§ [The page and line refer to Bill (140) as first printed for the Commons.]
§ 1 Clause 1, page 1, leave out lines 15 to 17.
§ Lord Simon of Highbury
My Lords, I beg to move that the House do agree with the Commons in their Amendment No. 1, which is grouped with Amendments Nos. 46, 47, 48, 76, 93, 99, 104, 105 and 114.
We start proceedings today, rather unusually, with amendments which are mainly to be inserted at the end of the Bill and which are in a sense peripheral to its central features. Rather, they concern how we are to transit from the existing regime in the Restrictive Trade Practices Act and the Resale Prices Act to the prohibition regime introduced by the Bill. This starting-point is a consequence of the paving amendment to Clause 1 of the Bill, which was used to introduce amendments to the transitional schedule, Schedule 13, on the issue of resale price maintenance of over-the-counter medicine. The Commons amendments overturn both the paving and the substantive amendments passed by your Lordships. I shall have more to say on the issue of over-the-counter medicines in a moment.
First, however, the new transitional schedule gives me a convenient opportunity to explain at the start of our proceedings when the Government propose to implement the Bill should it gain Royal Assent and what transitional arrangements there will be for existing agreements.
When we debated the Bill in Committee, I said:It is important that the main elements of the regime should be in place in good time before the prohibitions start to apply".I added:if the Bill is granted Royal Assent, there will be a period between Royal Assent and the coming into force of the prohibitions. I would expect this period to be about a year. I would also expect rules under Clause 49 and guidelines under Clause 50 to be issued early in that period".—[Official Report, 25/11/97; col. 899]Those clauses in the print we are considering today are Clauses 51 and 52.
1337 As your Lordships will know, initial draft rules and guidelines have been issued by the Office of Fair Trading and I fully expect formal drafts to be issued shortly after Royal Assent. We have now decided, however, to give business more time to prepare for the introduction of the new regime. We have decided that the two new prohibitions should be brought into force on 1st March 2000. I am sure the House will agree that this provides an ample period for business to prepare.
We further intend that the new competition commission should come into being, taking over from the Monopolies and Mergers Commission, on 1st April 1999. I am sure that all of your Lordships will agree that that is a most opportune date! This will enable the new body to be fully prepared to perform its new functions once the prohibitions come into force.
For agreements made before the Chapter I prohibition is commenced, the new schedule introduced by Amendment No. 104 will provide further generous transitional periods. As a general rule, all such agreements will receive a one-year transitional period from the commencement date which, as I have said, I expect to be 1st March 2000. But to the extent that an agreement has bene found by the Restrictive Practices Court not to be contrary to the public interest, it will receive a five-year transitional period. This includes agreements in respect of resale price maintenance for goods which have received an exemption order under the Resale Prices Act. This will—this is an important point—cover resale price maintenance for over-the-counter medicines if the court again gives an exemption to it at the conclusion of the present proceedings. The schedule also preserves the amendment passed by your Lordships which removed the director's ability to terminate this five-year transitional period early. A five-year transitional period for over-the-counter medicines would be available if merited.
There are also special arrangements for certain agreements or provisions in the utility, financial services and broadcasting sectors.
Apart from this, the main intention behind the new schedule is to ensure that businesses are not burdened by the ineffective and bureaucratic Restrictive Trade Practices Act any longer than is necessary. Hence, almost all registrable agreements made between the Bill receiving Royal Assent and the Chapter I prohibition coming into force will be non-notifiable under the Act.
When the prohibition comes into force, businesses will be fully freed from their obligations under the Act. They will therefore no longer have to furnish particulars of agreements. Restrictive Practices Court orders will fall and undertakings will cease to have effect. Instead, we will have a modern and effective prohibition against anti-competitive agreements which is aligned with the European prohibition system.
I recognise that the new schedule is a substantial addition to the Bill, but it made sense to tackle the many detailed remaining points on the transitional regime only when we had decided on the direction in which we were going. It is now possible for the rather sketchy 1338 provisions of the schedule, as introduced, to be amended with the main provisions of the Bill in mind. Many of the amendments were a response to the points put to us in this House and in another place. In other words, before finalising the transitional provisions, we needed to know where exactly we were transiting to.
