Competition Bill [H.L.]

HL Deb 05 March 1998 vol 586 cc1301-84

3.38 p.m.

Read a third time.

Clause 1 [Enactments replaced]:

Lord McNally 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, I rise to speak instead of the noble Lord, Lord Morris of Manchester, who is unfortunately unwell, although happily now out of hospital. Noble Lords will recall that on Report, on 23rd February, in tabling these amendments the noble Lord said that they had two purposes. The first was to stay the Director General of Fair Trading's legal proceedings under the old Act where not to do so would put community pharmacies in double jeopardy. The second was to secure resale price maintenance for over-the-counter medicines for a minimum five-year period of transition. At that time the noble Lord, Lord Morris, said that he would withdraw the amendment to give him time to consider the Government's reply and to inquire further about the activities of the Director General of Fair Trading who, it had been reported, had been lobbying against his amendments.

On that point, the Director-General of Fair Trading said that he had not been lobbying but providing press briefing in order to inform the debate. I suppose one could say: "He informs the debate; I lobby; they improperly influence". I believe that regulators should be careful about their activities while Parliament is debating their powers and responsibilities. From his sick bed, the noble Lord, Lord Morris, is not happy with the director general's explanation.

There are other noble Lords more qualified than I to argue the merits of the amendment. It seems to me that there is a genuine dilemma between health and retailing, between community service and competition. Having listened to the previous debate, what worries me is that at this stage parallel objectives seem to be at work, with health Ministers talking about their commitment to community pharmacies and DTI Ministers emphasising, quite properly, their desire to see the consumer obtain the best value when paying for their medicines.

I believe there is a genuine case for a pause before action is taken under old legislation or new legislation is put in place which may irretrievably damage the community pharmacy provisions and before the Government know the full implications of the competition law that they are introducing. A strong case can be made on both sides, but I believe that there is an even stronger case for the Government to pause and for there to be some departmental co-ordination to ensure that the full impact of their proposals for competition law will not have a devastating effect on health and pharmacy provision.

3.45 p.m.

Baroness O'Cathain

My Lords, I rise to oppose the amendment. The noble Lord, Lord McNally, said that there was a case for looking at the matter again. He said that, if the amendment were not passed, pharmacy provision would be irretrievably damaged. We need to consider what is involved here. We are talking about over-the-counter medicines, which account for between 3 per cent. and 7 per cent. of the total turnover of pharmacies; we are not talking about prescription medicines, which account for about 80 per cent. of the work of pharmacies. The idea that the Bill's effect on that 3 to 7 per cent. can damage the future of community pharmacies is unbelievable.

We need to look at the matter again. We are talking about resale price maintenance. This is a competition Bill. The amendment is anti-competitive: it is in breach of Article 5 of the Treaty of Rome. The OFT survey found that the proposal would not be sensible since such a small proportion of products would be affected. It would be a tax on the low-income shopper. a blunt instrument which would maintain higher than necessary prices. Lone parents and low-paid customers desperately need price competition.

I draw the attention of the House to the fact that, when the Net Book Agreement collapsed, many predicted the death of small bookshops. That did not happen. When in doubt, policy-makers should always err on the side of the consumer, particularly when discussing the Competition Bill.

Finally, I draw attention to a paper in Consumer Policy Review, published by the Consumers' Association, in November 1996, which said that resale price maintenance of these products, is inappropriate because it is the wrong instrument for the wrong target. Rural and disadvantaged communities should have adequate access to pharmacy services. However, a regressive tax on all consumers is not the best means of attaining this goal. The inadequacy of RPM as a means of protecting marginally profitable pharmacies has been implicitly recognised by successive governments in the establishment and maintenance of the Essential Small Pharmacies Scheme and support for self dispensation by General Practitioners. It is to these schemes and this type of approach that we should look when attempting to protect access to rural and vulnerable consumers".

Lord Montague of Oxford

My Lords, I too rise to oppose the amendment. My reasons for doing so are not entirely the same as those of the noble Baroness. The point at issue is whether there should be a careful review now, as sought by the director general, or whether it should be deferred for a period of seven years. I believe that what we shall hear in the debate will lead us to the view that the experts should look at the matter now and not defer it for seven years.

I am a past chairman of the National Consumer Council and have taken a close interest in the well-being of our pharmacies, which is a very important matter. I wish to draw to the attention of the House some facts which have not emerged during our discussions. Under the Essential Small Pharmacies Scheme, any pharmacy which prescribes fewer than 19,000 prescriptions per year receives a subsidy. The cost of that subsidy is currently about £4 million a year. It is a safety net for pharmacies. Indeed, new pharmacies are opening and using that safety net. One pharmacy receives a subsidy of £32,000 a year. It is not the case that no protection exists to prevent pharmacies from ceasing to trade. As the noble Baroness said, over-the-counter medicines represent only 7 per cent. of pharmacies' business. We should not ignore the fact that pharmacists' income is reviewed annually by a joint committee of the Government and pharmacists.

There are, however, other matters that I hope the director-general or the Restrictive Practices Court will examine. One which causes great concern in relation to the workings of the subsidy concerns doctors who provide pharmacy services. Where a new pharmacy opens under the Essential Small Pharmacies Scheme, doctors can no longer prescribe for a patient who lives within one kilometre of the surgery. That sounds fair because it is assisting the new pharmacy. But it is not very kind to the patients; it is not kind to people who have previously been making one stop when they are unwell, to have to make two stops. It is particularly difficult for elderly people. I hope therefore that whoever reviews this matter will bear that in mind.

There are other aspects to consider—one could go on forever—and we cannot consider them all here and now. The issue is whether all these matters should be considered now or whether they should be deferred for seven years. I suggest to this House that they should be considered now.

Lord Stallard

My Lords, I rise to support the amendment moved by the noble Lord, Lord McNally, for much the same reasons. I have taken an interest in the Bill since at Second Reading, through Committee and Report stages, and discussed it at length with the noble Lord, Lord Morris. As the noble Lord, Lord McNally, said, the noble Lord, Lord Morris, has been unwell, but we are pleased to see that he is on the way to recovery.

I am particularly concerned about a number of matters. I am a life-long supporter of the community pharmacist. I can remember even as a child when the only place one could go for assistance, advice or guidance was to the medical hall or the chemist because we could not afford a doctor in the days when we had to pay for every visit. There is therefore a long history attached to the community pharmacists, and that is being overlooked and brushed aside in the new approach. It is said that what was there before is no good and we must change it. But we cannot change things like the community pharmacy and the support for it in the community.

I have no knowledge of the minute details of this Bill, but I have a great deal of knowledge of the support for the local pharmacy in the communities in which I mix, even to the extent that when people are told that it may cost 6p, 7p or 8p more if they agree to the change, they say that they would sooner pay. Whatever the supermarkets say about the reduction in prices of drugs, medicines and so forth, the balance will be added to other items. They will add 0.5p on the price of a tin of beans or I p onto something else. People will not save money because the supermarkets will recoup whatever reduction they allegedly give. That is therefore a false argument. People are not stupid and will see through that immediately.

Amendment No. 1 is mainly concerned with the double jeopardy question mentioned by the noble Lord, Lord Morris, and repeated by the noble Lord, Lord McNally. Community pharmacies are entitled to be concerned by the Bill as it stands. They are not arguing for specific protection for all time. Once the Bill becomes law, the transitional provisions will apply. If resale price maintenance cannot be justified under the test of this Bill, at the end of the transitional period it will cease. Why, therefore, did the director-general see fit to begin proceedings in January of this year against community pharmacies? Only he knows because it was only in January that the Bill began its passage through your Lordships' House. Why did he choose that moment to begin those other proceedings?

Many community pharmacies are barely viable at the moment. That has been confirmed many times in the course of the debates. Two sets of proceedings, one under the old legislation and one under the new, will impose heavy costs on pharmacies quite unnecessarily because they will have two separate cases to fight. To add to that, as the noble Lord, Lord Simon, reminded us, there is always the possibility that the European Commission will jump into the ring, and nothing can be done about that. However, we can remove the double jeopardy argument if we have a mind to.

The effect of the amendment is to stay the proceedings the director-general began in January for two years. If the provisions of the Bill are brought into force before the two years expire, the proceedings are automatically discontinued. If for any reason there is a delay in implementation, then the proceedings resume. That takes care of the point made by the previous speaker. I argue that the amendments are modest, but extremely important. I do not see why my noble friend the Minister should not accept them and look again at the whole situation.

Baroness Miller of Hendon

My Lords, I was pleased to add my name to those of other noble Lords proposing this amendment. With the permission of the House I should like to reminisce for a few moments about my experience in this area when I was chairman of the Barnet Family Health Services Authority. We wanted then to extend the advice and help given to customers on health matters, primarily to help the consumer, but also to relieve the general practitioners and avoid their time being wasted unnecessarily, and also to enhance the professionalism of the pharmacists.

To that end we launched—as I said at Second Reading—a High Street Health project whereby pharmacies gave up a small part of their selling shelf space in order to create a private area where they gave free advice to customers. It resulted in the saving of a great deal of time and effort for local GPs. It won support not only in our area, but was also used as a pilot in numerous other parts of the country. Of the 6 million people every day who go to pharmacists, 1 million of them do so for their prescriptions. We know that 70 per cent. of customers show their loyalty by going to their regular pharmacist who, having the patient's medication records available, is in the best position to advise the patient.

Buying over-the-counter medication is not like buying cut-price beans or any other consumer product. The consumer cannot obtain advice from a supermarket shelf. I believe that the Secretary of State for Health knows that. Apart from the many statements that he has made in the other place, only as recently as last Monday he said at the Pharmaceutical Services Negotiating Committee's dinner that he wanted to see the role of the community pharmacist extended. He hoped that pharmacists would encourage people to use self-medication where it was appropriate. He wanted to see new and extended roles for the pharmacist in primary care.

If resale price maintenance on over-the-counter products is removed, that simply cannot happen. Removing resale price maintenance will result in around 3,000 of the barely viable pharmacists disappearing. Many more may disappear as well. I note what my noble friend Lady O'Cathain and the noble Lord, Lord Jacobs, said last week about nobody speaking for the consumers. Let me say that the Consumers' Association sent out solid press releases and briefs. The bottom line of all that is that unless there are pharmacies in the high street, the sick, the poor and the vulnerable will not be able to go anywhere for advice.

I understand the Minister's concern relating to competition and pricing. I understand that very well because I served on the Monopolies and Mergers Commission before I was privileged to enter your Lordships' House. But cost in matters such as this is a bad criterion. This is not a matter of competition: it is a matter of the health of the nation. With all the passion that I can muster I ask the Minister to see if he can go some way to accepting the amendment or, alternatively, that other noble Lords will follow us into the Division Lobby.

Lord Walton of Detchant

My Lords, I support the amendment, but with slight hesitation. In general terms, like the noble Baroness, Lady O'Cathain, I am opposed to restrictive trade practices and believe in the benefits of competition in our society. Having said that, and having listened in particular to the speech of the noble Baroness, Lady Miller, I too heard the speech by the Secretary of State for Health on Monday when he gave his support to the role of the community pharmacist.

It is clear that the medical profession and the profession of pharmacy have been having extended discussions over the course of the past year or two in the hope of extending the role of the community pharmacist in giving advice and in persuading people—where appropriate—to buy over-the-counter medicines in order to treat illnesses which do not require the attention of a skilled medical practitioner. I have been persuaded by all the arguments I have heard and read that if this issue is not resolved in favour of the community pharmacists there is a serious danger that many small pharmacies in villages and in the countryside will be forced out of business because of undercutting by the supermarkets and the major chains. I accept wholly what the noble Baroness, Lady O'Cathain, said about the book agreement and the dire consequences which were suggested when that agreement was withdrawn. But pharmacists are in a very different position. We need a period of lengthy reflection before resale price maintenance for over-the-counter medicines is withdrawn. For that reason I strongly support the amendment.

4 p.m.

Lord Campbell of Alloway

My Lords. I support this amendment. I am not concerned with the interests of pharmacists. I am not concerned with the Consumers' Association. There has been far too much heavy lobbying. I am not concerned with the interests of the great supermarkets. I am concerned with the interests of those about whom the noble Lord, Lord Walton, has just spoken. It is their interests with which your Lordships should be concerned. After all, I do not suppose that any of us are members of the Consumers' Association but we are all consumers. Let us concentrate, not on these trade associations, but on the interests of the people in the country.

Lord Borrie

My Lords, surely there can be no disagreement in this Chamber as to the importance of a geographic spread of pharmacies throughout the country, whether those pharmacies are small community pharmacies or pharmacies found within the larger unit of a supermarket. Many people, including the noble Baroness, Lady Miller of Hendon, say that nowadays one expects pharmacists to give advice as well as to sell goods. That is one of the extremely valuable assets which we surely would not wish to lose. The question before us is not the importance of pharmacies for all these reasons but whether the ending of the dictating by drug companies of the minimum price at which over-the-counter goods shall be sold will result in serious damage or the elimination of community pharmacies. That question will be determined, if this House permits it to proceed, by the Restrictive Practices Court—which consists not only of a judge but of two businessmen—after hearing all the evidence and all the arguments. I do not know the answer. Many Members of this House have claimed today, and on previous occasions, to know the answer. They know that pharmacies will be destroyed if resale price maintenance comes to an end. They may be right, or they may not.

Surely it is better that this matter be examined, since the inquiry has already started, or at least the proceedings have been started, by the body which exists for that purpose, the Restrictive Practices Court. It will certainly not be easy to establish, as is necessary under the present law, that there has been such a "material change of circumstances" since the 1960s that ending resale price maintenance is justified. That is a considerable hurdle to get over, but it seems to me that if it is established in the court that pharmacies would be damaged, then that would surely be against the public interest and the court would conclude that resale price maintenance in this specific field ought to continue and, under the existing terms of the Bill, it will continue for a period of five years.

With all respect to their Lordships who have spoken and who seem to know precisely what will happen in certain circumstances, we should allow the inquiry to discuss this matter in considerable detail and see what the outcome is. I think we should oppose the amendment.

Lord Milverton

My Lords, I support the amendment, as I have done previously. As my noble friend Lord Campbell of Alloway said, it is the person who counts. I cannot quite see supermarkets being able to give advice to a person. I have not changed my opinion. The pharmacies are important as places where people can receive advice. They do not always want to bother a doctor. So I support the amendment. Let us not just think of competition, but of persons.

Lord Hughes

My Lords, I put my name to the amendment at the request of my noble friend Lord Morris who just a short while ago was taken ill. In a way I am sorry that I put my name to the amendment, not because I have any doubts about it but because in previous discussions in Committee it was obvious that the fear of what would happen to small pharmacies was held by Members of all parties and no party. If I had not put my name to the amendment, the likelihood is that the fourth name would have been from the Cross Benches. That would have reflected better the feelings of the House.

This is the first time that I have supported amendment of a Bill put forward by a Labour government in 12 years of such government. Admittedly, for seven of those years I was a Minister and I did not have much choice. But even then, I can say that I always supported the Government on every occasion with the same degree of enthusiasm.

I put my name to the amendment because I do not regard it as a political amendment. If you are a Conservative, if you are a Liberal, if you are Labour, or if you are a Cross-Bencher, can you view with equanimity the closure of community pharmacies? I am certain that very few of us would say that it was a price worth paying for something else. At a previous stage my noble friend the Minister rightly pointed out that he is the Minister responsible for competition and that he did not feel that it was right for him to venture into the health side of the matter. But competition is not just one sided. There are other aspects. In relation to community pharmacies, health, the environment and the quality of life come into it.

In a village, people know each other. They know the chemist, they know the doctor. The doctor is not just a professional adviser. He is also a friend and their neighbour. People know the stress under which he operates. They know that it helps the doctor to carry out his work in the best possible way if he is not confronted with every minor ailment in his consulting room. That is where the benefit of the community pharmacy arises. People in the village know that if they have a minor ailment, or if they think they have a minor ailment which may turn out to be something more serious, they go in the first place to the chemist. They will get advice; and if the chemist thinks it is the right thing to do, he will supply them with the medicaments that they want. But on other occasions the chemist will say, "No, I cannot rightly deal with this. You must go along and see the doctor". People know that when they have seen the doctor and have been given a prescription they can go back to the chemist and, either immediately or within an hour, the prescription will be made out. If that shop is driven out of business they may have to go, as I have said before, to the nearest Boots or equivalent, which may be many miles away. They certainly will not get their prescription very quickly unless they go there to collect it. The great majority of prescriptions are free to the patient. But it will cease to be a free prescription if you have to add to it the cost of a bus or taxi fare to get to another chemist to collect the prescription.

There is another aspect. On competition, can it really be said that competition is helped every time a community pharmacy closes down because it is no longer profitable? Is it helped if 300 pharmacies close down or 1,000 pharmacies close down? If that happens, and the business goes to Boots or its equivalent, in many parts of the country we will be creating not competition but a local monopoly. I cannot see that that is in the interests of competition.

I have spoken about the help that chemists give to the doctors. Every year we know that thousands of general practitioners retire long before the normal retirement age because they can no longer stand the stress. If the village doctor, whose job, incidentally, does not just cover the 2,000 people in the village but covers a much wider area round about, has to retire and the pharmacy has to close down, patients' interests will not be served.

We have been accustomed in the past 10 months to hearing Ministers say, "This is a listening government". Not everyone believes it. On this side of the House, we do believe it, because there is now ample evidence that that is the position. But last Sunday 284,000 people put down their names to come to London. Not all of them managed to get there. I understand that some people in Yorkshire were held up because it was snowing and the coaches could not run. Those 284,000 people were in London not because they are opposed to the Foster Bill on fox hunting. Probably the majority are, but that was not their only interest. They were there because they were objecting to many other things and saying that the interests of the countryside were not being properly looked after—whether it was taking greenfield sites for housing, whether it was the closing of village schools, or whether it was the possible closure of the village pharmacy. Those were the things to which they wished to draw the Government's attention. What happened? The Government said, "Yes, we are a listening government. We will have to do more for the countryside". They are contemplating setting up a ministry of rural affairs. I would suggest to the listening Government that the best example of responding to what they have listened to would be to start with the community pharmacy.

I do not know whether this amendment is necessarily the best way of going about it. I have heard how the Government are anxious to protect community pharmacies. But, as far as I can see, what we are getting from the Government at this stage is only indications of what may happen. What we need is not possibilities; at the very least we expect probabilities; and the ideal would be if the Government were to give us certainties. I wholeheartedly support the amendment, to which I have put my name.

4.15 p.m.

Lord Desai

My Lords, when my noble friend Lord Morris moved this amendment at the Committee stage of the Bill. I tried to express my reservations about it. While it is quite true that community pharmacists perform many functions and we would like them to be preserved, there must be better ways of doing that than loading the costs on to the resale price of the medicine. This is a question of unbundling. The community pharmacists perform duties which are valuable and which should be rewarded, but the worst way of doing it would be to have resale price maintenance, thereby putting the costs on everyone, including those who do not need such help. I agree with my noble friend Lord Montague. We ought to have some kind of special fund to help small pharmacists and so recognise that they perform this function. This would be like a lump sum given to the pharmacists which would help them keep in business. But it would not carry over to the prices paid by the consumer.

Many noble Lords have said that consumers are loyal to the local pharmacist. That is very good. So even when resale price maintenance is removed, consumers will still go to their local pharmacist. Price will not be the only attraction. So consumers will be able to enjoy lower prices and the pharmacists will be given a lump sum to keep them in business. If some pharmacists disappear, which is what people want to prevent, the consumer will have to go to some other place and pay extra to buy the medicine. But the medicine the consumer buys will be cheaper than at his or her local pharmacy.

There are horses for courses here. When the Restrictive Practices Court, or whoever it is, looks at this matter it ought to consider ways other than resale price maintenance to help preserve these pharmacies and pass the benefit of lower prices on to the consumer. In that way, everyone would be happier.

Lord Campbell of Alloway

My Lords, before the noble Lord sits down, perhaps I may ask him a question. As there is not a special fund—

Noble Lords

There is!

Lord Montague of Oxford

My Lords, I hope I did not express myself earlier in a manner which misled the House. There is a fund. I named the fund. I stated the amount of money that has been paid by the Government. I can now tell the House the number of small pharmacies that are being assisted at the present time in England and Wales. It is 280. If any more fall below this threshold, they will be able to get similar funds from their local health authority. I may not have made myself completely clear; in which case I apologise.

Lord Jacobs

My Lords, I remain unconcerned that my noble friend Lord McNally moved the amendment while I am opposing it. As your Lordships will see, this is not an open and shut case. Noble Lords may have believed it was when they heard the speeches at the Committee stage, but they have heard a more balanced view today. Indeed, if the arguments were so clear-cut, why have the supporters of the amendment made such enormous efforts to prevent this going before the Restrictive Practices Court, where things could be properly evaluated? Perhaps they are not confident that they will win their case there.

The strongest spokesman for consumers in this country is the Consumers' Association. Last year it carried out a major study and said that it unreservedly opposed the continuation of resale price maintenance on these goods. Its research showed, on a survey of 2,000 people, that 13 per cent. of them were unable to afford certain medicines. This minority of just one in eight of the population is large enough to warrant the concern of noble Lords. If the removal of the RPM on medicines allows some of this group to purchase the medicines they wish, the social benefits will be considerable.

It is claimed that 3,000 pharmacists are at risk if RPM is removed on over-the-counter drugs. Regrettably, so far the report adducing this information has not been published, although it has been requested by the Consumers' Association. Those pharmacists which it is claimed are at risk will be the smallest ones, naturally, and they will have a turnover of between £120,000 and £150,000 a year. Eighty per cent. of that will be for regular prescription drugs and about 5 per cent.—there are differing figures ranging from 3 per cent. to 7 per cent., but the majority view is that it is about 5 per cent.—of that turnover will be on over-the-counter drugs.

If RPM is abolished, the Consumers' Association believes that there will be very little loss of business to supermarkets and other groups. It believes that customers will continue, as the noble Lord, Lord Desai, has said, to use local pharmacists for their convenience when they serve a local community and offer a good service.

I prefer to be more generous to the supporters of RPM by saying that perhaps as much as 50 per cent. of their turnover in what would be cut-price goods on over-the-counter drugs would go to the competition. The net loss of profit or margin for the 3,000 pharmacists in total would be about £7 million a year.

If RPM is not abolished, the Community Pharmacy Action Group believes that the cost to the consumer would be between 6p and 10p per week, which I am sure noble Lords will agree is a small sum—unless noble Lords have already calculated that even 6p per week is £180 million a year—which the consumers will have to pay to enable the £7 million a year of additional money to accrue to the 3,000 pharmacists. I can well understand why the Consumers' Association is so strongly in favour of the end of RPM.

The Government could compensate small pharmacists for the loss of business by a smaller amount of the dispensing fee which they receive and make up the cost of that by reducing by a small amount the dispensing fee given to the larger chemist shops. It has been argued before that the pharmacists do not want to go before the Restrictive Practices Court and are seeking a delay of five years before this matter is reviewed. That would be in order to protect the 3,000 small pharmacists who are at risk. Their loss of margin over five years would be £35 million. The cost to the rest of the nation for maintaining that system over five years would he in excess of £900 million.

I do not argue that the case against RPM is absolutely certain to win the day before the Restrictive Practices Court, any more than it is possible to argue that the supporters of RPM will win their case. However, this matter has not been reviewed for more than 27 years. I believe that the process of re-examination of the merits and demerits for the continuation of RPM should take place before the courts. As an opponent of RPM, I am confident that our view will be upheld, but so indeed are those in favour of RPM. Therefore, let it be judged before the courts, where all the facts and evidence can he produced. I ask your Lordships to avoid the temptation of being persuaded by some very good emotional arguments which I heard both at Committee stage and today.

