Enterprise Bill

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Mr. Alexander: I shall put the hon. Gentleman's remarks in context by explaining the clause and then deal with his points about the monetary penalties and the consequences with regard to the way in which investigations are conducted.

The clause gives the Competition Commission a power to impose monetary penalties on any person where specified information is not provided by a date formally notified by the commission in a clause 105 notice. The term "any person" means one of the merging parties or a third party. The power replaces the Competition Commission's current power to

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apply to a court for a contempt finding. I hesitate to say it, given some of the company in the Committee, but it is closely modelled on the powers that are available to the European Commission under articles 11, 14 and 15 of the European Community merger regulation, which has operated successfully since 1990.

In respect of the point raised by the hon. Member for Huntingdon, we both want these discussions to take place as amicably as possible. I agree that the parties involved in an agreed takeover will usually co-operate, as the form and track records show. However, I do not concur with the view that suggests that monetary penalties are a disincentive to a more voluntary and co-operative approach being taken. There are circumstances in which inquiries will not always be known as adversarial; in hostile takeovers, for example, one party may be deeply unwilling to co-operate and third parties will often have no incentive to co-operate, yet their information is vital to the work of the relevant authorities in ascertaining matters such as market shares.

Therefore, we believe that the approach of the parties to information requests is often affected, not just by the fact that there are potential monetary penalties but also in terms of the way in which the system works in practice and—I say it in a spirit of self-reproach as a lawyer—by the conduct of the legal advisers themselves. We must ensure that the legal advisers involved do not take an overly adversarial approach, allowing no ability for the relevant authorities to expedite the process in a situation that is susceptible to tactical game playing by respective advisers.

Parties and their advisers are used to operating in line with the provisions and disciplines of the EC merger regime. We do not think that they will have any problem in practice with the importation of this regime into UK law.

Mr. Djanogly: Does not the Minister appreciate that often the reason why the information is not provided is not because of the penalties but because the companies are afraid that that information will be put to uses other than those that the internal purposes of the investigation require? In other words, they ask if it will be released into the public domain. Can the Minister give any comfort to business that the provisions will not be used to allow confidential information, especially that belonging to third-party companies, to be released and used in a way that is detrimental to their interests?

Mr. Alexander: I am sensitive to the hon. Gentleman's point, but he is trying to identify a solution to what he perceives to be a problem in a clause that deals with something else. We are dealing with a substantive issue: do monetary penalties assist in the ongoing work of the competition authorities? I understand that discussions have already taken place in the Committee about the entrance into the public domain of information handed to the authorities. The substantive point at issue in the clause is whether

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those monetary penalties will focus the minds of the parties involved in the discussions. My view is that monetary penalties do focus minds and therefore make an important contribution to the non-adversarial approach that we are keen to ensure in as many cases as possible in this important work.

I hope that I have responded satisfactorily to the hon. Gentleman's point. I am sensitive to the fact that he has continuing and enduring concerns on issues of public disclosure of private information but I am not convinced that it sits comfortably within the debate.

Question put and agreed to.

Clause 106 ordered to stand part of the Bill.

Clause 107


Mr. Waterson: I beg to move amendment No. 290, in page 77, line 35, leave out `and' and insert `or'.

I do not want to have a stand part debate on the clause, but I shall speak generally about this straightforward amendment, which would make the penalties, especially those set out in subsection (7), alternatives rather than accumulative. It is based on a concern raised by the CBI that the penalties are pretty harsh. We accept that the powers of enforcement in investigation are necessary and that they should be backed up in appropriate circumstances, which we hope will be few and far between, with penalties. The CBI took the view that the penalties in clause 107 are heavy and draconian. The amendment would deal with that by making the penalties into alternatives. In theory, a fixed penalty amount not exceeding £30,000 could be imposed along with a daily rate of £15,000 or more. Taken together, that would be a substantial amount of money. The Minister accepts that we are talking about relatively few instances, but on what basis have Ministers concluded that the level of the penalties and their cumulative nature is appropriate? I assume that when they consulted on those matters organisations such as the CBI sounded something of warning bell.

Mr. Alexander: I will take some time to go through the detail of the points that the hon. Gentleman has raised. On the basis of the CBI briefing and his remark, I assume that the amendment is designed to prevent the Competition Commission from setting both a fixed-rate penalty and a daily-rate penalty for the same failure to provide information.

The Competition Commission must have effective information-gathering powers, which is a view held by all members of the Committee. In the new regime, it will be taking final and irreversible decisions against a tight statutory deadline of 24 weeks. It will be expected to take fully informed and high-quality decisions on which the shape of important sectors of the economy may depend. It is therefore right that it will have the power to impose both a fixed-rate penalty and a cumulative daily penalty for further

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days of delay and that it can impose a combination of the two.

