Enterprise Bill

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Mr. Alistair Carmichael (Orkney and Shetland): I have no objection to the creation of a cartel offence in the broadest principle. As the hon. Member for Hemel Hempstead said, the formation of cartels is merely a new species of dishonesty and I have little difficulty with criminal sanctions against them. However, I have several reservations about the clause and I share many of the concerns expressed by the hon. Members for Cities of London and Westminster, for Hemel Hempstead and for Eastbourne. Like the hon. Member for Eastbourne, I have had the benefit of the CBI briefing, but I will not follow him in quoting lengthy passages verbatim into the record.

I thank the Under-Secretary for her prompt and full answer to the point that I raised last week on criminal

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attempts. I do not wish to make great play of that, but as we are discussing the clause, it is timely to raise the point. In her letter, which is available to members of the Committee, she explains fully the circumstances in which attempts at the offence might be charged or indicted but does not make a case that the existing words remain necessary. That does not in any way contradict my original point. Indeed, a conversation that I had at the weekend with Anne Keenan, the deputy director of the Law Society of Scotland, reinforced that; her initial reaction was the same as mine. My concern is that unnecessary words might trip up someone later and lead to inelegant legislation.

Another concern that arises from the Under-Secretary's letter is the impact of the Bill on the law of Scotland and the extent to which that law has been taken into consideration. In her letter of 22 April, the Under-Secretary refers to the Criminal Attempts Act 1981 which, as she may know, does not extend north of the border, where the area of criminal attempts is regulated by common law. Until recently, there were significant differences in the law on attempts—particularly in relation to a fairly obscure part of the law on impossible attempts. The differences may not be significant, but I would be greatly reassured if I felt that they had been considered. The fact that the letter makes no reference to the different situation in Scotland concerns me, particularly in the light of proposals elsewhere in the Bill on the obtaining of warrants, which are simply wrong. What input have the Scotland Office and the office of the Advocate General had in preparing the legislation? Has the Under-Secretary consulted the staff of the policy unit at the Crown Office in Edinburgh who are normally the conduit for the prosecution service in making representations on such legislation?

My principal concern about the substance of the clause relates to the interaction between criminal and civil proceedings, especially in a case where a public body has gathered the same information that is then used in civil or criminal proceedings. It is at least desirable that primary consideration be given to criminal proceedings, and that civil proceedings are resorted to only if criminal proceedings are deemed inappropriate, or have been attempted and were unsuccessful. The hon. Member for Eastbourne made a comparison with road traffic accidents, which clearly illustrated the point.

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I am also concerned that we are talking about the criminalisation of activities, something that the 1998 Act substantially dealt with in the civil context. The CBI shares my concern that we have not allowed the civil proceedings envisaged under the 1998 Act to bed down properly. Severe penalties are now available and proceedings have been brought in only a limited range of cases. It would be better to introduce the legislation once we have full and extensive experience of how the 1998 Act has worked. We would not be leaving the position unregulated, as we have the civil provisions. The remedies under the civil proceedings are extensive, and would be severe.

I do not understand the rush to legislate on criminalising the offence, nor the difference in

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principle between soft-core and hard-core cartels, although the hon. Member for Hemel Hempstead gave us a good example. It struck me that it is possible under the clause to act in accordance with the instruction of a regulator, such as the one to which the hon. Member for Wolverhampton, North-East referred, and still be guilty of an offence. That part of the Bill would be much improved if a clause on defence were inserted. I commend that to the Under-Secretary for her later consideration.

The interaction with EU competition law is a potentially massive pitfall for the Bill. As a general rule, I would adhere to the principle of subsidiarity in relation to that law. If we apply subsidiarity, the appropriate level is a UK level in some circumstances, but an EU one in others. As the hon. Member for Cities of London and Westminster pointed out, there are often substantial interstate aspects to such cases. However, there is insufficient specification in the Bill to make that clear. The hon. Member for Hemel Hempstead highlighted the contradiction that the largest and most involved cartel operating throughout the EU could be dealt with on an EU level and given a civil penalty, whereas a minor soft-core cartel operating in the UK and prosecuted in the UK could be subject to criminal sanctions and imprisoned. I cannot square the logic of that position, which could bring the criminalised cartel into disrepute.