Lord Peston

My Lords, in addressing your Lordships briefly I declare two interests. I am an honorary member of the Royal Pharmaceutical Society of Great Britain and I am also chairman of the Office of Health Economics, which is financed by the pharmaceutical industry. It is for that reason that I have refrained from addressing your Lordships on this subject until now. I do not intend to deal with the substance of the matter even on this occasion, except to remark acerbically that it is customary in your Lordships' House for noble Lords to address the amendments before the Chamber and not to debate other subjects—which most noble Lords have been doing either for or against resale price maintenance, which, unless I have lost all my ability to read, is not the subject of these amendments. They are about a related matter.

I mention the matter largely to ask my noble friend a question which relates to double jeopardy. That is the only reason I rise to speak. Assuming that my noble friend Lord Stallard is right—and I believe he is—we are discussing here the question of triple jeopardy, because the bureaucrats in Brussels may well take an interest in the subject.

I believe that my credentials on competition are at least as good as those of any Member of your Lordships' House. Indeed, I believe that they are better than those of one or two noble Lords who have spoken today. But again that is me in my acerbic mood.

My noble friend the Minister has dealt with the Bill generally so admirably, but he has not answered the double jeopardy question. He has dealt with many other matters but he has not answered that. As I say, I do not wish remotely to get involved with the substance of the debate because I believe it would be improper for me to do so. But I hope on this occasion when my noble friend replies that he will explain to us why the Government view with equanimity the double jeopardy side of this subject. I have an open mind. I am willing to be persuaded that it is right that pharmacists should have to argue the case once under the old legislation, which they might win, but if they do, they have to argue the case a second time, let alone on a third occasion. I fervently hope that my noble friend wishes to carry his friends with him. But he has to answer once and for all the case for double jeopardy. I am looking forward to that.

Lord Fraser of Carmyllie

My Lords, I express to the Minister for the last time the view that it is not for him to respond to this debate. I very much regret that, having indicated on a previous occasion that it might at least have been a courtesy to the House to have one health Minister, or more, on the Bench alongside the noble Lord. As he well understands, what concerns me and many others in this House is that there are two sets of government policies which are in conflict. If the declared single objective of this Government was that over-the-counter medicines were to be as cheap as possible to the consumer, there would be no contradiction whatsoever.

But the fact is that the Secretary of State for Health has repeatedly said, and as recently as Monday evening, as the noble Lord, Lord Walton, and my noble friend Lady Miller remarked, and emphasised at great length, how keen he is to see the role of community pharmacies extended. He wanted to see them helping people to use self-medication where appropriate. He wanted to see a new and extended role for community pharmacists in primary care. That is not only a clearly set out policy—from this side of the House I say that it is an extremely good one. If the Government wish to follow that I can signal to them that they will get unswerving support. I believe, from all quarters of the House in the pursuit of such a worthwhile policy. It reduces the load on general practitioners.

In this debate we have over-concentrated on rural matters. I would like to see community pharmacies more extensively developing among some of the appalling housing schemes of our nation. That would be a much more important demonstration of the value of the extension of their role. That is what we are being told. In the White Paper for England, Wales and Scotland the Government have said that they wish to take competition out of the National Health Service. But by this change in the Competition Bill in a critical area of the policy they most wish to pursue they are saying that what will be paramount and the key issue, whether it affects community pharmacists or not, will be the price of such over-the-counter drugs. That is unacceptable. This is a health debate. As the noble Lord, Lord Peston, said, it may principally revolve around the issue of double jeopardy. However, the community pharmacists—and they are the people who have put up their own money and who run their own businesses—believe that if the limited protection now afforded to them is removed, their businesses will be put in real jeopardy.

It is unacceptable that the Secretary of State for Health should have gone to talk to the pharmacists on Monday night, praised them to the skies for all that they are doing and yet—although he is well aware that this is the one issue that is at the forefront of their minds—did not even refer to their worries during the course of a long speech. It would seem appropriate for a responsible government to say, "We understand your fears", and then either, "We do not accept them", or, "We are going to meet your concerns in another way by extension of the small pharmacy scheme or by some other device". None of those proposals has ever been offered to community pharmacists and I believe that their fears are well founded.

This is a matter on which we cannot be neutral. I understand that in answer to a question one of the Ministers responsible for health said that the Department of Health was neutral on this issue. It simply cannot be neutral on this issue because it is far too important for the future development of the National Health Service. I am aware that whatever may be the Government's view at present, over 100 of their Back-Benchers in the House of Commons have exactly the anxieties that have been expressed by the noble Lord, Lord Stallard, and others. In such circumstances, if those who are promoting the amendment are determined to put it to a Division, I shall advise my noble friends to support them in the Lobby.

4.30 p.m.

Lord Simon of Highbury

My Lords, I am clear that what I am trying to achieve this afternoon is an understanding of the implications of this Competition Bill to a particular sector. I am delighted to be asked to debate health policy during our proceedings on this Bill, but, again, I shall not rise to the challenge put to me because we are here to debate the Competition Bill. Although the noble and learned Lord, Lord Fraser, was very tempting in asking me to dispose of policy in another department, he will not find me willing to do so on this occasion. I am sure that if my noble friend Lady Jay were not in America she would be sitting here on the Bench beside me supporting me fully because what I am about to say relates to government policy. We are aware of government policy in both sectors.

As I have said before in previous debates (both in Committee and on Report)—I should like to make this clear to my noble friends Lord Stallard and Lord Hughes—the Government entirely accept the importance of community pharmacies. I fully understand that the CPAG wishes to press the arguments of community pharmacists and to outline their concerns about the future. However, as my noble friend Lord Borne explained—I agree with this point—at the moment we do not know whether resale price maintenance in that sector is a good or a bad thing. The issue is whether the independent bodies set up to examine such matters under statutory provisions should be allowed to do so, or whether the resale price maintenance for over-the-counter (OTC) medicines should be removed from scrutiny, both under the Resale Prices Act and under the Chapter I prohibition in the Bill until the year 2004. That is the purpose and the likely effect of the amendments.

The Director-General of Fair Trading has now initiated formal proceedings. I advise my noble friends that the proceedings have been on the stocks since October 1996. They were formally announced in January, but for 15 months people were well aware that the case was being prepared. Now that the director-general is seeking the leave of the court for resale price maintenance in OTC medicines to be reassessed, the Government are satisfied that it would not be desirable for the legislature to intervene to set aside the formal process which has been initiated. As has been pointed out, after nearly three decades, it is reasonable for the matter to be reviewed by the competition authorities. We do not think it could be justified to remove resale price maintenance from competition scrutiny until perhaps 2004. My noble friends Lord Stallard and Lord Peston have suggested that it is unfair and wasteful, and could involve pharmacists in double jeopardy, if they had to argue their case under the Resale Prices Act at a time when we are about to introduce a new competition regime.

As I said on Report, I can see the case for saying that the resale price maintenance of OTC medicines should be considered only under the new regime, in which case it should also benefit only from the one-year transitional period we are providing for most existing agreements. I can see the case for saying, as we propose, that the present action should be allowed to continue to a conclusion, but that if the result of the proceedings is that OTC medicines are exempt because their case is as strong as those promoting the amendment contend, resale price maintenance in those goods should benefit from a generous five years' transitional exclusion from the Chapter I prohibition from the date those proceedings end. But I do not understand the case for saying that the present action seeking a review of the exemption should be stayed and that resale price maintenance for OTC medicines should benefit from a five-year exemption.

The existing exemption of resale price maintenance for OTC medicines has always been subject to possible review by the court, if there is prima facie evidence of a material change in the relevant circumstances since the court took its decision in 1970. As I have said, the amendments take the opportunity of the Bill effectively to remove the practice from being considered until 2004.

I am not here to suggest in any way that the CPAG is hiding anything in seeking to avoid scrutiny of resale price maintenance of OTC medicines. As I have said, we recognise the public interest in a plentiful and well distributed supply of pharmacists, and we would hope, as well as expect, that the court will consider carefully any evidence against ending the exemption for OTC medicines.

I am sure that the pharmacists will be able to make a powerful case. But it is only fair to point out that the Director-General of Fair Trading has unquestionably studied this issue long and hard over a number of years and has reached a serious conclusion, to which many noble Lords have referred. There are factors which have changed considerably and the director-general has tried to lay out some of those factors publicly. I sense that the noble Lord, Lord McNally, implicitly criticised the director-general for making known his views which were reported in the press. I am assured that the director's intention was merely to put on record the issues which led him to refer the case and to set out the due process and merits of the case which would be properly examined.

The director-general notes that in 1970 the court was particularly concerned about the availability of ethical medicines should resale price maintenance be prohibited. He observes that resale price maintenance of such medicines appears to have been abandoned in the 1970s without there being the effects which the court feared. He questions whether the prohibition of resale price maintenance of the remaining medicines covered by the exemption would threaten the future of pharmacies. He points out, as noble Lords have pointed out today, that their mainstay is NHS dispensing, since over 70 per cent. of their turnover is accounted for by prescriptions. When the court made its order in 1970 pharmacy numbers were declining and branded OTC medicines made up between 10 per cent. and 13 per cent. of their sales. Since 1987 the number of pharmacies has been stable and these products account for about 7 per cent. of their sales. This is a real dilemma which the House has recognised. I believe that the director-general implies that pharmacies do not rely on branded over-the-counter-sales as they once did. As my noble friends Lord Montague and Lord Desai have pointed out, the director-general has noted that since the 1970 Essential Small Pharmacy Scheme has been instituted. That scheme protects small rural pharmacies from going out of business. Surely, a targeted scheme such as that to protect local pharmacies is a much more sensible policy for the Government and consumers than to make customers pay more for their goods. The Essential Small Pharmacy Scheme may well command greater support in the future.

As for the disadvantages of resale price maintenance in the sector, the director-general has pointed out the dramatic increase in prices since 1970. A basket of medicines used by most families has risen by 17 per cent. in real terms since then, and continues to rise. Between 1990 and 1996 the price rose 20 per cent. above inflation. Small pack sizes, which are most popular with low income families and the elderly, have risen by almost 60 per cent. above inflation since 1977.

I do not outline the economic facts that the director-general has put to the public because I necessarily draw conclusions from them. That is not my job but the job of the court. I do so just to point out—here I agree with many noble Lords—that there are important points to consider. The amendments that have been tabled would prevent proper consideration of those matters by the court. To what avail is that likely to be? Like my noble friend Lord Peston, I come to the triple-jeopardy question that I cannot answer, having attempted to answer the double-jeopardy question. The triple jeopardy question is: what would the European Commission do if we did not make this examination and the case was not heard by our own authorities? I must warn the House that the consequences of accepting these amendments are unpredictable in that sense and may not necessarily be to the advantage of the sponsors of the amendments. I believe that it would be better to leave the matter to be dealt with on its merits by the court. We seek to press to a conclusion these very difficult matters over which I sense the House is also divided. If the proceedings result in an exemption, then under the Bill resale price maintenance for over-the-counter medicines will enjoy the benefits of a five-year transitional exclusion from the Chapter I prohibition from the end of the proceedings.

In conclusion, I must advise your Lordships against accepting the amendments. I believe that it would be undesirable for this House to set aside proceedings before a court of law brought by a statutorily appointed officer exercising functions confirmed on him by the Act, particularly as the proceedings concern the very pertinent question of whether resale price maintenance for medicines is in the public interest. There should be and will be other ways to assure the distribution network, but they cannot be part of this particular Bill. I ask the noble Lord to reflect very carefully before pressing this amendment.

4.45 p.m.

Lord Stallard

My Lords, before my noble friend sits down, can he explain why for the past 30 years successive directors-general have believed it to be in the public interest to retain RPM but suddenly the present director-general decides in the same month as this Bill commences that he must institute proceedings? Is it merely a coincidence, or am I being over-suspicious?

Lord Simon of Highbury

My Lords, I believe that my noble friend is over-suspicious. These proceedings were already on the stocks 15 months before the official laying of the case. Therefore, the matter had been in preparation for 15 months. As to whether the circumstances today have changed from 1970, effectively that is a matter for the court. That is why the court should hear the case and be given the opportunity to reach a judgment upon it.

Lord McNally

My Lords, the Minister has addressed the House with his usual candour. The debate has been peppered with expressions such as "anxiety", "a real dilemma" and "a House divided". That is true. On the other side we have had Hughes against Desai and Stallard against Borrie and on this side we have had Miller against O'Cathain and McNally against Jacobs. We have also heard the noble Lord, Lord Peston, who with his usual professorial humility told us that up until his intervention we had all missed the point. In that respect the debate has followed the usual course.

The Minister is dealing with a competition Bill and has clearly argued the competition case. The Government's health strategy, as stated by the Secretary of State for Health, is to retain as many community pharmacies as possible and encourage trained pharmacists to make a greater contribution to the National Health Service than they make at present. That has given rise to the cross-party debate this evening. We are not sure that to keep to the close tramlines of this Competition Bill will not do grave damage to the Government's other stated objective of expanding pharmacies. In the circumstances, I believe that the House must be divided. It will give Ministers an opportunity to ponder further how to allay the very real anxieties that have been expressed from all Benches this evening. I beg to move.

4.48 p.m.

On Question. Whether the said amendment (No. 1) shall be agreed to?

Their Lordships divided: Contents, 138; Not-Contents, 81.

Division No. 1
CONTENTS
Aberdare, L.	Clanwilliam, E.
Addington, L.	Coleridge, L.
Addison, V.	Cope of Berkeley, L.
Ailsa, M.	Courtown, E.
Alderdice, L.	Cowdrey of Tonbridge, L.
Alexander of Tunis, E.	Cox, B.
Anelay of St. Johns, B.	Cranbrook, E.
Annaly, L.	Cross, V.
Astor of Hever, L.	Cuckney, L.
Belhaven and Stenton, L.	Cullen of Ashbourne, L.
Berners, B.	Cumberlege, B.
Biddulph, L.	Davidson, V.
Blaker, L.	Dean of Harptree, L.
Blatch, B.	Denham, L.
Bowness, L.	Denman, L.
Bridgeman, V.	Dholakia, L.
Brigstocke, B.	Dixon-Smith, L.
Brougham and Vaux, L.	Donegall, M.
Burnham, L.	Elles, B.
Butterworth, L.	Erne, E.
Byford, B.	Ezra, L.
Cadman, L.	Fookes, B.
Campbell of Alloway, L.	Fraser of Carmyllie, L.
Campbell of Croy, L.	Gainford, L.

Gisborough, L.	Onslow of Woking, L.
Gray of Contin, L.	Orr-Ewing, L.
Haig, E.	Oxfuird, V.
Halsbury, E.	Peel, E.
Hayhoe, L.	Pender, L.
HolmPatrick, L.	Pilkington of Oxenford, L.
Home, E.	Plummer of St. Marylebone, L.
Hooper, B.	Quinton, L.
Hooson, L.	Rankeillour, L.
Howe, E.	Rawlings, B.
Hughes, L.	Redesdale, L.
Hurd of Westwell, L.	Rees, L.
Hylton-Foster, B.	Renton, L.
Ilchester, E.	Renwick, L.
Kenyon, L.	Rodgers of Quarry Bank, L.
Kingsland, L.	Russell-Johnston, L.
Kitchener, E.	St. John of Fawsley, L.
Leigh, L.	Saltoun of Abernethy, Ly.
Linklater of Butterstone, B.	Seccombe, B.
Long, V.	Selborne, E.
Lucas, L.	Selkirk of Douglas, L.
Lucas of Chilworth, L.	Simon of Glaisdale, L.
Ludford, B.	Skelmersdale, L.
	Stair, E.
Lyell, L.	Manchester, Bp.
McColl of Dulwich, L.	Stallard, L. [Teller.]
McConnell, L.	Steel of Aikwood, L.
Mackay of Ardbrecknish, L.	Stewartby, L.
Mackay of Drumadoon, L.	Stoddart of Swindon, L.
McNally, L. [Teller.]	Swansea, L.
Manchester, Bp.	Swinfen, L.
Marlesford, L.	Taylor of Warwick, L.
Mayhew of Twysden, L.	Tenby, V.
Merrivale, L.	Teviot, L.
Mersey, V.	Thomas of Gwydir, L.
Miller of Hendon, B.	Thomas of Swynnerton, L.
Milverton, L.	Thomas of Walliswood, B.
Mottistone, L.	Tope, L.
Munster, E.	Trenchard, V.
Murton of Lindisfarne, L.	Walton of Detchant, L.
Napier and Ettrick, L.	Weatherill, L.
Naseby, L.	Wilberforce, L.
Nelson, E.	Williams of Crosby, B.
Newall, L.	Windlesham, L.
Nicholson of Winterbourne, B.	Wise, L.
Northesk, E.	Young, B.

NOT-CONTENTS
Acton, L.	Hayman, B.
Archer of Sandwell, L.	Hilton of Eggardon, B.
Berkeley, L.	Howie of Troon, L.
Blackstone, B.	Hoyle, L.
Borrie, L.	Hunt of Kings Heath, L.
Brooke of Alverthorpe, L.	Irvine of Lairg, L. [Lord Chancellor.]
Burlison, L.
Callaghan of Cardiff, L.	Jacobs, L.
Carmichael of Kelvingrove, L.	Janner of Braunstone, L.
Carter, L. [Teller.]	Judd, L.
Cocks of Hartcliffe, L.	Kennedy of The Shaws, B.
Currie of Marylebone, L.	Kilbracken, L.
David, B.	Longford, E.
Davies of Coity, L.	Lovell-Davis, L.
Desai, L.	McIntosh of Haringey, L. [Teller.]
Donoughue, L.
Dormand of Easington, L.	Mallalieu, B.
Dubs, L.	Merlyn-Rees, L.
Eatwell, L.	Milner of Leeds, L.
Farrington of Ribbleton, B.	Molloy, L.
Gallacher, L.	Monkswell, L.
Gilbert, L.	Montague of Oxford, L.
Gladwin of Clee, L.	Murray of Epping Forest, L.
Gordon of Strathblane, L.	Nicol, B.
Gould of Potternewton, B.	Northfield, L.
Hanworth, V.	O'Cathain, B.
Haskel, L.	Paul, L.

Pitkeathley, B.	Simon of Highbury, L.
Ponsonby of Shulbrede, L.	Stone of Blackheath, L.
Prys-Davies, L.	Strabolgi, L.
Puttnam, L.	Strafford, E.
Ramsay of Cartvale, B.	Symons of Vernham Dean, B.
	Taverne, L.
Rea, L.	Tebbit, L.
Rendell of Babergh, B.	Thomas of Macclesfield, L.
Richard, L. [Lord Privy Seal.]	Turner of Camden, B.
Sandwich, E.	Walker of Doncaster, L.
Serota, B.	Wedderburn of Charlton, L.
Shannon, E.	Whitty, L.
Shaughnessy, L.	Wilcox, B.
Shore of Stepney, L.	Williams of Elvel, L.
Sidmouth, V.	Williams of Mostyn, L.

Resolved in the affirmative, and amendment agreed to accordingly.

4.57 p.m.

Clause 2 [Agreements etc. preventing, restricting or distorting competition]:

Lord McNally moved Amendment No. 2:

Page 2, line 23, at end insert ("and has, or is likely to have, a significant effect on competition within the United Kingdom").

The noble Lord said: My Lords, the Minister knows my approach to the Bill. It is a technical competition Bill—which is how I understand the Whips lured him into looking after it in this place—but it is also an opportunity for interested bodies to raise issues where they can get a proper ministerial response. At an earlier stage I raised the matter of look-alikes. The Minister rebuffed the amendment, but it is interesting that the British Brands Group says: We are delighted that the position of the Government appears to be moving, albeit slowly. At least it has now been recognised that the problem exists, which represents a considerable advance from where we were in November".

I do not plan to divide the House, which is a subtle ruse to allow the Minister's troops to go home, but in raising these issues I see an opportunity for the Minister to give assurances. The amendments in my name are proposed by representatives of small business who are concerned with the broad sweep of the Bill. Many of its provisions can be handled very easily by large companies but could cause difficulties to small businesses.

The amendment inserts an appreciability test into the Bill. Such a test is crucial for small business. Its effect is to distinguish agreements which have a significant or appreciable effect on competition from those which do not. Such an appreciability test was included in the 1966 draft Bill, but it has been deleted from the present Bill on the grounds that the courts will interpret the legislation in a manner which is consistent with EU jurisprudence. It has been suggested that that will imply an appreciability test in the same way as one is implied in Article 85. But there can be no guarantee that the UK courts will interpret the legislation in that manner. The amendment is intended to end any uncertainty. It helps to ensure that the Bill achieves one of its stated goals and is interpreted consistently with the Treaty of Rome. I beg to move.

Lord Campbell of Alloway

My Lords, I support the amendment. Its origins, and the justification for it, have been established by the Commission and the ECJ in a body of jurisprudence on the interpretation of Articles 85 and 86 concerned with affecting trade between member states. Here we are concerned with affecting trade within the UK. For the avoidance of doubt, and because of difficulties over registration, in the early days of Regulation 17 the Commission started applying not just de minimis but the test of, has, or is likely to have", which comes straight from its own jurisprudence, a significant effect on competition". If it were necessary for the Commission and the ECJ, in the interests of certainty and to avoid doubt, to do that. it must surely be appropriate, as was said by the noble Lord, Lord McNally, to bring it onto the face of the Bill.

Lord Fraser of Carmyllie

My Lords, my name is also to the amendment. I support what the noble Lord, Lord McNally, said, with one exception. The word "significant" appeared, as I understand it. in the 1996 draft Bill. It is not an issue that has been around since 1966. It was in the 1996 draft. Its inclusion was warmly welcomed by business, and for good reason. Because of the wide interpretation of Article 85 in Europe regrettably the result was a mass of unnecessary notifications with which the Commission has been unable to cope within a reasonable timespan.

Our objective in seeking the inclusion of these words in the Bill is to avoid that experience within the UK. I appreciate that this is a matter we have dealt with at previous stages of the Bill. The Minister has given a number of answers pointing out that under EU law the scope of Article 85 is limited to arrangements which have an appreciable effect on competition. We propose that the word "significant" should be introduced. On reflection, I do not accept that the wording will hinder the overall aim of consistency with EU jurisprudence. I do not believe that it will be contradictory. We thought that the Government would share the aim that it is desirable to avoid that mass of unnecessary notifications. This is a simple way to achieve that object. I support the amendment.

Lord Simon of Highbury

My Lords, as the noble and learned Lord said we have considered most carefully the arguments advanced during the first Committee day and on Report by the noble and learned Lord, Lord Fraser, and the noble Lords, Lord Kingsland, Lord Ezra and Lord Campbell in support of the same amendment we are now debating. I remain convinced, as I said on Report, that we should not insert an express significance test on the face of the Bill.

As I explained on Report, the case law of the European Court of Justice clearly establishes that Article 85 applies only where there is an appreciable effect on trade and competition. I also gave an example of how the UK courts have clearly accepted the existence of the appreciability test under Article 85. The same result will follow for the UK prohibition of anti-competitive agreements as a result of the governing principles clause.

The requirement of appreciability will also be included in the director's guidance which will assist business in understanding what is expected of it in terms of notification.

We should not tinker with the wording of the Chapter I prohibition. There is no express significance test under Article 85. Insertion of such an express test for the Chapter I prohibition would, as I have argued before, create the impression that we were trying to depart from established European principles. That would create greater uncertainty. Worse still, 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.

The example of special treatment for small companies under the Dutch legislation given on Report by the noble and learned Lord, Lord Fraser, did not appear to amend the prohibition itself. Rather, it seemed to operate by way of specific exclusion. The Bill, of course, does provide special treatment for undertakings with a low turnover and we will shortly be debating amendments on that very subject.

So what of the concern expressed by noble Lords on Report, and today by the noble and learned Lord, Lord Fraser, of the risk of unnecessary notifications which Brussels has faced acting under Article 85? Many of the bureaucratic problems experienced by the Commission can be attributed to the way in which Article 85 has been applied to vertical agreements. Indeed, that has prompted the Commission to review its treatment of vertical agreements.

