Enterprise Bill

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Mr. Purchase: I am sorry to be unhelpful to my hon. Friend. I hear his argument about companies supplying five buses each in the interest of the general consumer, but what if I supplied six and my hon. Friend supplied four on a relatively profitable route and we came to another agreement on a different route? Would not that be anti-competitive? The issue may not be at the heart of this highly important clause, so could not public transport be dealt with effectively by regulation in the interest of the passenger? That is preferable to allowing, or even thinking of allowing, a diminution of the provision. My hon. Friend's argument about bus companies co-operating might be best dealt with through regulation.

Mr. McWalter: I was going to mention the position where a more effective bus service has been withdrawn in favour of a less effective one. I have written to the Under-Secretary of State for Transport, Local Government and the Regions, my hon. Friend the Member for Northampton, North (Ms Keeble) on this matter, about which I feel passionately, but I found her response less than reassuring.

I conclude that what counts as a dishonest, as opposed to an honest, co-operative or consumer-oriented agreement should be specified more fully in the Bill. I generally support the criminalisation of theft such as cartel fixing. I hope that my hon. Friend the Under-Secretary will reflect constructively and act on my remarks so that I can be more confident that the Bill will support co-operative arrangements that benefit consumers.

Mr. Field: I want to make a few general remarks about cartels, which we largely agree are, in principle, a bad thing. However, the devil is likely to be in the detail, and in this and subsequent clauses we shall try to tease out of the Government precisely how the Bill will work in practice.

The hon. Member for Hemel Hempstead (Mr. McWalter) made some narrow comments on the bus issue, although I appreciate that they related to matters far beyond it. We want an integrated transport policy and, as the hon. Member for Wolverhampton, South-West, said—

Mr. Purchase: North-East.

Mr. Field: That shows how at sea we Tories are. We go 180º from one direction to another. The hon. Member for Wolverhampton, North-East (Mr. Purchase) spoke about getting a regulator to determine matters. I would be uncomfortable with that, as it would not be in the interests of business. It would make far more sense if there were co-operation between bus and train companies and the local authorities that set up cycle tracks, for example.

I appreciate that the core issue in respect of cartels is dishonesty. Co-operation is not dishonest, but there may be concerns about large profits being made in a particular region if there are relatively few players in the field and interlinked shareholdings between

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transport companies. What might be seen as dishonest may merely be sensible co-operation between companies in the interests of a designated and small consumer group.

In business terms, I am on the side of the angels. I want businesses to be able to co-operate in a sensible way without the implication that they are engaging in illicit cartel activity.

Andy Burnham (Leigh): Does the hon. Gentleman agree that we are concentrating on the bus market because it shows the flaw in the policy of his party, which deregulated it? Buses are an essential public service, and the market, left to its own devices, is unable to come up with a system that will benefit consumers.

Mr. Field: The hon. Gentleman will not expect me to agree with that utterance. However, I accept that bus deregulation was a massive issue in the mid–1980s. At that time, I was an undergraduate in Oxford, where the streets, especially the Cornmarket and the High street, were packed with buses from four or five competitive companies, which drove prices down in the short term. I went up to London on several occasions and paid only £3 for a return journey. However, in a short time, some of those companies went out of business or decided not to run buses on similar routes, and there was an inexorable rise in the fares. That would concern us. In certain matters, I accept that the market does not necessarily have all the answers.

I want to make a few general comments without getting bogged down by the bus issue; if I were in a Standing Committee debating transport, I could wax lyrical about buses, trains and so on. We can understand the background to cartels by looking at what happened in the United States at the end of the 19th and the beginning of the 20th century. There was a deep-seated view about trusts, as they were known; hence the expression ''anti-trust''. Legislation came into force during the presidency of Theodore Roosevelt, who clamped down upon the perceived protectionist power of very big business. The undesirability of monopolistic or neo-monopolistic power is deeply entrenched in the corporate world of the United States.

11.15 am

An equally intrusive model in Europe in recent years has focused on a different test, that of ''dominant position''. As my hon. Friend the Member for Eastbourne pointed out, in recent months there has been an unprecedented run of decisions from the European Commission, which has imposed record fines on companies involved in price-fixing arrangements. As my hon. Friend rightly commented, one of the interesting developments has been the co-operation between the whistleblowers—companies or individuals—and the European Commission, which has led to large civil sanctions not being imposed on the first and even second of the groups that have decided to co-operate with the authorities.