My final concern is the protection of whistleblowers. Because of the interaction of EU and UK law, it will be difficult to protect whistleblowers who are protected on one level but open to prosecution on another. What protections does the Minister envisage in respect of whistleblowers? The concerns about this clause are so substantial that we have a long way to go before we can confidently say that it achieves the objective and will be workable.

Mr. Jonathan Djanogly (Huntingdon): My hon. Friends the Members for Eastbourne and for Cities of London and Westminster and the hon. Members for Orkney and Shetland and for Hemel Hempstead have already made a comprehensive case and shown not only that the clause will not work but that it might be counter-productive to the intention of stopping cartel activity. I shall not repeat earlier arguments, but I would like to add a few further points and elaborations.

The hon. Member for Eastbourne concisely explained the complex inter-relationships between UK and EU law, between the Bill and existing legislation and the many unresolved issues that arise from them. Many businesses and the CBI, which responded to the clause, have noted that while some countries have criminal liabilities for cartel actions, they are rarely enforced in practice; particularly in other European countries. In comparison with our European neighbours, this country has a history of active involvement, which might put UK companies at a competitive disadvantage. That is an important and valid point.

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The hon. Member for Hemel Hempstead rightly argued that the concept of criminalisation and whether a cartel exists are often highly complicated issues. It can be clear cut, but more often than not, identifying a cartel—deciding at what point a series of actions constitutes a wrong—is complex. Different interests—of consumers, companies, creditors and other parties—are at stake, and in some circumstances they coincide. Often, however, they do not, which is a problem that we have to struggle with throughout the Bill. It is not a straightforward matter and if we make a mistake, the implications for business and for consumers could be disastrous. If companies start to go bust and fewer people are in the market, prices are unlikely to become more competitive. Quite the opposite; the impact of regulation could increase prices.

On the basic concept of criminalisation, my hon. Friend the Member for Eastbourne is right that we need more time to assess how the penalties in the 1998 Act work out in practice. Some hon. Members have implied that the penalties are not onerous enough. We do not yet know, but companies can be fined up to three times 10 per cent. of their UK turnover, and the highest penalty would destroy most companies. The present penalties can be extreme, with the threat of the loss of business and jobs; I would not say that they are not tough. As my hon. Friend the Member for Eastbourne said, so far there has been only one case under the existing penalties. That area of the law needs to be developed, and we should see how it works before jumping into the unknown, as the matter has serious implications for other aspects of the law, which have been mentioned in the debate.

It is valid to mention concerns about how the concept of criminalisation would work in practice in larger companies. Many multinational global companies have many layers of management throughout the world. It would be difficult to discover when and where the price fixing occurred and who was responsible for it, and extremely hard to get to the bottom of the complicated matter of liability and culpability.

My hon. Friend the Member for Eastbourne mentioned Sotheby's and Christie's, but that case is probably as simple as it would get as they are relatively small companies with few layers of management, where decision-taking is relatively easy. In larger companies, the concept of criminal liability would become increasingly complicated.

We are worried that the proposal is a manifesto for scapegoatism. If a large, multinational company with many layers of management were threatened with extinction, what would be easier; taking the civil route, with the possibility of extinction, or finding a poor manager or director of subsidiary number 53 at the bottom of the pile to take the rap? My fear is that companies will take the latter option, and that PR machines will go to work and do deals with Government Departments rather than there being a significant fine for the whole company. I should be interested in the Minister's views on those implications.

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I am anxious, too, that criminalisation may discourage whistleblowers. The Under-Secretary asked my hon. Friend the Member for Eastbourne to explain why that should be so, as the proposed system worked well in the United States. However, there is a massive difference between this country and the United States, where the culture of criminalisation—

 
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