As I explained on Report, an important factor guiding the treatment of vertical agreements under Article 85 has been the single market objective of the Community. That is borne out by the study I referred to on Report prepared by Professor Whish and Dr. Bishop, a copy of which is in the Library of this House. Single market objectives will not be relevant to the interpretation of the domestic prohibitions. This fact therefore makes a comparison of the experience of the number of notifications to Brussels not an entirely fair one.

Even though single market objectives are not relevant to the interpretation of the domestic prohibitions, as I explained on Report we recognise the case for special treatment of vertical agreements under the Bill. I am not able to announce any special measures to this House, but work is continuing in consultation with business and the regulators.

We are taking steps to ensure that the regulators and business are not burdened with unnecessary notifications. Altering the nature of the prohibitions themselves, for the reasons I have explained, would be an uncertain and potentially dangerous course. I therefore urge the noble Lord to withdraw his amendment.

Lord McNally

My Lords, before the Minister concludes, will he clarify whether, in his guidance to the director, there will be specific guidance on the treatment of small businesses, because, as I said, that is what is motivating this and subsequent amendments? That would give some reassurance.

Lord Simon of Highbury

My Lords, I can confirm that that is the intention of the consultation process now taking place and will be part of the rule-making approach.

Lord Fraser of Carmyllie

My Lords, before the noble Lord sits down, he may think it is unusual for me to complain about an answer that seems to me to be exclusively court-focused, but does he not understand that what concerns us is that without the word "significant" those companies will have to reach a view as to whether or not they must make a notification? If they do not understand the threshold, the risk is there. It is a very real risk and has been perceived to be so by the CBI. If there is not a threshold like this, there is a real risk that the experience that the European Commission has encountered over the years, although I hear what the Minister says about the single market complication, will be duplicated here in the United Kingdom. That would be extremely undesirable. We should be looking at this matter from the point of view of businesses quite as much as from the point of view of the courts.

Lord Simon of Highbury

My Lords, I suggest that we are looking at it from the point of view of business, while understanding that this is a Competition Bill to deal with occasions when businesses are not conforming with the practices with which we should wish them to conform.

I believe that further advice should be in the guidance and not on the face of the Bill. The purpose of taking the text as per the prohibitions in the European jurisprudence is precisely so that there is not additional confusion for businesses and extra work is not created because of that confusion.

Lord McNally

My Lords, in the light of the Minister's reply, I beg leave to withdraw the amendment.

The Principal Deputy Chairman of Committees (Lord Tordoff)

My Lords, is it your Lordships' pleasure that the amendment be withdrawn?

Lord Fraser of Carmyllie

My Lords, no.

The Principal Deputy Chairman of Committees

My Lords, the Question is that this amendment be agreed to. As many of that opinion shall say Content.

Noble Lords

Content.

The Principal Deputy Chairman of Committees

To the contrary, Not-Content.

Noble Lords

Not-Content.

The Principal Deputy Chairman of Committees

My Lords, I think the Not-Contents have it.

Noble Lords

Content.

The Principal Deputy Chairman of Committees

My Lords, clear the Bar.

5.12 p.m.

On Question, Whether the said amendment (No. 2) shall be agreed to?

^*Their Lordships divided: Contents, 20; Not-Contents, 91.

Division No. 2
CONTENTS
Ailsa, M.	Merrivale, L.
Berners, B.	Monson, L.
Braine of Wheatley, L.	Montgomery of Alamein, V.
Campbell of Alloway, L.	Munster, E.
Courtown, E. [Teller.]	Murton of Lindisfarne, L.
Dixon-Smith, L.	Orr-Ewing, L.
Erne, E.	Pilkington of Oxenfond, L.
Fraser of Carmyllie, L.	Rawlings, B.
Holderness, L.	Swansea, L.
Howell of Guildford, L.	Teviot, L.
Kingsland, L. [Teller.]	Trenchard, V.

NOT-CONTENTS
Acton, L.	Kilbracken, L.
Addington, L.	Linklater of Butterstone, B.
Alderdice, L.	Longford, E.
Amos, B.	Lovell-Davis, L.
Archer of Sandwell, L.	Ludford, B.
Ashley of Stoke, L.	McIntosh of Haringey, L. [Teller.]
Berkeley, L.	McNally, L.
Blackstone, B.	Mallalieu, B.
Blyth, L.	Merlyn-Rees, L.
Borrie, L.	Milner of Leeds, L.
Burlison, L.	Molloy, L.
Carter, L. [Teller]	Monkswell, L.
Cocks of Hartcliffe, L.	Montague of Oxford, L.
Currie of Marylebone, L.	Nicholson of Winterbourne, B.
	Nicol, B.
David, B.	Peston, L.
Davies of Coity, L.	Pitkeathley, B.
Desai, L.	Ponsonby of Shulbrede, L.
Dholakia, L.	Prys-Davies, L.
Donoughue, L.	Puttnam, L.
Dormand of Easington, L.	Ramsay of Cartvale, B.
Dubs, L.	Rea, L.
Eatwell, L.	Redesdale, L.
Elis-Thomas, L.	Rendell of Babergh, B.
Ezra, L.	Richard, L. [Lord Privy Seal]
Farrington of Ribbleton, B.	Rodgers of Quarry Bank, L.
Gallacher, L.	Simon of Highbury, L.
Gilbert, L.	Stallard, L.
Gladwin of Clee, L.	Steel of Aikwood, L.
Gordon of Strathblane, L.	Stoddart of Swindon, L.
Gould of Potternewton, B.	Stone of Blackheath, L.
Hanworth, V.	Strabolgi, L.
Haskel, L.	Symons of Vernham Dean, B.
Hayman, B.	Thomas of Macclesfield, L.
Hilton of Eggardon, B.	Thomas of Walliswood, B.
Howie of Troon, L.	Thomson of Monifieth, L.
Hoyle, L.	Tope, L.
Hughes, L.	Tordoff, L.
Hunt of Kings Heath, L.	Turner of Camden, B.
Irvine of Lairg, L. [Lord Chancellor.]	Walker of Doncaster, L.
	Watson of Invergowrie, L.
Jacobs, L.	Wedderburn of Charlton, L.
Janner of Braunstone, L.	Whitty, L.
Jeger, B.	Williams of Crosby, B.
Jenkins of Putney, L.	Williams of Elvel, L.
Judd, L.	Williams of Mostyn, L.
Kennedy of The Shaws, B.	Young of Old Scone, B.

^*See Col. 1366.

Resolved in the negative, and amendment disagreed to accordingly.

5.21 p.m.

Lord Kingsland moved Amendment No. 3:

Page 2, line 25, at end insert— ("() Any infringement of the Chapter I prohibition is actionable by any person who may he affected by that infringement. subject to any defences under this Act and to the defences and other incidents applying to actions for breach of statutory duty.").

The noble Lord said: My Lords, in moving this amendment I shall speak also to Amendment No. 14. The amendment relates to the rights of third parties to bring an action under one or other of the prohibitions. In Clause 48, there is a right for a third party to bring an action in circumstances where that third party wishes to "vary a decision" taken by the director-general. However, there is no other third party right on the face of the Bill.

In Committee, I believe the Minister expressed the view that he thought that third parties did have rights to bring actions under the prohibitions in the legislation. Under European Community law, it is clear that these rights exist under Articles 85 and 86 of the treaty because both those articles are directly applicable. That fact, together with the doctrine of effective remedies, has meant that British courts have been prepared to express those rights through the tort of breach of statutory duty. Therefore, the amendments seek to accord the same rights to our citizens under the relevant clauses in the Bill. In my submission, it is a very important point to clarify. If the Minister believes that this ought to be the case anyway, I do not see how he could possibly have an objection to these two amendments.

One of the interesting things that has been happening in the European Community is the increasing desire of the Commission to see a greater number of cases under its own competition law being taken and pursued not by the Commission but by individuals in member states. I suggest that it is preferable for competition issues to be pursued by the least bureaucratic means possible; in other words, third party actions by individuals, taking advantage of these prohibitions, is a desirable alternative to seeing the British prohibitions (and alleged wrongs under them) pursued either by the Director-General of Fair Trading or by the regulator. That is the basis upon which my two amendments have been tabled. I beg to move.

Lord Borrie

My Lords, I feel sure that my noble friend the Minister will agree that it is most important that third party rights are not only available but also that they are widely known to be so. It would be most unfortunate if complainants against the prohibited conduct of cartels or anti-competitive practices should have only one choice; namely, to go through the nominated official, the Director-General of Fair Trading.

I have always thought, as I am sure is the case with my noble friend the Minister, that one of the great advantages of the changes being made in this Bill by the Government is to enable businesses, individually if they so wish, to attack the anti-competitive practices of others and to do that in their own name, quite irrespective of the duties and responsibilities of the director-general.

The amendment seeks to make that right explicit on the face of the Bill. At first sight, that certainly seems to have many advantages. If the response of my noble friend to the amendment is that it is unnecessary because such private rights of action are clearly incorporated into the Bill through what is now Clause 60 (the general principles clause which incorporates the European jurisprudence), that is fine as far as concerns the substantive matter of their being third party rights. However, I have two questions for my noble friend. First, is there any good reason why this should not be made explicit, if only for educative purposes? Secondly, if there are reasons against making it explicit in the Bill, what recommendations does my noble friend have for the director-general, or his own department, to ensure that the availability of private rights of action, and all that that involves, is widely known throughout the business community?

Lord Simon of Highbury

My Lords, as my noble friend Lord Haskel explained on Report, rights of action under the domestic regime are to be the same as those under Articles 85 and 86. The courts have held that a right of action exists for breach of the EC prohibitions. The same right of action will exist for breach of the UK prohibitions. Clause 58, regarding the use of findings of fact made by the director, clearly contemplates such rights of action.

We do not want to go wider or narrower than the rights which exist for breach of the EC prohibitions. We believe that the best way to achieve this result is for the Bill to remain silent on the issue of private rights of action. Perhaps I may explain our reasoning. It is clear that Community law confers rights arising from a breach of Articles 85 and 86. This is a "principle" laid down by the European Court of Justice within the meaning of subsection (2) of the governing principles clause which will be imported into the domestic system, as implied by my noble friend Lord Borrie.

However, Community law is still in the process of development, for example, in terms of the class of persons able to claim such rights. If, say, a company with a wide consumer base were to breach the EC prohibitions, could it be said that all the consumers affected directly or indirectly had Community rights arising from the breach? Such a question is yet to be resolved.

An express right of action for breach of the prohibitions would need to provide answers to these unresolved EC questions. That, in turn, could lead to a divergence between rights of private action under European Community and UK competition law. We would not want a situation where the extent of rights of private action depended on whether the agreement affected trade between member states, often a difficult line to draw. Leaving the Bill as drafted will ensure that our courts can evolve third party rights of action as they evolve in the context of Articles 85 and 86.

As regards damages and injunctions, the consequences of breaching Community rights is left to national law, provided that the remedy meets a minimum standard for protecting the rights. The European Court of Justice has confirmed that on many occasions.

It is already well established under UK law that private parties may seek an injunction for breach of EC competition law. Clause 58, relating to the use of findings of fact by the director in court proceedings, clearly contemplates such private rights of action for breach of the domestic prohibition. Rights to seek injunctions will therefore be available for breach of the domestic prohibitions.

Equally it is generally recognised under UK law that breach of the EC prohibitions may entitle third parties suffering loss as a result of the breach to claim damages. The majority of this House, by four to one, in the Garden Cottage Foods case stated obiter that such entitlement did exist. This ruling has generally been taken as authoritative, including by authors of leading textbooks in this field. In the light of this explanation I invite the noble Lord to withdraw his amendment.

Lord Kingsland

My Lords, I am much obliged to the Minister for that helpful response. I understood him to say that, as a consequence of his interpretation of what is now Clause 60 of the Bill, it is crystal clear that the courts of this country will derive from that private rights of action for breach of statutory duty and the array of defences that also go with that for a defendant in such cases. On that basis I am happy to withdraw the amendment. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

5.30 p.m.

Lord McNally moved Amendment No. 4: After Clause 2, insert the following new clause—

Loss LEADERS

(" .—(1) The Chapter I prohibition applies to agreements for the supply of goods where the supplier has reasonable grounds to believe that the purchaser intends to use the goods as loss leaders.

(2) In this section the "use of goods as loss leaders" means a sale of goods to consumers not for the purpose of making a profit but for the purpose of attracting to the establishment at which the goods are sold consumers likely to buy other goods or otherwise for the purpose of advertising the business of the person selling those goods.

(3) A sale of goods shall not he treated for the purposes of this section as the use of those goods as a loss leader where the goods are sold as part of a genuine seasonal or clearance sale, not having been acquired for the purpose of being resold as loss leaders.").

The noble Lord said: My Lords, as I explained when I moved an earlier amendment, I am quite consciously raising issues where Ministers have an opportunity to respond to real concerns from various sectors of industry. I have tabled this amendment as I have been lobbied by small shopkeepers and particularly independent newsagents. Their concern is that the current Bill has nothing to say specifically about loss leaders and the dumping of products in the market-place. Loss leaders and the dumping of products are significant commercial weapons. They are used by the powerful and wealthy to drive out of business competition which does not enjoy their financial "muscle". I am told that there are numerous examples of this taking place in the newsagency business.

Clearly we must not impede ordinary commercial activity, especially regular clearances or sales. Thus the amendment provides a specific exemption for goods which are genuinely sold at a reduced price as part of a sale. The Minister may have alternative proposals to that expressed in this amendment. There is clear evidence that small businesses may be vulnerable to loss leaders. I am sure that they, I and the House will be interested in the Minister's observations. I beg to move.

Lord Haskel

My Lords, I welcome this opportunity to address the concerns of small companies, particularly newsagents. However, we have dealt with loss leaders earlier in the Bill. The issue arose in relation to an amendment tabled by the noble Lord, Lord Kingsland, to the clause providing immunity from penalties for small agreements. Then, as now, we maintain our view that the Bill should not introduce any automatic rule in relation to loss leading. Our view is that the Competition Bill will properly address what constitutes anti-competitive behaviour. Special exclusions are unnecessary because anti-competitive behaviour will be assessed on the basis of the effects of the behaviour in question. Prohibiting anti-competitive behaviour as judged by its effects is an approach which should generally apply. It should apply in the case of newsagents and loss leaders.

In an individual case, whether or not the Chapter I prohibition applies to restrictions placed by a supplier on a retailer to prevent loss leading will depend on the effects on competition in the individual circumstances. The same is true for the supply of goods to a retailer in the knowledge that it will loss lead. Quite rightly this will ultimately be a question for the director—or on appeal to the tribunal or the courts—to decide in accordance with the governing principles clause.

Support for this Bill on all sides of the House has arisen because the current competition regime under the Restrictive Practices Act and the Resale Prices Act is considered to be too formalistic. That is one of the main criticisms of the current position. One of the purposes of the Bill is to move away from that formalistic approach and instead to concentrate on the effects of behaviour. This amendment would add to this much criticised formalism. It would mean that we would move backwards. On that basis, I suggest to the noble Lord that he might want to withdraw his amendment.

Lord McNally

My Lords, I thank the Minister for that reply. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Lord McNally moved Amendment No. 5: After Clause 3, insert the following new clause—

TRADE ASSOCIATIONS

("—(1) The Chapter 1 prohibition does not apply to agreements made between a relevant trade association and its members, or to decisions or practices of such an association which have the object or effect of enabling the members of that association to—

1. (a) compete effectively with other undertakings; or
2. (b) negotiate or conclude agreements with manufacturers, producers, distributors or suppliers for the supply of goods or services on competitive terms.

(2) For the purposes of this section a trade association is a relevant trade association if all of its members are small enterprises or micro-enterprises.").

The noble Lord said: My Lords, Ministers may be pleased to know that the end is nigh as regards my moving amendments. The origin of this clutch of amendments lies with small businesses which are concerned that this Competition Bill is concerned with big business and that somehow small businesses will be squeezed by some of the Bill's provisions. I hope that Ministers can put their minds at rest.

This proposed new clause would provide exemption from the Chapter I prohibition for agreements which are made between a trade association representing small businesses and its members. Such an exclusion is important to allow small businesses to compete effectively or to negotiate agreements for the supply of goods and services on competitive terms. Certain industries are complex oligopolies. This means that one part of the vertical supply chain is dominated by a small number of powerful companies while another part consists of a large number of small businesses. Clearly the large players are often able to impose terms on the many small businesses. I believe this is the case in the newspaper distribution industry. That causes problems. Small businesses' only defence is to combine together in a trade association, but when they do so small businesses find that their opportunities to combine are severely restricted by the current Restrictive Trade Practices Act which takes no account of the relative "muscle" in the market-place of the different parties.

I refer to Amendments Nos. 28 and 29. It is common sense that small agreements are those between small and micro-businesses. These amendments seek to confirm that that is the case. Amendments Nos. 42 and 43 are consequential to the proposed new clause relating to trade associations and the amendments to Clause 38. However, they also provide a general clarification. I beg to move.

Lord Haskel

My Lords, as the noble Lord, Lord McNally, has indicated, the purpose of these amendments is to provide protection in varying degrees from the Chapter I prohibition for agreements between small firms which are members of a trade association and such association and decisions/practices of the trade association. Before turning to the detail of the amendments, it may be helpful if I make three points which are relevant to the position of small firms under the Chapter I prohibition. That is the concern of the noble Lord, Lord McNally.

First, as a matter of principle, it seems to me to be wrong to attempt to make additional specific exclusions on the face of the Bill unless there is good reason to do so rather than relying on the mechanisms already provided in the Bill. This is the same argument that I put forward regarding loss leaders.

Secondly, it is only where there are appreciable effects on competition and trade that the Chapter I prohibition can come into play. Therefore many agreements between small firms should not be caught in the first place.

Thirdly, even where there are appreciable effects on competition and trade, the Bill already provides a mechanism for dealing with them. Where there are countervailing benefits within the exemption criteria, the director-general may issue an exemption. In addition, the Bill provides a process for block exemptions to be made. Agreements falling within the terms of a block exemption would not have to be notified to ensure there was no infringement of the Chapter I prohibition. There may well be a case for a block exemption relating to, for example, co-operatives.

We are seeking in the Bill to put right the defects of the existing regime to ensure that there is adequate deterrent against anti-competitive behaviour and to provide effective remedies where it occurs. Even though the chances of small firms falling foul of the Chapter I prohibition must be lower than that for large enterprises, the size of the perpetrators is not conclusive. It is the effects on competition which count. As my noble friend the Lord Borrie commented during Committee, "When one talks about small businesses one should not assume that they are all good boys". Why should persons who have suffered as a result of anti-competitive agreements only be able to seek protection or redress if the perpetrators are big business? We have to have a balance.

We are alive to minimising as far as possible compliance costs on small businesses. That is why we have provided the additional comfort of immunity from fines for small agreements within the terms of Clause 40 if they happen to infringe the Chapter I prohibition. The threshold for limited immunity under this clause is to be set by secondary legislation. As I said at Committee, the Government's present view is that the threshold should be the combined turnover of the parties at a level between £20 million to £50 million. It is not possible to be more precise at this moment because we shall need to make a judgment nearer the time and we shall wish to consult on the detailed provisions.

Any discussion of the treatment of small firms must be seen against that general background.

I hope that I have demonstrated to the noble Lord that the Bill takes into account the particular vulnerability of small and medium-sized companies and seeks to protect their interests.

I am not satisfied that it is right to make specific or special provisions in the Bill for certain classes of agreement. The Bill provides for the threshold for limited immunity to be set by secondary legislation. I am sure that that is the better approach. We shall need to see how the new competition regime works in practice. It may be that whatever figures are prescribed in secondary legislation will need to be adjusted as lessons are learnt as the new regime beds down.

I hope that I have been able to give the noble Lord assurances regarding his concerns for the small and medium-sized companies and that he will feel able to withdraw the amendment.

Lord McNally

My Lords, I do not think that anyone is beguiled into believing that all small firms or small retailers are good boys. But it is equally true that the capacity and opportunity for sinning are all the greater among the big boys.

I am reassured. I hope that those who motivated me to move the amendments will read what both Ministers have said in their replies. The Government are sensitive to the needs of small retailers and small firms in particular. They play such an important part not only in our economy but in our social fabric that it is right that the Bill should be alert to their needs. In the spirit in which the Minister responded, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 4 [Individual exemptions]:

5.45 p.m.

Lord Haskel moved Amendment No. 6:

Page 3, line 37, leave out from first ("may") to end of line 38 and insert ("extend the period for which an exemption has effect; but, if the rules so provide, he may do so only in specified circumstances.").

The noble Lord said: My Lords, this is a technical amendment which clarifies the effect of Clause 4(6).

It seems to us that the subsection might be interpreted as preventing the director from extending the period of an individual exemption if the rules do not specify any circumstances in which the period may be extended.

The amendment clarifies that the director may extend the period for which an individual exemption has effect even if rules under Clause 51 do not specify any circumstances in which the period may be extended. If the rules provide he may extend the period of exemption only in specified circumstances, his power is so restricted. I beg to move.

On Question, amendment agreed to.

Clause 6 [Block exemptions]:

The Deputy Speaker (Lord Murton of Lindisfarne)

My Lords, if Amendment No. 7 were to be agreed to, I shall be unable to call Amendment No. 8, owing to pre-emption.

Lord Kingsland moved Amendment No. 7:

Page 4, line 37, leave out from ("may") to end of line 38 and insert ("cancel a block exemption in respect of a particular agreement if that agreement has effects which are incompatible with the criteria in section 9.").

The noble Lord said: My Lords, Clause 6(6)(c) provides that, A block exemption order may provide & that the Director may in specified circumstances cancel a block exemption in respect of a particular agreement".

I imagine that those "specified circumstances" are circumstances to be defined by the set of rules to which we all look forward under Clause 51 of the Bill.

The provision seems to be too wide. Therefore the amendment seeks to discipline the circumstances in which a block exemption can he cancelled by adopting the words in Clause 9 which reflect paragraph 3 of Article 85 of the Treaty of Rome. I beg to move.

Lord Haskel

My Lords, I was interested to hear what the noble Lord, Lord Kingsland, had to say. He is also, of course, quite right. The Commission block exemptions do what he said. However, the amendment was tabled only on Tuesday and I have not had the opportunity to give the matter full consideration. Certainly I am not content with the precise wording of the amendment, but I believe that the noble Lord may have made a valid point. I believe that this matter will need to be reviewed in another place. I hope that on that basis he will be prepared to withdraw his amendment, which, as we have heard, would pre-empt Amendment No. 8 in my name, to which I shall now speak.

Amendment No. 8 is a further technical amendment to tidy up the provisions of the Bill. The Bill enables a block exemption order to provide a power for the director to cancel a block exemption in respect of a particular agreement in specified circumstances. The amendment clarifies that this power applies to the block exemption which is created by the order, not any other block exemption.

Lord Kingsland

My Lords, I feel quite disconcerted by the noble Lord's reply. I hasten to beg leave to withdraw the amendment before he changes his mind.

Amendment, by leave, withdrawn.

Lord Haskel moved Amendment No. 8:

Page 4, line 37, leave out ("a") and insert ("the").

On Question, amendment agreed to.

Clause 17 [Enactments replaced]:

5.50 p.m.

Lord Fraser of Carmyllie moved Amendment No. 9:

Page 10, line 23, after ("practices)") insert ("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, This amendment relates to the investigation of scale monopolies. It relates to a point that we have considered previously. I hope the noble Lord will not take it amiss if I say that I have never been entirely convinced that the full weight of his own intellectual rigour lies behind the response that he has offered. I shall not elaborate the argument; the noble Lord is well aware of my view. This is not just "belt and braces"; it is a wholly unnecessary additional power. It seems to me that the argument that at some time and some place in the future it might be desirable to be able to resort to these powers is a less than compelling argument.

