily the case for all of the rules of the professions currently listed in Schedule 4 to the Bill. In the light of those points, I hope that the noble Lord will feel able to withdraw his amendment.
The noble Lord commented about the position in Scotland. I am not sure whether it is appropriate to discuss that at this stage. We shall be debating later the effect of the Bill in Scotland. It may well be that Scottish notaries could be debated then.
Lord Selkirk of Douglas: My Lords, I thank the Minister for his reply. I had anticipated that he would advance that line of argument. This Bill does not follow precisely the terms of Schedule 1 to the Restrictive Trade Practices Act 1976. For example, Schedule 1 to the 1976 Act provides that legal services are restricted to the services of banisters, advocates, or solicitors in their capacity as such. The phrase "in their capacity as such" is omitted from the Competition Bill and as a result may produce a different outcome. Perhaps the Competition Bill envisages that the professional services of banisters and solicitors should not be restricted to those individuals acting in their capacity as such. For example, it might include insolvency practitioners or independent financial advisers. Surely, that is not a correct interpretation.
I should be grateful if the Minister would reconsider the matter before Third Reading. The omission of the notaries from the Restrictive Trade Practices Act 1976 may have been an oversight. I shall reflect on the Minister's reply and if necessary return to the matter on Third Reading. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Baroness Knight of Collingtree Baroness Knight of Collingtree moved Manuscript Amendment No. 64A:
Page 50, leave out line 33 and insert—
("4. The services of ophthalmic medical practitioners, ophthalmic opticians (optometrists) and dispensing opticians other than (in each case) the sale or supply of optical appliances.").
The noble Baroness said: My Lords, Schedule 4 as currently drafted will not do what the Bill intends. It is clear that the intention is to exclude the services of various professions from the provisions of the Bill. But if we leave the wording as it is in respect of ophthalmic services the law will affect a range of things which the authors of the Bill surely did not intend to affect.
In recent years, there have been enormous advances in the care and treatment of eyes. The clinical activities of optometrists go far wider than just sight testing. For instance, the fitting of contact lenses demands high levels of expertise. Currently, the law provides that only

979
professionally qualified people can do that, but it is not the testing of sight and it will therefore not be covered by the Bill.
What about shared care, to use the current jargon? That system brings together GPs, ophthalmologists, other doctors and optometrists to monitor such things as the clinical progress of a patient suffering from glaucoma or perhaps diabetic retinopathy. That is an important service, but it is not the testing of eyes and it will not be covered by the Bill.
The Government appear to believe that the current wording linking the words "ophthalmic" and "the testing of sight" are sufficient to protect the activities of optometrists. However, the profession does not agree and I believe that in respect of such matters we should listen to the profession. It states that, as Schedule 4 stands, some of the professional and clinical activities of optometrists and dispensing opticians will be included and some excluded. If in future a court is asked to interpret the Competition Act it is likely to declare that Parliament decided to exclude some activities and to include others.
However, why should the optometrist's clinical monitoring of a patient suffering from glaucoma be subject to the rules on competition? That is not a commercial activity; it is essentially a clinical and professional activity. The Government propose to exclude professional activities from the scope of the Bill, so why will they not exclude the monitoring of glaucoma?
I do not seek more than the profession seeks—to exclude from the Bill commercial activities such as selling frames, glasses or contact lenses—but I want to ensure that all aspects of professional eye care are properly covered. That is not the case at the moment.
Will the Minister look at the matter again? I am sure that he shares my wish to have a clear law and a fair law and one which will not lead to a number of court cases. I beg to move.
10.30 p.m.
Lord Howie of Troon: My Lords, this amendment has been grouped with Amendment No. 65, as far as I understand it, unless the grouping has been changed, and I do not think it has, although that amendment has nothing to do with optometry.
I listened with great interest to what the noble Baroness, Lady Knight, said. She may remember me from a previous incarnation long ago in the House of Commons. We sit diagonally across the House from each other and I can scarcely see her from here. I am sure that if people hear that plea from the faint sighted, they may pay some attention to her amendment.
I turn to Amendment No. 65. I do not wish to add anything to the list which has been put in the Bill. It is always dangerous to add to lists because, as the noble and learned Lord, Lord Hailsham, used to tell us over and over again, the longer the list, the longer the list of people left off it. Therefore, a list was dangerous.
