HL Deb 28 April 2004 vol 660 cc862-80

8.12 p.m.

Lord Triesman

rose to move, That the draft order laid before the House on 31 March be approved [15th Report from the Joint Committee].

The noble Lord said: My Lords, this legislation represents the first major change in this area for 42 years—since February 1962. It is appropriate that after such a period of time a major overhaul should take place.

I hope that it will be helpful if I open this debate on this important issue by setting out the context in which the Government have decided to introduce these statutory instruments. Their purpose is to amend certain aspects of United Kingdom law governing competition rules and how they are enforced. Primarily, they introduce certain changes to the Competition Act 1998. Those changes are being made mainly because equivalent changes have now been made in the corresponding European Community law. In November 2002, the European Council of Ministers approved the text of a new EC regulation that substantially overhauls the framework of European competition law. The regulation it replaces established the Commission's powers, procedures and penalties for enforcing the EC Treaty Articles 81 and 82 on competition. This new regulation comes into force on 1 May 2004 and will be directly applicable in all EU member states from that date.

These statutory instruments introduce certain changes that are required as a result of the new EC regulation. In addition, they introduce a number of legislative changes not expressly required by the new regulation but which the Government none the less believe are necessary or desirable to ensure that the United Kingdom's competition regime is properly harmonised with the Community competition regime and up to date.

The changes being made to the relevant Community and domestic legislation are accompanied by relevant changes being made in respect of the associated regulatory regime. The Commission is issuing new procedural regulations and notices on the interpretation of community law. In the United Kingdom, the Department for Constitutional Affairs is introducing a number of related changes to court rules and the Office of Fair Trading is modifying its guidance on competition rules and how the regulatory regime works.

By way of background, I will briefly outline the purpose of Articles 81 and 82 in the context of this evening's debate. Article 81 is concerned with anti-competitive agreements, decisions and arrangements. Article 81(1) generally prohibits all agreements between undertakings, decisions by associations of undertakings and concerted practices which may affect trade between member states and which have as their object or effect the prevention, restriction or distortion of competition within the single market. However, an agreement between undertakings of the kind that I have just described, which falls within Article 81(1), is not necessarily automatically void. Article 81(3) provides that the prohibitions in Article 81(1) may be declared inapplicable where such agreements, decisions or practices have a countervailing benefit. Article 82 is concerned with the behaviour of "dominant" undertakings: monopolies and other businesses with market power. It prohibits any abuse of its dominant position by such an undertaking.

The modernisation of EC competition law is intended to improve substantially the enforcement of these prohibitions and, with it, the operation of the single market, while reducing regulatory burdens for most businesses. It comes into force on 1 May 2004 in order to coincide with the enlargement of the EU.

The new EC regulation has four main effects. First, it abolishes the current system of notifications under which businesses have been required to notify the Commission of agreements that would be prohibited under Article 81(1) in order to confirm that they qualify for individual exemptions provided for under Article 81(3). This has led to the Commission devoting considerable enforcement resources to examining largely innocuous agreements; inevitably that reduces effectiveness, resources and focus on rooting out the worst kinds of competition law infringements. Moreover, undertakings have faced significant delays in obtaining clearance for their agreements and the Commission has resorted to dealing with many notifications by offering comfort letters, which have no binding legal quality.

The new EC regulation replaces the notifications system with what is known as a legal exception regime, which will enable businesses to self-assess their own agreements for compatibility with the terms of Article 81. In practice, many businesses have been doing this for some considerable time, evaluating their proposed commercial transactions in the light of Article 81 on the basis of existing case law and practice before deciding whether to notify.

Secondly, the new EC regulation sets minimum standards of competition enforcement, thereby providing for a consistent approach to the competition scrutiny of commercial agreements across Europe. It achieves this in a number of ways. First, national competition authorities and national courts in member states will in future be able to apply the treaty articles on competition in their entirety. In addition, national competition authorities will have to apply Articles 81 and 82 in parallel with domestic competition legislation in respect of agreements or conduct that might have an effect on inter-state trade. Decisions under national competition law in relation to anti-competitive agreements must not reach a different outcome from the decision which would be reached under European competition law.

Thirdly, the new EC regulation requires that member states co-operate closely in enforcing competition law. It provides for exchange of information and for investigations on each other's behalf. To facilitate this process, a European competition network is being established.

Lastly, it strengthens and clarifies the Commission's powers of investigation, widens the range of available remedies and provides tougher sanctions for procedural infringements.

Those changes should enable the Commission to focus on rooting out the most damaging types of competition law infringement such as secret cartels.

As I said earlier, the changes we are making to the Competition Act fall into two categories: those necessary to give effect to the new EC regulation for which we are using powers in Section 2 of the European Communities Act 1972; and those that we are choosing to make in order to realign the domestic competition regime with the new EC competition regime. For this purpose we are using powers in Section 209 of the Enterprise Act.