We have produced a guide, a copy of which is in the Library, to assist noble Lords in navigating their way around the new schedule. I would, of course, also be happy to take questions on it. First, I would like to deal with the question of over-the-counter medicines.
When we debated at Third Reading the amendments which were subsequently removed in another place, I made plain the Government's view that it would be undesirable to set aside the formal process which has been initiated by the Director-General of Fair Trading under statutory provisions. That remains the Government's position. I went on to indicate that the European Commission might want to intervene if the case is not heard by our own court. I warned that the consequences of accepting the amendments were, therefore, unpredictable and would not necessarily be to the advantage of the sponsors of the amendments.
It has become abundantly clear that the European Commission has refrained from pursuing its own investigation under Article 85 into agreements enforcing resale price maintenance in this sector only because the director-general had initiated action. In particular, Commissioner Van Miert wrote to Margaret Beckett stating, in effect, that if Parliament stops the Restrictive Practices Court from considering resale price maintenance on over-the-counter medicines, the Commission is unlikely to have any alternative but to take up the complaints it has received under Article 85. But if the court proceedings are allowed to continue, the understanding is that the Commission will not pursue the complaints, provided that the court's decision is acceptable to the Commission.
I am sure that the House will agree that, on the principle of subsidiarity, it is better, if possible, that these matters are dealt with domestically. Indeed, the Commission itself is committed to the decentralised enforcement of competition law, and has issued a notice on co-operation between the Commission and national competition authorities which sets out how cases in which both national authorities and the Commission have jurisdiction should be allocated, and how both are to co-operate in resolving a case. Hence the Commission's willingness for this matter to be dealt with by the director-general and the Restrictive Practices Court.
If the Commission subsequently takes up a complaint, it would be bound to give due consideration to the national court's findings if it is argued they are relevant to the assessment under Article 85. We would expect the view of the court to be an important factor in any Commission consideration under Article 85. Indeed, as the Government have made clear in another place, we would want to take a robust line with the Commission if it were to take action following the court's decision which flew in the face of that decision.
1339 In the light of this, I hope that your Lordships will agree with the Government, and with the Commons, that it would be better if we let the court reach a conclusion on the proceedings which have been brought before it. Perhaps I may emphasise that we expect the court to consider fully the views relating to the retention or abolition of resale price maintenance in this sector. In particular, having taken the view in 1970 that an exemption was justified on the grounds that a plentiful and well distributed supply of pharmacies was essential. we would expect the court to take full account of the role played by local pharmacies and the harm which would be caused if, as some pharmacists fear, many would be unable to survive without resale price maintenance. Certainly, the Government recognise the important role that independent pharmacies play in providing valuable advice as well as medicines, encouraging community life, reducing transport use and making life easier for those less fortunate in the community. With that summary, I commend the amendment to the House.
Moved, That the House do agree with the Commons in their Amendment No. 1.—(Lord Simon of Highbury.)
§ 4.45 p.m.
§ Lord Morris of Manchester
My Lords, community pharmacists were most grateful for the approval of my two amendments in their defence when the Bill was considered at Report stage by your Lordships' House. The first provided that if the Office of Fair Trading lost its case against resale price maintenance, the exemption would be protected for the full five-year transitional period.
My second amendment had the effect of preventing the Director-General bringing proceedings under the legislation which this Bill will repeal when it comes into force.
What was sought by my first amendment is now accepted by the Government and I pay tribute today to the Minister's part in that outcome. To the disappointment of community pharmacists threats of action by the European Commission have, as he said, persuaded the Government to allow the case now brought by the Office of Fair Trading under old legislation to continue. But community pharmacists believe they have an overwhelming case and accept that if the Government themselves cannot protect the consumer interest, it should be the Restrictive Practices Court, not the European Commission, which decides the issue. The first stage in that case, the leave application, has been listed for hearing on 7th-8th December.
Community pharmacists believe that the Restrictive Practices Court will recognise, as your Lordships' House has done and as the court itself so eloquently did in 1970, how valuable local pharmacies are to the most needy: elderly and disabled people, the poor and mothers with small children, among others, who lack mobility or depend on medicines. The approval of the two amendments by this House was much appreciated by them as well as by community pharmacists.