980
However, I am more interested not in leaving something off the list or adding to it but dealing with the definitions with which the list is concerned. I am weary of raising the subject of engineering in this House, and no doubt noble Lords, such few as are here, are tired of hearing me doing it, apart from the noble Lord, Lord Ezra, who delights in it. But Whitehall can never get engineering right somehow. It has a hang-up or problem with it. As I understand it, there have been discussions between the Engineering Council and the Government but, as far as I can see, those discussions have not, as yet, been fruitful.
If one looks at paragraph 17 of Schedule 4 at the bottom of page 51, a list of a sort can be seen. Under the heading "Engineering", the Bill states:
"The services of persons practising or employed as consultants in the field of … (a) civil engineering".
That either leaves out or includes structural engineers. The structural engineers would not like to be left out; the civil engineers might be happy if they were. However, an accommodation should be arranged in that respect.
The Bill goes on to refer to mechanical, aeronautical and marine engineering and others. It then refers to, "mining, quarrying, soil analysis", and this is where I begin to become a little bit worried about Whitehall,
"or other forms of mineralogy or geology".
We engineers admire mineralogists and geologists and we often depend upon them. But however admirable and dependable they are, they are not engineers. A geologist is not an engineer; he is a geologist. He is a scientist of some kind. He is not an engineer. He may impinge on engineering and engineering may depend upon him, but an engineer he most emphatically is not.
I move on to agronomy. I am sure that is very good. The Bill then mentions forestry. I am rather unhappy that my noble friend Lord Taylor of Gryfe is not here because he is a great forester. However, my noble friend Lord Taylor, for all his goodness as a forester, is not an engineer. Foresters are not engineers. Let's pull ourselves together. The Bill then refers to "livestock rearing". I should have thought that livestock rearing had something to do with fanning. Farmers are sometimes engineers when they drain their fields but they are not engineers when they are rearing their livestock, I do not think, unless I am in some way misled.
The Bill then refers to ecology. Ecology has to do with a variety of things—mushrooms and newts. Ken Livingstone would be an engineer under this definition, I imagine. There must be some mistake here.
I move on to metallurgy, which is near enough. My old friend, but not noble friend in the sense that it is used in this House, the noble Lord, Lord Kirkwood, is a metallurgist, and he is a chartered engineer because we permit metallurgists to describe themselves as chartered engineers.
I move on to the reference to chemistry. The most notable chemist I know from recent years is the noble Baroness, Lady Thatcher. However, with all her virtues, she is not an engineer; she is a chemist. My younger brother is also a chemist, but he would be affronted to

981
be described as an engineer. We know that there are chemical engineers, but chemists are not engineers. Indeed, the word "chemist" is used in Scotland to describe pharmacists who are most emphatically not engineers. However, that is another matter.
The next item is biochemistry, to which the same applies, followed by physics. Some practitioners in physics are engineers, that is most usually so if they happen to be electrical engineers. However, most practitioners of physics are not electrical engineers. Therefore, to include physics under the general heading of "Engineering" is—I hesitate to use the word "ignorant"—preposterous. In a way, the whole paragraph is gathered together both roughly and readily under sub-paragraph (f) which refers to,
"any other form of engineering or technology analogous to those mentioned in sub-paragraphs (a) to (e)",
which I suppose is meant to include the people I have mentioned as having been left out; namely, chemical engineers, petroleum engineers, naval architects, and so on. Indeed, this set of definitions is a rag-bag and is almost entirely useless.
I have been asked by the Engineering Council to refer to the clause and propose a rather simple amendment to it. In doing so, I shall look further up page 51 of the Bill and to paragraph 10 which refers to, "The services of architects". I believe that we all understand what an architect is—or do we? We know that an architect is a man who designs buildings, houses and things of that nature and makes them rather lovely, and so on. However, in professional terms, an architect is someone who is registered under what used to be called ARCUK. I know that that name has recently been changed but, unfortunately, I cannot quite remember the new name. Perhaps my noble friends on the Front Bench will be able to tell me. However, the service of an architect must refer to one who is registered, otherwise it does not mean an architect at all because the title of "architect" is protected.