First, the Government are required to designate UK national competition authorities for the purposes of the new EC regulation. These national competition authorities will be the Office of Fair Trading and the sectoral regulators to the extent that they have concurrent powers under the Competition Act. When I refer to the OFT, it should be taken as read that I mean the sectoral regulators as well.

Secondly, we are required to lay down the procedures to be followed by the OFT when investigating and enforcing Articles 81 and 82 and specify what penalties are applicable. Thirdly, we must provide for appeals against decisions of the OFT under Articles 81 and 82.

There is also a requirement to make provision for the OFT to have the power to assist with Commission investigations in cases involving inspections of undertakings located in the United Kingdom; and discretion to assist with investigations by competition authorities of other member states in cases involving inspections of undertakings in the United Kingdom. While the former position is largely unchanged, the latter is new.

The Competition Act 1998 was drafted so as to mirror as far as possible the system applied in European competition law. The Government continue to believe that it is desirable for the United Kingdom system to continue to mirror EC competition law, ensuring business is not faced with having to comply with two completely separate systems. Accordingly, we need to change the Act to avoid any misalignment between the United Kingdom system and the revised European system.

I will now outline a couple of examples of the changes we are making to the Competition Act 1998 in the interests of such realignment. The first concerns the legal exception regime. The new EC regulation does not require the United Kingdom to abolish the domestic notification system which provides for individual exemptions from the prohibitions in the Competition Act. But to retain a UK notification system when the Commission is abolishing its own notification system inevitably risks increasing the number of notifications received by the OFT. For instance, there is a risk that undertakings may seek to notify to the OFT under the domestic regime as they know that the OFT generally applies a consistent approach to corresponding questions arising under both the Competition Act 1998 and under Articles 81 and 82.

There is also a risk that the OFT might find itself dealing with notifications from across the EU from undertakings seeking a degree of comfort through a decision under the Chapter I or II prohibitions, particularly in cases where there is some effect on United Kingdom trade. To ease any concerns that business may have as a result of the switch to a legal exception regime, the OFT will be introducing an extra-statutory system of written opinions in cases which raise genuine uncertainty because they present novel or unresolved questions of law under either the Competition Act or Articles 81 or 82.

The second example is to do with the harmonisation of maximum penalties for infringements of Chapters I and II and Articles 81 and 82. At present, the Commission may fine undertakings up to 10 per cent of their total worldwide turnover in the preceding business year for infringement of the prohibitions in Articles 81 and 82. That limit on maximum penalties imposed by the Commission will not change under the new EC regulations. A number of member states have already given their national competition authorities power to apply Articles 81 and 82, and have adopted maximum penalties equivalent to those of the Commission.

Under domestic law, the OFT can impose on undertakings financial penalties of up to 10 per cent of turnover for breaches of the Chapter I and II prohibitions. Turnover during the period of the infringement up to a maximum period of three years can be considered when determining the penalty. The OFT may impose a penalty on an undertaking only if it is satisfied that an infringement has been committed intentionally or negligently by the undertaking. The maximum penalties provided for in UK national law are therefore different from those currently applicable by the Commission and by some other member states for breaches of Articles 81 and 82.

The Government have consulted in detail on whether we should align the maximum penalties that may be imposed by the OFT for infringements of EC competition rules with those of the Commission or those provided for infringement of domestic competition law. There are a number of arguments in favour of alignment with the Commission's maximum penalties. It is possible that, in applying current national maximum penalties to breaches of Articles 81 or 82, the United. Kingdom could find itself out of step with the fines that would be imposed by the Commission or other member states for the same anti-competitive behaviour.

For instance, an undertaking may be found by the OFT to have infringed EC competition rules that has a large European or global turnover but a comparatively small UK turnover. That might increase the potential for "forum shopping" where the maximum penalties available in each member state relevant to the infringement, influence where a complainant chooses to lodge their complaint. It might also make it more difficult for the OFT to be able to fine for effects in other member states in suitable cases where the relevant other member state consents. A lack of alignment of maximum penalties may also exacerbate the risk of dispute over whether the correct legal framework is being applied.

In the light of the fact that the Commission's maximum penalties are clearly effective, dissuasive and proportionate for infringements of the EC competition rules, the Government have consulted on whether they should be applied to infringements for domestic competition rules. The decision to harmonise maximum financial penalties for infringement of both EC and domestic competition rules with those of the Commission was made in the light of the responses to that consultation.

I would also like to address briefly a matter that has caused some interest; namely, the repeal of certain exemptions and exclusions from the Competition Act. In particular, I shall deal with the domestic exclusion from the Chapter I prohibition for most vertical agreements. Ministers stated in 1999, on the consultation on the draft exclusion order, that they intended to review the verticals exclusion when a new system had settled in place. That review has now been carried out and, having consulted extensively, the Government do not think the retention of that exclusion desirable for a number of reasons.

