Standing Committee E
Tuesday 7 January 2003
[Mr. Roger Gale in the Chair]
4.30 pm
The Chairman: Good afternoon, hon. Ladies and Gentlemen and welcome back. I trust we find you refreshed. I wish you a happy new year, by the end of which I trust that we shall have made modest progress with the Bill.
Mr. Chris Bryant (Rhondda): Only modest?
The Chairman: That only time will tell. Clause 95
Confirmation of directions under s. 94
Mr. Andrew Robathan (Blaby): A happy new year to you, Mr. Gale. I beg to move amendment No. 109, in
clause 95, page 90, line 19, leave out 'the' and insert 'a'.
The Chairman: With this it will be convenient to take the following amendments: No. 110, in
clause 95, page 90, line 22, leave out 'the' and insert 'a'
No. 111, in
clause 95, page 90, line 23, leave out from the second 'that' to end of line 24 and insert 'a direction was justified, they may confirm the direction with or without modifications'.
Mr. Robathan: The amendments are small and would replace the word ''the'' with the word ''a''. The purpose of that is to give Ofcom greater flexibility regarding action that it might wish to take to deal with alleged breaches. The Minister will know that under clause 94 Ofcom can take action to deal with an alleged breach as a matter of urgency and it can make a direction. Clause 95 enables Ofcom to confirm such a direction. The amendments are intended to give Ofcom flexibility to confirm or modify directions that have been made. The Committee might consider that to be a matter of semantics, but it has been suggested to us that the amendment would allow Ofcom to work with greater flexibility.
The Minister for E-Commerce and Competitiveness (Mr. Stephen Timms): A happy new year to you, Mr. Gale, and to all Committee members.
I have listened with interest to the case that the hon. Member for Blaby (Mr. Robathan) made for substituting the word ''a'' for word ''the''. That would give Ofcom the opportunity to be able, when confirming a direction, to modify it as an alternative to withdrawing it. One can see the attractions of doing that. However, the scope of the urgent directions in clause 94 is deliberately narrow. That provision is supposed to be used only in urgent cases. It is right that Ofcom should be able to confirm the original direction only if it found that a contravention had occurred and it was justified in giving the direction in the first place.
Clauses 94 and 95 are not intended to replace the normal enforcement procedures that are set out in clauses 91 to 93 and 96 to 99. It is intended that
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clauses 94 and 95 should be used in conjunction with those other procedures. Ofcom might determine, following an investigation, that it was not justified in giving a direction under clause 94. That does not mean, however, that Ofcom could not continue enforcement action in accordance with the normal enforcement procedures if it chose to do something different from what was proposed in a direction.
We do not want the power to be used too liberally. It is very tightly drawn and we need Ofcom to get it right or not use it at all and use the conventional procedures that are available. That provides an important protection for the companies. On that basis, and having given some thought to what is an interesting and significant amendment, I hope that the Committee will accept that the existing wording of the clause is the right one.
Mr. Robathan: I pointed out that the amendment is small. It is not a matter of semantics, but seeks to allow Ofcom greater flexibility and the chance to modify its decisions. However, it is not something for which we should die in a ditch, nor do we wish to force it to a Division. I beg to ask leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Question proposed, That the clause stand part of the Bill.
Mr. Richard Allan (Sheffield, Hallam): I want to ask the Minister a brief question about clause 95 in respect of confirmation of the directions under clause 94. He said that provisions under clause 94 apply only in exceptional cases. Clearly, the interests of a communications service provider are primarily in respect of its legal relations with its customers. The clause enables discretionary powers under which compensation can be paid.
Under clause 95 and the confirmation of clause 94 orders, communication service providers will want a clear idea of the time that may be involved. For example, if a clause 94 order has been issued and the providers are required to restrict or withdraw a service from their customers, this will trigger a set of legal relationships and activities. They may wish to invoke the force majeure clauses within their contracts with individual customers so that they are not liable for withdrawal of the service. They can say that they are withdrawing the service because the Government have issued an order under clause 94.