I propose now to move on to rather shaky ground; indeed, rather thin ice. I say that because the title "engineer" is not, unfortunately, protected in the same way as that of an architect. My amendment suggests that we leave out that farrago—that misleading collection of titles—and quite simply insert the words,
"chartered or incorporated engineers and engineering technicians".
It is quite possible that all those words should carry capital letters, but I suppose that that would be too presumptuous. What we need is a simple definition of "engineer" here which is understood in the profession rather than this "Whitehallese" which is quite un-understandable.
Lord Ezra: My Lords, the point just raised so effectively by the noble Lord, Lord Howie, merits some consideration. I feel quite simply that if the heading "Engineering" could be headed "engineering and technology", as is stated in paragraph 17(f) of Schedule 4, his problem would be solved.
The Earl of Buckinghamshire: My Lords, before the Minister replies to the amendment, I shall speak to
982
Amendment No. 66 which is grouped with the series of amendments that we are discussing. I should declare an interest as a partner in Watson, Wyatt Partners who are a firm of consulting actuaries and employ benefit consultants. I have been in discussion with the Faculty and the Institute of Actuaries about this amendment. Watson, Wyatt Partners and I are regulated by the Institute of Actuaries.
I am concerned that the Competition Bill currently before your Lordships' House does not specifically exempt the actuarial profession from the revisions of Chapter I of the Bill, which as we know are designed to prohibit commercial agreements preventing, restricting or distorting competition. As it is currently drafted, the Bill could open up the professional rules of the actuarial profession to challenge as anti-competitive practices. This is clearly not the intention of the Bill, which in Schedule 4 lists a wide range of professions which will be exempt from Chapter I, including, among others, solicitors, accountants, architects and insolvency practitioners.
The UK's 10,000 or so actuaries are represented by the Faculty of Actuaries in Scotland and the Institute of Actuaries in England and Wales. Like other professional bodies the faculty and the institute are governed by charter which can be altered only by sanction of the Privy Council. The faculty and the institute set their own standards and professional qualifications for the actuarial profession and in order to protect the interests of the consumer.
Before I conclude my remarks, I apologise to the Minister and to your Lordships for not checking the generic title under which Amendment No. 66 has been tabled. It has been tabled under the generic term "Insurance". As I am sure your Lordships are aware, the work of actuaries is not confined solely to insurance. If the Minister accepts this amendment, as I am sure he will, it may be better for the generic term "actuarial" to be used. That would be in line with the other generic terms in Schedule 4. I believe that the omission of actuaries from Schedule 4 of the Bill is an oversight that can be rectified by this simple amendment.
Lord Haskel: My Lords, the discussion we have just had proves how wise the Government are to confine the list in Schedule 4 to those professional services which are excluded from the Restrictive Trade Practices Act by Schedule 1 of that Act. It will be apparent from what I am going to say that the Government do not agree that the exclusion should be widened any further.
The purpose of Schedule 4 of the Bill is not to confer a mark of respectability upon particular professions. The purpose is to carry forward into the Bill an exclusion for the professional rules of those professions which are presently excluded from the Restrictive Trade Practices Act. Those professions are listed in italics under Schedule 4. The suggestion of the noble Lord, Lord Ezra, is helpful because the headings in italics such as "Engineering" carry no weight in the Bill. It is the listed activities which are not in italics which are important. Certainly the Government would consider

983
whether these headings should be changed. Perhaps that will help to deal with the point raised by the noble Lord, Lord Howie.
10.45 p.m.
Lord Howie of Troon: My Lords, it will not do so in any way. Changing "engineering" to "technology" will make no difference to what I said. I am sorry to disappoint my noble friend.
Lord Haskel: My Lords, I turn to the question of actuaries. I do not wish to disparage the profession of actuary, but the fact is that it is not one of those services which is excluded from the Act. If there were a need for actuaries to be reconciled with competition law, they would already have to ensure that they complied. In the light of that point, I hope that the noble Earl will not move Amendment No. 66.
