Enterprise Bill

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Mr. Waterson: This is an important point, and the Minister is being generous in allowing me to intervene. It is important that we nail down what we are debating.

For the record, I did not say that there should be a two-way power; I was merely inquiring what the logic was, but let us put that on one side and lock it away in its box for the rest of the debate. Surely the Minister has grasped that the political pressure will come when a Minister receives a reference in which the OFT says that it does not think that it is appropriate because of some campaign, Back-Bench pressure, or whatever. Is

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that not the sort of situation that we are trying to get away from?

Mr. Alexander: We should return to the issues under debate, and being investigated by the OFT. By definition, those are issues on which discretion is exercised. There could be circumstances in which highly complex and important matters were under consideration. A reasonable body—the OFT—could reach one conclusion, and the Minister could reach a view that it was necessary to have the matters further investigated. I would make clear the distinction between a decision and a discussion.

Mr. Barnes: I shall not rise to the continuous provocation from the hon. Member for Eastbourne. Is not the reason for the clause quite straightforward? The Bill is entirely different from the Fair Trading Act 1973. Under the 1973 Act it was possible for the Secretary of State to ask for a view from the OFT, and on the basis of that view he could decide whether to go to the Competition Commission. There are no avenues for that in the Bill. Instead, there is a free-standing area for the OFT. With competition policy only, the Government have a fallback provision for exceptional circumstances that could come along—[Interruption.]

The Chairman: Order.

Mr. Alexander: I have a couple of points to make. Of course, the entire scope of the Bill is not fundamentally different from the 1973 Act, many of the provisions of which are drawn and modernised in the Bill. I would concur with the view that one must have regard to the exceptional nature of the circumstances. Although there are complex matters in which discretion may be exercised, it is explicit that it would be an exceptional circumstance if a Minister chose to ask for those complex matters to be further investigated by the Competition Commission. I fear that there is a genuine disagreement about the import and significance of the clause. If the view being offered from the Conservative Benches was that the matter concerns decisions being taken by Ministers as distinct from a request for further investigation by the Competition Commission, I would have more sympathy. However, the provision is important, further strengthens accountability in the overall process and is consistent with the spirit of the Bill.

Huw Irranca-Davies (Ogmore): The arguments of Conservative Members would have validity if there were to be constant challenges to the OFT by the Secretary of State, but they will be rare or very infrequent and on that basis the reserve power seems sensible. It would undermine confidence within the OFT if they became a regular occurrence and I am sure that the Minister will confirm that that will not be the case.

Mr. Alexander: I am certainly happy to give that assurance and I reiterate that, as my hon. Friend said, it would be exceptional for circumstances to demand action by the Secretary of State. I reinforce the point that even under the existing provisions of the Fair Trading Act, Ministers have not sought to act with a cavalier disregard for the position of the OFT or the impact of a referral on business. The provision is sensible and appropriate to ensure that in exceptional

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circumstances—I emphasise exceptional circumstances—Ministers have a power to ask for further investigation.

Mr. Lansley: I remind the Minister that colleagues deflected him in other directions—I understand that—and he has not answered my question. He said that the Secretary of State would decide whether to make a reference on the same criteria. Will that be not only on statutory criteria but on the same guidance that might have been published by the OFT?

Mr. Alexander: Certainly the reference criteria that the Secretary of State will have to satisfy will be the same as for the OFT. However, there are obviously circumstances in which there may be a genuine disagreement about the discretion that must be exercised in reaching a decision on whether to refer.

Mr. McWalter: Does my hon. Friend agree that one of those circumstances might be privileged information? For example, information that is available only to members of the Cabinet or others about foreign countries might have the effect of potentially reconfiguring a market in a way that the OFT might not be aware of. If the Secretary of State took a decision in part on that information, he would not be making it on the same information base as the OFT, which is what the hon. Members for Eastbourne and for South Cambridgeshire keep insisting on. There could be a differential in information.

