Enterprise Bill

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Miss Johnson: Will the hon. Gentleman explain why he believes that the legislation would have the effect of discouraging whistleblowing? He is merely alleging that, without evidence.

Mr. Waterson: Obviously, no one—least of all the Under-Secretary—knows how the system will work in practice, but, in principle, if someone knows that he could be the subject of criminal prosecution for his part in an offence, he might well not blow the whistle. That is the straightforward point that I was making. It is possible, as happened in the US case, that immunity will be negotiated, just as some key players in the Enron saga have negotiated or are likely to negotiate immunity, but there is no guarantee of that. The European Commission has a clear rule that the first person to come out is automatically exempted, and that includes the company. Do the Government and the OFT intend to have a similarly clear policy?

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Miss Johnson: I shall outline the details of our policy when I respond because I cannot make a speech in an intervention on the hon. Gentleman. Our provision is parallel to that in the US and provides the same sort of leniency arrangements.

Mr. Waterson: I look forward to hearing the details of those complex matters. The concerns need to be aired, and what else is a Committee stage for if not to allow the Under-Secretary to allay such concerns?

To return to the issue of the European Commission, the CBI states that

    ''the Commission is planning to share enforcement of the rules with the national competition authorities . . . and the courts of each Member State''.

That involves the laudable aim of ensuring consistent application of the law by, among other measures, setting up a network for passing information backwards and forwards. I have already described how the Bill will affect that. As the CBI states:

    ''Decentralisation can only work if all Member States 'sing from the same hymn sheet'. Unfortunately, even before the Commission's reforms are in place, one large Member State''—

the UK—

    ''has—in full knowledge of Modernisation and despite paying lip service to the need for consistent application of the rules—gone off on a tangent by doing its own thing . . . for the UK to adopt a criminal regime may significantly reduce the willingness of NCAs in other Member States to pass information within the network to the UK, for fear that their citizens may be prosecuted.''

I have developed the argument before, so I shall be brief in my citation. Although

    ''Austria and Ireland have anti-trust regimes which are part-criminal . . . criminal sanctions have hardly ever been used in either jurisdiction . . . Anti-trust violations in Germany are treated by the BKA as civil, not criminal, offences.''

The CBI also touches on the whistleblowing issue, on which we shall hear more from the Under-Secretary later. The European Commission operates a ''first in, no fine'' rule similar to the US system. The first person in the office to blow the whistle can be guaranteed no fine. The CBI continues:

    ''However, given that the Commission will not be able to guarantee immunity from prosecution in the UK, for the UK to adopt a criminal system could seriously reduce the likelihood that individuals involved in cartels affecting the UK would want to come forward for leniency.''

The CBI is exercised about a related issue:

    ''the Commission will . . . rightly continue to handle the larger cases—be they 'hard-core cartels' ''

or whatever, but

    ''given that the EU's regime is civil not criminal, companies which are found by the Commission to have infringed Article 81 will be subject to a civil administrative fine. On the other hand, individuals in the UK involved in breaching Article 81 could find themselves subject to criminal proceedings and imprisonment. We believe this to be inherently unfair.''

The CBI also quotes an article in the Financial Times last August, which was written by the former deputy head of the European Commission's cartel unit, who stated:

    ''The perverse result in Britain would be that double-glazing salesmen fixing prices in the local pub could go to jail, while the biggest pan-European cartels would at most risk administrative fines on companies. Clearly, justice would fall into disrepute quickly if the smallest cases were the ones receiving the stiffest penalties''.

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Running the risk of sending small offenders to prison or fining them heavily, and of subjecting large offenders to civil rather than criminal sanctions makes a nonsense of the deterrence argument.

The CBI's final concern is that the criminalisation of cartels would

    ''undermine the relationship between the OFT and business by making companies far less willing in future to provide sensitive business information on a voluntary basis''.

Companies might be nervous about whether their arrangements in a particular market were in breach of the legislation and might like to meet the authorities to establish their view on the matter. That would be possible and should be encouraged in a purely civil regime as a means of cutting out possible abuses and sharing information between the authorities and legitimate business men. Why would anyone want to take the risk, however, if criminal sanctions were brought into English law?