Amendments Nos. 64A and 65 take us into different territory. Instead of adding an exclusion they amend existing exclusions. I do not wish to underestimate the worth of the Engineering Council or the engineering profession. In the noble Lord, Lord Howie, it has a doughty champion. The effect of the amendments would be to narrow the scope of the services whose professional rules may be designated under the Bill.
As I understand it, the purpose of Amendment No. 64A is to make the words in the schedule conform more closely to how optometrists view their profession. However, the present provision referring to the testing of sight is not only longstanding—it is drawn from the Restrictive Trade Practices Act—but it is also drawn from Section 36 of the Opticians Act 1989 which is identical to Section 30 of the Opticians Act 1958. It is true that the provisions need to be seen in their different context and that, for example, the Bill and the RTP Act do not need to concern themselves with the criminal offence of the Opticians Act relating to the testing of sight for the purposes of prescribing glasses. But I do not see a case for changing the longstanding link between the Opticians Act and the provisions in the Bill.
As your Lordships know, the existing criteria are copied from Article 85(3) of the EC treaty. To change the criteria would defeat one of the main objectives of the Bill since it would mean that competition law and practice domestically, and at European level, would diverge.
Objectively justified standards of professional competence and good practice are designed to protect the consumer, and to be objectively justified they should not deny consumers a fair share of the benefits or impose restrictions which are not indispensable to that objective or substantially eliminate competition. I have no doubt that if professional rules are justified they are capable of satisfying these criteria. Of course it may also be that an objectively justified professional rule did not infringe the prohibition in the first place.
We have had a lengthy discussion on professional rules. The Government recognise that a case can be made for a wider exclusion as regards professional rules, and for a narrower exclusion of such rules. We have
984
sought to take account of the different arguments and to bear in mind both the particular nature of professional rule making and the different historical treatment of particular professional rules.
I hope that all noble Lords who have spoken will recognise that other noble Lords have taken a contrary view. The Government believe that they have taken a balanced view on the matter.
Lord Howie of Troon: My Lords, before my noble friend sits down, is he replying to the right amendment? I was not aware that we were talking about professional rules. I do not think that I mentioned professional rules at any point during my brief intervention. Had I known that he would do so, it might have been longer. I will give my noble friend ample time to recover his memory. I was talking about the definition of "engineer", which had nothing whatever to do with rules or anything of the sort. It was entirely to do with the farrago of a definition which is in the Bill. I proposed to him a very simple, two-line amendment which covers the matter adequately. I wonder if he would turn his mind to that and perhaps just say, "Yes, what a good idea".
Lord Haskel: My Lords, I was speaking to Amendments Nos. 64A, 65 and 66. Other noble Lords raised the question of professional rules.
Lord Howie of Troon: My Lords, I wonder if my noble friend would actually reply—
Lord Carter: My Lords, this is Report stage. The noble Lord is allowed to ask some brief questions for elucidation.
Lord Howie of Troon: My Lords, I yield entirely to the Chief Whip.
Baroness Knight of Collingtree: My Lords, in the light of the Minister's remarks, although I am very disappointed, and certain that there will be a time ahead when he will regret the number of court cases that the matter will engender, I beg leave to withdraw my amendment.
Amendment, by leave, withdrawn.
[Amendments Nos. 65 to 68 not moved.]
Clause 9 [The criteria for individual and block exemptions]:
[Amendments Nos. 69 and 70 not moved.]
Clause 12 [Requests for Director to examine agreements]:
Lord Simon of Highbury Lord Simon of Highbury moved Amendment No. 71:
Page 7, line 33, at end insert?
("( ) The Secretary of State may by regulations make provision as to the application of sections 13 to 16 and Schedule 5, with such modifications (if any) as may be prescribed, in cases where the Director

(a) has given a direction withdrawing an exclusion; or

(b) is considering whether to give such a direction.").

On Question, amendment agreed to.
Clause 14 [Notification for a decision]:
Lord Haskel Lord Haskel moved Amendment No. 72:
Page 8, line 25, leave out ("if it is not otherwise exempt").
The noble Lord said: My Lords, in moving this amendment I shall also speak to Amendments Nos. 145, 221 and 222.
These are technical amendments designed to ensure that the term "infringe" is used consistently throughout the Bill. They are drafting amendments. I beg to move.
On Question. amendment agreed to.
