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The Chairman: With this we may discuss the following amendment: No.106, in
Mr. Greenway: We are in similar territory to our previous discussion. Clause 90 gives Ofcom powers of enforcement in respect of all types of conditions pursuant to clause 41. Where Ofcom has reasonable grounds for believing that a person is or has been in Column Number: 021 breach of any condition, it may notify that person accordingly, allow them time to make representations and take steps to make them comply.The amendment focuses on whether there are ''reasonable grounds for believing''. Notwithstanding the Minister's earlier remarks on Ofcom's duty under clause 3 always to act in a proportionate and measured way, it seems to us inappropriate for a person to be expected to remedy notified contraventions only on the basis of there being reasonable grounds for believing that there may have been a contravention. It also does not seem reasonable and appropriate that remedying a notified contravention should be required to be done at the same time as the person concerned is making representations. The requirement to remedy should be in place only after there has been a finding of guilt, which would occur after a full investigation in which the person concerned would have had a full opportunity to present their case and make their representations. My hon. Friends and I think that the amendment is a more reasonable way of dealing with the matter. There ought to be an investigation and a finding that there is a problem as opposed to Ofcom simply saying that it thinks that there are reasonable grounds for believing and therefore intends to impose a condition with which, although they can still make representations, a service provider or supplier must comply. That approach does not seem to be correct. The problem is that the clause does not correctly implement article 10 of the authorisation direction, which states:
Ofcom's saying that it has ''reasonable grounds for believing'' is not a finding. Faced with a finding of guilt, an undertaking has a clear choice between remedying the matter or maintaining their innocence, which would risk enforcement action and the imposition of a penalty. It is not as though Ofcom does not have strong powers to deal with an undertaking where there has been a clear finding of guilt or a breach. We think that the group of amendments would bring the clause more in line with the requirements of the directive, and put in place a process that achieves greater equity and makes better sense. At this juncture, I should also comment that the enforcement requirement of other clauses in part 2 uses the same formulation as the one that we are complaining about. I suggest that the Minister should keep our concerns in mind; we would like all those clauses to be changed to refer to a finding of a breach, and not have Ofcom's action on an undertaking, which could be draconian, based merely on ''reasonable grounds for believing''. Mr. Timms: Clause 90 is the first of a group of clauses up to clause 100 that set up a new system for enforcement action against those who breach any of the conditions of entitlement. The system will replace the arrangements under the Telecommunications Act Column Number: 022 1984 for enforcing breaches of licences issued under the Act. Because of the importance of the matter, I shall put the amendments in context and outline the main provisions of the new enforcement regime.Critics of the current system, including those mentioned during the debate on the previous clause, have commented that it is unduly weighted against those who have sought to have an alleged breach investigated and enforced. They have a point, which I think was the import of our earlier debate. They have been concerned that the system does not provide enough incentives to avoid breaches, or sanctions against repeating them; and that it is too slow and inflexible in its operation. As a result, the effective, competitive development of the industry, and its delivery of greater choice and lower prices, has been hampered. The new regime addresses those concerns by introducing several new elements, as well as fully implementing the relevant provisions of article 10 of the authorisation directive. In future, Ofcom will be able to impose financial penalties on those found to be in breach, and to require them to remedy the consequences of the breach as well as—as happens at present—ordering them to comply in the future. Those are significant additional strings to Ofcom's bow. Third parties will be able to bring civil proceedings on their own initiative for the recovery of losses suffered, even where Ofcom has not previously taken action on the matter. There are special provisions to allow Ofcom to take rapid action in urgent cases, and fall-back powers for Ofcom to require the suspension or restriction of a person's entitlement to provide networks, services or associated facilities in the case of a particularly serious and repeated breach; failure to observe such requirements will be an offence. Those changes are a significant enhancement of the regulator's powers. It would therefore not be right to introduce them without at the same time providing firm procedural safeguards for those subject to enforcement action. The new right of appeal on the merits to the Competition Appeals Tribunal, set out in clause 187, is a major safeguard. In addition, we propose the right for those subject to enforcement action to argue their side of the case before a definitive decision is taken, and that no penalty is to be posed against someone contravening a condition if they promptly take appropriate action to comply, and to remedy the consequences of the breach as soon it is brought to their attention. Ofcom will have to publish guidelines on penalties, having first consulted the Secretary of State. The method used for calculating turnover for the purpose of penalties has to be approved by resolution of both Houses. Suspensions and restrictions of entitlement are possible only if strict conditions are met. In the case of third-party actions, it will be a defence for the provider to demonstrate that all reasonable steps were taken to ensure compliance and due diligence was exercised. Contrary to the hon. Gentleman's argument, we have an appropriate set of safeguards to protect those against whom action may be taken. Mr. Greenway: If I have understood the Minister correctly, that structure is fine, but the basic point is Column Number: 023 that Ofcom may make a finding based simply on what it believes to be reasonable grounds rather than a proper finding. It is all very well for the Minister to say that if the undertaking states that it will not repeat the action, it will avoid the penalty, but if it does not agree and asks for evidence for the finding of guilt, it will have a point.
10.30 amMr. Timms: The problem with the hon. Gentleman's argument is that it would build in additional delay precisely to damage the position of competitors to a dominant provider in the way we discussed during our previous debate. Under the provision as drafted, Ofcom can begin the enforcement process when it determines that there are reasonable grounds for believing that there is a breach of condition. I accept that in urgent cases—they are defined quite narrowly in clause 94—Ofcom cannot take further action until it has a definitive decision on whether there is or has been a breach, having allowed an opportunity for the subject to make representations and, if appropriate, to take corrective action voluntarily. Even when it does then find that there has been a breach, Ofcom cannot impose a financial penalty or take any other enforcement measures if appropriate corrective action has been taken within the period of at least a month, except in urgent cases that are allowed for in the notification of contravention. The clause as drafted enables Ofcom formally to notify the subject of the case against it and to give it time to react before reaching a definitive view. To that extent, the amendment would make no change. However, it would prevent Ofcom from starting enforcement action on the basis of a ''reasonable cause to believe''. It is important that Ofcom should be able to do that to promote competition and safeguard against anti-competitive arrangements rather than having a definitive decision that there was a breach. That change in the amendment would risk frustrating the main purpose of these measures: to allow Ofcom to act speedily and effectively in the interests of competition. Ofcom will still have to have a reasoned case and evidence to back it up before issuing a notification, so it will have to have ''reasonable cause to believe'', which is not same as suspecting or thinking it possible. There will have to be reasonable cause before acting. Amendment No. 106 aims to replace the reference to ''making representations'' from the subject of a contravention notice before Ofcom makes a definitive decision with one allowing his views to be stated. That is the phrase used in article 10 of the authorisation directive. We have discussed previously the precise words. The word ''representations'' in this context is well understood by the industry and, indeed, it features in amendment No. 105. It is used in the same sense elsewhere in United Kingdom law—for example, in proceedings under the Competition Act 1998 and the Consumer Credit Acts. It has a more precise meaning than ''stating views''. ''Making representations'' implies that the subject of a notification would be Column Number: 024 expected to produce reasoned arguments and evidence against the alleged breach, whereas simply ''stating views'' could involve a flat denial. We need people to go further than that.The amendment would not assist with speedy and effective decision-making, nor would it assist the subject. Ofcom might just conclude that the case was justified because it had not received representations to persuade it otherwise. I hope that the hon. Gentleman will accept that the way in which the provision is set out in the Bill has achieved what is a difficult balance.
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| ©Parliamentary copyright 2002 | Prepared 19 December 2002 |