I make no apology for spending some time to develop those issues, which are a major concern to us and to legitimate business in the UK, not to mention our friends in Europe who are worried about how the provision will work in practice. The danger is that this country's system will move in a different direction from the European regime. There is no need to rush into it and no need to impose criminal sanctions.

11 am

Mr. Tony McWalter (Hemel Hempstead): Cartel formation clearly can be theft, and those who are guilty of it on a large scale are guilty of substantial theft. Therefore, I approve of the general intention behind clause 179. However, I am concerned about some of its details. The hon. Member for Eastbourne mentioned the Leeds bus case. That case applies to two bus operators in my constituency—Sovereign and Arriva—who had through-ticketing and timetabling arrangements. Even though one of the companies in the Leeds case subsequently had its fine withdrawn, Sovereign and Arriva dissolved their co-operative partnership following the Leeds judgment.

I am a Co-operative and Labour MP. I am interested in businesses co-operating for the benefit of the public, rather than colluding to defraud and rob them. I am not sure that the clause makes that important distinction. If Sovereign and Arriva each has six buses but needs 10 to serve the needs of Hemel Hempstead at the rush hour on a particular route, it is reasonable for them to get together to provide a regular service. That is better than a situation in which Arriva discovers that Sovereign's bus is due at 9 am and gets a bus there at two minutes to 9 so that it can poach the customers, and Sovereign responds with a reprisal activity. We know that that has happened in other cases of bus competition. In other words, we have had berserk competition that has acted against the interests of consumers, rather than co-operative competition that could enhance the quality of service for consumers.

Mr. Mark Field (Cities of London and Westminster): There should be common agreement with the hon. Gentleman's remarks. However, we

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should go far beyond co-operation among bus companies, which has had a high political profile.

I am interested in what the hon. Gentleman has to say about co-operation between a dominant player in a particular market—perhaps a narrow regional one—and two or three new players to divide the market informally by, say, timetable or geography. That would fall foul of the intention behind the clause. Does he believe that that arrangement could greatly benefit the consumer and should be recognised?

Mr. McWalter: I thank the hon. Gentleman for his observations. There is clearly a role for companies to co-operate as well as compete. That applies beyond the bus market, although that market is the object of my concerns. If a co-operative arrangement is recognised, the substantial burden of proof lies in whether it would be permitted because, ultimately, it is in the interest of the consumer. A dishonest arrangement would be one that leads to an overpriced product or a restricted supply of a product, and so acts against the consumer interest. The clause must make the consumer interest more explicit.

Mr. Ken Purchase (Wolverhampton, North-East): On the narrow issue of buses, the point is surely that it is the job of the regulator to ensure that the service operates at the right price for bus passengers, rather than to say that the clause is flawed because it cannot deal with regulation in a way that would benefit them. Is not the clause perfectly adequate to deal with cartels in the general sense as a criminal offence, which my hon. Friend would support? Focusing on public transport issues may be diverting us from the clause's general importance to the competitive market.

Mr. McWalter: I thank my hon. Friend for his observations. As a fellow co-operator, I know that he shares my concerns and the general drift of my remarks. I do not want to focus exclusively on buses but, as the hon. Member for Cities of London and Westminster (Mr. Field) acknowledged, I am using this particular case to examine the wider context for business. If my points apply to one specific sector and not another, they may still be relevant in a general sense to other areas.

In the circumstances I described, where 10 buses are needed and both operators agree to provide five to meet the demand, an agreement exists between them, however arrived at, that results in bus company A, which would otherwise have provided six buses, providing only five. In that sense, a limitation of the supply of a product or service by company A exists in the United Kingdom. At first glance, at least, it appears that the bus operators had better be careful about how they conduct themselves.

Subsection (1) provides much of the clause's impetus:

    ''An individual is guilty of an offence''

not if he agrees with one or more other persons to carry out the actions listed in subsection (2), but if he ''dishonestly'' agrees to do them. Much weight attaches to the word ''dishonestly'', so what counts as a dishonest agreement should be spelt out in the Bill more effectively. The Bill already emphasises the sort of agreements that might give pause for thought, but

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as some agreements could have been entered into honestly and for the benefit of the consumer, I am worried that the clause underspecifies precisely what market rigging involves.

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