Enterprise Bill

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Mr. Lansley: We seem to be touching on the technical point that arose under clause 133, and it is precisely what I am concerned about. If there were a national security consideration and it had no competition effects, surely the Secretary of State would want to retain a reserve power and take some remedy through a market investigation to deal with the relevant public interest effect. Unlike some of our other arguments, I acknowledge that a public interest may need to be protected. If no competition effect arises, the Secretary of State has no power to determine the public interest consideration.

Miss Johnson: The hon. Gentleman is encouraging me to write to him further. There will be a hierarchy for taking into account competition, public interest, customer benefits and the regulated statutory functions. If the Secretary of State accepts a Competition Commission analysis of competition, she will choose the remedy in the light of all the relevant considerations. I take the hon. Gentleman's point that, supposing no adverse effects were identified, how would we meet the possible public interest requirement. I undertake to write to him about that.

Mr. Purchase: The matter is becoming confusing and it is right that we should understand it properly. Notwithstanding the fact that the Secretary of State may find other reasons, let us deal specifically with security. Even though no competition issues may flow from what the Secretary of State considers a security issue, would not she decide that the security issue overrides all the other considerations?

Miss Johnson: No. However, given the interest that has been shown in the matter, I still undertake to write to members of the Committee about it.

Question put and agreed to.

Clause 139 ordered to stand part of the Bill.

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Clauses 140 and 141 ordered to stand part of the Bill.

Clause 142

Power of veto of Secretary of State

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

11.45 am

Mr. Waterson: My comments echo the type of nasty technical point that my hon. Friend the Member for South Cambridgeshire is prone to make about such matters, and it may be that we need a detailed letter from the Under-Secretary setting out how all the clauses hang together. When we debate clause 145, we shall return to the separate issue of the definition of public interest and so forth; we need to debate that topic more than once.

I am concerned about the bald title of the clause. Given the complexity and technicalities of the Bill, there must be provision for an interface between what the Secretary of State and the OFT are doing. However, I am alarmed that the Secretary of State will have very wide powers. The OFT may have good reasons for wanting to proceed with particular undertakings that it considers sufficient to sort out problems in particular cases. Why should the OFT be subject to a sweeping power of veto by the Secretary of State?

As a general theme in the Bill, we are concerned about the Government's purported aim of taking politicians out of decision-making in this subject area. We broadly support that aim, which should be made abundantly clear, although we believe that it probably already happens in practice. However, on more than one occasion, the Secretary of State has seemed doggedly to want to hang on to some of the powers currently held by politicians. Although I accept the need for a defined interface between the Secretary of State and the OFT, is it necessary for the Secretary of State to retain the wide power of veto?

Mr. Djanogly: Is there a deadline for the Secretary of State to give consent under the provisions and, if not, why not?

Miss Johnson: I reassure the hon. Member for Eastbourne that the reason for the provision is that there may be proposed undertakings in lieu of a reference that operate against the public interest. The clause would give the Secretary of State the power to block acceptance of any such undertakings. The hon. Gentleman was right to ask whether such powers were absolutely necessary, but I am sure that he and I could readily agree that there are circumstances in which the Secretary of State would need such powers.

Mr. Waterson: Again, in wrestling with concepts of public interest, it would be useful to us both if the Under-Secretary provided concrete examples of the type of undertaking that would be damaging to the public interest. Why on earth would the OFT

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consider accepting such undertakings in the first place?

Miss Johnson: It is quite difficult to give examples, because we envisage the powers being used only in rare circumstances; when the OFT seeks undertakings in lieu of reference in a public interest case. We must ensure that the undertakings are not inappropriate in light of a legitimate public interest issue. The nature of undertakings can be tremendously varied, and it would be difficult to give specific examples to illustrate the point. It is likely to be a rare recourse, but it is important to have the provision to ensure that the Bill can do what may sometimes be necessary.

Mr. Djanogly: Did the Under-Secretary consider my short point about whether there should be a deadline for the Secretary of State to give her consent?

Miss Johnson: I apologise to the hon. Gentleman for not having responded. There is no deadline or specific time frame but there is a requirement on the Secretary of State to respond as soon as practicable. The Secretary of State also has a duty to act reasonably. Safeguards are, therefore, built in.

Mr. Djanogly: In such circumstances, would it not be normal to have a time limit?

Miss Johnson: In many cases in the Bill an assumption is made and, sometimes, spelled out, that the time frame will be as soon as is practicable. That is, apparently, normal provision under administrative law. In this case, that is the right time frame in which to demand a response, as it may be difficult to know which issues might arise. I assure the hon. Gentleman that it is not an attempt to elongate the process. I share his concern that the process should be transparent and timely throughout.

Question put and agreed to.

Clause 142 ordered to stand part of the Bill.

Clause 143

Further interaction of intervention notices with general procedureMr. Waterson

: I beg to move amendment No. 310, in page 104, line 19, leave out `126 and'.

