Enterprise Bill

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Mr. Lansley: I tried to help the Minister before only to lull him into a false sense of security. I shall now try to disagree with him on the clause.

When I first considered the proposal for an appeal process in relation to decisions on merger control, I thought that it might be remotely akin to the appeal process in the 1998 Act. However, it is not, which is misleading. I am worried about the nature of the proposal. All that will happen is that what was previously a right of appeal against a decision by way of judicial review, which would have proceeded through the courts, is now to be an appeal on exactly the same type of grounds through the CAT.

As my hon. Friend the Member for Eastbourne (Mr. Waterson) pointed out, the appeal will not be on merit. In the 1998 Act, appeals are quite a different matter. Schedule 8 to that Act makes it clear that the tribunal can

    ''determine the appeal on the merits by reference to the grounds of appeal set out in the notice of appeal''.

It also says that it can quash the decision and substitute its own decision on whatever legal basis the Director General of Fair Trading wants to use. Such decisions are on merit, but decisions under the clause are not on merit at all. Appeals under the clause are only on the grounds of judicial review.

Is it reasonable in all circumstances of merger control—we shall come to market investigations later, as there is a parallel provision in clause 169—for there to be no appeal against the decision? The Competition Commission exercises its judgment after an initial decision by the Office of Fair Trading, so one could argue that there was a decision and an appeal.

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I know of no substantive evidence to suggest that, in the course of decision making on mergers in the past, the Competition Commission has been thought anything other than competent to decide the merits of a decision. People would prefer the consistency and predictability of the Competition Commission acting as the mechanism to decide the merits of merger decisions.

I will not dispute the clause in so far as it relates to decisions on the merits of mergers on competition grounds. However, I shall flag up my problem with the clause, as I have done with problems on several other provisions, so that the Minister can think about whether he can deal with it as work on the structure of the Bill proceeds. My problem is with decisions made on merger control that are not on competition grounds. It will not surprise the Minister that I am exercised by the fact that the Secretary of State can intervene to specify public interest grounds other than national security, to require a reference even though the OFT does not believe that there should be one, to consider the decisions made by the Competition Commission and in effect set them aside, and to make orders if necessary—subject to Parliament's approval—to remedy any adverse public interest effects.

So far as I can see, at no point in that process can one honestly say that the Secretary of State is subject to any appeal. The provision proposes that she would not be subject to such an appeal. If she chose to go down a certain path, she could decide a merger on some grounds. The Secretary of State does not seem to meet all the desirable requirements of a distinction between the initiation of a process and its subsequent determination by an independent and impartial body.

The Secretary of State has told us—it is written on the front of the Bill—that the provisions are consistent with the European convention on human rights. We enjoy considering how that convention impacts on our proceedings, and I wonder whether the clause is entirely compatible with it. On the Competition Act, we discovered that the institution of an appeal in relation to the chapter II prohibition was the subject of the Napp Pharmaceuticals case, with which I am sure the Minister is familiar.

The CAT heard an appeal against the determination by the Director General of Fair Trading in that case, and in the course of its judgment considered the relationship between proceedings before the tribunal and article 6 of the convention. As the Minister will remember, article 6.1 is on the right to a fair trial and states:

    ''In the determination of his civil rights and obligations or of any criminal charge against him, everyone is entitled to a fair and public hearing within a reasonable time by an independent and impartial tribunal established by law.''

So far as the chapter II prohibition and the penalties that flowed from it were concerned, the tribunal held that, for those purposes, there was a criminal charge or offence, but the European convention on human rights does not define criminal charge, which is effectively defined by the nature of the penalties involved. It did not affect the burden of

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proof that was applied by the tribunal because the convention does not say what burden of proof should be applied to its proceedings, so we need not worry too much about that. However, in relation to the public interest considerations that were applied to the case, the nature of the penalties, undertakings or orders that apply to parties to a merger may be sufficiently substantive to bring such cases under article 6.1.

My personal view is that the Competition Commission is an independent and impartial tribunal, but where public interest considerations come into play, and the Secretary of State is effectively overriding the decisions of an independent and impartial tribunal, it is arguable whether the Secretary of State constitutes an independent and impartial tribunal for the purposes of the convention, especially in the light of his having issued the intervention notice in the first place. We should have another process, so that the Competition Appeal Tribunal can consider not only the judicial review decisions but an appeal on its merits, when a decision has been taken by the Secretary of State contrary to the decisions or advice of the Competition Commission.

Several points were put to Ministers in the White Paper consultation process, and the Government document that summarises the responses says:

    ''A few respondents suggested that the new merger regime should incorporate a right of appeal. One suggested this would be necessary whenever a divestment remedy was recommended. Others thought a robust appeals process was needed for all mergers and markets cases.''

I do not believe that an appeals process for all merger cases would be a good thing on balance because it would add a whole set of decisions by another body to those of the Competition Commission. However, the penalties in some cases may be so severe that some appeal mechanism is necessary. It is worth considering whether, in divestment cases, for example, where the order made has substantial effects on a business by requiring the separation of businesses rather than a more modest undertaking, there should be some threshold above which the enterprise could have its case heard again on merits by a further tribunal. Otherwise, notwithstanding the positive record of the Competition Commission and the Monopolies and Mergers Commission on these matters, it is possible that the Monopolies and Mergers Commission, as investigating body, could get carried away when it comes to the penalty. An investigation into the penalty, rather than a hearing of the whole case, might be considered.

Indeed, in the Napp Pharmaceuticals case, the Competition Appeal Tribunal supported the Director General of Fair Trading in his decision, except for the penalty, which it scaled back. There may be a risk in competition decisions—we will consider this again when we discuss market investigations—that the enthusiasm of the commission to demonstrate its pro-competitive credentials is so great that it may overestimate what is the appropriate penalty, undertaking or obligation to be laid on parties to a merger, and that the penalty might be scaled back when viewed on its merits by an independent tribunal.

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In trying to deter anti-competitive mergers, the Competition Commission may go over the top in setting undertakings and obligations in the first instance.

Mr. Alexander: I am grateful to the hon. Gentleman for his comments. If he had carried on any longer, I should have disappeared under a blizzard of helpful notes from officials replying to his various points. I am grateful, too, for his citing of the relevant clause of the European convention on human rights. My study of the law pre-dated 1997 and the assimilation of the convention into British law, so it was useful to have a recitation of it.

While bearing his remarks in mind, I shall resist the temptation to be drawn into discussions of a more substantive role for the Secretary of State. The Committee will have plenty of opportunities to address that issue in detail. By way of a courteous reply for the trouble that he has taken to raise these points, I refer him to the explanatory notes. Page 133, paragraph 762 states:

    ''Remedies imposed in merger and market investigation inquiries may engage rights under Article 1 of Protocol 1 to the Convention. However, such remedies may only be imposed for legitimate reasons in the general interest, and the Bill provides for fair and transparent procedures to be followed in such inquiries and a right of review to the CAT. The Government is satisfied that this approach is compatible with the Convention.''

It should go without saying that the position in which decisions are taken in the public interest is the same as for judicial review under the Fair Trading Act 1973. The Bill provides for an independent and fair hearing before the CAT, as described in the explanatory notes.

The hon. Gentleman asked why the CAT had been given its specific role. We created the new route of appeal to the CAT because it offers the prospect of a faster and less expensive access to justice.

 
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