Schedule 5 [Notification under Chapter 1: Procedure]:
Lord Haskel Lord Haskel moved Amendment No. 73:
Page 52, leave out lines 40 to 43.
The noble Lord said: My Lords, I shall also speak to Amendments Nos. 74 to 78, and Amendment No. 161. These amendments respond to amendments tabled in Committee by the noble Lord, Lord Lucas, the noble and learned Lord, Lord Fraser, and the noble Lord, Lord Kingsland, on which we gave a solemn and binding undertaking to reflect.
The noble and learned Lord, Lord Fraser, argued that the ability of the director to convert an application for guidance into a formal decision might discourage businesses from seeking guidance because of concerns about confidentiality.
It is our intention that the provisions on applying for guidance should provide a relatively informal procedure whereby businesses can obtain confidential guidance which, because third parties have not been consulted, cannot be as certain as applying for a decision that is made with the benefit of the views of third parties.
We accept the noble and learned Lord's point that the ability of the director to convert an application for guidance into an application for a decision might undermine confidence and procedure. These amendments put the noble Lords' proposals into practice. I beg to move.
Lord Fraser of Carmyllie: My Lords, I am extremely grateful to the Government for listening to what we had to say in Committee. We warmly applaud the introduction of these amendments.
On Question, amendment agreed to.
Lord Haskel Lord Haskel moved Amendments Nos. 74 and 75:
Page 53, leave out lines 7 to 29.
Page 53, line 41, leave out from ("decision") to end of line 43.
On Question, amendments agreed to.
Schedule 6 [Notification under Chapter II: Procedure]:
Lord Haskel Lord Haskel moved Amendments Nos. 76 to 78:
Page 54, leave out lines 41 to 44.
Page 55, leave out lines 4 to 22.
Page 55, line 34, leave out from ("decision") to end of line 36.
On Question, amendments agreed to.
Clause 25 [Director's power to investigate]:
Lord Kingsland Lord Kingsland moved Amendment No. 79:
Page 13, line 4, at beginning insert ("Subject to subsection (3),").
The noble Lord said: My Lords, these amendments are intended simply to ensure that there is no overlapping jurisdiction in relation to competition matters by excluding an express sub judice call from the face of the Bill. I beg to move.
Lord Simon of Highbury: My Lords, this amendment would prevent the director from conducting an investigation or exercising any other functions in respect of matter which is the subject of proceedings before any court.
I do not think this is a desirable restriction. The prohibitions are a matter of public law. If there is an agreement or conduct to which they apply then the director should be free to act nowithstanding the existence of civil proceedings as his concern is with the effect of the agreement or conduct on competition generally and not just between the parties. There will obviously be cases in which he will leave the matter to the civil proceedings to determine. However, equally there may be cases where he considers he should investigate because of the effects on those who are not party to the proceedings. It would be wrong for him to be prevented for so long as the proceedings may continue.
If a third party were to pursue a case that a particular agreement was void on the grounds that it infringed the prohibition, the parties to that agreement might wish the director to make a decision on whether or not to grant an exemption. The court cannot grant an exemption; the director can and should be able to do so in these circumstances. It would be wrong to prevent him from doing so.
In general terms, I would advise that we should require the freedom for the director to be able to operate at two levels. On that basis, I urge the noble Lord, Lord Kingsland, to reconsider the case for the amendment.
Lord Kingsland: My Lords, I thank the Minister for his reply. I shall reflect on what he said but may well wish to return to this issue at Third Reading. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Lord Haskel Lord Haskel moved Amendment No. 80:
Page 13, line 4, leave out ("he has a reasonable suspicion") and insert ("there are reasonable grounds for suspecting").
The noble Lord said: My Lords, Clause 25 is the first clause in the important section of the Bill dealing with the director's powers of investigation. We discussed these clauses extensively during Committee. I shall bring forward later significant amendments to strengthen the various safeguards that were discussed in Committee.
But at this stage I must begin by reporting to the House that in one respect Clause 25 is defective and needs to be corrected. That is the purpose of Amendment No. 80. As a point of principle, we believe that it is essential for the director general to be able to delegate his functions to his officers.