There are 12,000 pharmacies in Britain today. They play a vital role at the heart of their local communities dispensing invaluable but free healthcare advice along 1340 with prescription and over-the-counter medicines. My noble friend the Minister voiced the Government's recognition of the value of community pharmacy in the debates on my amendments, as he has done again today. He acknowledged what no one can seriously doubt will be the case, namely,
that independent pharmacies would close if it was merely a matter of repealing price maintenance".—[Official Report, 9/2/98; col. 883.]When the Bill went to another place all the main political parties made clear their support for maintaining the network of local pharmacies. The Government's position could not have been made clearer. On 11th May my right honourable friend Margaret Beckett, then President of the Board of Trade, said:There is no doubt that the Government strongly support and care about community pharmacies. My right hon. Friend the Secretary of State for Health has made it clear how important community pharmacies are to his vision of health in the next century".— [Official Report, Commons, 11/5/98; col. 34.]The Minister who took the Bill through Standing Committee for the Government in another place stated:Independent pharmacies are small businesses that provide important services to the community. Local shops encourage community life and reduce the use of private transport and local pharmacies provide invaluable advice as well as medicines. My right hon. Friend the Secretary of State for Health has spoken of his plans to make greater use of pharmacies".He went on,The Government also want to support and encourage small businesses. When the restrictive practices court considers the Director General's application under the 1976 Act, it will undoubtedly take full account of the role played by local pharmacies and of the harm that would be caused if, as they fear, many were unable to survive without resale price maintenance".—[Official Report, Commons Standing Committee G, 23/6/98; col. 562.]More recently, back here in your Lordships' House, my noble friend Lady Hayman, the Parliamentary Under-Secretary of State at the Department of Health, stated that she was,particularly interested in the potential role of community pharmacists in helping patients to understand their responsibilities"—[Official Report, 13/10/98; col. 779.]in the area of compliance. And it will certainly not escape the Restrictive Practices Court's attention that community pharmacies will need to survive if they are to go on acting in the public interest as Ministers, more especially health Ministers, so clearly want them to do.
The depth of feeling here and in another place about the threat posed to thousands of community pharmacies by the campaign against resale price maintenance is echoed by many patient groups including Disability Scotland, the Joint Committee on Mobility for Disabled People and the Disability Advice and Welfare Network, among many others. The campaign against RPM, was initiated by a large supermarket chain, Asda. Abolition of RPM, which, as my noble friend the Minister readily acknowledged, would lead to the closure of pharmacies, may serve the interests of the supermarket giants but not those of local communities.
Last week Sir Donald Acheson, the former Chief Medical Officer, said that the growth of out-of-town supermarkets has led to food deserts in inner cities, 1341 increasing the incidence of poor nutrition and disease among the neediest people in our society. On 15th October 1998, the Independent reported:Ministers have already signalled action to deal with food deserts on inner-city housing estates under the social exclusion initiative launched by Tony Blair last month. Eighteen task forces have been set up, including one headed by Tessa Jowell, the Health Minister, which will examine ways to support shops in poor areas".Unquestionably, for the most vulnerable people, the local pharmacy is often the most vitally important of those shops.
Many of your Lordships will have read in recent weeks about the bankrupting of farmers as a result of low prices paid for beef and lamb by the major supermarket chains, and of the high prices paid for meat by shoppers. They will have read that supermarket profit margins, and prices paid by consumers, are higher here than in other countries. They will have read also that the largest supermarket chains now have an enormous market share, amounting to market domination.
It cannot be in the interests of the consumer for one of the few surviving High Street businesses to be swallowed up in the ever-growing market domination of the supermarket giants. No one should be persuaded that Asda's attempt to grab business from local pharmacies is motivated other than by the pursuit of more profit. Anyone who thinks otherwise will have no difficulty in believing that the earth is flat or that the moon is made of green cheese.
The consequences of the pursuit of more and more profit could be devastating. For those with low incomes and frequent healthcare needs, the survival of small businesses and local communities is essential. Local pharmacies are an essential part of those communities. This House attempted to ensure the survival of a network of these pharmacies by the amendments we made to the Bill. It is now for the Restrictive Practices Court to protect the consumer. We must all hope that right will be done.
