Restrictive Trade Practices (Hansard, 8 March 1988)

§ Mr. Maude

The Green Paper, "Review of Restrictive Trade Practices Policy" has been laid before the House today. It proposes fundamental reform of the current legislation in order to control seriously damaging cartels more effectively. Together with the conclusions announced in the departmental policy paper on mergers published on 3 March, this concludes the review of law and policy on mergers and restrictive trade practices announced in June 1986, by my right hon. Friend the Member for Southend, West (Mr. Channon).

In particular, the Green Paper proposes a general prohibition of business agreements whose effect is to prevent, restrict or distort competiton. This concentration on anti-competitive agreements means that the scope of the law is at once consistent with its objective. By contrast, the present legislation covers agreements of a particular legal form; it is therefore possible for it to cover agreements which have little effect on competition. This disadvantage and the present statutory requirements to furnish details of agreements of a specified form to the Office of Fair Trading (OFT) makes the present law unduly burdensome on business. The new law proposed in today's Green Paper, which is aimed at the effects of agreements, will be more precisely targeted on those agreements which are genuinely anti-competitive, and will have the added advantage for firms of being closely aligned with European cartel law.

There will be provision under the new system for the exemption of agreements which, though anti-competitive, are on balance beneficial. Applications for exemptions will be judged against a broad test, along the lines of article 85(3) of the treaty of Rome. Guidance notes will be published to help firms and their advisers.

It may be appropriate to draw up "block" exemptions for some categories of agreement, such as franchising, whereby agreements which satisfied certain conditions would become automatically exempt. This would allow some element of self-policing by firms.

As a general rule, it is our intention that exemptions will be granted sparingly; it is a central objective of the Government's economic philosophy to promote competition as far as possible — not to sanction anti-competitive behaviour. The same principle applies to 115W economic sectors and professional services which benefit from exemption from the present legislation. These exemptions will not be automatically carried across into new legislation without the merits of each case being thoroughly re-examined. The Government intend to end as many of the existing exemptions as possible.

We propose that decisions whether agreements are anti-competitive and decisions on applications for exemption will be taken by an administrative competition authority. This will be based on the OFT although the new legislation would require changes to the OFT's organisation and procedures. For this reason, the Green Paper simply refers to an "authority" throughout.

There will be rights of appeal from the authority to the Restrictive Practices Court, and provision for private actions.

The Green Paper also proposes more effective powers of investigation and enforcement and potentially heavy fines—up to 10 per cent. of total turnover—for those who breach the law. This is a particularly important feature of our proposals and an approach strongly urged on us by many of those who submitted comments during the review. It is envisaged that the authority will impose the fines, although decisions on fines would also be subject to appeal.

I hope that the business community will support these proposals; they reflect many of the comments made to us over the last year or so. This is a crucially important area for business and I believe that our proposals will benefit from thorough public debate. We are allowing a further period (up to 30 September) for comments on the basis of the Green Paper proposals, which I hope will be widely read.