It might be argued that the provision should be retained, just in case it is necessary to use it. But what troubles me is that while the Bill seeks to ensure full and effective competition policy, at the same time our policy should be to reduce so far as is possible unnecessary duplication in bureaucratic terms, and reduce so far as is possible the uncertainty for business and the risk that it might be confronted with attacks on more than one front for no good reason.

My understanding is that leaving these provisions in place will ensure that there is imposed within the United Kingdom a more extensive regime for regulating the competitive behaviour of firms than presently exists anywhere in either Europe or North America.

If the noble Lord, Lord Simon, can confirm that that assessment is correct, I shall make one final attempt and ask him to set out the argument that he regards as compelling for retaining what, I am bound to repeat, seems a wholly unnecessary provision. There would he no risk to competition policy if this particular part of the existing arrangements were to be removed. I beg to move.

Lord Borrie

My Lords, it is a great pity that the noble and learned Lord pushes this amendment for the third time in the course of debate on this Bill.

It is true that if we were a country in the European Community which had no experience of these matters in terms of competition policy, we should probably simply incorporate in a tidy way, holus-bolus, Articles 85 and 86 of the Treaty of Rome, and there would be no other provision.

I am glad to say that the noble and learned Lord has admitted, at least implicitly, that continuation of the old-style complex monopoly references is desirable; otherwise, there would be a possible hole between the Chapter I prohibition and the Chapter II prohibition.

So far as scale monopoly references are concerned, it is to be generally admitted that it is only a somewhat remote possibility that such would be needed after these prohibitions of the Competition Bill have been initiated and incorporated into our law.

It may be desirable, in relation to a scale monopoly—which would be some very dominant company in a market that had been engaging in serious anticompetitive practices or excessive pricing—that the only satisfactory remedy would be the structural one of divestment, of requiring a de-merger of a company. That possibility is provided as a remedy in the Fair Trading Act but is not included in the Competition Bill because it is not within the European Union jurisprudence. It would be a pity if it were to be lost. It would be as if our own experience of this kind of possible scale monopoly reference over the past 40 years was simply cast aside and we did no better than a country which has had no such experience at all. This Bill is intended to make a dramatic and radical change in competition law, but not in such a way as to ignore valuable experience from the past.

Lord Simon of Highbury

My Lords, as the noble and learned Lord said, we debated this same proposal on Report. On that occasion the noble and learned Lord, Lord Fraser, set out eloquently why he felt that the scale monopoly provisions should be repealed. Indeed, on that occasion my noble friend Lord Borrie set out with equal intellectual rigour why they should remain in place.

I respect the noble and learned Lord's position and his reasons for wanting to raise the matter again today. Fortunately, he does not have to test my intellectual rigour so much, because the argument has already been provided by perhaps the most experienced exponent of competition law in this House. I freely admit that we have said that there is scope for debate about the precise powers that need to be retained under the new regime. We invited an open debate on the retention of the scale monopoly powers and we have listened carefully to the views that have been expressed from the other side of the Chamber. However, having listened to all the arguments, I am not yet persuaded that it would be right to repeal the scale monopoly powers.

I have explained in earlier debates that we believe that these provisions will continue to have value in situations where, as my noble friend Lord Borne said, it is the fundamental 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 the divestment of part of a business, as my noble friend Lord Borrie mentioned.

We have said that the prohibitions will be the primary weapons against anti-competitive behaviour, and that the scale monopoly provisions will be very much a reserve power. Nevertheless, in some circumstances they may prove the only real means of remedying a market in which structural factors inhibit free competition.

I entirely agree that firms should not be subject to double jeopardy. I was grateful to the noble and learned Lord, Lord Fraser, for giving me an opportunity on the second day of Report to clarify how we intend the Chapter II prohibition and the scale monopoly provisions to interact. As I made clear on that occasion, it is not the Government's intention that the prohibitions and the Fair Trading Act monopoly provisions should be used in parallel on the same matters.

I also re-stated during the debate on Report, the Government's policy on future use of the scale monopoly provisions. We intend that these powers should be used in the future only in circumstances where there has already been proven abuse under the prohibitions, and where the director believes that there is a real prospect of further abuses by the same firm. In these circumstances the more flexible powers to impose structural remedies that we have discussed may be the only effective means of preventing further abuses.

As I also said on Report, the use of the scale monopoly provisions in the regulated utility sectors is being considered separately under the utility review.

In conclusion, we have considered carefully the arguments that we have heard on this issue, and they have been eloquently put. The debates in this House have been particularly valuable in this respect. We have concluded that our policy of retaining the provisions, albeit as very much a reserve power for use in limited circumstances, represents the right balance. I therefore invite the noble Lord to withdraw his amendment.

Lord Fraser of Carmyllie

My Lords, like many others in this House, I of course acknowledge the wide experience and distinguished manner in which the noble Lord, Lord Borrie, conducted himself in another role. However, "he would say that, wouldn't he?" when it comes to a desire to retain yet a further set of powers possibly to confront a remote set of circumstances where there might just be a degree of anti-competitive behaviour.

I make no apology for returning to this matter. I am concerned that, as this Bill is about to leave this House, we have not yet struck the balance correctly in the sense of making sure that we have a proper, clear, lucid competition policy, but at the same time we do not impose unnecessary burdens on business in the United Kingdom. I do not believe that that balance has been achieved.

Until half an hour ago, I was minded to test the mood of the House on this amendment. I do not propose to do that, although I make no apology for raising the matter again. I hope that I correctly picked up the emphasis in the response of the noble Lord, Lord Simon, that he is not yet persuaded that before this legislation concludes its passage through another place it will be recognised that this is an unnecessary duplication of the powers. If, as the noble Lord, Lord Borrie, said, this is a dramatic and radical change in our approach to competition policy, that ought to be enough without leaving in place an unnecessary power in relation to scale monopolies. With that grouse, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

6 p.m.

Clause 18 [Abuse of dominant position]:

Lord Fraser of Carmyllie moved Amendment No. 10:

Page 10, line 26, after ("undertakings") insert (", which carry on business in the United Kingdom,").

The noble and learned Lord said: My Lords, at the risk of irritating the Minister, this is yet another set of amendments we have previously considered. At an earlier stage, the noble Lord, Lord Simon, emphasised that if there were a lack of clarity in the Bill the courts could have regard to Hansard to clear up any ambiguities that might exist. Of course, I understand how that would work. On reflection, it is of greater concern to me that Clause 18 is one of the linchpins of this legislation. It is not an incidental provision within the Bill; it is one of the two most important clauses. If there is any ambiguity about it, and that has been recognised, it is desirable that we should clear up that ambiguity now and place on the face of the Bill a set of terms that will not require the courts, companies or anyone else to search Hansard to discover exactly what the Government had in mind. That might be desirable, following on the Pepper v. Hart decision, if ambiguity unintended by the draftsman and government emerges at a later point. If we know there is ambiguity or difficulty, it seems to me desirable to make the matter clear on the face of the Bill. It is for that reason that I return to the point, particularly as it seems to me that there is little of substance between the Minister and myself on what we wish to achieve.

Amendments Nos. 10, 11 and 13 are grouped with Amendment No. 12, which seeks to clarify the relationship between Chapter I and Chapter II prohibitions. At Community level, conduct may be investigated under both Articles 85 and 86 as those articles provide two distinct means of addressing competition issues in relation to the development of the single market and the over-arching objectives in Article 3 of the treaty. Such considerations are not, in our view, relevant on a domestic level.

Both the Chapter I and Chapter II prohibitions concern behaviour which prevents, restricts or distorts competition. The distinction between them is that Chapter I addresses such behaviour between two or more undertakings while Chapter II addresses such behaviour by one undertaking alone. In order to reduce uncertainty, compliance costs and litigation, the Bill should make clear that, if conduct does not prevent, restrict or distort competition and thus falls within Clause 2(1), it cannot and should not fall within Clause 18(1). It is to avoid that duplication that I return to this amendment. I beg to move.

Lord Kingsland

My Lords, the comments of my noble and learned friend Lord Fraser are all the more powerful in view of the Minister's response to the previous amendment on scale monopolies. If it is the Minister's determination to keep the scale monopoly legislation intact, that is a powerful argument for making the scope of Clause 18 crystal clear.

As the Minister knows, in the European Community Articles 85 and 86 have a relationship, but we do not yet know—because the jurisprudence of the European Court still evolves—exactly what that relationship is. Jurisprudentially, that is a different world. In the Bill the Minister has the power to make clear the relationship between the two articles. We need to know what that relationship is. If the prohibition is the same, he must say so. If it is not, he must tell us to what extent the Chapter II prohibition differs from that of Chapter I.

Lord Simon of Highbury

My Lords, as we were reminded, we debated identical amendments during the Report stage. I explained on that occasion that the Government are at one with the noble Lord in terms of how we wish Clause 18 to operate in relation to the relevant geographic market. I entirely agree that there may well be circumstances in which the relevant market includes, but is wider than, the UK. Indeed, your Lordships' Committee accepted two amendments which I moved in order to ensure that Clause 18 is not read as limiting the relevant geographic market to the United Kingdom.

Clause 18(1) requires that there must be dominance in a market. Clause 18(3) provides that there must be dominance within the United Kingdom or any part of it. It is plainly right that both of those elements must be present. We are not interested in dominance which exists elsewhere but not in the United Kingdom, nor in dominance of any kind other than market dominance. What the clause does not do is require that the market must be entirely contained within the UK.

I believe it to be clear, but it is worth noting, as I did at Report stage, that your Lordships' 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. That does not mean that the legislation is therefore unclear. I am merely saying that, if there is any doubt in anyone's mind as to the clarity of the legislation—I believe it to be clear, but others may not—that opportunity exists and the courts will be entitled to look at statements that I have made about the operation of the clause. That opportunity is largely for the court. In practice, I believe that people will understand the clause as written.

It may be that the noble Lord's amendments would achieve the same effect in a different way. I am not clear whether they would or would not; but that is not the point. The Government are clear that the amendments that I moved in Committee meet the concerns which the noble Lord has raised and which we debated at that time. It is for that reason that I invite the noble and learned Lord to withdraw his amendments.

Amendment No. 12 contains three different elements, which I shall address in turn.

The first element would introduce a test into the prohibition which is not present in Article 86. It is true that Article 86 is concerned with abuses which restrict or distort competition. However, the wording of the amendment does not reflect the fact that exploitative behaviour by dominant companies may also be an abuse. In any case we have made clear that we do not intend to depart from the fundamental principles of Articles 85 and 86. This amendment departs from the Article 86 model in a significant way and will therefore interfere with the application of the governing principles clause. For all the reasons that we have debated at length, we are not prepared to do that. Business is entitled to be able to look to Article 86 jurisprudence to help understand the interpretation of the new prohibition.

The second element of the amendment is rather circular. As I noted during Report (col. 956 on 9th February), EC jurisprudence shows that the director could not grant on agreement an exemption under the Chapter I prohibition if in doing so he would he exempting something that appears to be prohibited under the Chapter II prohibition. So, if an agreement involves conduct that breaches the Chapter II prohibition, it cannot meet the requirements for exemption under Chapter I. At the same time, firms 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.

The third element of the amendment provides that no conduct which is excluded from the Chapter II prohibition by virtue of Clause 20 may be caught as an abuse. This is clearly the effect of the Bill as it stands, although I am grateful for the opportunity to explain that position in terms.

The fact that we are excluding particular behaviour from the Chapter I prohibition does not automatically mean that it should be excluded from the prohibition of abuse of dominance. We are proposing to exclude some categories of behaviour from both prohibitions; for example, agreements or conduct engaged in in order to comply with a legal requirement, or to avoid conflict with international obligations. In other cases, however, competition issues may arise from certain sorts of behaviour only where there is dominance. Vertical agreements are the most obvious example. As I said, the Government are seeking to define an exclusion from the Chapter I prohibition for such agreements. But we are clear that the Chapter II prohibition should still apply.

I hope that, having heard those explanations, the noble and learned Lord will be prepared to withdraw his amendment.

Lord Kingsland

My Lords, before the Minister sits down, having given that no doubt well-intentioned but extremely unsatisfactory reply, perhaps I can return to the point that my noble and learned friend and I sought to make in our interventions under the amendment.

If the Minister wishes to give a wide interpretation to the second prohibition, how does he see the relationship between that prohibition and the scale monopoly powers being exercised by the other branch of the competition commission? Industry is entitled to know what it will have to face in terms of regulation. It flows from the Minister's unwillingness to restrict the second prohibition in the way that this amendment seeks to do, that he ought now to tell the House or make clear soon after, exactly how he sees the relationship between the exercise of this power by the Director-General of Fair Trading and the exercise of the scale monopoly power by that part of the competition commission which will be responsible for exercising it.

Lord Simon of Highbury

My Lords, as I tried to make clear in my previous answer, the application of the scale monopoly powers will be put into place only if an abuse has been found under the second prohibition. It will therefore be looked at as a remedial structural issue. The overriding issue will be whether the abuse has taken place. I shall reflect upon the question and if there is a further answer beyond that, I shall let the noble Lord know.

Lord Fraser of Carmyllie

My Lords, my noble friend Lord Kingsland made an extremely telling point. However, in view of what the Minister said, I do not propose to press any of these amendments, though they remain matters of concern.

As I said earlier, the amendments relate to parts of the Bill that seem to us to point to a lack of balance between ensuring that there is proper regulation of competition within the United Kingdom and providing certainty for business within the United Kingdom. It is an unsatisfactory basis on which to leave this most important of clauses in the Bill, but I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendments Nos. 11 to 14 not moved.]

6.15 p.m.

Clause 27 [Powers when conducting investigations]:

Lord Fraser of Carmyllie moved Amendment No. 15:

Page 14, line 17, at end insert— ("() The power conferred by subsection (6) shall only be exercised after the person is afforded reasonable time to seek legal advice before complying with any such requirement").

The noble and learned Lord said: My Lords, at Report stage I acknowledged that the Government had been extremely helpful in drawing together a number of amendments which seemed to us to clarify the circumstances in which extensive powers of investigation would be permitted to the director. In many respects the major concerns that we had in relation to the powers of investigation—entering premises, asking questions of individuals and so forth—were allayed.

However, Amendments Nos. 15, 17, 18, 20 and 21 have a single common theme running through them. That is, in the circumstances where such powers are to be exercised, they are likely to be exercised in circumstances where those who are confronted with someone seeking to enter the premises to take documents away and requiring them to answer questions are likely to be people who are not familiar with the law. It is extremely unlikely that they come into that group of citizenry who have regularly, in the past, had contact with the police and know how they should answer or the extent to which they will be required to answer. In the main they will be perfectly law-abiding officers of companies who may have little or no idea what it is that is under investigation.

The common theme in all that is that if an individual has to respond to an exercise with powers under this part of the Bill—Chapter III—they should be given the opportunity to seek legal advice. That does not seem to me to be an excessive request, nor does it seem to me to be a proposal that, if the Government were prepared to accept it, would mean that the proper investigation that the director wished to undertake would in some way be impeded. In our view it would be a reasonable request to be made.

As the noble Lord will be aware, often in such circumstances, where an individual has the opportunity to take legal advice, far from there being difficulties caused in the furtherance of the investigation, once individuals understand what is required of them and once they appreciate what powers are vested in the investigating officer, there may be a greater willingness to co-operate and ensure that what is being sought is handed over.

I do not believe that, if these amendments or amendments along these lines were to be accepted, the powers of investigation which we all acknowledge must be there would be seriously damaged or restricted. I beg to move.

Lord Simon of Highbury

My Lords, this is an important area but I must express for the first time some disappointment that we are going to go over the ground again.

Amendments Nos. 15, 17, 18, 20 and 21 address the question of access to legal advice during investigations into suspected infringements of the prohibitions. We discussed this at length.

As noble Lords will be aware, I was grateful for their raising the point in previous discussions, particularly that notices should indicate the subject matter of an investigation and the nature of the offences created. The Bill has already been amended to deal with that. On access to legal advice, however, there is nothing I can usefully add to those discussions. My view remains that it is not appropriate to put this kind of provision on the face of the Bill.

I turn to the second part of Amendment No. 21. I am not absolutely clear why it was tabled. Amendments which the Government introduced at Report included the new Clause 30 dealing with matters supplementary to the entry of premises under a warrant. Subsection (3) makes specific provision for premises which are empty. Where that is the case, before the warrant is executed the investigator will have to take reasonable steps to inform the occupier that the premises are to be entered and afford him a reasonable opportunity to be present at the time.

Unless I have misunderstood the amendment, I hope that we have dealt with the key issues. We do not see the need for further amendment in this area, and therefore I urge the noble and learned Lord to withdraw these amendments.

Lord Fraser of Carmyllie

My Lords, I hope it will be apparent to the House from what I said in moving the first amendment that the issue of access to legal advice remains one which we consider to be important and to which we attach some significance. Having looked at Amendment No. 21 and what is said about Clause 30, I have little doubt that the Minister is correct on that. I must express my disappointment to the Minister that, even after this third attempt, it is proving to be so intransigent. But I recognise that I am not going to get anywhere with it this evening. I beg leave to withdraw.

Amendment, by leave, withdrawn.

Clause 28 [Power to enter premises without a warrant]:

Lord Haskel moved Amendment No. 16:

Page 15, leave out lines 4 and 5 and insert— ("(ii) if the document is produced, to provide an explanation of it:").

The noble Lord said: My Lords, I beg to move Amendment No. 16 and also speak to Amendments Nos. 19, 22, 23 and 30. These amendments correct a number of points of detail in the investigations provisions of the Bill. I beg to move.

On Question, amendment agreed to.

[Amendments Nos. 17 and 18 not moved.]

Clause 29 [Power to enter premises under a warrant]:

Lord Simon of Highbury moved Amendment No. 19:

Page 15, line 14, leave out ("appropriate person") and insert ("Director").

On Question, amendment agreed to.

[Amendments Nos. 20 and 21 not moved.]

Lord Haskel moved Amendments Nos. 22 and 23:

Page 16, line 23, leave out ("(2)(b)") and insert ("(2)(c)").

Page 16, line 25, leave out subsection (8).

On Question, amendments agreed to.

Clause 35: [Enforcement of directions]:

Lord Fraser of Carmyllie moved Amendment No. 24:

Page 18, line IS, leave out from ("default") to end of line 16.

The noble and learned Lord said: My Lords, I recollect that this is a matter we have considered on a previous occasion but I shall return to it briefly. Clause 33 enables the director-general, or a regulator, to apply to the court for an order to enforce a direction to end an infringement of a Chapter I or Chapter II prohibition under Clauses 31 or 32 where the undertaking to which that direction is addressed has failed to comply with its terms, in addition to imposing a liability on undertakings to comply with such a court order or else face the risk of being in contempt. To meet the costs of the application for that order, Clause 35 also provides for the order and the liability of costs to be directed at the offices of the undertaking personally. We do not have any difficulty with the appreciation that the undertaking itself should suffer these pains and penalties but we still are concerned that the individual should suffer a liability for costs. I would be grateful if the noble Lord would reconsider this matter. I beg to move.

Lord Simon of Highbury

My Lords, we discussed a similar amendment on Report. I said then that, in circumstances where the director has given directions involving some managerial or administrative action to be taken by officers of an undertaking and the director has had to obtain a court order because they have wilfully failed to take that action, we think it right that they should be liable for the costs of remedying their default. That is the position that we debated on Report and that is the position that we now wish to state again. I would ask the noble and learned Lord to consider withdrawing his amendment.

Lord Fraser of Carmyllie

My Lords, I have listened to what the noble Lord has to say. He will not be surprised if I express my disappointment, but I beg leave to withdraw.

Amendment, by leave, withdrawn.

Clause 36 [Interim measures]:

Lord Kingsland moved Amendment No. 25:

Page 18, line 28, leave out from ("person,") to end of line 30 and insert ("and (b) of protecting competition, he may give such directions as are requisite for the purpose. (2A) In determining whether to give directions in accordance with subsection (2) the Director shall have regard to—

1. (a) the seriousness of the alleged infringement;
2. (b) the likelihood that the infringement will be established at the completion of his investigation;
3. (c) whether the imposition of a fine under this Act or an award of damages would provide an adequate remedy for that alleged infringement; and
4. (d) the balance of convenience in giving or not giving such directions.").

The noble Lord said: My Lords, Clause 36 gives the Director-General of Fair Trading an immense power by allowing him to issue interim measures. That is particularly true when one considers that he is not acting in a judicial capacity. In my submission, therefore, we ought at least to subject him to the same principles of control as are applied by a judge when issuing an interim injunction in the High Court. That is the purpose of my amendment which I beg to move.

Lord Simon of Highbury

My Lords, we have discussed amendments on interim measures before. We are determined that interim measures should provide a way of tackling anti-competitive behaviour quickly before serious damage has been inflicted. We believe that that has been the great failing of our current system. Indeed my noble friend Lord Borrie made that point previously.

This amendment would shift the balance too far in one direction, making it difficult for the director to act in cases where we believe he ought to be able to act. There are already adequate safeguards in the clause as it stands. They are intended to ensure that the director hears the views of the alleged offender and will have to take into account any representations that are made to him about the harm that the offender says the measures will cause him when considering whether to take measures to protect the victim.

I believe that the noble Lord underestimates these safeguards. The director must have a reasonable suspicion that infringement of either prohibitions has taken place. He must consider it necessary for him to act: as a matter of urgency for the purpose—

1. (a) of preventing serious, irreparable damage to a particular person or a category of person, or
2. (b) of protecting the public interest".

The directions must be such as are reasonably necessary to deal with the matters in question. These safeguards, as I have tried to read them in an italicised sense in the clause, are very significant. We also think that they are appropriate. I therefore would invite the noble Lord to withdraw his amendment.

Lord Kingsland

My Lords, in a court of law when there is an award of an interim injunction you have to give to the other side what is called an undertaking in damages just in case you are wrong. Interim injunctions can often do irreparable harm to somebody who turns out to be entirely innocent. If the Minister intends to persist in his approach to the question of interim injunctions, will he agree that the director-general should apply a similar rule to that in the High Court: that is, if the director-general issues an interim injunction against a company, he must also give an undertaking in damages?

6.30 p.m.

Lord Simon of Highbury

My Lords, I am not prepared to respond to the position in which we would put the director-general. I have clearly stated that we believe the safeguards to be appropriate and significant. We must also wait for the rules which the director-general will be publishing on the issue of interim measures. As your Lordships will have seen from the letter placed in the Library, it is one of the areas in respect of which he must lay down rules. Therefore, I am not prepared to make any further commitments until we have considered the matter again.

Lord Kingsland

My Lords, in view of that interesting reply, will the Minister undertake to draw the attention of the director-general to this part of the debate so that the director-general can give due consideration to introducing such an undertaking in damages to benefit an enterprise which is under investigation as the subject of an interim measure?

Lord Simon of Highbury

My Lords, as I have said, I am making no further commitments at this stage. However, I am certain that after the debate the director-general will read Hansard very carefully.

Lord Kingsland

My Lords, that is some consolation. In those circumstances, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 37 [Penalty for infringing Chapter I or Chapter II prohibition]:

Lord Fraser of Carmyllie moved Amendment No. 26:

Page 19, line 21, leave out from ("undertaking") to end of line 22 and insert ("in the United Kingdom in the relevant goods or services").

The noble and learned Lord said: My Lords, I rise with some weariness to address the amendment. Earlier during Third Reading, I suggested that in view of the Minister's apparent agreement with the purpose of the amendments which we previously moved he might agree to these amendments. However, he appears to be content that the debate is recorded in Hansard. I imagine that I shall receive the same dusty answer in relation to this amendment.

During previous debates on the issue of penalties, the turnover of the offending business and how that is to be defined or restricted, the Minister has taken the view that those issues are sufficiently clear. I still regard that to be a somewhat cavalier approach. I am not clear what might be involved in a large company with separate businesses. It would be desirable to have in the Bill an amendment similar to Amendment No. 26 rather than the matter being left to secondary legislation or to comments by a Minister, however well intentioned, which may have been recorded in Hansard.

