Enterprise Bill

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Clause 115


Mr. Djanogly: I beg to move amendment No. 296, in page 83, line 7, at end insert—

    '(6A) Any order made by the Secretary of State which increases the level of fees payable shall require the approval by affirmative resolution of each House of Parliament.'.

The clause provides for the Secretary of State to make orders for the payment of fees to the Office of Fair Trading for merger filings. Given the substantial costs for companies to make merger filings—there are professional costs as well as the fees—any order under the clause requires approval by affirmative resolution in each House as a safeguard against an unjustifiable increase in fees. The Confederation of British Industry picked up on that point and we concur. We are therefore proposing the amendment. The straightforward question that I would add is, does the Minister intend to use the opportunity of the Bill as an excuse to hike the fees involved, and if so, by how much?

Mr. Alexander: If I can answer a straightforward question with a straightforward answer, no. I understand that that echoes the views of my ministerial colleagues, who are fairly clear that the merger fee provisions in clause 115 reflect the provisions of the Companies Act 1989. They included the negative resolution procedure, so we consider that to be the appropriate mechanism to include in the Bill.

Changing the level of fees would affect businesses. Any change that we make, therefore, will involve undertaking a regulatory impact assessment. That will be a public document and the option for Parliament to debate that matter will always be open. I hope that my comments on the motivation for the clause, and the factual basis on which we have arrived at the mechanism, offer the comfort that the hon. Gentleman seeks and that he will feel able to withdraw the amendment.

Mr. Djanogly: For clarification, is it not normally the case that such fees involve affirmative action?

Mr. Alexander: As I said, we are mirroring the provisions in the 1989 Act, which had the negative resolution. To that extent, there is form: such provision has existed for more than a decade. That has therefore been deemed the appropriate mechanism for the Bill.

Mr. Djanogly: On the basis of the Minister's answer, I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 115 ordered to stand part of the Bill.

Clause 116 ordered to stand part of the Bill.

Column Number: 420

Clause 117

Offences by bodies corporate

Mr. Mark Field (Cities of London and Westminster): I beg to move amendment No. 297, in page 84, line 3, leave out

    ''or to be attributable to any neglect on the part of''.

The provision on offences by bodies corporate seems to mirror section 132 of the Fair Trading Act 1973. As is often the case with provisions in legislation, it is a clear example of a chunk that has been moved from one piece of legislation straight to another, albeit from the depths of time, 29 years ago, as the Minister pointed out, which is almost before his time—almost before many of our times.

As is shown in the amendment, our concern is with the idea that negligence alone should be enough. We are keen to delete the wording:

    ''or to be attributable to any neglect on the part of''

particular individuals from subsection (1). Our concerns are not the same as those expressed when we discussed negligence in relation to cartels, when the Minister's colleague the Under-Secretary was here. In that case, there is a criminal offence and the possibility of going to prison for five years. We are not in criminal territory with the mergers in part 3.

However, the offences are serious. No doubt, in the scheme of things, officers of companies may find themselves under threat of disqualification if they are company directors and subject to quite large fines. We are therefore concerned to include a sense of intent, rather than purely negligence or recklessness. I would be interested to have some guidance and perhaps some examples from the Minister, on where he thinks that negligence and recklessness would and should be enough for an officer of a company to fall foul of the provisions.

Mr. Carmichael: I am inclined to support the amendment. The clause seems to be exceptionally wide, in that much is attributable to any neglect. If the wording were changed to ''gross'' or ''culpable'' neglect, I could see that there might be some force in it, but the present, wide, drafting leaves me with some concerns about the wide range of activities that might be encompassed.

I am always mindful when dealing with such situations of my one outside directorship. I am a director of Aberdeenshire Women's Aid. I fully accept that that organisation is not likely to fall under the ambit of part 3 but, then again, we live in a funny old world and we just never know.

One can well imagine relevant circumstances involving people in partnerships. The Minister has a similar background to mine and may remember some of the prosecutions for cashier fraud undertaken by Aberdeen legal firms in the not-so-distant past. In such cases, there may have been a substantial degree of neglect, but nothing that would justify bringing proceedings against partners under the provision. I would be interested to hear the Minister explain why it is thought necessary to define the range of culpability as widely as has been done.

Column Number: 421

5.15 pm

Mr. Alexander: In the hon. Gentleman's absence last week, when I first attended the Committee, there was an interesting discussion about businesses in Orkney and Shetland. I understand that he was obliged to travel back to his constituency early. There was an amusing exchange across the Floor of the Committee about how many businesses in Orkney had a turnover of £45 million. Much as I am delighted that the Scottish Executive, under a joint Labour and Liberal Democrat Administration, have provided additional funding for women's legal aid and refuge centres in Scotland, I would be very surprised if the level of funding for the body of which he speaks would bring it anywhere near the de minimis requirements for the provision.

The hon. Gentleman raises the serious point of whether the description of negligence in the clause is too widely drawn. I am constrained by the fact that my background is in delict rather than tort, but I can offer the comfort that the clause is long-standing, as the hon. Member for Cities of London and Westminster (Mr. Field) was generous enough to acknowledge. It is a common provision in both existing and previous legislation. However, it would not be appropriate or right for the Committee to send the message that negligence does not matter and that company directors should not be held accountable for what information is brought before the relevant authorities.