First, the original reasons for the exclusion's introduction no longer subsist. It was originally intended in part to alleviate the effects of the introduction of a notification system; there was a fear that, without it, the OFT might be swamped with notifications on commencement of the Competition Act. Clearly, that is no longer an issue. In addition, since it was introduced, the EC Block Exemption Regulation for Vertical Agreements has come into force. This block exemption has a parallel effect under the Competition Act and so provides a safe harbour for most vertical agreements from the Chapter I prohibition as well as Article 81.

Secondly, the verticals exclusion no longer accurately reflects current economic thinking on the treatment of vertical agreements between member states. Vertical agreements are now generally considered benign except where they are accompanied by market power or have network effects.

Finally, the vertical exclusions do not provide as much legal certainty for vertical agreements as has been perceived. The OFT can withdraw the benefit of an exclusion where it considers that an agreement would infringe Chapter I and that it would be unlikely to be granted individual exemption. So, the value of the vertical exclusions after modernisation will also be limited by the OFT's obligations to apply Article 81 to the same agreement where there is an effect on inter-state trade. The result in the eyes of the business community was that there would be a good deal of confusion to the competition law framework.

Here again, we have consulted widely and few concerns have been expressed. The one area where there has been unease—and that is why I have spelt the matter out at what I hope noble Lords will not feel is at unreasonable length—has been that of the newspaper and magazine distribution world, where publishers and wholesalers have been concerned at the potential result in terms of the application of the Competition Act to their distribution agreements. We have considered all their concerns carefully.

Our conclusion is that the exclusion has outlived its usefulness. We believe that the framework established by the EC block exemption and the provisions of Section 9 of the Competition Act, allowing countervailing benefits to be taken into account in considering the lawfulness of restrictions in vertical agreements, should be sufficient to enable any concerns to be met. However, to ensure that businesses have time to adjust and, if necessary, seek advice from OFT on the implications for any particular agreements where they have concern, we do not propose that the repeal should come into force for a year.

I should like to stress to the House that the changes made by these regulations have been the subject of a lengthy public consultation process. The new EC regulation itself was of course long in the gestation and was consulted upon extensively. In April 2003, we published a consultation document that clearly explained how we intended to give effect to the new EC regulation and discussed the subsequent changes needed to the UK competition regime. The treatment of exemptions and exclusions was the subject of a second consultation document published in June 2003. In addition to those written consultations officials have hosted a number of workshops and meetings on various aspects of the regulations, where lawyers and business representatives were able to air their views and discuss the issues.

However, I would like to highlight to the House at this point that we recognise that it is unfortunate that the draft regulations were not ready sooner. This has been essentially the result of the tightness of the timetable for implementation which was driven by the need to have the new EC regulation in place in time for the accession of the new EC member states. There was also a need to get absolutely right the detailed harmonisation of the UK and EC regimes. I draw a little comfort—but I do not in any way resile from my point that it is unfortunate—from the fact that the statutory instruments will contain no surprises for business—in particular, the main change, the abolition of the legal exception regime, has been long trailed and very widely discussed. The one other change—repeal of the verticals exclusion—will not take immediate effect. The lack of adverse comments from business and stakeholders suggests that the steps we have taken to engage with them effectively have gone a long way towards ameliorating any problems caused by the timetable.

In conclusion, I believe that the measures contained in these statutory instruments giving effect to the new EC regulation and re-aligning the domestic and European competition regimes should help us towards our goal of having one of the best competition regimes in the world. The overall effect of these changes will be deregulatory in impact and they will enable both businesses and regulators to operate in a domestic competition regime that is as consistent as is practical with the EC competition regime. In my view, greater deregulation and improvements in the competition environment are good news for this country. I hope that gaining greater domestic control over regulation will commend itself to those on all sides of the House.

I am sorry that the regulations are so complex, but at least I have tried to deal with all three at once, which I hope—in the long term, at least—will have saved a little time. I commend the regulations and orders to the House.

Moved, That the draft order laid before the House on 31 March be approved [15th Report from the Joint Committee].—(Lord Triesman.)

8.30 p.m.

Lord Hodgson of Astley Abbotts

My Lords, I begin by thanking the Minister for, in 22 minutes, giving us a run through these very complex orders. As he pointed out, and as we appreciate, they will have a significant impact on British business. They are—to the uninitiated reader, at least—fairly technical and dense, and therefore his explanations were most helpful.

In general terms, we on these Benches support the proposals for three main reasons. First, in our view, effective competition increases innovation and improves efficiency and productivity within the single market, and it reduces prices to consumers. It is good to know that a Labour Government and the Labour Party are equally convinced of the virtues of the free market. Long may that continue.