It could mean that some penalties will be disproportionately large or that the companies which might be confronted with such penalties will be left with a greater degree of uncertainty. I should prefer to see the provision on the face of the Bill and I hope that, after at least three exchanges on the subject, the Minister is moving closer to my argument. I hope that he is prepared to accept the amendment because, as I looked hack in Hansard, he did not appear to disagree with the Opposition that some limitation should be achieved in determining the level of penalty. I beg to move.

Lord Simon of Highbury

My Lords, for reasons that I shall explain, I wish that the noble and learned Lord had spoken to his Amendment No. 27. I shall deal, first, with Amendment No. 26. As he rightly said, we have discussed the matter previously. In case I failed to do so, I should like to make the Government's position on the definition of turnover for the imposition of a penalty as clear as I can.

It is the Government's firm and unambiguous policy that when we come to make the order specifying how turnover is to be defined, we shall confine it to turnover which arises in the UK. I therefore entirely concede the substance of this aspect of the noble and learned Lord's concerns and I hope that he will not question further my position on this matter. However, it is also, and has always been, our clear policy that these are not matters to be specified in the primary legislation. They should be provided in secondary legislation.

The other manner in which the noble and learned Lord seeks to restrict the definition of turnover is by confining it to "the relevant goods and services". As I said on Report, I do see the argument for that and it is something which we can consider. However, there are other points to take into account. A very large undertaking might have a dominant position in a small market which it abuses to the detriment of small competitors. In that case it might not be right that the penalty should be limited to the turnover of the company in that market, and not reflect wider considerations; for example, the size and sophistication of the undertaking committing the abuse. It is precisely because of detailed points like this that we believe the matter should be dealt with by secondary legislation and we should consult interested parties first.

Nevertheless, we do recognise the particular sensitivity of the scale of any penalty that may be imposed under the Bill. That is why the Bill provides that no order specifying how turnover is to be determined may be made unless a draft of it has been laid before Parliament and approved by a resolution of each House. Your Lordships will therefore have an opportunity to consider and discuss the detailed provisions we will propose, after consultation, for determining turnover. On that basis, there is no need for—and good arguments against—specifying these matters on the face of the Bill.

Turning to Amendment No. 27, I believe that the director should issue guidance on the criteria to be applied in deciding whether to impose a penalty, as well as on setting the appropriate amount of any penalty. As I told the House on Report, I am assured by the Office of Fair Trading that it intends to issue such guidance.

Our policy is that Clause 39 guidance should be capable of including the principle that, as under Community law, penalties should be applied only where there has been intent or negligence in breaching the prohibitions, and that the director, tribunal and court should be required to have regard to it. Since the discussion on Report, however, I have received further advice on this matter. I suggested then (19th February, col. 360) that no amendment of the Bill was necessary. I am now advised that the clause may well not have the effect intended and that an amendment may indeed be necessary. I am sorry if I have inadvertently misled your Lordships' House.

To put this right, the clause will clearly need to be reviewed in another place. On that basis, I hope that the noble and learned Lord, will kindly withdraw his Amendment No. 27.

Lord Fraser of Carmyllie

My Lords, I am grateful to the noble Lord for what he said about Amendment No. 27. He has succeeded in wearing me down. I did not hold out too much hope of a positive response and have learnt that on occasions the Minister is satisfyingly unpredictable. I am grateful to him for that answer.

As regards Amendment No. 26, I should like to see a wider definition of what is to be the subject of penalty. However, I recognise that there are a number of difficulties in securing a precise definition. I believe that if one imposes a penalty it is desirable to have as wide a definition as possible.

I shall not press the amendment, but urge the Minister to look at Clause 39, as he has indicated, and bear in mind our real reservations about Clause 37. I invite the Minister to contemplate amending that clause when the Bill reaches another place. In the meantime, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendment No. 27 not moved.]

Clause 40 [Limited immunity for small agreements]:

[Amendment Nos. 28 and 29 not moved.]

Clause 43 [Offences]:

Lord Simon of Highbury moved Amendment No. 30:

Page 22, line 17, leave out ("show") and insert ("prove").

On Question, amendment agreed to.

Lord Kingsland moved Amendment No. 31: After Clause 45, insert the following new clause—

DUE DILIGENCE

(" .—(1) It shall be a defence in any proceedings brought under or in connection with this Act for a person to show that he exercised due diligence.

(2) The Director shall not impose a penalty under section 37 on any person if that person shows that he exercised due diligence.

(3) For the purposes of this section a person has exercised due diligence if he shows that in all the circumstances he exercised all due diligence to avoid an infringement of the Chapter I or Chapter II prohibitions.").

The noble Lord said: My Lords, this is an amendment which provides protection to anyone if they have shown due diligence in seeking to avoid an offence under either prohibition I or II. It would give a complete defence to the imposition of a penalty. In other words, it goes to penalties and not to the contraventions themselves. I beg to move.

Lord Simon of Highbury

My Lords, we discussed at Report an amendment tabled by the noble and learned Lord, Lord Fraser, which would have introduced a similar defence in proceedings, one based on whether it was reasonably foreseeable that an agreement or conduct would constitute an infringement. Here the defence would be available where a person could show he had exercised all due diligence to avoid an infringement of either of the prohibitions.

Our view of this amendment is similar to our view of the earlier one. As my noble friend Lord Haskel said on that occasion, It is for the courts to determine whether an agreement or conduct breaches the prohibitions with all the consequences that that may have in civil law. It should not be a matter that depends on the parties foreseeing such an infringement".—[Official Report, 19/2/98; col. 364.] Similarly, we consider that the decision whether there is an infringement should not depend on the parties having exercised due diligence to avoid an infringement.

The Bill itself provides amply for the opportunity for businesses to take precautions against infringing a prohibition. In particular—and this is especially relevant to the point made about penalties—firms may seek guidance or a formal decision from the director on whether agreements or conduct infringe the respective prohibition. The effect of such guidance or decision is that immunity from penalty is conferred in respect of the agreement or conduct concerned and that immunity cannot be removed except in very limited, justifiable circumstances.

Turning to the issue of penalties under Clause 37, the director must, under Clause 39, publish guidance on the appropriate level of penalty to be applied. We have already discussed that clause. As I have explained, we will examine how the degree of culpability is to be taken into account in decisions as to the imposition of penalties. Intent or negligence are a prerequisite under Regulation 17 in result of penalties for breach of Article 85 and we would expect to follow that practice.

Appeal may be made to the competition commission against a wide range of decisions by the director, including a decision whether there has been an infringement of a prohibition and the imposition and level of a penalty. Again, we expect the extent of any due diligence would be a factor to be taken into account. We see no need for a blanket provision, of the kind proposed, on the face of the Bill. The Bill itself already provides sufficient avenues by which account can be taken of a firm having exercised due diligence. I would therefore ask the noble Lord to withdraw his amendment.

Lord Kingsland

My Lords, I am not entirely happy with what the Minister has said. I believe that I see his point on the issue of contravention. However, as regards penalties, there is a very strong case, in circumstances where someone has shown all reasonable care to avoid committing an infringement under prohibition I or II for him not to be penalised. If the Minister is saying to me that, through the guidance on penalties, in effect, there will be a similar consequence, then I am grateful for that information. In those circumstances, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 47 [Appealable decisions]:

Lord Fraser of Carmyllie moved Amendment No. 32:

Page 24, line 29, at end insert— ("() as to whether a dominant position exists for the purposes of Chapter II, () requiring the production of a specified document under section 27(1), () as to whether the requirements of section 55(3) have been met in relation to the disclosure of information without the consent mentioned in section 55(2), () on a Director's finding within the meaning of section 58, () as to whether he has complied with the requirements of section 60,").

The noble and learned Lord said: My Lords, Clause 47, as it now is, deals with appealable decisions. While we would not wish to see opened up unnecessary sets of grounds on which a decision might be appealed, nevertheless we are concerned that, as the clause is laid out at present, it is too restrictive. This amendment suggests a number of additional circumstances in which, Any person in respect of whose conduct the Director has made a decision may appeal to the Competition Commission against, or with respect to, the decision". Those circumstances are set out in Amendment No. 32. I am not sure that I attach equal weight to every one of the proposed additional bases on which an appeal might proceed, but they are clearly important. It would be of advantage if all of them were included within the clause as presently drafted.

Amendments Nos. 36 and 55 are grouped with this amendment. I have been helpfully corrected in that I understand that Amendment No. 55 deals with the meaning of Section 45 and reflects a previous stage of the Bill. It should be Section 47. My noble friend Lord Kingsland may wish to speak to that amendment. I beg to move.

Lord Kingsland

My Lords, Amendments Nos. 36 and 55 make a very simple point; namely, that decisions made by the director general as a consequence of alleged infringements under prohibitions I and II are likely to be decisions involving mixed fact and law issues. The purpose of these amendments is to ask the Minister to make it clear that this class of decision will be appealable to the Court of Appeal.

Lord Simon of Highbury

My Lords, this group of amendments concerns different aspects of appeals. I note that we debated a number of these amendments in Committee, but it is perhaps no bad thing to have another opportunity to discuss this complex area. It may be—who knows?—that another shaft of unpredictability may appear.

Amendment No. 32 seeks to add a number of items to the list of appealable decisions in Clause 47(3). Clause 47 enables appeals to the tribunal against decisions taken by the director or the sector regulators under the prohibitions. As I explained in Committee, it is our intention that substantive decisions should be appealable to the tribunal. I will go through the subsections in the amendment in turn. New subsection (1) deals with the question of whether a dominant position exists is not a substantive decision. We addressed this issue at an earlier stage, when the Committee discussed the proposal that the DGFT should be asked to give decisions on whether an undertaking held a dominant position. As my noble friend Lord Borne said on that occasion, this is an academic question. The substantive issue is whether there has been an infringement of the prohibition. The prohibition applies only where there has been both dominance and an abuse of that dominance.

We also debated in Committee the matter covered by the second paragraph in this amendment. The point about allowing appeals against substantive decisions is that it allows people and businesses to appeal against decisions which, if put into effect, will damage their interests; for example, a decision to impose a penalty, or a direction to stop engaging in a particular business practice.

Requests for documents by the director under his powers are not substantive decisions. An individual or business is not going to suffer any harm by producing a document, or explaining a document, to the director—not, of course, unless the document reveals that there has been wrongdoing, in which case the document is obviously relevant.

The third paragraph of the amendment proposes that there should be appeals to the tribunal on whether a disclosure of information under Clause 55(3) properly meets the requirements of that clause. There are two points here. First, this is not a substantive decision within the meaning of the Bill. Secondly, unlawful disclosure of information is a criminal offence by virtue of Clause 55(8). If the director disclosed information unlawfully he would be liable to criminal prosecution.

The fourth paragraph of the amendment returns to a point on which I promised in Committee to reflect further. This was a point raised by the noble Lord, Lord Kingsland (col. 450), speaking to a similar amendment, which he explained referred to the possibility of an appeal—after a final decision had been taken—in relation to the factual underpinning of that decision. He said that in his view it was important that there should be a right of appeal in those circumstances.

I have sought advice on the effect of the Bill in this respect. The advice that I received is that the wording in subsections (1) and (2) of Clause 47, and in particular the words "with respect to," ensure that a party may appeal in circumstances where he is happy with a decision, but not with the reasoning underpinning that decision. This is an important point, and I am grateful to the noble Lord for having raised it. I hope that this explanation meets his concerns.

Turning now to the final point in this amendment (the fifth paragraph), I explained in Committee (col. 447) that Clause 60 is no more and no less than an interpretation clause which feeds through into the rest of Part I of the Bill. Hence the fundamental principles of EC law feed through into the relevant provisions of the Bill. There is no separate obligation in relation to Clause 60. The question is therefore not whether an appeal lies under Clause 60, but to which other clauses in the Bill appeals apply. As I said in Committee, it will be possible to appeal against a decision of the director on the grounds that his decision was not in accordance with the requirements of Clause 60. I hope that these explanations meet the noble and learned Lord's concerns in relation to this amendment and that he will be prepared to withdraw it.

Turning to Amendment No. 36, the parties may of course appeal a decision of the tribunal that either or both of the prohibitions had been infringed, provided there is a point of law in issue. For example, a party will be able to appeal on the question of whether his refusal to supply was an abuse of a dominant position within the meaning of the Chapter II prohibition. EC jurisprudence on the point would of course be highly relevant.

However, in appealing an infringement decision to the Court of Appeal, it will not be possible to contest findings of fact. We have considered this point very carefully. We need to balance safeguards for the parties faced with a decision under the prohibition system, with the need to ensure the workability of the appeals system by making it sufficiently streamlined.

In striking this balance we felt it right that the Court of Appeal and this House should be able to rule on the interpretation of the prohibitions and on the level of penalty. However, we decided against allowing the director or the parties to contest every single finding of fact. The parties already have the guarantee that findings of fact made by the director can be challenged before an appeal tribunal headed by a lawyer of High Court standing. Allowing appeals on findings of fact beyond the tribunal could lead to serious clogging of the appeals system. For those reasons we are not persuaded that this is the right course and I would invite the noble and learned Lord to withdraw his amendment.

Turning finally to Amendment No. 55, this amendment would streamline paragraph 2(2)(c) in Schedule 8. Simplification of legislation is an attractive prospect in itself, but the matter needs further thought, and it will need to be considered in another place. We think that it is a positive suggestion and we should like to consider it. I hope that the noble and learned Lord will agree to withdraw the amendment on that basis.

Lord Fraser of Carmyllie

My Lords, I am grateful to the Minister for spelling out his reasoning for not accepting our additional grounds. It has been helpful to us. As I said in moving the amendment, we do not necessarily attach equal weight to each ground. However, I should like to reflect further on what the Minister has said about dominant position. There seems to be some force in that argument. Clearly, we shall not have an opportunity to return to this in your Lordships' House but if, on reflection, we are not satisfied, the matter can be raised in another place as the Bill continues its parliamentary progress. In the meantime, I beg leave to withdraw Amendment No. 32.

Amendment, by leave, withdrawn.

Clause 49 [Appeal tribunals]:

Lord Kingsland moved Amendment No. 33:

Page 25, line 22, at end insert— ("(1A) The members of the appeal tribunal shall be appointed by the Lord Chancellor in consultation with the Lord Advocate. (1B) The Lord Chancellor shall not appoint a person as a member of the appeal tribunal unless that person—

1. (a) holds an appropriate judicial office:
2. (b) has a ten year general qualification within the meaning of section 71 of the Courts and Legal Services Act 1990;
3. (c) is an advocate or solicitor in Scotland of at least ten years' standing: or
4. (d) is—
1. (i) a member of the Bar of Northern Ireland, or
2. (ii) a solicitor of the Supreme Court of Northern Ireland, of at least ten years' standing, and appears to the Lord Chancellor to have appropriate experience and knowledge of competition law and practice.

(1C) A person holds an appropriate judicial office for the purposes of subsection (1B)(a) if he is—

1. (a) a puisne judge of the High Court:
2. (b) a judge of the Court of Session: or
3. (c) a judge of the Supreme Court of Northern Ireland.

(1D) Before appointing as a member of the appeal tribunal any person who holds the judicial office mentioned in subsection (1C)(b) or (c), the Lord Chancellor shall consult the President of the Court of Session or the Lord Chief Justice of Northern Ireland, as appropriate. (1E) A person appointed in accordance with this section shall not exercise any functions of the Competition Commission other than in relation to appeals. (1F) For the hearing of any proceedings the appeal tribunal may consist of a single member. (1G) The appeal tribunal may, at any stage in any proceedings before it, refer to a person or persons appointed by the tribunal for the purpose of any question arising in the proceedings, other than a question which in the tribunal's opinion is primarily one of law, for inquiry or report: and the report of any such person or persons may be adopted wholly or partly by the tribunal and, if so adopted, may be incorporated in an order of the tribunal.").

The noble Lord said: My Lords, Her Majesty's loyal Opposition place great importance on this amendment. I realise that in moving it I might once again render the noble Lord, Lord Borrie, incandescent. The amendment is designed to provide the system with a credible appeal tribunal. In my submission, the appeal tribunal set out in the Bill is not credible. I say that particularly in the light of the Minister's reply to my noble and learned friend Lord Fraser of Carmyllie and myself on the relationship between scale monopolies and the prohibition under Chapter II.

The problem with the competition commission and its component appeals committee, as set out in the Bill, is that there is no clear distinction between those individuals who will be looking at scale monopolies and structural monopolies, and those individuals who will be hearing appeals. Perhaps I may give one example of how a conflict of interest might occur. Let us suppose that a company is under investigation by the Director General of Fair Trading for a Chapter II prohibition infringement and that at the same time the competition commission is considering whether to unleash a scale monopoly investigation. In those circumstances, it would be difficult for the company appealing to the competition appeal tribunal to feel that it was getting a fair hearing; because what the investigatory arm of the competition commission would be doing would be seen to be contaminating what the appeal branch of the competition commission was doing. It is important that in this system justice should be seen to be done.

My recommendation is that the appeal tribunal should be a completely separate institution from that part of the competition commission which still deals with structural and scale monopolies and merger investigations, and that it should have, as its president, a High Court judge or somebody of equivalent status selected by the Lord Chancellor. The tribunal could, if necessary—as can the European Court of Justice—invite experts to produce reports and to submit them to the tribunal as part of the decision-making process. But it would wholly exclude any members from that part of the commission investigating monopolistic practices from sitting on the tribunal.

That would reflect the change in culture that the Bill is bringing to competition matters in this country. The old system was 90 per cent. discretion and 10 per cent. law We are now on the threshold of a system which is 90 per cent. law and 10 per cent. discretion; and that must be reflected in the institutional way in which it is treated all the way up the ladder.

The European Community has precisely such an institution interposed between the Commission, which is the equivalent of the Director General of Fair Trading, and the European Court of Justice. That is the court of first instance whose task it is to deal with fact and law. In a very short time that institution has acquired great prestige and the commercial world has much confidence in its jurisprudence. I should like to see the same kind of institution built up between the Director General of Fair Trading and the High Court and the Court of Appeal. The issues with which this tribunal must deal will be extremely complex. If it is successful companies that wish to appeal from decisions of the Director General of Fair Trading will have confidence in it and therefore will not seek to go for the alternative remedy of judicial review or an appeal to the Court of Appeal. I believe that the Minister has a great interest in making this tribunal as credible as possible.

At Report stage I cast these ideas in the form of a competition court. I sensed that the Minister was not prepared to accept a competition court as a branch of the High Court. I am now more flexible in the institution that I propose, but the principle underlying my amendment is exactly the same. I beg to move.

7 p.m.

Lord Borrie

My Lords, the noble Lord expected me to make a comment, and indeed I do. I share his admiration for all senior lawyers and judges—the kind of people he wants exclusively to man the appeal tribunal to deal with appeals from the Director General of Fair Trading. He made a comparison with the court of first instance and said how well regarded it was. I am a member of the sub-committee of the European Communities Select Committee of this House that is about to conduct an inquiry into that tribunal because of the great dissatisfaction on the part of lawyers throughout the Community with the way it is proceeding, in particular the delays and the proposal by the Commission whereby the court of first instance will no longer he constituted by a panel of judges but decisions will he made by only one person in order to speed up the process. That situation worries a large number of lawyers who practise before that court.

I draw an analogy, not with the court of first instance, on some of whose current difficulties I have pronounced, but our own Restrictive Practices Court which has existed for 40 years. In relation to an earlier amendment I suggested that because we were embarking on a new Bill which largely followed European jurisprudence the noble Lord and his noble and learned friend Lord Fraser of Carmyllie should not ignore experience within the United Kingdom. The constitution of the Restrictive Practices Court combines legal talent in its chairman, who is a High Court judge, with the experience of others who are able to bring to bear their knowledge of business and commercial life. The Bill as it stands at the moment—the detail is largely in the appropriate schedule—combines the president of the tribunal who is to be of High Court calibre and no doubt other senior lawyers who will preside over particular panels hearing particular cases. They will do so in combination with others of relevant experience. That is of great value as the Restrictive Practices Court and the membership of the Monopolies and Mergers Commission over the years demonstrated. The kinds of cases that will fall within function of that commission will in large part involve matters of commercial and economic concern from which lawyers may learn something but for which they are not normally trained. Therefore, while lawyers have a valuable part to play—certainly in terms of the chairman of any particular panel—to suggest that the tribunal should be constituted wholly of senior lawyers is unfortunate. I believe that the present suggested composition is a good one.

I completely turn around the argument advanced by the noble Lord at an earlier stage. He referred to the reporting and appeal function. The membership of the commission will include people who will perhaps deal frequently with merger and complex monopoly references—hardly, if at all, with scale monopoly references—and there will be a very useful cross-fertilisation if the experience of those people is also available in the new role of an appeal tribunal with a senior lawyer as its chairman. Their experience of dealing with other matters of competition policy should not be cast aside or regarded as negative rather than positive. I hope that my noble friend will resist as strongly as he has on previous occasions the amendment that has been moved by a member of Her Majesty's loyal Opposition. I noted that phrase. I remind the noble Lord that only a few years ago his party when in government made proposals for membership of a very similar kind to those contained in the present Bill.

Lord Haskel

My Lords, the noble Lord, Lord Kingsland, has developed his ideas a good deal further since they were discussed at Report. He said that he was moving towards a court of first instance. My noble friend Lord Borrie has replied in a manner that is far better than I could manage myself.

The noble Lord, Lord Kingsland, has been consistent in his thesis. He has proposed a tribunal that would much more closely resemble a division of the High Court than the specialised tribunal that we intend. I too shall be consistent. There is a difference of principle between us. We propose a tribunal to deal with complex commercial issues relating to specialised areas of economics, competition and the law. As my noble friend Lord Borrie said, it is crucial to the success of the new regime that that tribunal is able to deal with such cases with expertise, fairness and efficiency so that it is credible. This means that the tribunal panel must include lay members with particular areas of expertise and experience as well as legally qualified members of appropriate standing. The tribunal that we envisage will have both. We believe that lay members will be able to add tremendously to the resources and expertise of the tribunal. It would be most unfortunate to dispense with that expertise, as the amendment seeks to do.

Our arrangements for appointments will open up a much wider pool of expertise. We believe that this will be extremely valuable both for the legally qualified president and chairman and for the lay members. We also believe that the Secretary of State for Trade and Industry will be well placed to identify and select candidates with the necessary blend and breadth of experience to lead the tribunal. At the same time it is important that the president and chairman have considerable legal experience and standing. This is obviously crucial to confidence in the new regime. We intend that whoever is appointed would have a standing at least equivalent to that of a High Court judge. The Bill requires the Secretary of State to consult the Lord Chancellor on legal appointments to the tribunal.

The noble Lord, Lord Kingsland, spoke of separation between appeal and investigatory functions. It is crucial to have this separation. We have done this in our arrangements by clearly separating the tribunal from the director who is responsible for investigation and enforcement under the prohibitions. The reporting side of the competition commission will not be dealing with cases under the prohibitions. I hope that this explanation satisfies the noble Lord.

We envisage a rather user-friendly specialised tribunal; the noble Lord's proposals would be much closer to a division of the High Court. There is a difference of principle between us, but our proposals will satisfy the needs in the end. I hope that the noble Lord will withdraw his amendment.

Lord Kingsland

My Lords, I am deeply disappointed at what the Minister has said. The only thing I got right in my intervention was the reaction of the noble Lord, Lord Borrie, to what I said.

I hope the Minister will think again about what he has said. It is crucial that justice is seen to be done by the business community that the appeals tribunal will serve. If people who sit on the appeal tribunal play an investigatory role in the other part of the competition commission, it will not be credible. It is unacceptable that there should be a cross-fertilisation of individuals who are capable of playing both roles. Whatever else the Minister reflects upon as a result of these exchanges, I hope he will reflect upon that point. It is not inappropriate that complex economic matters should be heard by a third party, arbitral system supervised by a High Court judge. Quite often the only way these complex matters can be sorted out is by applying the legal process.