This provision applies to the Competition Bill, because of the reference to "any other enactment". Accordingly, the many other functions of the director set out in the Bill can be delegated by him to a properly authorised member of staff. We consider that the same position should apply to the initiation of an investigation as applies to these other functions. The power to delegate should apply.
The fact that Clause 25(2) makes explicit provision for delegation casts doubt on the applicability of Schedule 1 of the Fair Trading Act in this area of the Bill. Specifically, the unintended effect of Clause 25(2) was that the director general would personally have to be satisfied each and every time information was sought under Clause 26 that the threshold of suspicion that the prohibitions had been infringed was crossed.
This is not practicable nor desirable, as the noble Lord, Lord Kingsland, realises. The Office of Fair Trading is anticipating in the region of 1,200 complaints per year. Many, indeed a large majority, may well be disposed of easily without the need for the use of any formal powers. But a substantial number, perhaps up to 300, may require at least initial investigation by the seeking of information under Clause 26. Accordingly, it is important that his ability to delegate to an officer, properly authorised in writing, should be put beyond doubt. Amendment No. 80 rephrases subsection (1). It is intended to put beyond doubt that the director does not require personally to "suspect". I beg to move.
11 p.m.
Lord Kingsland: My Lords, I am grateful to the noble Lord, Lord Haskel, for his response to Amendment No. 80. If I remember rightly, during Committee stage I was pressing for a "reasonable suspicion" to be replaced by "reasonable grounds for belief'. I have been met at least half-way. In light of the number of times that I have been met at least half-way on the previous amendments that I tabled, I regard that as an excellent result.
On Question, amendment agreed to.
Lord Haskel Lord Haskel moved Amendment No. 81:
Page 13, line 8, leave out subsection (2).
On Question, amendment agreed to.
[Amendment No. 82 not moved.]
Clause 26 [Powers when conducting investigations]:
Lord Fraser of Carmyllie Lord Fraser of Carmyllie moved Amendment No. 83:
Page 13, line I I, leave out ("person") and insert ('officer or senior employee of an undertaking").
The noble and learned Lord said: My Lords, looking to the hour, I reflect on the time that we agreed for Report stage, particularly seeing the Chief Whip in his place for which I am grateful, and I feel sorely done by. Neither my noble friend Lord Kingsland nor myself have taken up anything like a quarter of today's proceedings and there have been some exchanges latterly which hardly enhance the reputation of your
988
Lordships' House as a revising Chamber. I wonder whether we will achieve much more at this time of the night.
We still have some important small amendments. I can move them briefly now, but I anticipate and have to give warning that we may need more time for Report stage or shall certainly return to these at Third Reading. It has been thoroughly unsatisfactory, as the Minister will appreciate. We have sought to be as constructive and positive as we have been throughout the passage of the Bill.
I turn to Amendment No. 83, which is coupled with a significant number of other amendments on the same theme. To describe it in shorthand, it is the "tea lady" problem. We are concerned that if requests are made and people are going to be interviewed, it should not be just any person; it should be any officer or a senior employee of an undertaking.
This is not merely a matter of being difficult. What follows from a number of these requests is that ultimately there is a risk of criminal sanctions being imposed on people. Although this is a brief set of amendments, they contain some important points. If people do not comply it may be because they are too junior. We do not want to see them subjected to the risk of any criminal sanction following from a failure on their part.
I appreciate that the context of the Bill sets a high standard if there are to be prosecutions at a later stage; it is not just a question of someone shrugging their shoulders and saying, "I do not understand". But in our view it is unreasonable to include present or past junior employees and that is what lies behind this set of amendments. I beg to move.
Lord Ezra: My Lords, Amendment No. 89 is grouped with this series of amendments and I should like to speak to it briefly. Its aim is to introduce a safeguard which allows the company under investigation to comment on the role of ex-employees being questioned, and on the appropriateness of so doing without wishing in any way to dilute the powers of the investigators. Obviously specific difficulties may arise where the departure of the employee was not on amicable terms.