Mr. Alexander: Tempting though my hon. Friend's offer is, I shall resist being drawn into a series of examples about the exceptional circumstances that I have described. However, his point was well made. I remind the Committee that there will be a degree of accountability in that the Secretary of State is accountable to Parliament. To that extent I see no inconsistency between the independence not just of the Competition Commission but the OFT and its work and a reasonable and appropriate power for the Secretary of State who is accountable to Parliament.

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

The Committee divided: Ayes 10, Noes 5.

Division No. 4]

AYES
Alexander, Mr. Douglas Atkins, Charlotte Barnes, Mr. Harry Borrow, Mr. David Brown, Mr. Russell
Burnham, Andy Carmichael, Mr. Alistair Irranca-Davies, Huw McWalter, Mr. Tony Pearson, Mr. Ian

NOES
Djanogly, Mr. Jonathan Field, Mr. Mark Hendry, Mr. Charles
Lansley, Mr. Andrew Waterson, Mr. Nigel

Question accordingly agreed to.

Clause 124 ordered to stand part of the Bill.

Clause 125 ordered to stand part of the Bill.

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Clause No. 126

Questions to be decided on market investigation references

Mr. Djanogly: I beg to move amendment No. 302, in page 91, line 35, after 'services', insert 'significantly'.

The Chairman: With this it will be convenient to take the following amendments: No. 303, in page 91, line 40, at end insert 'significantly'.

No. 305, in page 92, line 23, after second 'a', insert 'significant'.

Mr. Djanogly: Some of the issues that arise with regard to this batch of amendments have been discussed. However, they should also be debated now, as we are discussing the questions to be decided on the market investigation and significant changes have been made to monopoly inquiries from the 1973 Act.

In the broadest sense, changing the focus from the vague public interest test to one based on identification of the adverse effects on competition that arise from the structure of markets is welcome. We will direct our protests and I hope that—the last debate not withstanding—the political input will be reduced.

Although the new test will more clearly identify what is to be reviewed, one of the main concerns about the new regime is that the 25 per cent. supply share level that is contained in the 1973 Act is missing from the provisions. Therefore, business is rightly concerned that the new all-powerful OFT might use its increased funding and prosecuting powers to roam around on what will effectively be fishing expeditions, in circumstances that do not merit reviews. That could be destabilising to affected businesses and to the business environment in general.

These amendments recognise that the mere prevention, distortion or restriction of competition should not be sufficient grounds for investigations, which should be based on the belief that there is a significant restriction or distortion of competition, to avoid fishing expeditions and unnecessary investigations, no matter how irrelevant the effect is likely to be on competition.

It is important to state that there will always be some distortion of the market: there is no such thing as a perfect market. The key issue is the extent of the distortion of a market. In effect, these amendments are saying that a certain level of disturbance needs to be established, which is the level at which it becomes significant. At that point, it should become unacceptable, because the public would not want that.

We last discussed this type of issue when we debated clause 123. The Minister said that investigations might not lead to action. That is a straightforward and fair point. However, he will also appreciate that the fact that investigations may not result in action will not necessarily be a comfort to businesses, or alter how they will view this legislation.

The Minister also spoke about the possibility that the reputation and credibility of the OFT would be damaged if it went on a series of fishing expeditions, as if that would be the reason why it would not do so. I

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appreciate that the hon. Gentleman has not been present throughout our deliberations, but I have spoken on several occasions about the fears that businesses have with regard to investigations. I mentioned a few examples—which I will not go over again now—to show why there have been problems in practice. Problems do arise. The hon. Member for Hemel Hempstead asked what would happen if the OFT got it wrong. That is also a fair point to make.

It is a case of legislating on the basis not only of what we would like to see, but of what is possible. To that extent, materiality is a valid concern and it is not adequately dealt with in the clause. The amendments will deal with that.

6.45 pm

 
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