If the tribunal is not credible, then the ordinary courts of the land—either in judicial reviews or appeals to the High Court—will become over-burdened with complex issues which ought to be dealt with by a specialised court of a kind that the Minister refuses to contemplate. I am most disappointed, but I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendments Nos. 34 and 35 not moved.]

Clause 50 [Appeals on point of law, etc.]:

[Amendment No. 36 not moved.]

7.15 p.m.

Clause 54 [Regulators]:

Lord Sempill moved Amendment No. 37:

Page 28, line 5, after ("Part") insert (", subject to subsections (4) to (9).").

The noble Lord said: My Lords, I rise to speak to Amendments Nos. 37 and 38. Before doing so, I apologise to the Minister for my intervention at this late stage. Unfortunately my noble friend and colleague Lord St. John is unable to be with us and I feel as if I have been plucked off the substitute's bench with five minutes to go. I may have a pair of fresh legs but I do not have his expertise in confronting such a formidable defence.

These amendments have been altered in order to address some of the Minister's previous reservations. We maintain that the issue remains the same—an issue of clarity over who does what. These amendments will ensure that certain tasks are dealt with by the Office of Fair Trading. The amendments identify certain circumstances where the Office of Fair Trading is the right body to deal with a matter. The amendments also allow the Secretary of State to add to the circumstances where the Office of Fair Trading should be the body to deal with further matters.

The Bill would be strengthened and the key objectives of certainty and consistency would be promoted if the Bill prescribed who should do what. I beg to move.

Lord Kingsland

My Lords, we are speaking to Amendments Nos. 37 and 39 and also to Amendments Nos. 58 and 59. Amendments Nos. 37 and 39 apply to the relationship between the Director General of Fair Trading or regulators, and the latter amendments are specific to British Telecommunications.

The Minister is familiar with this matter. Although I have not seen any written evidence, I understand that on the crucial subject of what has come to be known in the jargon as "the bridge" he has made a very substantial concession. If that is so, I am extremely grateful to him.

This amendment concerns the second central problem of concurrency. The intention of Amendment No. 39 is to meet some of the objections that the Minister had to the previous amendment. I draw his attention to three parts of it. Subsection (5) reads, For the purposes of this section a 'reserved matter' means which a matter which … (e) affects or may affect an industrial or commercial project or scheme of substantial importance to the national economy". On Report the Minister described those words as being too vague. They are, in fact, an expression contained in the Restrictive Trade Practices Act. It may be that experience has shown them to be too vague but there is at least a respectable precedent for them.

I also draw attention to subsections (6) and (7). These give the Minister the best of both worlds. On one hand, on the face of the Bill, he has a clear set of criteria upon which to establish who is responsible for what. If he wishes to alter the criteria he has, in subsection (6), the power of the Secretary of State, by order, to amend subsection (5) by providing one or more additional categories of reserved matters. So the range of reserved matters is unlimited at the Secretary of State's discretion.

Even more importantly, subsection (7) provides that, Any question as to whether a matter is a reserved matter for the purposes of this section shall be determined by the Secretary of State". So the Secretary of State will have complete discretion in this matter.

Thus, on the one hand you have the merit of clarity for the clients, if I may put it that way—that is the enterprises likely to be subject to investigation either by the director-general or the regulator—and, on the other hand, the merit of flexibility, because the Secretary of State can alter the position at any time he wants. This would be infinitely preferable to the kind of old boy network which has been described at various stages throughout the debate on this Bill. That is not a satisfactory way of providing the kind of certainty required by the client, who needs to know not only the case he must meet but the individual or the institution to whom he must answer.

Lord Simon of Highbury

My Lords, on Report I set out once again why we believe the principle of concurrency is right. This is a Bill about competition. Regulators need to have powers in order to apply competition law in their sectors and to co-ordinate their use of sector-specific regulation with those powers. We have said that we do not believe that a "bright line" of jurisdiction between the DGFT and each of the regulators is practical. We do not want gaps or litigation about whether the DGFT or a regulator has jurisdiction. Hence, powers have to be exercisable concurrently by the regulator and the Director General of Fair Trading.

The marketplace is dynamic, as we have repeated many times. The legal scope of a regulator's remit needs to be kept under review. It must be clear, but it must be wide enough and it must be up to date. That links to the utilities review, and it is one of the reasons why we are committed to keeping the regulation of telecommunications and broadcasting up to date and expect to launch a consultation document on that in the spring. That is where the wider review of scope is taking place. It is right that this Bill should limit itself to providing concurrent powers on a similar basis to the concurrent powers regulators already have under existing competition law.

We have said clearly that flexible rules need to be drawn up covering the procedures that will apply where concurrent jurisdiction exists. Rules need to change and adapt as necessary. Let us define the rules that we need now, and make clear as part of the rules how notification should be made. That is a matter for the Director General of Fair Trading, consulting regulators and appropriate persons, to decide in the first instance, under Clause 51 of the Bill. Rules are, however, to be subject to consultation, approval by the Secretary of State and the parliamentary process, so that there will be ample opportunity to make sure that they are clear and adequate. There is further scope for clarification of the role of individual regulators in the advice and information to be prepared under Clause 52.

However, I accepted that there was a need to reflect further on the provision in utility statutes that requires a regulator and the DGFT to consult before either takes action; and for one to be barred from taking action once the other has done so. We will continue to reflect on that point.

I emphasised that we regard consistency in the basis for applying the Chapter I and II prohibitions as paramount, and accepted that we need to bring forward amendments to ensure that that is achieved. We have done so, and we will be considering those amendments a little later. They represent a significant response to concerns expressed by noble Lords, as the noble Lord, Lord Kingsland, gratifyingly noted.

However, where there would clearly be an unsatisfactory interaction between the prohibitions and the licence regime, as the noble Lord, Lord Kingsland, raised on enforcement, we have said that we will come forward with amendments. We will be considering those amendments shortly. Again, they represent a significant response to concerns expressed by noble Lords.

In all of that I was seeking to describe and develop a framework in which, in a dynamic marketplace, sensible people will speak and work together under a format of rules which will be flexible and capable of taking into account the dynamism of the marketplace, which we all wish to encourage and make more competitive.

I have made that general statement because I hope that, on reflection, noble Lords will be pleased and take pride in the amendments that they have encouraged us to bring forward to refine that part of the Bill, and that they will also support us in providing concurrent powers, on the appropriate basis, to sector regulators.

We do not want those powers hamstrung by constraints and rigidities. We do want them implemented with the co-operative approach we are already seeing from the DGFT's working party with regulators, and noble Lords are aware of progress made from the letter in the Library.

The amendments in the present group do not follow that sensible approach. They would cut across the consultation between a regulator and the DGFT as to which of them should exercise concurrent functions in a particular case. They would claw back a large part of a regulator's concurrent functions. As I made clear on Report, I do not believe that that would be right. The criteria by which they would do so are, in some cases, subjective. In other cases they would make almost impossible the application of the prohibitions by a regulator. For example, the criteria would mean that a regulator would be prevented from taking action in respect of a matter which mainly but not exclusively falls within the scope of his jurisdiction; many of the matters within the scope of a regulator's jurisdiction would affect commercial projects; and how could a regulator apply the prohibitions if he is prevented from being able to interpret them? Moreover, they leave the determination of what would fall within the criteria, as was pointed out by the noble Lord, Lord Kingsland, to the Secretary of State. I indicated at Report, in relation to the exclusion for services of general economic interest, that the Government did not wish the Secretary of State to have a role in case-by-case determinations (col. 968 on 9th February). I do not believe it would he right for the Secretary of State to have a role in making determinations against unsatisfactory criteria such as those.

We have stated our case in depth and broadly, and tried to set out the principles which lie behind our approach on concurrency. As I said, we are bringing forward further amendments in the light of previous debates. Therefore, I urge the noble Lord to withdraw the amendment.

Lord McNally

My Lords, as the Minister will be aware, my noble friend Lord Ezra, who cannot be with us this evening, is the guru of these Benches on concurrence. It seems that Ministers are trying to meet real concerns while dealing with practicalities. One easy way of avoiding any regulator is to behave oneself. That might be a good rule for some companies.

Did I understand the Minister to say—we will all be aware how thoroughly British Telecom has briefed on this matter—that the whole question of telecoms regulation is, as it were, in the melting pot as technologies converge?

Lord Desai

My Lords, is the noble Lord in order? We are on Third Reading.

Lord McNally

My Lords, I am asking the Minister a question, but I defer to the greater knowledge of procedure of the noble Lord, Lord Desai. I rest my point there.

Lord Sempill

My Lords, I am grateful to the Minister for his reply. I am disappointed that he is unable to support the amendment. I mentioned earlier that I arrived on the scene very late. My knowledge of the issues is limited to this specific area. The issue of concurrency is complex. My colleagues and I have looked carefully at the amendment, and we feel that it clears up some of the areas of potential conflict. Therefore, we maintain that where there are circumstances which are easily identifiable now, with which the OFT should deal, they should be clearly identifiable in the Bill. Therefore I wish to test the opinion of the House on this amendment.

7.30 p.m.

On Question, Whether the said amendment (No. 37) shall be agreed to?

7.33 p.m.

The Deputy Speaker (Lord Ampthill)

My Lords, Tellers for the Contents have not been appointed, pursuant to Standing Order No. 51. The Division therefore cannot take place and I declare that the Not-Contents have it.

Resolved in the negative, and amendment disagreed to accordingly.

Lord Kingsland moved Amendment No. 38:

Page 28, line 5, at end insert— ("() Where it appears to a regulator that a matter is—

1. (a) an agreement, decision or concerted practice of the kind mentioned in section 2(1); or
2. (b) conduct of the kind mentioned in section 18(1),

he shall regard the most appropriate way of proceeding in respect of that matter to be by exercising the functions assigned to him by subsection (2) and Schedule 10 and not by exercising any functions provided by or under a sectoral enactment or any licence issued under such an enactment. () Where a regulator exercises any of the functions assigned to him by subsection (2) and Schedule 10 in respect of a matter, any duty imposed upon him by or under any provision of a sectoral enactment to take enforcement action in respect of that matter shall not apply. () In this section "sectoral enactment" means, in relation to the relevant regulator under that enactment—

1. (a) the Telecommunications Act 1984;
2. (b) the Gas Act 1986;
3. (c) the Electricity Act 1989;
1358
4. (d) the Water Industry Act 1991;
5. (e) the Railways Act 1993;
6. (f) the Electricity (Northern Ireland) Order 1992;
7. (g) the Gas (Northern Ireland) Order 1996.").

The noble Lord said: My Lords, this is another amendment which deals with concurrency. It is also an aspect of concurrency which has been much worked-over in your Lordships' House. It refers to the circumstances in which a regulator who can apply either his powers under the relevant regulatory Act or his powers under the Competition Bill has the discretion to pick and choose between both those sets of powers.

The amendment seeks to provide that where a sectoral regulator considers that a matter is more properly the subject of the Bill rather than of his regulatory Act, in pursuing his objectives under the Bill he must use the powers and procedures set out in the Bill—and those powers and procedures alone.

If at some stage he takes the view that his initial decision was wrong, and that he should have pursued the matter under the relevant regulatory Act, he is entitled to switch to pursue matters under that Act; but in those circumstances he must abandon the use of the powers under the Bill and revert to the use of the powers under the Act. That will prevent the regulator in question switching between the two sets of powers.

In my submission, it is inconsistent with the Government's position—that the powers under the Bill are necessary to further the objectives of the Bill—to allow a regulator to use the powers under his Act to pursue the objectives of this Bill. It is in those circumstances and in that spirit that this amendment is tabled. I beg to move.

Lord Simon of Highbury

My Lords, in dealing with this amendment, I should like to speak also to government Amendments Nos. 57, 66 to 72 and 82 to 86. I should like to deal first with the government amendments and I hope that that will follow sequentially when I reflect on the intervention of the noble Lord, Lord Kingsland, on Amendment No. 38.

The amendments to which I am speaking remove the obligation on the regulator to take licence enforcement action where he is satisfied that it is more appropriate to deal with the matter under the prohibitions.

In Committee I said that an amendment moved by the noble Lord, Lord Kingsland, seemed to make a valid point about the interaction between Section 25 of the Electricity Act and the enforcement of the prohibitions. I promised to reflect on the issue raised in relation to all the utility statutes.

On Report, I said, at col. 495 of Hansard of 23rd February, that we had concluded that, in the light of that reflection, it would be right to bring forward government amendments in respect of each of the utility statutes. Amendments Nos. 66 to 72 make the substantive changes. Amendments Nos. 82 to 86 are consequential.

As for transparency, where a regulator is satisfied of the facts which displace his obligation to enforce licence obligations he is required to serve a notice on the licence holder and to publish a notice for the attention of those affected, informing them of that fact.

I am grateful to the noble Lord for raising that matter in Committee and on Report. I am also pleased to have been able to respond with amendments to deal with the problem that he identified.

The noble Lord, Lord Kingsland, spoke to Amendment No. 38. I suspect that that also takes in Amendment No. 57. Indeed, both amendments fall in the area we are now discussing. One purpose of the amendments is to remove any duty imposed on a regulator by virtue of a utility enactment to take enforcement action when he is exercising functions under the Bill. The government amendments would already have the effect of removing the duty to take licence enforcement action where the regulator is satisfied that the most appropriate way of proceeding is under this Bill.

The other purpose of the noble Lord's amendments appears to be to require a regulator to regard action under the Bill as the most appropriate way to proceed whenever something falls within the scope of the prohibitions, by implication even when it is not the most appropriate way to proceed. The term "appropriate" requires judgment. In this case, it rightly should be the regulator's judgment and not a requirement imposed on him just because a matter falls within the scope of the Chapter I or Chapter II prohibition. Moreover, in certain cases a regulator has a Community law obligation to enforce licence conditions, which the noble Lord's amendments might preclude.

I am therefore convinced that the amendments tabled by the Government provide the right approach to cover the direction of the discussion that we have been taking forward. In those circumstances, I urge the noble Lord to withdraw Amendment No. 38. I should point out again that I have also been speaking to Amendment No. 57 in the same light.

Lord Kingsland

My Lords, I should like, first, to acknowledge and thank the Minister for the amendments that he has tabled in response to a number of issues raised in Committee and on Report. In particular, I should like to thank him for tabling Amendment No. 66 which demonstrates a particularly constructive approach to the problem outlined.

However, I am disappointed by the Minister's response to Amendment No. 38, and a little surprised. I say that because the amendment does not really ask him to go much further than he has already gone. All it requires is that if a regulator considers that the Bill is the more appropriate approach for dealing with an issue, then he ought to be limited to using the powers under that Bill.

It flows from everything that the Government said about the philosophy that the objectives of the Bill, and the procedures laid down in it, are indivisible. Why, therefore, when the Minister comes to the issue of concurrency, does he abandon that indivisibility and give the regulator the option to choose a regulatory route to approach his obligations under the Bill?

The amendment would not tie the regulator down to pursing the matter under the Bill. Indeed, if a regulator at any stage thinks that a regulatory approach is better, he can switch to it. All the amendment does is to say that, while he is pursuing his objectives under the Bill, he ought to be obliged to use the procedures, powers and remedies under that legislation. That seems to me to be consistent with what the Government are trying to do under the Bill and not in contravention of it.

Of course, the exercise of discretionary powers inevitably injects an element of uncertainty into the mind of the "regulatee"; indeed, that is unavoidable. However, all things being equal, the Minister ought to be aiming for the maximum amount of certainty and predictability possible. In my view, Amendment No. 38 provides that, without in any way interfering with the discretion of the regulator to switch to the relevant regulatory Act if he changes his mind about the nature of the fundamental problem that he faces. Nevertheless, as the Minister does not appear to wish to speak again, I have no option but to beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendment No. 39 not moved.]

7.45 p.m.

Clause 55 [General restrictions on disclosure of information]:

Lord Fraser of Carmyllie moved Amendment No. 40:

Page 28, line 43, leave out subsections (5) and (6).

The noble and learned Lord said: My Lords, this amendment and Amendment No. 41 relate to issues of confidentiality and immunity from defamation. They propose the deletion of subsections (5) and (6) and suggest an express provision which states: Information disclosed pursuant to subsection (3) or (5) is subject to an obligation of confidentiality and shall not be disclosed by the recipient". The concern behind the amendments is that the Bill as framed allows the information to be passed on to a large number of other authorities. We recognise that there is a need for that. However, the concern is that the power could be used to allow the exchange of confidential information between the UK competition authority and a foreign competition authority, and—dare I say it?—in the spirit of friendship, to Washington and the United States of America for whom I have the highest regard. The Minister will be well aware that, in regulatory and competition matters, if in other areas an unacceptable degree of extraterritoriality has been exercised, in this sphere the appetite for extension of power is almost limitless.

It is possible that the Minister can give a simple assurance that the powers allowed under the Bill would not extend to allowing disclosure of information in the circumstances I have outlined. However, with his extensive knowledge of matters both industrial and commercial, I am sure that the Minister will appreciate that there is a very real concern that there should not be a kind of disclosure at large. Indeed, that could cause huge damage and might involve all manner of British companies in ranges of actions or huge requirements for justification of their actions which, in other circumstances, no UK government or department would consider was correctly within the purview of the United States authority. I should not over-emphasise the United States because there may be others. However, I am sure that the Minister will understand where the concern lies. I beg to move.

Lord Simon of Highbury

My Lords, we debated the important issue of confidentiality at great length both in Committee and on Report. I shall speak briefly to Amendment No. 40. As I explained on Report, subsections (5) and (6) of Clause 55 enable the Secretary of State to specify additional persons and purposes to whom, and for which, disclosure is to be permitted. That power is exercisable by order subject to annulment by either House. The purpose of this power is to ensure that there is sufficient flexibility in the Bill to respond to developments in regulatory and competition policy without need for fresh primary legislation.

The noble and learned Lord, Lord Fraser, asked specifically about disclosure to foreign competition authorities. I wish to make it clear that the power was not designed for this purpose and the Government's view is that the powers conferred by this provision would not enable a foreign competition authority to be designated as a person to whom a disclosure could be made. I am grateful for the opportunity to clarify that point. Under those circumstances, I hope that the noble and learned Lord will withdraw the amendment.

Lord Fraser of Carmyllie

My Lords, that was a short but extremely satisfactory answer. That is exactly the concern we had. I express my thanks to the Minister. With the reassurance he has given, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendment No. 41 not moved.]

Clause 59 [Interpretation]:

[Amendments Nos. 42 and 43 not moved.]

Clause 60 [Principles to be applied in determining questions]:

Lord Kingsland moved Amendment No. 44: Leave out Clause 60 and insert the following new Clause—

PRINCIPLES TO RE APPLIED IN DETERMINING QUESTIONS

(" .—(1) Subject to subsection (2)—

1. (a) a person exercising functions under this Part in relation to a matter; or
2. (b) the court in determining a question arising under this Part in relation to a matter,

shall ensure that the matter is dealt with and determined in the same manner as the European Court or the Commission would deal with and determine that matter in accordance with Title V of the Treaty, if that matter affected trade between Member States.

(2) The Secretary of State may by order provide that subsection (1) shall not apply to any provision of this Act where he is satisfied that it is necessary to do so.

(3) Any order under subsection (2) shall be made by statutory instrument which shall be laid in draft before Parliament for approval by resolution of each House.

(4) In subsection (1) "court" means any court or tribunal.").

The noble Lord said: My Lords, Amendment No. 44 seeks to leave out Clause 60, which used to be Clause 58—we all became used to calling it Clause 58 so it is now rather strange to have to call it Clause 60—and replace it with this concise but at the same time comprehensive amendment, which does everything the Government's clause does but in half the space. However, I suspect that the Minister will not agree with that judgment.

The purpose of the amendment is to clarify a number of issues that have been in doubt about the extent to which the law of the European Community governs the clauses of the Bill. The confusion has arisen for two reasons. First, there are some places in the Bill where the Government have quite deliberately decided to stray from the path taken by the European institutions. In those areas where the Government have made that expressly the case, there has been no problem. But there are many other areas where it seems by implication to be the case but is not absolutely clear.

The second problem is that it is not clear on the face of the Government's text to what extent it extends beyond the substantive law to the procedural and remedial law. Leaving that question uncertain is damaging. It is unnecessary to leave it uncertain. In any case, the Government are going to be hedged about as a consequence of the incorporation of the European Convention on Human Rights, whose standards, if anything, will prove more demanding than those of the European Court of Justice. The Government have every interest in getting this matter as right as they can before the Bill becomes an Act of Parliament.

What the amendment does, in, I suggest, a very helpful way for the Minister, is to state clearly what aspects of European Community law apply. That is done in subsection (1). Subsection (2) gives the Secretary of State a complete way out by enabling him, by order, to say that subsection (1) shall not apply to any provision of this Act where he is satisfied that it is necessary to so provide. The approach is not dissimilar, I recognise, from the one adopted in Amendment No. 39, where the reserve powers of the Director General of Fair Trading are set out, subject to the discretion of the Secretary of State, to add to them or vary them. Here, the effect of European Community law—substantive, procedural and remedial—is crystal clear under subsection (1); but under subsection (2) the Secretary of State in any particular case, either all at once at the beginning or at some stage later on, can resile from that position. That is an infinitely better approach than the one laid down in the Bill.

I accept that this approach was not taken on day one. This approach has evolved as the Minister has reacted to our amendments. We have incorporated the Minister's concerns in our amendments. By this process of successive approximation I hope that we have now arrived at an amendment which the Minister can accept. I beg to move.

Lord Fraser of Carmyllie

My Lords, before the Minister responds, he will appreciate that my name is also attached to the amendment. Whether or not the amendment is in precisely the right form is, in a sense, not the most important matter. What I hope we impressed on the Minister at Report stage is the importance we attach to Clause 60, as it now is. I appreciate that the Minister has kindly indicated to me that he has reflected on what we have had to say. While I became excited at Report stage about the way the clause would appear to operate, I shall say nothing more at this stage until I hear what the Minister has to say.

Lord Simon of Highbury

My Lords, I am pleased that we have the opportunity to debate the governing principles clause. It is an important clause and the amendment gives me the opportunity to respond to the questions raised by the noble Lord, Lord Kingsland, and the noble and learned Lord, Lord Fraser. It may be helpful if I explain how the governing principles clause is to operate.

Perhaps I may deal, first, with what is imported under the clause. The noble and learned Lord, Lord Fraser, raised at Report a particular query on the extent to which EC procedural safeguards are imported. The primary purpose of the governing principles clause is to secure that, subject to single market considerations, the prohibitions apply to business in the same way under the Bill as under the EC Treaty. As far as possible, we want to achieve a seamless web so that agreements and practices which are prohibited under one regime are prohibited under the other and those that are permitted are permitted under both. The EC prohibitions are propositions of law which, over time, have acquired an internal dynamic in the Community system, in exactly the same way as purely domestic law propositions do in our own system. It is therefore not just a question of borrowing definitions. It is the propositions of law as a whole that we want to mirror.

The same considerations do not apply to purely procedural matters. Different procedural arrangements can apply for consideration of the same substantive issues. There is a strong argument of convenience, in terms of minimising burdens, for keeping in line wherever it makes sense to do so, but it is an argument of practicality rather than legal substance.

However, it is not always possible completely to separate substance and procedure. Issues such as the margin of discretion and what is to be treated as a question of fact rather than law fall on the borderline between them and involve elements of both. The very fact that Articles 85 and 86 now have an internal dynamic means that they have to be understood in the context of the general principles which apply to them as part of Community law. These, which one might call high level principles, may impinge on the meaning and effect of the prohibitions as a question of law. They range from the principle of legal certainty, which carries with it the proposition that contracts should not lightly be set aside, to the principle of fairness in administrative action. They can perhaps best be summarised as the necessary underpinning of the rule of law and, in this context, law means the whole system of Community law.