This is a short point. Subsection (1) states:

    "Where an intervention notice  . . . comes into force in relation to a market investigation reference, sections 126 and 128 to 130 shall cease to apply in relation to that reference."

This is all part of our eternal quest to improve, brush up and generally make the Bill a wonderful addition to the statute book. Surely there are definitions in clause 126 that are essential to the working of clause 143. Why, therefore, should they cease to apply? It is a probing amendment. I suspect that the draftsman's word processor slipped again, and I look forward to hearing what the Under-Secretary has to say.

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Miss Johnson: This relates to our earlier discussion of amendments Nos. 304, 308 and 309. I am grateful to the hon. Gentleman for having raised these issues, and I do not want to shock him too much by saying again that our intention is that the definitions in clause 126 should apply to public interest cases. I would welcome the opportunity to study the points involved further, with a view to introducing amendments to deal with the issues raised on Report. Again, I reassure the hon. Gentleman that we should like to take away the amendment and come back with appropriate amendments. I therefore ask him to withdraw the amendment.

Mr. Waterson: This is a red-letter day. On that basis, I am all too willing again to beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 143 ordered to stand part of the Bill.

Clause 144 ordered to stand part of the Bill.

Clause 145

Specified considerations: Part 4Andy Burnham

(Leigh): I beg to move amendment No. 376, in page 105, line 8, after `security', insert `and sport'.

Variety is the spice of life. I shall not divert the Committee long on the amendment, which is narrow but significant and raises interesting and important issues.

The amendment would make sport a second public interest issue that the Secretary of State could specify in serving an intervention notice into a market investigation by the Competition Commission. Even I would not accept that sport is in the same bracket as national security when it comes to the public interest, but it plays a vital role in Britain's social fabric, which is why it needs safeguarding. Why is it necessary? Main sports were invented in this country not originally for profit-making enterprises, but as voluntary and amateur activities for leisure and recreation. In recent years, the influx of vast sums of revenue from broadcasting has brought sports into the purview of the competition authorities.

Sport is unique among markets in that the businesses that make up the market—the professional clubs—rely on their competitors to survive. More importantly, they need their competitors to remain healthy and strong. That is what creates a vibrant and buoyant sports league with an uncertainty of outcome and that, in turn, is what is of interest to the public. It is fair to say that sports leagues are perhaps the most blatant form of public cartels in this country. Furthermore, they prevent, restrict and distort competition.

Sports leagues need to maintain competitive balance and, to do that, they need to operate internal rules and practices, such as transfer fees and the collective selling of marketing and

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broadcasting rights. In recent years, the FIFA transfer system has come into conflict with employment legislation and the collective selling of sports rights continues to conflict with competition legislation not only in this country, but in Europe.

Collective selling has two distinct functions. First, it allows for resources to be shared out equally among the members of the league, thereby preventing the emergence of dominant clubs. Secondly, it provides for resources to be top-sliced and reinvested in the grass roots of sports or in wider public interests, such as the rebuilding of stadiums following the Hillsborough disaster. The rules have never before troubled the competition authorities, but most relevant to the amendment is the OFT's claim, brought under the restrictive trade practices legislation three years ago, against the Football Association premier league and its selling of collective broadcasting rights. That was one of the OFT's most high-profile failures to date.

Under that legislation, there were seven gateways through which a restrictive agreement could pass and be allowed to stand. One was if it brought significant and substantial benefits to the public, and it was on those grounds that the premier league argued its case. The judge in the restrictive practices court accepted the arguments advanced by the premier league and, as a result, the money that has been generated from that deal is now partly being pumped into grassroots football in this country. If the OFT had won the case, the consequences for all organised sport would have been disastrous. All other collectively negotiated television deals would have collapsed as there would have been no legal basis for them to continue. It would have put all the power in the hands of the broadcasters and the very big clubs, at the expense of the smaller and weaker clubs.

The premier league's argument was successful because of the wide definitions of the public interest that were allowed under the restrictive practices legislation. While I accept that those wide definitions needed to be narrowed—I welcome the Bill in that it narrows the tests—if the same case were brought today by the OFT against the premier league, I am confident that it would be upheld and that the collective deals would be struck down. That would pave the way for the individual selling of rights by clubs.

In specifying sports, I am not opening the Bill to wider abuse, nor do I want to give the sporting bodies in this country carte blanche to carry on without regard to the public interest. The amendment would give the Secretary of State the ability to question whether the proceeds of any collective deals were being used for purposes for the wider public good. Such an approach would be entirely consistent with United States anti-trust legislation. In the early 1960, a US court ruled that the collective sale of television rights by sporting leagues violated US anti-trust law. Congress acted quickly to grant an exemption to such sales under the Sports Broadcasting Act 1961. Today,

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that exemption from anti-trust law exists for American football, baseball, basketball and hockey.

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Prepared Tuesday 7 May 2002