It is critical that we take an amicable and proactive approach to the resolution of the matters that we discussed in Committee this morning and that there should be appropriate checks on directors to ensure that the information furnished to relevant bodies is appropriate and right. The provision is not a significant departure from that in other legislation that has been passed by the House. It is right that officers of companies should be liable to prosecution by a body corporate for an offence directly attributable to the director. I urge the hon. Member for Cities of London and Westminster to withdraw the amendment.

Mr. Field: We are still uncomfortable with the provision. The issue of negligence affects the Bill in a small way, but I think that that issue will come up increasingly frequently in Department of Trade and Industry and Treasury Bills in the next few years. Both the City of London and general corporate law are at a crossroads in relation to ethics and other such issues. More responsibilities are being heaped on directors—and, indeed, more junior employees—of companies.

One need only consider what happened recently with Arthur Andersen and Enron. Clearly, fraud was also involved in that case, but as the hon. Member for Orkney and Shetland rightly pointed out, the massive majority of the equity partners of Andersen world wide were entirely ignorant about the matter and found themselves in dire straits. There will have to be a recalibration of neglect as opposed to criminality, and of the way in which people, particularly company officials, can protect themselves if such relatively draconian measures are forced on to the statute book. Clearly, I shall not win the battle in

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Committee today, but I would like to flag up the issue as one that will need to be discussed further.

Mr. Alexander: I merely highlight the fact that DTI Ministers have the company law review before them and we are considering a wider range of those issues. I am certainly cognisant of the points that the hon. Gentleman makes and will bear them in mind during those deliberations.

Mr. Field: I thank the Minister. I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 117 ordered to stand part of the Bill.

Clauses 118 to 122 ordered to stand part of the Bill.

Clause 123

Power of OFT to make references

Mr. Waterson: I beg to move amendment No. 298, in page 90, line 9, leave out 'suspecting', and insert 'believing'.

The Chairman: With this it will be convenient to take the following amendments: No. 155, in page 90, line 9, leave out from 'that' to 'prevents' in line 11 and insert—

    'the conduct in the course of a business of any person or persons substantially'.

No. 299, in page 90, line 11, after 'services', insert 'significantly'.

Mr. Waterson: We now move to the market investigations part of the Bill. I am happy to speak to the amendments in my name and that of my hon. Friends in the first group—Nos. 298 and 299. It was rather a photo finish in tabling No. 155 and I shall leave the Liberal Democrats to speak to that amendment, although our names also feature above it.

A few general comments might obviate the need for a stand part debate on the clause, which is an important provision that kicks off this part of the Bill. It sets out the OFT's power to make references and extends its power to seek out anti-competitive behaviour.

Concerns have been expressed, not least by the CBI, about the clause, along with the Government's commitment to giving the OFT increased resources to ferret out anti-competitive behaviour in the UK economy. I assume that the Government believe that a great deal of illegal activity is going on that current powers and resources have been unable to tackle. That is not a view that the CBI entirely shares. It states:

    ''However the great concern of industry is the second case and the potential for an enlarged and empowered OFT to cast its net far and wide looking for any possible behaviour or structure that could be construed as anti competitive.''

It refers to the consumer protection aspects such as super complaints, for example. There was a slight worry that British business would be rather beleaguered as a result of the provisions. As a Committee, it is our job to reassure if possible. It refers to the need for ''some reasonable constraints'' on the OFT to avoid disruption and counter-productive investigations and so on.

Column Number: 423

Amendments Nos. 298 and 299 would change ''reasonable grounds for suspecting'' to ''reasonable grounds for believing'' and would insert the word ''significantly'' before

    ''prevents, restricts or distorts competition''.

In addition to the CBI's worries, there is a genuine concern about the cost to business of such investigations—that they might be extremely expensive and tie up an awful lot of resources, especially management time. The amendments are designed to produce a higher threshold for the provisions.

The CBI points out that in clause 123(1) there is no lower limit to the level of impact. There should be a de minimis provision to ensure that unreasonably counter-productive investigations are not launched because they would tie up businesses' time and lead to costs. That is why the requirement of suspicion is too low and there should be a good reason to believe that something has occurred, which is a somewhat higher test. The insertion of the word ''significantly'' would also tighten things up.

I mention the scale monopoly provisions. I think that they are mentioned in the White Paper, although I cannot find the reference—I am sure that the Minister has it at his fingertips. In a debate in the House of Lords on the Competition Bill on 13 November 1997, Lord Simon of Highbury said:

    ''We also believe that the scale monopoly provisions will continue to have value although we do not intend that their use should be limited with the introduction of the new prohibitions. In future we do not expect references to be made of scale monopolies except in circumstances where there has already been proven abuse under the prohibition and where the DGFT believes that there is a real prospect of future abuses by the same firm.''—[Official Report, House of Lords, 13 November 1997; Vol. 583, c. 300.]

Is that the Government's view on this Bill, or has their view changed since that debate?

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