Secondly, the proposal to align our domestic and EU competition legislation, as paragraph 3.25 of the regulatory impact assessment points out, enhances coherence, creating greater clarity for business, their legal advisers and enforcers alike". As the Minister pointed out, that will mean a reduction in the regulatory burden, which is also much to be welcomed. I express the hope that the Government will consider spreading this deregulatory approach to other areas of their activity.

Thirdly, the package recognises the fact that levels of cross-border activity within the EU are continuing to rise and that, in due course—perhaps already—the present system of competition law will cease to function effectively. In that context, it is perhaps a shame that the Government have not devoted similar energy to ensuring the passage of an EU takeover directive, which represents the other great spur to the proper allocation of resources and appropriate economic activity. I accept that that is perhaps outwith the remit of tonight's debate, but any updates that the Minister can give us would be gratefully received.

I wish to make a number of detailed points about the individual regulations but, before doing so, I want to raise some general questions that apply to them all. First is the question of speed of response and/or decision by the competition authorities. The Minister, quite rightly in my view, laid stress on the importance of aligning domestic and EU competition law. One provision of the Enterprise Act 2002—as the Minister pointed out, the regulations are being introduced under Section 209 of that Act—was to lay down timetables specifying the maximum time within which UK competition authorities had to make responses or decisions. I am not clear whether this particularly useful provision is matched in EU law.

This is far from an academic issue. If I speak with some vehemence on the matter, it is because I was formerly a director of a Stock Exchange-listed company which was the subject of an unwelcome "dawn raid"—a process by which a predator company bought a 29 per cent stake through the stock market in the company of which I was a director. That was totally unwelcome. At that time, the purchasers anticipated no problem with the competition authorities but, to their surprise, further purchases were then prohibited, pending a competition review, which took months. Noble Lords can imagine the difficulty of maintaining morale within the company during that period when its future was so uncertain. Therefore, a few words from the Minister on timetabling and deadlines would be very welcome.

Secondly is the issue of the speed with which this process is being concluded. I accept the Minister's expression that this is "unfortunate". I read very carefully the remarks by Mr Gerry Sutcliffe in the debate on the regulations in another place, where a lengthy discussion took place. But, notwithstanding the fact that the Government have ensured widespread consultation, which I accept is inevitably time-consuming, the reality is that these regulations flow from the EC competition regulations agreed on 16 December 2002. Surely it should have been possible to have produced these regulations in January or February of this year at the latest, not 72 hours before they are due to come into force.

In this context, is the Minister aware of the knock-on effect this delay has had on the OFT consultation period on best-regulation guidelines? As I understand it, the normal OFT consultation period is 12 weeks, but because of the late arrival of these orders, the OFT has reduced the period to six weeks. That is inherently unsatisfactory in an area as complex and far-reaching as this one. Perhaps the Minister can confirm or deny the accuracy of what I have been told.

Thirdly, can the Minister explain the comparative position in the rest of Europe, particularly among our major industrial competitors? It has been put to me that, once again, the UK stands on the 1 May start line, uniform pressed, shoes shined, with every "i" dotted and "t" crossed, and well resourced authorities enforcing a competition regime as tough as any in Europe. How many other EU countries will be standing on the start line with us, in a similar position, with every piece of EU law ready and in place for enforcement at one minute past midnight on Saturday morning next? All too often, the UK's keenness to implement is not matched elsewhere.

Finally, I would like to raise the position of professional privilege under these codes. Professional privilege has been an important part of the UK legal scene for many years, enabling the provision of independent legal advice on a confidential basis. It would be helpful if the Minister could explain the general position of professional privilege under these rules. May I press him on a rather more specific aspect? Many of these competition regulations will be of particular significance to larger companies. Many larger companies will have in-house legal departments to address these issues. What is there position as regards professional privilege under these regulations?

It has been suggested to me that under UK law, in-house legal advice can be provided on a privileged basis. This is not true under European law, where in-house legal advice is not covered by professional privilege. Can the Minister confirm or deny what I have been told and, if my information is correct, what are the Government going to do about it?

Let me go one stage further to try and explain how complicated the matter could become. Paragraph 1.4 of the regulatory impact assessment points out how one of the purposes of the regulations is to, bring enforcement of EC law closer to the markets concerned by expanding the role of national courts and authorities". Indeed, the Minister made some play of this in his remarks.

Mr Sutcliffe elaborated on that in another place when he said on Monday: The hon. Gentleman asked about the European competition network. It is being established to allow the Commission and the national competition authorities of the 25 member states to co-ordinate the application of EC competition law. A legal basis will be created to allow the Commission and the national competition authorities to exchange and use in evidence any matter of fact or of law, including confidential information, in order to apply EC competition law".—[Official Report, Commons First Standing Committee on Delegated Legislation, 26/4/04; col. 14–15.] The EU competition authorities could request the UK competition authorities to investigate on their behalf. What, then, is the position of in-house legal advice—privileged, because it has been obtained by UK authorities, or not privileged, because it has been obtained under EU law?