For this reason, we did not feel that it was right to attempt to confine the effect of Clause 60 to issues relating purely to the meaning of Articles 85 and 86 in isolation. Legally, I am advised, there would be great doubt whether it would have worked and it might well have created greater uncertainty.

As I have said, purely procedural rules are not at all the same thing. The EC Commission could change its procedure, and has done, without affecting the substance of Articles 85 and 86. Different procedures apply in different sectors. It is true that some procedures, for example "Access to the File", are derived from ECJ/CFI judgments drawing on the high level principles, but these judgments were given in the context of the particular procedures adopted by the Commission. This is shown by the fact that they are not applied in the same way in other areas of Community administrative action. The same will be true of the director's rules.

At the Community level, much of the detailed procedure for the administration of the EC prohibition system is set out in Commission or Council regulations. The governing principles clause will not import any of these detailed procedures. This is especially so since the Commission is made up of a college of Commissioners and many of its procedures would simply not be appropriate for the director.

The Bill provides that the detailed procedure for the administration of the domestic system is to be set out in the director's rules. Clause 51 sets out the procedure for making the director's rules. These are the rules to which business will look to find out how the detail of the administration of the prohibition system will operate. In practice of course many of the detailed procedures adopted by the director may be very similar to the procedure set out in EC regulations. Parliament of course will also have the opportunity to object to the rules since they cannot come into operation until made by order.

There is some precedent for our approach. The noble Lord may have recognised that the wording of Clause 60 reflects, to some extent, the wording of Section 3(1) of the European Communities Act. In particular, there is the reference to determining questions in accordance with the principles laid down by and any relevant decision of the European Court of Justice and court of first instance. It is this which causes our courts to follow Community law when applying Article 85. Member states retain responsibility for applying Article 85 in the field of aviation transport beyond the Community frontier. However, nobody would suggest that it meant that the procedures which have been adopted by the UK authorities for the application of Article 85 had to be the same as the ones adopted by the Commission in those fields where it is they who have power to apply Article 85.

I hope the noble Lord will see from my explanation that we have given serious and detailed consideration to the suggestion that we should seek to ensure that European jurisprudence on procedural matters does not apply under Clause 60. This is the approach which the noble and learned Lord, Lord Fraser, indicated in debate on 23rd February (Hansard col. 517) that he hoped we would confirm. As I have said, in certain respects, procedural and substantive aspects of Community law are closely inter-related and in fact would be very difficult to separate. Any attempt to make such a separation could create greater uncertainty. The approach in Clause 60 which we have adopted in our view avoids this problem. I hope this clarifies the position on the question of the extent of procedural safeguards imported by the governing principles clause.

I turn briefly to divergences from the EC system. As for the question of divergences, we are not importing it "lock, stock and barrel". Divergences are possible in three respects. First, I have just explained that the director will be setting out his own rules for the detailed procedural administration of the new prohibition system. Secondly, it is apparent from the face of the Bill where we have departed. A wider exclusion for mergers than exists under EC law is but one example. We have also previously debated the Government's position on penalties and interim measures. Thirdly, I explained at Committee that single market objectives would not be relevant to the domestic prohibition system.

We have debated these issues before and therefore I do not want to discuss them in any detail or pursue the issue of all the procedural approaches that are separate from the import of the high principle through Clause 60. However, I would be happy to write further on this subject to the noble Lord outlining our thinking in this area.

In conclusion, I believe that the governing principles clause will operate well in practice. However, I agree that it is important for business that the clause is made as certain as possible. I take very seriously the comments that the clarity of provisions, especially critical provisions such as the governing principles clause, could be improved. The department will have further dicussions with the CBI as the Bill progresses through the parliamentary process. If a suggestion is made which would improve the operation of the Bill we will make every effort to secure that improvement. However, for the reasons I have explained, I am not persuaded that the governing principles clause as drafted needs to be changed. With those general reflections I hope that the noble Lord will be prepared to withdraw the amendment.

8 p.m.

Lord Kingsland

My Lords, despite the attachment I have to the text of the amendment, I appreciate the full and thoughtful way in which the Minister has reacted to the amendment. In those circumstances, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Lord Fraser of Carmyllie moved Amendment No. 45: After Clause 60, insert the following new clause—

APPLICATION TO PROPERTY OWNERSHIP

(". Nothing in this Act shall affect the law and practice governing the system of property ownership.").

The noble and learned Lord said: My Lords, this amendment is grouped with Amendment No. 44 that we have just discussed. I welcome the approach that the Minister has taken. I know the importance that he attaches to giving an undertaking and I hope that that undertaking will be fulfilled. If Clause 60 is to be the subject of further and continuing discussions with the CBI, that is a satisfactory way forward. I do not think the noble Lord expressly addressed Amendment No. 45. I believe that amendment should be included on the face of the Bill. However, if he tells me that it will also form part of the discussions that he and his officials will undertake once the Bill leaves this House, I shall be satisfied with that. I beg to move.

Lord Brightman

My Lords. I beg your Lordships' pardon. I did not hear Amendment No. 47 called—

Lord Fraser of Carmyllie

My Lords, I hope I may clarify the position. My Amendment No. 45 was grouped with Amendment No. 44. Amendment No. 45 states that this Act shall in no way prejudice the rules in the United Kingdom, governing the system of property ownership". This is in our view an important amendment. I had hoped to indicate to the Minister that if he will simply tell me that there will be continuing discussions on this matter, as he has done in relation to Clause 60, that will be sufficient for my purposes and I shall be happy to withdraw the amendment once I have that assurance.

Lord Simon of Highbury

My Lords, subsection (2) of the governing principles clause also refers to principles laid down by the EC Treaty. This is relevant to Amendment No. 45. This provides an express equivalent to Article 222 of the EC Treaty. This treaty article provides that nothing in the treaty is to affect the law and practice governing the system of property ownership. There is no need for such an express provision. Subsection (2) of Clause 60 expressly refers to the, principles laid down by the Treaty as being part of the EC jurisprudence which is imported. Since Articles 85 and 86 must be applied within the limits of Article 222, then so must the UK prohibitions. If we were to include an express equivalent to Article 222, then we would cast doubt on the importation of principles from other treaty articles. For example, as I said in Committee, the objective to promote the environment in Article 130 may be relevant in considering whether exemption can be granted. I believe that under these circumstances the noble and learned Lord has the assurance that he requires.

Lord Fraser of Carmyllie

My Lords, I compliment the noble Lord in stopping the ball just before it rolled over the boundary. That is the assurance I want. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

The Deputy Speaker

My Lords, I have to announce corrections to the voting figures for Division No. 2. The correct figures are as follows: Content 22; Not-Content, 92.

Clause 70 [Regulations, orders and rules]:

Lord Kingsland moved Amendment No. 46:

Page 39, line 4, after ("37(7),") insert— ("() section 51,").

The noble Lord said: My Lords, the amendment seeks to require that the rules and guidance made by the director under Clause 51 of the Bill shall be subject to an affirmative resolution of each House of Parliament. This is important statutory guidance. We believe that the House should have an opportunity to consider it and, if necessary, speak to it before it becomes binding. I beg to move.

Lord Haskel

My Lords, I cannot accept that the director's rules should be subject to the affirmative resolution procedure.

Perhaps I may refer your Lordships to the Select Committee on Delegated Powers and Deregulation which reported on the powers in the Bill on 5th November 1997. It expressed no concern that the powers in what is now Clause 51 should be subject to negative resolution procedure. Perhaps I may pray in aid the wisdom of your Lordships' Select Committee and ask the noble Lord, Lord Kingsland, to join me in doing the same.

Lord Kingsland

My Lords, on 99.9 per cent. of occasions I find the decisions of the committee to be extremely satisfactory. However, this is the one occasion when, with the utmost respect, I disagree.

The rules are absolutely fundamental to the individual human rights of the person to be regulated. This is the most important statutory guidance that will be made under the Bill. Yet unlike other parts of the Bill which are accorded affirmative resolution support, these are not.

I deplore the situation, but I recognise that the Minister's expression intimated deep intransigence on his behalf. In those circumstances, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

8.15 p.m.

Lord Brightman moved Amendment No. 47: After Clause 74, insert the following new clause—

INDEX OF DEFINED EXPRESSIONS

(". In this Act the expressions listed below are defined by or otherwise fall to be construed in accordance with the provisions indicated—

appeal tribunal	section 59(1)
appropriate court	sections 39(10) and 50(5)
Article 85	sections 59(1) and 61(1)
Article 86	sections 59(1) and 61(1)
authorisation	section 61(3)
authorised officer	section 61(1)
block exemption	sections 6(4) and 59(1)
block exemption order	sections 6(2) and 59(1)
the Chapter I prohibition	sections 2(8) and 59(1)
the Chapter II prohibition	sections 18(4) and 59(1)
the Commission	sections 59(1) and 61(1)
Commission investigation	section 61(1)
Commission official	sections 62(2) and 62(4)
Community prohibition	section 10(10)
conduct of minor significance	section 41(1)
costs	section 35(3)
the Council	section 59(1)
the court	sections 59(1) and 60(5)
decision	sections 42(3) and 60(6)
designated person	section 55(4)
the Director	sections 59(1) and 61(1)
Director's finding	section 58(2)
Director's investigation	section 61(1)
Director's special investigation	section 61(1)
document	section 59(1)

dominant position	sections 18(3) and 19(3)
EEA agreement	section 59(1)
the European Court	section 59(1)
the High Court	section 31(3)
individual exemption	sections 4(2) and 59(1)
information	section 59(1)
infringement	section 72(7)
investigating officer	sections 28(1) and 59(1)
leave	section 50(5)
legal professional privilege	section 31(3)
Minister of the Crown	section 59(1)
named officer	sections 30(5) and 64(5)
notice period	section 7(4)
occupier	sections 30(5) and 64(5)
officer	sections 59(1) and 71(3)
parallel exemption	sections 10(3) and 59(1)
partner	section 71(6)
Part I proceedings	section 58(2)
party	section 50(5)
penalty notice	section 38(2)
person	section 59(1)
premises	sections 59(1) and 61 (1)
prescribed	sections 59(1) and 61(1)
press diversity prohibition	section 19(4)
price fixing agreement	section 40(9)
privileged communication	section 31(2)
provisional immunity from penalties	section 42(5)
Regulation	section 10(10)
regulator	sections 54(1) and 59(1)
relevant decision	section 48(1)
relevant functions	section 55(4)
relevant party	section 58(2)
rules	section 53(1)
section 11 exemption	sections 11(3) and 59(1)
small agreement	section 40(1)
specified	sections 6(8), 53(3) and 55(6)
specified date	section 38(2)
specified document	section 27(4)
the Treaty	section 59(1)
the United Kingdom	sections 2(7) and 18(3)
withdrawal date	sections 40(6) and 41(6).")

The noble and learned Lord said: My Lords, my purpose in moving the amendment is to suggest that this important Bill would be more user friendly if it contained at the end a simple index of the words and phrases which are given a special meaning.

I raised this point with the Minister last December. In a letter to me he indicated that it was an interesting issue relevant to legislation in general and worthy of debate. I suggested that the best time for me to move the amendment might be at Third Reading when most of the major issues might be out of the way.

An index has two advantages. First, it tells the reader at a glance whether a particular expression used in an Act has a special meaning. Secondly, it tells the reader at a glance where in the Act that special meaning is to be found. Let me give an example. Clause 27 of the Bill empowers the director general, when conducting an investigation, to require a person to produce a document that he specifies. That is no problem. We all know what the word "document" means—or do we? Perhaps a "document" has some special meaning in the Bill. The reader can turn to the index to find out. He immediately discovers that it has a special meaning because the word is listed in the left-hand column of the index. Where can he find that special meaning? The right-hand column of the index immediately tells him: Clause 59. He sees there that "document" includes not only written matter but also, for example, a tape recording or a floppy disk, neither of which is within the dictionary definition of document.

Another useful function performed by an index arises when the same word is given different meanings in different clauses of the Act. For example, Clause 35 empowers the court to make an order for costs against an "officer" of a company. Clause 59 defines an "officer" for the purposes of this clause as including a director, manager or secretary.

But let us suppose that someone who is not really the secretary of the company purports to act as secretary. Let us say that he signs letters and so forth as though he were the secretary. Can an order for costs be made against a person who purports to act as secretary? It would not be in the least surprising if it could. It seems a rather difficult point.

If the Act contains an index of defined expressions, the answer is easy. The index shows that "officer" of a company is defined in two different sections, with different meanings. One definition is to be found in Clause 59 in relation to a costs order under Clause 35. That is, it includes a director, manager or secretary. The other definition is in Clause 71 which defines "officer" in relation to certain criminal liability clauses as meaning director, manager or secretary or a person who purports to act as such. It therefore becomes clear that no costs order can be made against a person who purports to act as a director, manager or secretary because the second definition makes it abundantly clear that when "officer" is meant to include a person purporting to act as an officer, the Act says so.

In the absence of an index of defined expressions, I simply do not know how the reader of the costs clause can be expected to appreciate that "officer" in that clause does not include a person who merely purports to act as an officer, unless he reads through the whole Act down to Section 71. If a word or expression is used in an Act with different meanings, it may be essential for the reader to study and compare both definitions to be certain what each means. Only an index can alert the reader to the fact that there are two different definitions.

The idea of including in an Act an index of defined expressions is not new. It has been used on a number of occasions over the past 23 years. It is obvious that it is not appropriate for all Acts of Parliament. It depends on the Act, notably how complicated the Act is, and how many defined words and expressions it contains. The matter must clearly be judged on a case-by-case basis. However, in my respectful submission, the question must always be this: will an index be useful to the reader, and sufficiently useful to justify its incorporation in the Act?

I wish to deal with one objection to an index which is sometimes raised. I have heard it suggested that an Act of Parliament ought not to contain matter which has no legislative effect. One can see the logic of that objection. But does it really stand up to examination? Every Act contains marginal notes against sections. A marginal note has no legislative effect. It is inserted for the convenience of the reader. If a marginal note is permissible, why not an index?

An index of defined expressions is coming into increasing use in heavy Bills. There are no fewer than three Bills now going through the other place which have just such an index as I am proposing for the Competition Bill. They are: the Government of Wales Bill, with 35 defined expressions; the Scotland Bill, with 44; and the school standards Bill, with 58. Each of those Bills contains an index of defined expressions similar to that which I propose for the Competition Bill. The Competition Bill has, in fact, 59 defined expressions.

There is also a fourth Bill, the Data Protection Bill, which is at this very moment being taken through this House by the noble Lord, Lord Williams of Mostyn. That has 38 defined expressions, which are collected together in an index. I ask myself: why should the reader of the Data Protection Act have the advantage of an index of defined expressions, while the reader of the Competition Bill, with more sections and more defined expressions, is denied that advantage? Is it right, in the case of a long and complicated Bill, that we should sometimes help the reader and sometimes we should not? If an index is appropriate for the Data Protection Act, why is it not appropriate for the Competition Act? I beg to move.

Lord Kingsland

My Lords, I warmly support this imaginative and constructive initiative by the noble and learned Lord, Lord Brightman. He has in effect already done the work for the Government. I earnestly hope that the Government will respond in a most positive way.

Lord Haskel

My Lords, the Government always have an open ear to suggestions which would make legislation easier to read and more user-friendly. We have taken advice from the appropriate authorities on whether we should include an index of defined expressions in the Competition Bill. The clear advice we have received is that it would not be appropriate to include such an index in the Bill.

However, in view of what the noble and learned Lord has said, perhaps we should ask the legal draftsman to read his remarks very carefully and to reconsider that advice. In view of that, perhaps the noble and learned Lord will withdraw his amendment.

Lord Brightman

My Lords, I am delighted to hear what the Government have said and I gratefully accept what is suggested. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Schedule 2 [Exclusions: Other Competition Scrutiny]:

Lord Simon of Highbury moved Amendment No. 48:

Page 50, line 18, leave out from beginning to ("that") and insert ("and").

The noble Lord said: My Lords, I shall also speak to Amendments Nos. 49, 50 and 51.

I mentioned in Committee on 13th November that we should need to refine some of the provisions in Schedule 2. These amendments refine the provisions which deal with agreements relating to Channel 3 news provision and networking arrangements, which are subject to competition scrutiny under the Broadcasting Act. They also provide a power to exclude or modify provisions in the Bill in respect of producer responsibility schemes and certain agreements. At present, the Environment Act provides a power to make regulations which provide for competition scrutiny and for the RTPA to be excluded or modified in respect of producer responsibility schemes and certain agreements.

Amendments Nos. 48 and 49 are technical amendments. Amendments Nos. 50 and 51 are subsidiary and relevant to the same provisions. I beg to move.

On Question, amendment agreed to.

Lord Simon of Highbury moved Amendments Nos. 49 to 51:

Page 50, line 36, at end insert ("and expressions used in this section which are also used in Part I of the Competition Act 1998 are to be interpreted in the same way as for the purposes of that Part of that Act.").

Page 50, line 44, leave out from ("arrangements") to end of line 48 and insert ("to the extent to which they—

1. (a) are subject to Schedule 4 to the Broadcasting Act 1990 (competition references with respect to networking arrangements); or
2. (b) contain provisions which have been considered under that Schedule.

(2) The Independent Television Commission ("ITC") must publish a list of the networking arrangements which in their opinion are excluded from the Chapter I prohibition by virtue of sub-paragraph (1). (3) The ITC must—

1. (a) consult the Director before publishing the list, and
2. (b) publish the list in such a way as they think most suitable for bringing it to the attention of persons who, in their opinion, would be affected by, or likely to have an interest in it.

(4) In this paragraph "networking arrangements" means—

1. (a) any arrangements entered into as mentioned in section 39(4) or (7)(b) of the Broadcasting Act 1990, or
2. (b) any agreements—
1. (i) which do not constitute arrangements of the kind mentioned in paragraph (a), but
2. (ii) which are made for the purpose mentioned in section 39(1) of that Act, or
3. (c) any modification of the arrangements or agreements mentioned in paragraph (a) or (b).").

Page 50, line 48, at end insert—

("Environmental protection: producer responsibility obligations

.—(1) The Environment Act 1995 is amended as follows.

(2) In section 94(1) (supplementary provisions about regulations imposing producer responsibility obligations on prescribed persons), after paragraph (o), insert— (oa) the exclusion or modification of any provision of Part 1 of the Competition Act 1998 in relation to exemption schemes or in relation to any agreement, decision or concerted practice at least one of the parties to which is an operator of an exemption scheme;".

(3) After section 94(6), insert— (6A) Expressions used in paragraph (oa) of subsection (1) above which are also used in Part I of the Competition Act 1998 are to be interpreted in the same way as for the purposes of that Part of that Act.

(4) After section 94, insert—

"Producer responsibility: competition matters.

94A.—(1) For the purposes of this section, the relevant paragraphs are paragraphs (n), (o), (oa) and (ya) of section 94(1) above.

(2) Regulations made by virtue of any of the relevant paragraphs may include transitional provision in respect of agreements or exemption schemes—

1. (a) in respect of which information has been required for the purposes of competition scrutiny under any regulation made by virtue of paragraph (ya);
2. (b) which are being, or have been, considered for the purposes of competition scrutiny under any regulation made by virtue of paragraph (n) or (ya); or
3. (c) in respect of which provisions of the Restrictive Trade Practices Acts 1976 and 1977 have been modified or excluded in accordance with any regulation made by virtue of paragraph (o).

(3) Subsections (2), (3), (5) to (7) and (10) of section 93 above do not apply to a statutory instrument which contains only regulations made by virtue of any of the relevant paragraphs or subsection (2) above.

(4) Such a statutory instrument shall be subject to annulment in pursuance of a resolution of either House of Parliament." ").

On Question, amendments agreed to.

Schedule 4 [Professional Rules]:

Lord Howie of Troon moved Amendment No. 52:

Page 58, leave out lines 10 to 13 and insert— ("17. The services of chartered engineers, incorporated engineers and engineering technicians.

Technology

17A. The services of persons practising or employed as consultants in the field of—").

The noble Lord said: My Lords, I am sorry to detain the House at this late hour, but this amendment, though short, is important. We discussed it previously on Report. Unfortunately, the amendment that I tabled then was imperfect—as is often the case with amendments that I table. Owing to its imperfection, it received a somewhat perfunctory reply. In fact, it received no reply at all—it was merely swatted to one side like an interfering fly. I later wrote to the Minister, suggesting a better way of dealing with this specific problem. He is therefore aware of what I am about to say—although I shall say it at greater length than I did in the letter.

The amendment that I proposed for this stage was changed by the Committee Clerks into the series of three amendments that appear on the Marshalled List. I shall speak to all three together. The effect that I had, and still have, in mind is to split paragraph 17 of Schedule 4 into two parts, so that it demonstrates clearly that engineering is a discrete discipline, quite separate from science, technology, architecture or any other discipline. The effect of these amendments would be to leave sub-paragraphs (a) and (b) of paragraph 17 under the general heading, Engineering, and the remaining sub-paragraph would come under the heading, Technology, making quite clear the distinction between these matters.

On Report, we were told that the headings in italics carried no weight, just as marginal notes, referred to by the noble and learned Lord, Lord Brightman, have no weight. That led me to two thoughts. If they have no weight, why are they there at all? Or, if they are there in order to help the reader, as the noble and learned Lord, Lord Brightman, suggested, they should be helpful rather than misleading.

As paragraph 17 presently stands, it is misleading. Under the general heading, Engineering, it includes a large number of matters which are clearly not engineering matters at all. I went into this point at some length on Report and shall not delay the House unduly, except to say that nobody with any respect for language would regard geology, agronomy, forestry, livestock rearing in particular, ecology, chemistry or biochemistry as engineering. They may well be described as technology, but there is no way in which they can be described as engineering. It is absurd so to describe them.

I have spent the 20 years that I have been in this place trying to get Whitehall to recognise engineering as a separate discipline. I have had modest success—but it has been extremely modest. I am hoping to add another modest success to my rather dismal record in this respect.

There is more to it than merely that. Sub-paragraphs (a) and (b) refer to engineering, but they contain a serious flaw. The Bill excludes professional people working under designated professional rules from some of the strictures of the Bill. In the case of engineering, the rules are those of the Engineering Council and the various institutions of engineering, of which there are a number—some may say an unreasonable number. It is possible to practise as a consultant and to do engineering work without being a member of any engineering institution or of the Engineering Council. Thus a person who was not working under the rules of a professional body would be excluded under the Bill as it stands. I cannot believe that that is what the Minister wishes to provide.

Let me illustrate the point by reference to the paragraph referring to architects. That merely says "architects", which is all right because architects are registered. Although one can do architectural work without being registered, as I have myself as a civil engineer, one cannot then describe oneself as an architect and therefore would not be subject to the exclusion in the Bill. Engineering does not have the advantage of registration. Therefore people who are not registered engineers, in the usual sense of the term, and are not subject to professional rules of any kind would be unreasonably excluded.

I tried earlier, and will try again, to show that paragraph 17 is flawed, though not fatally so, and can be remedied. I have suggested one means by which it can be improved. I sincerely hope that the Minister will pay attention to what I have said. I beg to move.

8.30 p.m.

Lord Haskel

My Lords, as I explained in Committee and on Report, the Government's intention in Schedule 4 is simply 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 1976. The present definition can be found there, and I am not aware that it has caused any problems since. As we wish to carry forward an exclusion, we have no wish to depart from the wording now used in Schedule 4.

The specified professional services are the ones for which, if there is a professional body which regulates the service or the persons providing or wishing to provide that service, that body may apply to the Secretary of State to have its professional rules designated and hence excluded from the Chapter I prohibition. This applies equally to engineers and engineering consultants. Therefore the purpose of the definitions is to define which professional bodies may—and by omission may not—have their professional rules designated. It is a matter of regulating professional bodies and their members. I should perhaps emphasise that it is only professional rules that we are talking about here. Other agreements between members of the relevant professions could not be excluded under the schedule.