When the providers confirm those orders under clause 95, the question concentrates on the extent to which the clause 95 confirmation will follow hot on the heels of the issuing of the order under clause 94 or whether the Government anticipate a long delay. Communication service providers will want to know whether they will receive a clear idea about the length of time under which the clause 94 restrictions may be imposed on them and their customers. The Minister said that the powers are exceptional and, in that context, we expect them not to be invoked for long periods. I am trying to obtain an idea of the time scale, set against the context of communication service providers potentially having complex legal disputes with their customers as they will have been required to
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withdraw a service and their customers will feel that they have been damaged by that withdrawal. In those circumstances, time scales will be critical, especially as they are likely to affect businesses with their sales taking place online. Let us consider the effect on a large online retailer of the withdrawal of service. Whether it will be invoked for a week, a month or six months will be critical to how potential disputes are resolved. Will the Minister clarify the time scales? I recognise that such circumstances are exceptional and that he cannot predict all of them, but it would be helpful if he gave the Committee some idea of the length of time.
Mr. Timms: I agree with the hon. Gentleman that the time scale may be critical and have a big impact on service providers. That is why reference is made in subsection (2) to things happening as soon as
''practicable after the period allowed by OFCOM for making those representations has ended, they must determine''.
Ofcom can, in several cases, reduce the period—usually a month—for the provider to respond to its notification of the contravention and direct the suspension or restriction of a provider's services and the imposition on conditions on the provider immediately. Nevertheless, Ofcom must confirm that direction or revoke it as soon as reasonably practicable, having allowed time for representations and voluntary remedial action. Ofcom can also delay the entry into effect of the conditions at a later date if it so to allow, for example, more time for the provider to introduce corrective measures. Any conditions attached to the direction that require the contravening provider to pay compensation to its customers cannot take effect until and unless the direction has been confirmed under clause 95(6). The hon. Gentleman will accept that it is difficult to anticipate precisely what the periods will be. A period of a month for the provider to respond has been mentioned, but there is an important requirement on Ofcom to act as soon as practicable, which is probably as specific as one can be given the range of potential situations covered by the clause in what would, we hope, be unusual circumstances.
Clause 95 ordered to stand part of the Bill.
Clause 96 ordered to stand part of the Bill.
Clause 97
Suspending apparatus supply for
contraventions of conditions
Mr. Andrew Lansley (South Cambridgeshire): Thank you, Mr. Gale. Happy new year to you and the rest of the Committee.
In its way, clause 97 is exactly like clause 96, but applies to apparatus supply rather than the provision of services. As we previously discussed, article 10(5) of the authorisation directive covers clause 96. In line with that, clause 97 allows such a penalty to be imposed in circumstances of persistent contravention of the conditions.
I have a problem with the clause. EC directives are not intended to govern apparatus supply. For reasons
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of complementarity, the Government have chosen to extend the structure of industry regulation that applies to services to apparatus supply. As we move through this part of the Bill, we are examining two complementary systems: the EC directives on the one hand and the structure of penalties and competition rules contained in the Competition Act 1998 and the Enterprise Act 2002 on the other. Wherever possible, we have sought to establish a direct parallel between the penalties available under this legislation in relation to the telecommunications industry and those available in other industries for contravention of competition prohibitions under the Competition Act. We are looking at those two regimes side-by-side.
Clearly, the two regimes cannot be directly parallel when the EC directive has a different penalty in mind. The directive goes beyond stating that there should be penalties for contraventions and specifies that there must be a power to require a provider to suspend service under certain circumstances. I understand that we cannot escape from that. However, there is no requirement on us to depart from the structure of the Competition Act penalties to control apparatus supply. The question is whether it is necessary to have a power to require an apparatus supplier simply to suspend its business altogether in order to secure compliance with the conditions.
Nobody has suggested that there should be such a power under the Competition Act. That Act looks to construct penalties in terms of a fine in relation to relevant turnover and exactly the same power is available to Ofcom to secure the compliance of apparatus suppliers with this regime. Why is it necessary for there to be a power that goes beyond what is available even under the Competition Act? We would literally be telling apparatus suppliers that they had to go out of business immediately, for some period of time or indefinitely.
We have discussed a fine of 10 per cent. of turnover, which is intended to be a penalty and, I suspect, is intended to be not only proportionate but to have a deterrent effect. The clause proposes more than that. It would put companies out of business. Why is it necessary to stretch the regime to that extent when the decision to apply penalties is at the Government's discretion?
4.45 pm
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