This is an important issue. The Minister has not had the benefit of participating in the Committee stage of the Companies (Audit, Investigations and Community Enterprise) Bill, but we have been tramping through the foothills of this topic with his colleague, the noble Lord, Lord Sainsbury of Turville. I think the Government are under no illusions—indeed, I think they agree—that the maintenance of professional privilege is important. But no less importantly, the Government have laid great stress on the harmonisation aspect of these regulations. If my belief is correct, this clearly does not represent harmonisation.

So much for the broad issues. I turn now to some specific points. The Competition Act 1998 (Determination of Turnover for Penalties) (Amendment) order was covered by the Minister in some detail. In the debate in the other place, my colleague, Mr Henry Bellingham, raised the issue of the multinational with only a small part of its businesses in Europe. He said: The Minister talked about turnover. Will he tell us what happens when a multinational trades predominantly in the Americas or the far east but also trades in Europe—will it be the worldwide or the European turnover that is relevant?".—[Official Report, Commons First Standing Committee on Delegated Legislation, 26/4/04; col. 12.] Mr Sutcliffe's reply at col. 15 was that the penalties will be calculated under a five-step approach in which, The fifth step is an adjustment if the maximum penalty of 10 per cent applies to the world wide turnover".—[Official Report, Commons First Standing Committee on Delegated Legislation, 26/4/04; col. 15.] That was not a clear reply. It would be helpful to know what is meant by that.

I turn to the land agreements exclusion and revocation order. As the Minister said, the debate on the desirability of this seems to focus very much on the single issue of distribution of newspapers and magazines. The report by Professor Paul Dobson entitled, The Impact of Proposed National Distribution Developments on the UK Regional Press Industry argues that there will be a widespread loss of newspaper/magazine distribution services, particularly to country areas. It is clear from the paperwork that the Government do not accept Professor Dobson's arguments.

I have no idea who is right. Events must take their course. My question is what will happen if Professor Dobson does prove to be correct and the system for newspaper/magazine distribution collapses. Can the legal situation be reversed or are we on a one-way street? If it can be reversed, do the Government believe that the status quo ante bellum can be restored?

I turn to the third and final set of regulations, the other enactment amendment regulations, which appear to be concerned primarily with enforcement and about which worries have been expressed. First, the general power to investigate appears to he very imprecisely and broadly drawn. Nowhere do the words "company" or "industry" appear. That in turn gives rise to concerns about fishing expeditions.

The regulator sets out with only very generalised objectives in the hope that he will stumble across more specific information about some activity or other en route. What safeguards exist to prevent such an approach? Secondly, what restrictions exist on the onward transmission of information so gathered? Can it be passed by the regulator, for example, to the Inland Revenue or to the Health and Safety Executive, and what use could they make of information so gained?

Thirdly, I refer to the nature and scope of interviews taken under these regulations. Presumably, they do not fall within the provisions of the Police and Criminal Evidence Act and associated codes. So, what safeguards exist for the naïve, inexperienced or unwary interviewee? I note that paragraph 16 on page 13 of the Explanatory Memorandum refers to protection against self-incrimination. Perhaps the Minister could explain a little further what safeguards there are and how they will operate.

Finally, could he explain the judicial hierarchy by which warrants are issued? For example, on page 25, paragraph 38 inserts a new section 62A (power to enter non-business premises under a warrant). That requires the assent of a judge of the High Court for the issue of a warrant. By contrast, page 29 paragraph 44, Section 65H (power to enter domestic premises under a warrant), requires only the assent of a judge. It could be argued that entering domestic premises should be subject to higher safeguards than non-business premises. Perhaps the Minister could enlighten us.

There is one small administrative issue which I would ask the Minister to take up with his officials. In all three of these statutory instruments there is a reference to the regulatory impact assessment, which has been prepared. Indeed, the statutory instrument numbers 1077 and 1078 provide Internet links to the DTI consultations page which claims to hold a copy of this RIA. I can tell the Minister that the link will take him to a vast page containing 30 or so RIAs in which the relevant link can be found only after sifting through 15 other consultations and their attachments. The third attachment of consultation number 16 is entitled Public Consultation on the Government's Proposals for Exclusions and Exemptions from the Competition Act 1998 in the light of regulation 1203EC Hallelujah! Here is the RIA that we have been looking for, but I see no reason why this title is not included in the Explanatory Notes of the instruments and the absence of a direct link seems equally unhelpful. A technically complicated area such as this hardly needs the added confusion of imprecise and protracted referencing.

I end as I began, by saying that we on these Benches give a broad welcome to these provisions. However, they raise questions, issues and concerns on which enlightenment and clarification would be helpful. I look forward to hearing the Minister's reply.