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Hoffmann-La Roche has been fined £530 million. In Germany, as I am sure the Minister will know, there has been widespread concern about commission-fixing, and five German banks have been fined. Several manufacturers of carbonless paper throughout Europe and brewers in Belgium and Luxembourg have been found guilty of price-fixing and market-domination agreements. One feature of that development has been the way in which lawyers for companies that discover that their employees have been involved in a cartel arrangement have managed to get discounts on their fines.

Even in this country the OFT has the power under the Competition Act 1998 to impose fines of up to 10 per cent. of a company's total UK turnover in a three-year period. That makes for a large potential upside for those co-operating early with the authorities in more complex hard-core cartel arrangements. That domestic system of fines has existed only a short time. The concern of many of the business organisations, which contact us more regularly than they might contact Labour Back Benchers, is that that Act has not yet bedded down and so it is too soon to see whether it is right to proceed with what could be quite draconian measures.

The seventh of my hon. Friend's eight tests related to human rights. Given that some three fifths of our trade is with the European Union, the larger scale and more blatant cartel arrangements will inevitably have an interstate element. Many of our more talented business executives, particularly in sensitive areas such as pharmaceuticals, may decide that it is more dangerous to be based here in the UK and opt for an easier life in Frankfurt, Paris or wherever. There could be a brain-drain if we had a system that was manifestly different. I am concerned that European law may apply to the exclusion of national legislation. In view of the reluctance of many European countries to extradite their nationals on a whole range of issues that I suspect would apply under this provision, it is difficult to see how the new cartel busting could operate on the larger and more complex price-fixing arrangements that have a strong interstate element.

In discussions about the issue of cartels and the thinking that underlies part 6—this also applies to the Government's high-profile press releases on much of what is in the Bill—it has become fashionable to argue that modern competition law requires politicians to be taken out of the process as much as possible. That is slightly illusory, however. Perhaps the Under-Secretary will speak at some length later about the strategy behind the Bill.

In a sense, the hon. Member for Wolverhampton, North-East let the cat out of the bag in the earlier discussion about regulation. To a large extent, it boils down to a choice between those who think that market failure can be left to the market—again, I take on board the intervention of the hon. Member for Leigh (Andy Burnham)—and those who believe in bureaucratic intervention. Ultimately, that is a political choice, and it is a little disingenuous of the Government to suggest that they will be stepping out of the process on cartels. If anything, with the Government not directly involved but hovering

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slightly above that process and much of the mergers legislation or regulation, their involvement could act as even more of a control on many of the companies that might be subject to an OFT-type inquiry.

Mr. Purchase: The hon. Gentleman said that I had let some cat out of the bag. In fact, I only reaffirmed that, in a competitive society, it is necessary to have rules. To have a rule such as the one that we are considering, but nothing to back it up—such as in this case the creation of a criminal offence—would be to say, ''We don't really approve of cartels, but you might as well get on with them.'' Perhaps the hon. Gentleman does not share my view, but we cannot proceed on that basis. The example that was given of American anti-trust law shows that the system that I have described simply has not been strong enough.

Mr. Field: In all fairness, I do not have enough knowledge about the American situation to go into great detail about whether it would be right or wrong. Clearly, a particular time and its culture brought into play much of that anti-trust legislation.

There is no question of our saying that we want carte blanche for companies to establish price-fixing arrangements and complex cartels and to rip off the customer. We shall come to some of the more nitty-gritty consumer issues later, but it would be wrong to caricature our position in that way. However, it is important to ensure that whatever legislation is enacted operates correctly.

At a fundamental level, it seems somewhat odd to be considering a new tranche of legislation a very short time after the Competition Act 1998 came into force. In addition, we may be a step ahead of the game in the European Union at the very time when, to make the single market work effectively and given the interdependence of the larger-scale cartels that are likely to come into being, we should be looking for an integrated policy. A different policy could cause large-scale difficulties and, frankly, would be unenforceable. Nothing would be worse than a number of high-profile cases going to court and beginning to collapse because of the complexity of human rights legislation or otherwise.

I am interested to hear how the Under-Secretary feels that the issue could be taken further forward at a strategic level. I know that I have spoken for some time and other hon. Members wish to speak, so I shall await her comments with interest.

 
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