§ Lord Jacobs
My Lords, I have listened again to a strong argument in favour of the small pharmacies. I had the opportunity to study the arguments of the pharmacies as to why the Restrictive Practices Court should not examine the situation. I sometimes feel that the emotion of the situation—I recall the description given in this House of an old lady in a village who needed just one prescription but who could not get any transport and whose nearest pharmacy was 30 miles away—rings bells with all of us. We can see that it would be disadvantageous to these communities to lose small pharmacies.
I have read the data regarding how many pharmacies are involved. The figure is 3,000 out of 12,000. However, there are just a few hundred pharmacies situated in the country far away from towns. I did not argue then—and I do not argue now—that those small pharmacies should be protected. It would not be difficult or unaffordable for the large pharmacies to transfer some of their revenue to support the small pharmacies. 1342 I do not say that they should do it voluntarily; it could be done by means of a graduated scale for prescription charges.
I believe not that we were hoodwinked but that we were emotionally misled on this issue. According to the data sheets to which I referred, the cost to the consumer if resale price maintenance continued would be an extra £900 million over a period of five years. That is an enormous amount of money and I find it difficult to understand why the House feels that that is not of any consequence.
It is not for the House to decide the future of small pharmacies. The matter will be considered by the Restrictive Practices Court. When that court makes its decision, I am sure that we shall all abide by it. In my opinion, the case for helping small pharmacies but abolishing RPM remains very strong.
§ 5 p.m.
§ Lord Fraser of Carmyllie
My Lords, I thank the Minister for his explanation of this group of amendments. I congratulate him on introducing what I think is the longest amendment I have ever seen and also on his explanation of the various points at which these provisions will come into force. I am not sure that I took in everything that he said, but for those who will have the important task of implementing this legislation it is valuable to have on the record at such an early date exactly when it is anticipated the provisions will come into force. If I understood the Minister correctly, it will be March 2000.
I do not intend to revisit the issue of small pharmacies. I still feel strongly about the matter and I believe there is an essential contradiction between the Government's health policy and their competition policy, one of which will have to come out on top at the end of the day. It is not just rural communities which are affected. If there is one pharmacy that I wish to see retained, rather than pharmacies in some of the pretty villages up the glens in the Grampians, it is a pharmacy on one of the worst estates on the outskirts of Dundee. Pharmacies such as that one are central to government health policy and those are the ones which we wish to see retained. We have been over that ground. Commissioner Van Miert managed to terrify those who might otherwise have wished to continue the debate, and we accept that outcome.
Paragraph 23(1) of the new schedule proposed in Amendment No. 104 provides that, if the court has found an agreement,not to be contrary to the public interest, the transitional period lasts for five years".I understand that five-year period in subparagraph (1) of paragraph 23 to start from March 2000. In subparagraph (3) there is envisaged a set of circumstances where, at the time these provisions come into force, the legal proceedings have not yet terminated. From the narrative that has been given of the proceedings in relation to community pharmacies, I am bound to say that, though at this time March 2000 may seem fairly distant, it would be surprising if all legal proceedings on that matter were concluded by that date. If at a point after 1343 March 2000 the court were to determine that agreements in place were not contrary to the public interest, will that five-year period still run from March 2000 or will it run from the time and date of the determination by the court? I may be making the matter unnecessarily complicated, but it would be useful to have clarification of that point.
I am grateful to the noble Lord for what he said about the transitional arrangements. I have no doubt that they will be studied carefully outside your Lordships' House.
§ Lord Simon of Highbury
My Lords, I am grateful to all noble Lords who have spoken and who have helped in formulating the Government's approach to the question of over-the-counter medicines. I quite understand that strong views are still held in the House. I thank my noble friend Lord Morris for the work he has done. I believe we are now at a stage where the Government must listen to the views of the court and formulate their health policy accordingly.
I thank the noble and learned Lord for his kind words on the expectation that we will have helped the business community by extending the date to give them time to prepare and clarifying how that will work in the transitional schedule, which is tabled in the Library for those who wish to see the detail. In answer to the noble and learned Lord's question, the five-year period starts when the court has reached its conclusion.
§ On Question, Motion agreed to.