Lord Razzall

My Lords, I share the general acceptance of the noble Lord, Lord Hodgson, of these regulations. I want to confine my comments to one point, which I regard as pretty fundamental. When the Minister opened the discussion he said that he was opening a debate. We have debates on Second Reading speeches, in Committee, on Report and at Third Reading. With regulations the Minister says, "These are the regulations that we, the Government, think we should have". The Opposition go through what I can perhaps call the charade of asking a number of questions about the regulations. Our only remedy as Opposition Members is to propose that the regulations should not be passed.

I speak as one who in an earlier life spent a lot of time dealing with competition law and the practice of it. The Minister and the noble Lord, Lord Hodgson, do not need me to tell them that these regulations provide fundamental alterations to competition law in practice. The fundamental point for the House is whether this is the right way to implement these sorts of provisions.

I understand that the Government have a timetable problem. The attendance of noble Lords in this House is currently limited to six, if we include the noble Lord leaning with attentive interest behind me. That does not demonstrate the importance of the laws we are about to pass. These measures have significant implications for matters such as entry to people's business premises and personal residences under warrant. I can almost hear my noble friend Lord Lester behind me questioning the human rights aspects. Yet, here we are at 8.50 p.m. dealing with this item because of the way in which the Government have brought it forward.

I have no complaint, nor has the noble Lord, Lord Hodgson, about the thrust of what the Government are trying to achieve. The point that I wanted to make in a gentle way is whether this is the right way to deal with fundamental changes to competition law. Dare I say it—the reason why the Government can deal with the matter in this way is that very few noble Lords in this House are particularly interested in this area. They leave it to the noble Lords, Lord Triesman and Lord Hodgson, or to me. That does not mean that it is the right way to make these alterations.

The Minister spoke for 22 minutes on introducing a regulation. The length of time he spoke indicated the importance of this regulation to law in our country. The noble Lord, Lord Hodgson, asked him a number of significant questions. However, there is no point in his answering the noble Lord because the noble Lord cannot do anything about it. The Minister may be able to clarify matters, but all the noble Lord, Lord Hodgson, can say if he does not like the answer is, "Well, I have to accept the regulation because I cannot amend it".

I put in a plea to the Government. It is not the fault of the noble Lord, Lord Triesman; he does not decide the Government's programme. In these technical areas which fundamentally change British law our body politic has to think carefully about whether the right way to make the changes is by regulation of this nature.

Having made that general point, of course I shall support the regulation. I agree with the thrust of what is happening. However, I am sure that if the matter had come to the House in primary legislation, the noble Lord, Lord Hodgson, and myself would be bringing forward amendments that the Government would be likely to accept. That is the friendly and amicable way in which the noble Lord, Lord Triesman, always deals with these matters.

The Earl of Erroll

My Lords, I rise briefly to echo and concur entirely with what the noble Lord, Lord Razzall, has just said. I came upon the orders by accident and listened with interest to the exposition of exactly why the EC should be allowed to amend our primary legislation without our debating it. I can see all sorts of good reasons for it being amended, but I am not at all sure that I am happy with the method by which it is done.

I was intrigued by a couple of things that the Minister said. At the end, he said that this gives us domestic control of the regulation. But I think that I heard him say at the beginning that EC legislation must run in parallel with our domestic law, and, in fact, will overrule it when there is a conflict. So I do not see how we have any domestic control over it at all, or why we bother to keep domestic law, although I do not necessarily need a detailed answer on that.

The Minister went on to say that it will be the best competition law. But if it complies with EC competition law, I do not see how ours will be better than anybody else's—or are we gold-plating again? In that case, we should carefully consider the gold-plating elements. This sort of thing should be done through proper parliamentary scrutiny and debate, not in the form of statutory instruments which we cannot amend. I was concerned when I heard about the powers that are being given to enter domestic premises, and so on. That is the sort of thing that Parliament should debate, because I am sure that that is not in the EC competition regulation.

My last point relates to something that I find irritating about many government measures. The Government produce incredibly complicated regulations and then, to be helpful, they produce something like this thick tome, which starts with a note that states: has been prepared for illustrative purposes only, in order to aid Parliamentary consideration of the Regulations. It has no formal status and should not be relied upon for any other purpose". All I can say is that if the Government cannot get it right, how is anyone else expected to? Let us say that I had a smallish business and could not afford expensive lawyers. I might want to rely on a document such as that, but I am told that I cannot. It is ridiculous that the Government should be allowed disclaimers of that nature. If they cannot get it right, I cannot see how they can expect anyone else to. That does not mean that such documents should not be issued—they should be—but they should not include a disclaimer such as that.

9 p.m.