The noble Lord is concerned that the definition does not match his own definition and that it includes some persons whom he would rather have included in a separate category. That can apply to all parts of Schedule 4.

If there are no such professional rules, there will be none to be designated and hence excluded under the Bill. As the only purpose of the clause is to list those professions which are presently excluded from the Restrictive Trade Practices Act 1976, it seems sensible to carry forward the wording of that Act. It may well be out of date, but it serves for the purpose of the Bill.

I know that the noble Lord is a champion of engineering and engineers and has spoken up for them many times in this House, but I do not believe that the Bill is a proper place for him to try to further the profession. In view of that, I hope that he will be able to withdraw his amendment.

Lord Howie of Troon

My Lords, that is the miserable kind of reply that I expected. I have not heard such nonsense since my noble friend replied to me at Report stage. it must be possible for him, even so late in the evening, to grasp the simple fact that there are groups of persons included in paragraph 17 who are not engineers at all, who are livestock stockbreeders and agronomists, for goodness sake! I greatly admire those people, but they are not engineers. It would be a simple matter for my noble friend to do what I asked.

I know there is a problem, which I have come across in earlier legislation. Someone, beavering through previous legislation, found this part, took his scissors, cut it out and pasted it into the draft of the Bill. It is done all the time; but it should be done with thought. To change this provision and improve the Bill would be a very simple matter. I do not imagine that there is any way of knocking sense into my noble friend's head, other than with a sharp instrument. I do not have one of those, and it would be impolite of me, in any case, because he and I have been friends for many years. He really must get a grip of this. I can assure him that there is every likelihood that the matter will be raised in another place.

Perhaps it would be a good idea if he were to take up the suggestion I made in the letter to which I referred that we should have a brief meeting, perhaps over a glass or two of Scotch, and sort the matter out. It is not difficult. That would not only redound to my noble friend's reputation but please something like a quarter of a million engineers. Under the paragraph as it stands, it is possible to act as a consultant without being subject to the rules, and that is a flaw. In view of the extremely unsatisfactory reply, the kind of reply that I am used to, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendments Nos. 53 and 54 not moved.]

Schedule 8 [Appeals]:

[Amendment No. 55 not moved.]

Schedule 10 [Regulators]:

Lord Simon of Highbury moved Amendment No. 56:

Page 76, leave out lines 16 to 19 and insert— (""(3B) Subsections (1) and (2) above do not apply in relation to anything done by the Director in the exercise of functions assigned to him by section 50(3) below ("Competition Act functions"). (3C) The Director may nevertheless, when exercising any Competition Act function, have regard to any matter in respect of which a duty is imposed by subsection (1) or (2) above, if it is a matter to which the Director General of Fair Trading could have regard when exercising that function."").

The noble Lord said: My Lords, in moving Amendment No. 56, I shall speak also to Amendments Nos. 60 to 65.

At Report, the noble Lords, Lord St. John of Bletso and Lord Kingsland, and the noble Viscount, Lord Trenchard, spoke to amendments concerning the duties of regulators under their utility statutes. I was grateful to the noble Lords for raising the matter.

In response I said that the position that we wished to achieve was that a regulator applying the prohibitions was to do so on precisely the same legal basis as the DGFT; that we wished to make that clear on the face of the Bill, and that we would bring forward amendments in order to achieve it (23rd February; col. 476). These amendments fulfil that commitment.

The amendments provide that the statutory duties contained in utility legislation do not apply in relation to the regulators' concurrent functions under the Bill. The amendments also make clear that, when exercising a concurrent function, a regulator may have regard to the matters which are the subject of the statutory duties if the DGFT could have regard to those matters if he were exercising that function. I said at Report that we were concerned that simply to disapply the duties might lead to uncertainty as to the effect of the "disapplication". The amendments put the effect beyond doubt.

Two of the amendments also contain a further clarificatory provision to ensure that, in dealing with the last point, we do not raise doubts about the effect of disapplication provisions already in the legislation. This further clarification is in Amendment No. 61 relating to the Electricity Act 1989, and Amendment No. 64 relating to the Electricity (Northern Ireland) Order 1992. It is possible that we may wish to provide similar clarification in relation to the Telecommunications Act 1984 and the Water Industry Act 1991. If so, amendments would need to be brought forward in another place. I beg to move.

On Question, amendment agreed to.

[Amendments Nos. 57 to 59 not moved.]

Lord Haskel moved Amendments Nos. 60 to 72:

Page 77, leave out lines 3 to 6 and insert— (""(3A) Subsections (1) to (3) above and section 4A below do not apply in relation to anything done by the Director in the exercise of functions assigned to him by section 36A below ("Competition Act functions"). (3B) The Director may nevertheless, when exercising any Competition Act function, have regard to any matter in respect of which a duty is imposed by any of subsections (1) to (3) above or section 4A below, if it is a matter to which the Director General of Fair Trading could have regard when exercising that function."").

Page 77, leave out lines 44 to 47 and insert— (""(6A) Subsections (1) to (5) above do not apply in relation to anything done by the Director in the exercise of functions assigned to him by section 43(3) below ("Competition Act functions"). (6B) The Director may nevertheless, when exercising any Competition Act function, have regard to any matter in respect of which a duty is imposed by any of subsections (1) to (5) above ("a general matter"), if it is a matter to which the Director General of Fair Trading could have regard when exercising that function: but that is not to be taken as implying that, in the exercise of any function mentioned in subsection (6) above, regard may not be had to any general matter."").

Page 78, leave out lines 31 to 34 and insert— (""(6A) Subsections (2) to (4) above do not apply in relation to anything done by the Director in the exercise of functions assigned to him by section 31(3) below ("Competition Act functions"). (6B) The Director may nevertheless, when exercising any Competition Act function, have regard to any matter in respect of which a duty is imposed by any of subsections (2) to (4) above, if it is a matter to which the Director General of Fair Trading could have regard when exercising that function."").

Page 79, leave out lines 22 to 25 and insert— (""(7A) Subsections (1) to (6) above do not apply in relation to anything done by the Regulator in the exercise of functions assigned to him by section 67(3) below ("Competition Act functions"). (7B) The Regulator may nevertheless, when exercising any Competition Act function, have regard to any matter in respect of which a duty is imposed by any of subsections (1) to (6) above, if it is a matter to which the Director General of Fair Trading could have regard when exercising that function.").

Page 80, leave out lines 11 to 14 and insert— (""(3) Paragraph (1) does not apply in relation to anything done by the Director in the exercise of functions assigned to him by Article 46(3) ("Competition Act functions"). (4) The Director may nevertheless, when exercising any Competition Act function, have regard to any matter in respect of which a duty is imposed by paragraph (1) ("a general matter"), if it is a matter to which the Director General of Fair Trading could have regard when exercising that function; but that is not to be taken as implying that, in the exercise of any function mentioned in Article 4(7) or paragraph (2), regard may not be had to any general matter."").

Page 80, leave out lines 45 to 48 and insert— (""(3A) Paragraphs (2) to (4) do not apply in relation to anything done by the Director in the exercise of functions assigned to him by Article 23(3) ("Competition Act functions"). (3B) The Director may nevertheless, when exercising any Competition Act function, have regard to any matter in respect of which a duty is imposed by any of paragraphs (2) to (4), if it is a matter to which the Director General of Fair Trading could have regard when exercising that function."").

Page 82, line 16, at end insert— ("() In section 16 (securing compliance with licence conditions), in subsection (5), after paragraph (a), omit "or" and after paragraph (b), insert "or (c) that the most appropriate way of proceeding is under the Competition Act 1998."").

Page 83, line 16, at end insert— ("() In section 28 (orders for securing compliance with certain provisions), in subsection (5), after paragraph (aa), omit "or" and after paragraph (b), insert "or (c) that the most appropriate way of proceeding is under the Competition Act 1998."").

Page 84, line 23, at end insert— ("() In section 25 (orders for securing compliance), in subsection (5), after paragraph (b), omit "or" and after paragraph (c), insert "or (d) that the most appropriate way of proceeding is under the Competition Act 1998."").

Page 85, line 35, at end insert— ("() In section 19 (exceptions to duty to enforce), after subsection (1), insert— (1A) The Director shall not be required to make an enforcement order, or to confirm a provisional enforcement order, if he is satisfied that the most appropriate way of proceeding is under the Competition Act 1998. () In section 19(3), after "subsection (1) above", insert "or, in the case of the Director, is satisfied as mentioned in subsection (1A) above.".").

Page 87, line 14, at end insert— ("() In section 55 (orders for securing compliance), after subsection (5), insert— (5A) The Regulator shall not make a final order, or make or confirm a provisional order, in relation to a licence holder or person under closure restrictions if he is satisfied that the most appropriate way of proceeding is under the Competition Act 1998. () In section 55—

1. (a) in subsection (6), after "subsection (5)" insert "or (5A)";
2. (b) in subsection (11), for "subsection (10)" substitute "subsections (5A) and (10)".").

Page 88, line 30, at end insert— ("() In Article 28 (orders for securing compliance), in paragraph (5), after sub-paragraph (b), omit "or" and after sub-paragraph (c), insert "or (d) that the most appropriate way of proceeding is under the Competition Act 1998."").

Page 89, line 31, at end insert— ("() In Article 19 (orders for securing compliance), in paragraph (5), after sub-paragraph (b), omit -or" and after sub-paragraph (c). insert "or (d) that the most appropriate way of proceeding is under the Competition Act 1998."").

The noble Lord said: My Lords, with the leave of the House, I shall move Amendments Nos. 66 to 72 en bloc. I beg to move.

On Question, amendments agreed to.

Schedule 11 [Interpretation of Section 55]:

Lord Kingsland moved Amendment No. 73:

Page 90, leave out lines 6 to 25.

The noble Lord said: My Lords, Amendments Nos. 73 to 76 are in a group of amendments which seek to change parts of Schedule 11 in the context of Clauses 53 and 54 of the Bill. This is a matter that was covered both at Committee and Report stages when we sought to use a different approach.

At Committee stage we promoted the idea of a complete exclusion of these categories from the Bill and received an unfavourable reaction from the government Benches. At Report stage we promoted the idea of a 14-day notice before information was transferred from one designated person fulfilling a relevant function to another. Our final approach is to seek to amend Schedule 11 by narrowing down the range of delegated persons and relevant functions.

The amendment invokes an important principle; that is, that information acquired for one purpose by one regulator or the director-general should not be used for another purpose; otherwise, any one of the parties who is a designated person can go fishing in this pool to extract information to which he or she is not entitled. I beg to move.

Lord Simon of Highbury

My Lords, we have indeed covered this ground before and I noticed the slowing of the approach marks but no lacking in the keenness with which the amendments are put forward.

These amendments would prevent disclosure of information for any of the statutory functions listed in Schedule 11 other than for Bill purposes. I understand that noble Lords opposite believe that that should be the position. They have put their cases. However, we believe that we have answered them and shall do so one more time.

In brief, our view is that if the director or one of the sector regulators has information that he thinks will assist one of the other regulators to perform his statutory functions under another Act, he should be able to give him that information. This is entirely in line with many other UK regulatory statutes. There are similar provisions for disclosure for specified purposes in the Fair Trading Act, the Competition Act, the Restrictive Trade Practices Act, utilities statutes, the Financial Services Act and the Companies Act to name just a few.

The noble Lord has in the past—I am sorry that I did not catch everything he said--referred to the common pool of information available to the regulators in which to fish. I heard the mention of "fishing", but I did not know whether it was a reference again to the common pool. It is important to get that issue into perspective. Under Clause 55 the director or a sector regulator can only pass information to another regulator for a specific purpose; that is, to assist him with a specific statutory function.

I understand why noble Lords opposite wish to ensure that the House gives close attention to this issue. As I have said on a number of occasions, it is one that we believe to be important and sensitive. But we responded carefully and fully to the points raised in debates and I therefore invite the noble Lord, Lord Kingsland, to withdraw his amendment.

Lord Kingsland

My Lords, I thank the Minister for the patient way in which he yet again responded to another approach to try and achieve a similar or the same result. The issue concerns the status of the information which is put into the pool. It is put in for a specific purpose. Another regulator may seek to extract it from the pool for his own purpose, a different purpose from the purpose for which it was originally put in.

That is the point I was trying to make. I see that have made no headway tonight. Nevertheless, I appreciate the calm way in which the Minister responded. In those circumstances, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendments Nos. 74 to 77 not moved.]

7.45 p.m.

Schedule 13 [Transitional Provisions and Savings]:

Lord Fraser of Carmyllie moved Amendment No. 78:

Page 98, line 26, after ("determined") insert—

1. ("(a) in the case of proceedings under the RPA, before the date of enactment; and
2. (b) in the case of proceedings under the RTPA").

On Question, amendment agreed to.

Lord Fraser of Carmyllie moved Amendment No. 79:

Page 98, line 26, at end insert— ("(1A) On the date of enactment, continuing proceedings under the RPA shall automatically be stayed for a period of two years from that date or until such earlier time as they are discontinued under sub-paragraph (1B) or (5). (1B) On the commencement date, continuing proceedings under the RPA which are stayed by virtue of sub-paragraph (1A) shall automatically be discontinued.").

On Question, amendment agreed to.

Lord Fraser of Carmyllie moved Amendment No. 80:

Page 99, line 22, at end insert (" or (c) it is an agreement—

1. (i) where resale price maintenance has been approved,
2. (ii) particulars of which have been furnished under section 24(1) of the RTPA and which has not been referred to the Restrictive Practices Court,
3. (iii) which has been determined under section 21(2) of the RTPA to contain no significant restrictions or which has been found to contain no significant restrictions or which has been found not to be contrary to the public interest, or
4. (iv) specifically exempted or excluded from the RTPA.

() Sub-paragraph (1)(c) shall apply for the full life of the agreement or for as long as the agreement fulfils the relevant conditions for exclusion or exemption from the RTPA.").

The noble and learned Lord said: My Lords, I can deal with this matter briefly. The concern is that appropriate additional arrangements will be vital to keeping the compliance costs of the new legislation manageable. Once again the focus that we want to give to this legislation is not that there should just be an appropriate competition law regime in place, but that it should not be unnecessarily burdensome.

In our view the present provisions are inadequate. For example, under the Bill as currently drafted it will be possible for legislation to come into force before guidance on the interpretation of prohibition is agreed. That will cause confusion; force industry to make lots of potential unnecessary failsafe notifications: and will overburden the OFT.

I anticipate that the response from the Minister will be that, although it is theoretically possible, he will offer me an assurance that in practice it will not happen. If he offers that assurance, I can indicate that he can respond briefly, and I shall withdraw the amendment with even greater alacrity. I beg to move.

Lord Simon of Highbury

My Lords, we shall certainly do everything in our power to ensure that there is a minimum of bureaucracy in any way in which the Office of Fair Trading behaves. Beyond that, if that answer is satisfactory, I shall not go into the detail of Amendments Nos. 80 and 81.

Lord Fraser of Carmyllie

My Lords, I think that the noble Lord might have given me a little more than that, but at this time of night, given my high regard for the Department of Trade and Industry, I will assume that nothing irrational will be done. I will give credit for that, but the noble Lord might write to me giving the assurance that there will be no risk of the type I mentioned. I do not ask for any further comment from him. I am sure, knowing his reaction to other matters in the Bill, he will do as I request. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendment No. 81 not moved.]

Schedule 14 [Repeals and Revocations]

Lord Haskel moved Amendments No. 82 to 86:

Page 104, line 17, column 3, at end insert—

("In section 16(5), the "or" immediately after paragraph (a).")

Page 104, line 40, column 3, at end insert—

("In section 28(5), the "or" immediately after paragraph (aa).")

Page 105, line 17, column 3, at end insert—

("In section 25(5), the "or" immediately after paragraph (b).")

Page 107. line 21, column 3, at end insert—

("In Article 28(5), the "or" immediately after sub-paragraph (b).")

Page 107, line 54, column 3, at end insert—

("In Article 19(5), the "or" immediately after sub-paragraph (b).")

The noble Lord said My Lords, we have already spoken to these amendments. I beg to move Amendments Nos. 82 to 86 en bloc.

On Question, amendments agreed to.

An amendment (privilege) made.

8.53 p.m.

Lord Simon of Highbury

My Lords, I beg to move that the Bill do now pass. We shall send this Bill to another place having made a number of important changes. In particular I refer to the 26 changes we made prior to today in response to points and concerns raised in the House. There are a number of other amendments consequential upon those changes.

There were two matters on which the House did not accept the Government's position. We shall have to reflect carefully on both. But the fairly numerous changes made to what I think all of us believe is an important and quite complex Bill are indicative of a very effective opposition and, I hope, a responsive government.

As a personal experience, I have very much enjoyed and appreciated the way the House has gone about its business. I pay tribute to the Opposition spokesmen and to other noble Lords whose experience we have greatly benefited from. All speeches were well argued, constructive and, sometimes, short. I am pleased that we have been able to work together in a spirit of consultation in order to bring about some real improvements.

I thank also my own Bill team and my noble friend on my left for all his help. I thank too the officers of the House and the staff—because we have been late on occasions—and parliamentary counsel, despite his views on indexes, for the unstinting support they have given. I thank all concerned and commend the Bill to the House.

Moved, That the Bill do now pass.—(Lord Simon of Highbury.)

Lord Fraser of Carmyllie

My Lords, I am grateful to the noble Lord for what he said. This has been a relatively long Bill. It has been extremely technical, and interesting for those of us who have participated in it. It has not quite drawn the houses that the "Titanic" has been achieving in recent weeks: nevertheless, for those of us who have participated, particularly in the presence of some of the most extraordinarily skilled and knowledgeable people in competition law, it has been a very worthwhile experience.

I cannot say the Bill leaves your Lordships' House in quite the shape we would like. There are a number of respects in which we would still like to see progress and improvement but we note with appreciation the undertakings that the Minister gave at earlier stages and also today. The legislation does not yet have quite the right balance that is required of an enforceable competition regime operating in the best interests of British industry, but I do not think that the differences between us are so large that the appropriate balance cannot be struck before the Bill completes its legislative procedure.

I thank the noble Lord, Lord Haskel, for dealing with amendments in his usual courteous fashion and for the receptive way in which he understood our concerns. I say particularly to the noble Lord, Lord Simon, that his reputation in your Lordships' House is very considerably enhanced. The Bill is extremely complicated. Not only has he dealt with it with great courtesy, but we have all appreciated his deep and profound understanding of competition matters. for some of us it is reassuring that in this government there is at least one significant intellect that will shape competition policy in the future.

I hope that the noble Lord appreciates that there is one aspect in which we have improved him. When he first began on the Bill he seemed irresistibly drawn to using the second person plural. As the Bill leaves this House, he is firmly thirled to the third person plural. I compliment him on that improvement. It is unfortunate that he has not been able to provide greater satisfaction as regards the voting ambitions of the engineers. I doubt, however, that the matter will preoccupy those in another place. Very sincerely, I compliment the Minister on the way he has handled the Bill. Our appreciation extends, of course, to those who stand behind him in the Bill team. The Bill is technical and they have done an exceptionally good job in complicated circumstances.

Lord McNally

My Lords, may I associate myself with those sentiments, particularly the compliments to the noble Lords, Lord Simon and to Lord Haskel, who have throughout shown courtesy and good humour. I thank also the noble and learned Lord, Lord Fraser of Carmyllie, who probably took chestnuts out of the fire for me more times than was entirely within his job description during the passage of the Bill. I am still a relative newcomer to the House and I am grateful to him, as I am to my colleague, my noble friend Lord Ezra, whose wisdom and experience has often contributed to our debates. I am also grateful to the noble Lord, Lord Borrie, who has been a kind of uncle to the debates.

I should make clear to the Minister and the ministerial team that it is not their Bill now; it is our Bill. It goes to another place with two significant amendments which I had the pleasure of carrying. I appreciate that the Minister said that the Government were still pondering on those issues. The most significant debate was that on predatory pricing. Whatever else emerged from that debate we found that there are almost as many directors of The Times in this House as there are bishops. So that was an advancement. Since that famous night we have come to realise, if we did not know before, that Mr. Murdoch is not by nature a self-regulator. Nor does he seem over-zealous in keeping to undertakings about ownership and editorial independence. I hope that the Government will look on the amendment, to quote the Minister, as "a real improvement." Parliament, I submit, will have to draw a line in the sand at some time on these matters. I think the time is now but the decision is for another place. In the meantime it has been a tremendous experience working on the Bill and it has been made all the better by the courtesy, good humour and great skill of the Minister and his team.

9 p.m.

Lord Cocks of Hartcliffe

My Lords, when I spoke on Second Reading on 30th October, I declared a registered interest in British Telecommunications plc, and I do so again. I spoke about the convergence of the telecommunications, computing and media industries and the conclusions of Oftel that: telecommunications is now but part of the new digital communications market". I also raised questions about the responsibilities of the OFT and the interrelationships between that body and the industry-specific regulators. My position as vice chairman of the BBC makes me even more concerned about the issue of convergence. I also raised a question about Microsoft and its alleged packaging of Internet software and asked who would conduct an inquiry into that.

I wish to emphasise what has been said about the quality of the debates that have taken place on the Bill. I hope that those considering the future of this House have taken note of them. The House is of immense value, and whatever replaces it must be of an extremely high standard in order to match it. I also hope that notice has been taken of the Government's readiness to listen. That is in keeping with the Government's willingness to listen and to "get it right" in the national interest.

There have been a number of changes which we welcome. On studying the debates, it is clear that Clause 60 is the key to the Bill. The Government have stated their intention to align the UK system more closely with the European system. Among the benefits to both industry and consumers will be increased simplicity and certainty in the application of the law throughout Europe. Alignment does not mean that UK competition law will incorporate European law "warts and all". It does mean that we will align the system of law and jurisprudence to create greater certainty and clarity.

Perhaps Clause 60 can be tidied up a little more, but where we make improvements it should be clear that we have done so. That enables us clearly and proudly to set the pace in Europe rather than appearing to be out of step with Europe.

Although we have had very good debates, the issue has been complex and the key issues have emerged clearly. They are the role of regulation, the role of competition policy, and the relationships between the relevant authorities. The debate over the plurality of the media and its consequent implications for the limits on competition policy generally have brought the House alive to overreliance on competition policy alone. Today we have debated the pharmacies, which is another example of the conflict between a wider social policy and the consequences of applying purist competition policy without reconciling that with other aspects of the wider public interest. It is no exaggeration to say that we have been dealing with the limits on the free market and ultimately we have been debating the role of the state in a market economy. Those are matters of heavy importance.

I return to the Microsoft question. It was answered on 24th February in the Financial Times by the outgoing Director-General of Oftel, Mr. Cruickshank. After a visit to Microsoft, he is reported to have said that: anti-competitive behaviour by companies such as Microsoft and British Sky Broadcasting should be checked by tough, new regulation". The article goes on to record that Mr. Cruickshank wants more regulation to deal with the problems he sees. Following my Second Reading speech, Mr. Cruickshank had the courtesy to write to me and I have read those letters with care. My response is that, in relation to the information technology sector, these matters do not arise in one area of the economy alone and are of such importance to the economy generally that they should be dealt with by the authority best able to pursue them in the national interest.

The Government have indicated that they wish to see a system of competition law modelled on Europe. Ensuring that the right policeman has the ability to call on the right resources at the right time is now the important task. I suggest that there remains a substantial role for the Government. Where there are instances of market failure, where the nation believes that there ought to be a diverse media ownership, or where we consider the continued existence of community pharmacies to be more important than economic efficiency, there needs to be a clear mechanism in the Bill to enable this to take place. To an extent, such mechanisms exist in Schedule 3, but are not well developed in European law.

This area may also need to be revisited in the light of the convergence between markets which has taken place in the information technology sector in order to deal with our European obligations. I welcome the Green Paper recently issued by the European Commission.

I apologise for taking up your Lordships' time at this hour of night, but I shall suffer because I am on the Woolsack for the rest of the evening.

On Question, Bill passed, and sent to the Commons.