Viscount Trenchard: My Lords, I wish to speak to Amendment No. 101, which is grouped with these amendments. I believe that the powers granted by Clause 27 to enter premises without a warrant are unduly strong and that the Bill would be improved if it ensured that investigating officers check that the people they deal with in exercising their powers under subsection (4)(b)(ii) of the clause are those who are responsible for any relevant document and understand the meaning and purpose of such a document. As drafted the Bill refers to "any person on the premises". The safeguard which Amendment No. 101 introduces would ensure that the investigating officer, in seeking an explanation as to the meaning of any particular document, would be required to check that the person under interrogation is indeed an appropriate person. The

989
amendment largely follows the wording proposed by the noble Lord, Lord Ezra, in Amendment No. 89, which deals with a similar point.
Lord Haskel: My Lords, Amendments Nos. 83, 95, 98 and 107 in the name of the noble and learned Lord, Lord Fraser, would limit the persons who can be required to produce documents or explanations or statements in this way to officers or senior employees of an undertaking under investigation. We debated similar amendments in Committee at some length and I see nothing here which would cause us to change our view. In particular, as the amendments seem specifically aimed at removing junior employees from the scope of these provisions, I would recall the words of my noble friend Lord Simon. He said in Committee:
"As regards junior employees…it is important that we seriously have the ability to speak to both secretaries and personal assistants. They may be younger but they may, effectively, have a great deal of knowledge of the activities under investigation. We must also remember that the range of things that may appear in documents needing explanations is wide. Therefore, it seems to me to be right that the powers should also he exercisable when asking that category of employee or past employee for explanations".—[0fficia/ Report,17/11/97: col. 391.]
There is a further point about Clause 26. The "person" here may be a legal person; for example, a company that is asked to produce documents. Indeed, when an investigation is started using these powers the director will not know to whom to direct a request, and so I would expect him to require the company—a legal person—and not an individual to produce documents and perhaps also ask the company for explanations. In Clauses 27 and 28 the persons can only be individuals.
I would add no more other than the fact that we already have a defence in respect of failing to produce in Clause 41 and are bringing forward further amendments to that clause dealing with offences to ensure that persons who are genuinely unable to give such explanations will not be guilty of an offence.
Amendment No. 89 seems to be aimed at adding a form of safeguard when explanations of documents are being sought under Clause 26. The director would be required to consult the undertaking as to the role of the employee or officer in the matter under investigation and the appropriateness of requiring them to provide an explanation. The object appears to be to give the undertaking or person being investigated an element of involvement and influence in respect of the persons against whom the director is to exercise his powers.
I suggest that this would not be a proper procedure to achieve that end. The director is deliberately given powers under the Bill to enable him to obtain as wide a
990
range of information as possible in an investigation. He should be able to exercise those powers by asking those whom he believes can produce the documents or give the explanations he requires without being subject to the limitations proposed or having his choices scrutinised by the undertaking concerned. Surely it is for him to judge whether the person from whom he seeks information is a suitable person able to produce the document or give an explanation. If in so doing information he obtains is irrelevant or unreliable and if he based a decision on such evidence that there had been an infringement of one of the prohibitions, the proper course of action would be for the undertaking concerned to appeal against it under Clause 45. I ask the noble and learned Lord to withdraw the amendment and to rely on the judgment of the director.
Lord Fraser of Carmyllie: My Lords, I am not much inclined to rely on the judgment of the director. However, the noble Lord might be encouraged to know that I am prepared to rely on the very useful comment that he slipped into the middle of what he said, namely that he may bring forward amendments to Clause 41 because that is what is at the centre of our concerns. It is not that the director should not be able to investigate but that junior people who do not really know what is going on may find themselves open to a set of criminal sanctions. That could be extremely serious for young men and women, junior in a company, who have no intention of being obstructive in any fashion but who do not understand what is going on. That is the clear interrelationship between the two provisions that we wish to explore and clarify.
It would be extremely helpful if we were advised at the earliest possible opportunity of what the noble Lord proposes to do in relation to Clause 41 because that would not only potentially affect our assessment or judgment on amendments to this clause, but also to Clauses 27 to 30. With that lure I shall withdraw the amendment. This may be an appropriate time for the noble Lord to reflect on what he is going to write to me about Clause 41. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Lord Carter: My Lords, I beg to move that further consideration on Report be now adjourned.
Moved accordingly and, on Question, Motion agreed to.
House adjourned at eleven minutes past eleven o'clock.