Lord Triesman

My Lords, first, I thank noble Lords for raising one or two interesting issues for me to try to address. Given the lateness of the hour, I shall try to do so rapidly. If I do not cover all of them, I hope that noble Lords will accept that we will go through the record carefully and ensure that we write to them to explain anything that I inadvertently miss.

I start with the large-scale questions about the process in which we are engaged. That is obviously a matter of fundamental importance. Both the noble Lord, Lord Razzall, and the noble Earl, Lord Erroll, raised those questions. First, I accept what I took to be a mild rebuke that this is not a debate in the sense in which most people would use the word. It is certainly true that a considerable volume of statutory instruments enter your Lordships' House, which we deal with whatever the hour of the day or night as best we can schedule them. In a way, I make no apology for that, because I suspect that the alternatives would be worse.

None the less, that does mean that on occasion, we will be faced with what are very significant changes. I accept that—I think that I said that I saw them as that: they are the first really big changes in this area for about 42 years. We will face big changes and this is a limited debate in that sense. I can only say to the noble Lord, Lord Razzall, that, having heard what he and other noble Lords said, we may be a small group but, goodness knows, it is a highly erudite one, from what I have just heard, and one that has obviously looked at the matter in some detail. It may be an issue that the Joint Committee on Statutory Instruments should look at. I should go no further than that today. No doubt, people will wish to consider the impact of the points made.

Further to the comments of the noble Earl, Lord Erroll, when I referred to greater domestic control, I meant that I was pleased to see, as the statutory instruments were developed, that the requirement to designate UK national competition authorities to deal with EU regulation brought back some extremely important powers rather than leaving them with EU regulation authorities. I would rather they were dealt with by the Office of Fair Trading, the sectoral regulators and the others that I mentioned than elsewhere. The repatriation of some of those powers is good domestically.

Nothing said today indicates gold plating. In many ways it indicates that, in a very complex area, a successful attempt is being made to simplify as much as possible a good deal of complex material. Once it is simplified, either in explanations or statutory instruments, we are bound to make the obvious point that the law is the law. Illustrative statements about the law, and remarks about it in this House or elsewhere, are important explanations, but inevitably everyone will have to rely on ensuring that the law itself is obeyed and that we do not introduce ambiguity inadvertently.

The noble Lord, Lord Hodgson, raised a sequence of important questions. Like all speakers in this debate, I am grateful that we all seek the same enhancement of competition—the operation of the free market in vigorous circumstances—and that we all recognise that it is valuable for the United Kingdom. I was disappointed to hear that the website was quite so obscure. I am in a lifelong search for great websites, but I shall now conduct the experiment that the noble Lord, Lord Hodgson, has carried out, not because I disbelieve him in any respect but because I would like to feel that it could be got right.

The noble Lord's first question was about timetables. The timetable has been tight from the start, given the scale of the changes needed to give effect to the regulations and, in reviewing the domestic regime, considering the changes necessary to ensure that the EU and United Kingdom regimes were not so divergent as to cause considerable difficulties for those that the regime would cover—the overwhelming proportion of business. It is a very significant issue. It is true that the process has taken months. I do not want to depart significantly from the remarks of my honourable friend Gerry Sutcliffe in another place. He explained why the process had taken so long, and have expressed as fairly and as clearly as I can my regrets about the legislation's late arrival in this House. One of the things that I take comfort from is the extent of the consultation carried out. Sometimes consultation can take time, but it is nevertheless worth getting right.

I understand the point made about the OFT timescale and the consultation period of six weeks. The consultation period will close on 4 June. Incidentally, responses will be made public, unless anybody has specified that confidentiality is required. The OFT hopes to publish final versions of the competition law guidelines and related guidelines by 1 August 2004, so that the procedural rules can come into operation on the same date. I hope that that will mean that that short time will, at least, be used to the optimum effect. I know that it is desirable to have the maximum time and not rush matters in consultation on any regulation. That is one of the guiding features of the work of the Better Regulation Task Force, for example. None the less, there is an intensive but sensible and well designed programme on the part of the OFT. There is every reason to think that it will be workable.

I was asked how many member states were ready to roll with the proposals on 1 May. We know that member states are in various states of preparedness for 1 May. Some will catch the train on the same date as we do, but a great deal depends, in all member states, on the structure of their domestic competition law and the timetables required for making amendments to that law. Obviously, we have little influence on that, just as they would have little influence on our position. All are co-operating fully within the European competition network, and the regulation will have direct effect from that point. Generally speaking, the legislative processes are moving rapidly, even if not all the states will be ready on 1 May, for the reasons that I gave.

I turn to the vexed issue of legal professional privilege. I think that the essence of the questions that I have been asked is whether the regulations weaken the protection of legal professional privilege. They do not. When the OFT investigates suspected infringements of EC competition law in the UK on its own behalf or on behalf of other national competition authorities, the UK rules on legal professional privilege will apply. It is not necessary or desirable to elaborate greatly on that statement. It is a clear statement, and the position is best expressed in clear terms.