A fixed-rate penalty clearly has value as a deterrent, which is similar to the points that we were making on the previous clause. It will provide a strong incentive for parties to comply with a request for information. However, once it has been imposed, it has no further value as a lever for securing the required information. In those circumstances, the cumulating daily-rate penalty becomes the more potent power. It will increase the likelihood of parties complying with the information request, which must be the main purpose of the powers. After all, the point is to secure the relevant information, rather than punishing parties, which was the point made earlier by the hon. Member for South Cambridgeshire (Mr. Lansley). The point is not to punish, but to secure the relevant information for the relevant authorities. I suspect, too, that the fact that a daily-rate option is available will perhaps encourage the Competition Commission to impose lower fixed-rate fines.

The hon. Member for Eastbourne is concerned that being able to impose both types of penalty may lead to excessive penalties being imposed, but the effect may well be the opposite of what he fears. The ability to use the two powers may actually lower the overall amount of any penalty.

Mr. Djanogly: If the fixed-rate penalty were imposed rather than fixed and daily-rate penalties, but the information was still not provided, could the Competition Commission go back to the court and ask for a daily rate to be imposed as well? Can a further penalty be added to what is, in effect, a conviction?

Mr. Alexander: No, as I hope I made clear in my earlier remarks, the specific provision to allow for both a fixed penalty and a daily rate to be imposed is designed to address a situation in which a fixed penalty has been imposed but no action has been taken on the disclosure of information by the companies affected. In those circumstances, it is appropriate to give authorities the power further to incentivise the passage of information, which is so important to their work. In that sense, the clause recognises a possibility by which both penalties would be imposed, but we are aiming for an outcome that would result in the overall sum of money handed over being potentially less.

I should like to reassure the Committee that the use by the Competition Commission of the powers will not be arbitrary. Clauses 105 to 112 set down a detailed procedural framework that we believe to be both fair and reasonable. Before a penalty can be imposed, for example, the Competition Commission must consider whether a person has a reasonable excuse for a failure to comply. There is a full right of appeal to the Competition Appeals Tribunal for aggrieved parties. Furthermore, the Competition Commission is required under clause 112 to consult on, publish and then have regard to a statement of

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policy on the enforcement of information notices and the considerations that will be relevant in determining the type and amount of any penalty that is imposed, which is an important safeguard. That will provide the necessary certainty for business about how those penalties will be used in practice.

As I emphasised earlier, the powers are closely modelled on equivalent powers in articles 11, 14 and 15 of the European Community merger regulations. It is right that we pick the best aspects of the equivalent merger regimes elsewhere. Those powers have worked very effectively for the European Commission for more than a decade—since 1990—and they should therefore be incorporated into the domestic regime. Therefore, I ask the hon. Member for Eastbourne to withdraw the amendment.

Mr. Waterson: I repeat that we do not have a problem with the powers; it is the penalties that back them up. I am sure that business appreciates the certainty involved, but the certainty that one is going to be hammered is not necessarily the sort of certainty that it wants. The penalties are quite stringent. I have expressed our views and those of the CBI. I do not want to disturb the pre-lunch torpor of the Committee, so I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 107 ordered to stand part of the Bill.

Clauses 108 and 109 ordered to stand part of the Bill.

Clause 110

Appeals in relation to penalties

Question proposed,That the clause stand part of the Bill.

Mr. Lansley: Having roused myself, Mr. Beard, I just want to ask a question. I want to talk a little more about the Competition Appeals Tribunal, in relation to clause 114 and others. A specific decision has been made to use the CAT as an appropriate body. The structure of the tribunal, as the Minister will know, centres on expertise in competition law, rather than the general issues, although the president of the tribunal must be a senior lawyer. Is the CAT the best body to deal with the decision? Or would it be simpler for the decision on the appropriateness of a penalty of this kind, which is to be akin to a penalty for an offence, to be considered through the High Court in the normal way? The issue does not bite

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directly on competition law consideration so much as the behaviour of individuals in receipt of a notice from a public body. It is of a generic kind in that direction, rather than of a specific kind in the competition direction.

Mr. Alexander: I suppose that that partly turns on one's understanding of the economic expertise of the CAT. It could be argued that a certain awareness of the importance of finance and economics would equip it well to make deliberations on the penalties of which the hon. Gentleman spoke. The substantive and serious point that must be addressed is how we achieve the maximum degree of expedition and certainty in the process. It is a mistake to move on to the grounds of philosophy—but that is the underlying thinking behind the Bill.

In essence, we believe that the CAT offers a cheaper and quicker remedy for the parties involved, and a more appropriate forum in terms of which fines can be determined, than involving a decision of the High Court or whatever would be decided by the alternative judicial forums in which those matters could be described. The whole thrust of the Bill is to try to provide a degree of certainty in terms of the route by which a case would be taken forward. I emphasise and echo the argument of the hon. Gentleman that someone of considerable distinction in terms of legal qualifications will be sitting in the chair of the CAT, which I think would deal with some of the concerns that he has raised about its ability to deal with such matters appropriately.

Question put and agreed to.

Clause 110 ordered to stand part of the Bill.

Clauses 111 to 113 ordered to stand part of the Bill.

Clause 114

Review of decisions under Part 3

Mr. Carmichael: I beg to move amendment No. 172, in page 81, line 5, leave out "person" and insert "party to a merger".

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