I do not think that there is a difference to the protections that exist for in-house lawyers in a company. The point that has been made is straightforward: the OFT may receive communications from in-house lawyers from a national competition authority in a member state where the circumstances of communication for the in-house lawyer are not privileged. In those circumstances, the OFT may use the documentation received from other competition authorities in its investigation. The position in the UK does not change.

The decision on whether it is necessary to act on a request from another member state for an investigation is discretionary. I hope that there will be widespread co-operation; the system will not work without it, and there would be little point in it. Having said that, I feel that the discretionary element is of some importance. We would not want to find ourselves dragged through widespread fishing expeditions of any kind, for example. That is an important factor.

The amount of any penalty imposed will be determined by the OFT and calculated in accordance with published guidance. The draft guidance on the issue is the subject of separate consultations by the OFT. The closing date of the OFT consultations is 4 June. Once again, all the responses will be published on 1 August.

A point was made about the fifth factor—the adjustment to ensure that the maximum turnover figure was not exceeded and that fines could not be more that 10 per cent of the undertaking's world-wide turnover in the previous business year. I mentioned it in the initial statement. That is the description, and, if further detail is required, I shall be happy to write to any noble Lord who wishes to have it. However, that is the fundamental position.

I was asked about the position of the verticals, in particular as regards the newspaper and magazine distribution world. Perhaps I may say to the noble Lord, Lord Hodgson, that there is no expectation that that element of business will collapse. We do not believe that it will. Indeed, we would be considerably alarmed if we thought that it would. Generally, I do not think that the businesses involved think that it will collapse either. No one would want to take irremediable steps, in the circumstance that there may be problems.

The general arguments for the repeal of the verticals exclusion apply to newspaper and magazine industry businesses as they do for other industries. Anticompetitive agreements should all be subject to competition scrutiny. I do not think that we would want to see any stand outside it unless there was an overwhelming reason to do so. The Competition Act allows for anti-competitive effects of an agreement to be balanced against the consumer benefits that it provides. Obviously, if widespread loss of delivery of newspapers and magazines occurred, that would be disbeneficial of a quite major kind to the affected communities. As I say, we do not anticipate that that will happen.

I undertake to go back over the responses that have been received from that industry in order to ensure that no loopholes as regards the loss of benefits will be found. I do not believe that they will be found, but it is worth checking.

With regard to evidence that can be used in possible prosecutions, when the OFT is investigating suspected infringements of EC competition law in the UK on its own behalf or on behalf of another national competition authority, under Section 30 or Section 65J of the Competition Act, those are the provisions that would apply. Investigations will be conducted by the commission on As own behalf. When OFT officials assist the commission in its inspections Article 12 of the EC regulations will apply.

I make those points because that provision should stop the kinds of fishing expedition that would, quite rightly, cause considerable concern. From having discussed this matter in some detail with officials and others, my understanding is that it is not really expected that those will be the sources from which OFT investigations will lift off. I think that it is fair to say that the bulk of the possible investigations are much more likely to arise from complaints by injured parties, by complaints from whistleblowers—now becoming something of a factor—and by evidence that is coming from the European Competition Network that has been specifically established in order to assist in that area.

I should touch on self-incrimination. I do not think that there are any fundamental changes in the provisions in United Kingdom law on self-incrimination, but I shall make certain that I am right and I will write to noble Lords for clarity. At the moment, I am not aware of any fundamental point on that.

As regards the judicial hierarchy, Sections 62A and 65H both require an application to a High Court judge for a warrant. Court is defined in Part II as meaning the High Court. Therefore, there should not be the sort of problem that, quite rightly, I have been asked to deal with.

In the midst of all the issues that have been raised—I close with this and again apologise for the length of my response—the fundamental point is that this is a big change. It needed a degree of elaboration and I hope that noble Lords will forgive me for the extent to which I have done that. Modernisation of business regulation can be lost in the fine detail, but it is extremely important to the well-being of the United Kingdom economy. Indeed, all noble Lords have remarked in the course of our discussion that that is the objective of us all: good competition makes for sound business, which in turn increases the prosperity of the country and its people. That is the core message I have taken from the contributions to the debate.

When we introduced the Competition Act 1998, we recognised the desirability of aligning regulatory systems for the EC and the UK to bring them substantially into parallel and to minimise uncertainty for business. Pursuing good and sound business practice and looking for the benefits of that—I am happy that we are all on the same side—does not remove from us the responsibility for ensuring that the businesses we are talking about are not embroiled in uncertainty, which is the purpose of what we have done.

I have tried to respond to all the points as satisfactorily as possible. If I have not done so, no doubt noble Lords will let me know and I will come back to them in due course.

On Question, Motion agreed to.