Joint Committee on the Draft Communications Bill Minutes of Evidence

Examination of Witnesses (Questions 152-159)


MONDAY 27 MAY 2002


  152. Mr Vickers, would you introduce your colleagues.
  (Mr Vickers) I am John Vickers from the OFT. On my right is Margaret Bloom, who is Director of our Competition Enforcement Division.
  (Dr Morris) I am Derek Morris, Chairman of the Competition Commission. I have colleagues but they have been forced onto the row behind me! I may need to refer to them, particularly on legal issues.

  Chairman: Welcome to you all. Paul?

Paul Farrelly

  153. There have been some concerns about OFCOM's concurrent position and the less voiced concerns that OFCOM takes on too many of the responsibilities that have been the preserve of the OFT traditionally and that this might affect OFCOM's ability to be nimble and indeed a light touch regulator. We have asked these questions of other regulators. Could you explain to us how you see the roles of OFCOM, the OFT and indeed the Competition Commission and the EU Commission once this Bill and the Enterprise Bill become law? I know such a general question is very difficult to answer, so please feel free to relate your answer to alleged anti-competitive practices in satellite broadcasting in particular, because I have got a few supplementaries in other sectors for which you might have responsibility in the media industry.
  (Mr Vickers) I shall feel equally free not to do that! I shall leave Competition Commission matters to Derek and his colleagues, but let me try to address the other aspects. The first thing to say is that concurrency is not new. Under the Competition Act it has been going for some time including in relation to Oftel. It is a concept that is relevant not only in the competition area; in fact we have some consumer protection powers where again there are concurrency arrangements. The fundamental principle, as I see it, is that the one who is best placed acts, and it avoids duplication, as David Edmonds was describing earlier on. I think the effect of the Communications Bill, assuming it becomes law, would be that the sphere of activity where Oftel has up until now had concurrency under competition law will widen to some related matters where the presumption is that OFCOM will take cases in that area rather than ourselves. We could do so, but that presumption will clearly be there. You also mentioned the European system. In relation to mergers, if I could comment on that, there concurrency does not apply and will not apply. Of course, the European Merger Regulation catches mergers that cross certain trans-national thresholds and that Regulation itself is under review at the moment. We have a role under that process and mergers that have gone to Brussels can sometimes be repatriated , again very much on the principle of the best placed acts, where there are primarily national issues arising. Also our own Competition Act provisions mirror European law in Articles 81 and 82, and there trans-national cases, as it were, could be taken forward by the European Commission. Private actions are possible too, so it is not just the competitions authorities.

  154. Is there anything that can be learned from the OFT's experience of competition issues and related issues of dominant TV operators in the sky that could be incorporated usefully in this Bill that are not already in there? Are OFCOM's powers deficient in any respect, in your experience?
  (Mr Vickers) Our experience under the Competition Act is in its early days, but it ranges across a diverse set of industries. With that Act we are taking forward a number of cases under that legislation. In the Communications Bill there are also what are sometimes called the ex ante provisions coming from the European Directive. Those have been in the Oftel bailiwick up until now rather than our own sphere, so we would not be well placed to form judgments on the basis of that experience.
  (Ms Bloom) The Competition Act has a very important section, Section 60, under which the jurisprudence under 35 to 40 years' worth of EC competition law is carried through into UK law. That is very important in the way that competition powers work. These are powers that are concurrent with Oftel and will be with OFCOM in future. So if you ask should we improve it, in a sense we are asking should we also improve 40 years' worth of EC competition law? I think that has worked well.

  155. Who do you think should police the media ownership rules that remain as this Bill goes through Parliament? Should you do it concurrently together or should either OFT or OFCOM do it?
  (Mr Vickers) That question has two parts. The first has to do with the application of general competition law. The Enterprise Bill that is before Parliament at the moment is reforming, among many other things, the general merger regime where the OFT has a role at the first phase of cases. As it is now we advise on referral. In the Enterprise Act world, if that legislation is enacted, reference decisions would be made by us and those references would go to the Competition Commission at the second stage. The second aspect is should there be media ownership rules which go beyond the provisions of the general merger framework and it is a question for Government and Parliament to decide what, if any, sector specific measures are required on other grounds, ie, plurality and diversity. I would say that competition is positive for those goals but that is not to say that it is sufficient for the achievement of those goals.

  156. There is a reason for this line of questioning which goes back to the concern that if OFCOM takes on too much it is going to be so unwieldy that it is not going to address the questions that many people feel are of crucial importance to this country like broadband. Should OFCOM get involved in looking at things like newspaper mergers or should we leave that to the OFT and the Competition Commission as previously?
  (Mr Vickers) At the moment there is a newspaper regime which the Competition Commission are better placed to talk about. The newspaper area is also one where the proposals for the reform of communications legislation would give OFCOM a role in some cases involving plurality issues. We as the OFT would see ourselves as the competition analysts. That would be our role there, as elsewhere.

Lord McNally

  157. Just on that line of questioning, there is an old saying that "justice delayed is justice denied" and in an industry with fast technical changes and with convergence, there is a danger that if OFCOM is not nimble enough then anti-competitive practices can be put in place and by the time a slow-moving regulator gets round to correcting them, the abuser will have killed off the competition. Do you think that the Bill we are putting in place and the powers that we are giving OFCOM are going to give us a nimble, fast-moving regulator that can deal with that kind of tactical abuse?
  (Mr Vickers) There are different aspects of public policy which bear on that. Some can be put under the ex ante label—merger control is an example, or the measures which Oftel applies at the moment involving significant market power and so on. As far as the Competition Act is concerned (sometimes described as ex post) the first thing I would say about that is that the Competition Act has penalties as part of the system in a way that used not to be the case under UK competition law and therefore part of the benefit of the Act comes through the deterrent effect. It is not as though it has no influence on cases until cases are concluded—this is a pan-economy point, not a point specific to this sector—because of the sanctions which are attached to this measures. You spoke of justice. Another thing that justice requires is due process. Taking forward a case under the Competition Act—or referring to the three or four decades of experience under European competition law, or indeed the century plus experience of the US anti-trust cases—necessarily takes time for that reason as well.

Mr Lansley

  158. Could I put to you something very akin to what I was asking David Edmonds earlier, which is given the experience of concurrency and obviously the implication is that—and I do not want to put words in David's mouth—if people cared to look hard enough at what had been already said by way of the regulations, your guidance on concurrency and the working party and so on, they would know how it all worked, in practice what would be your view about there being any advantage in OFCOM exercising powers in relation to a section up until the point where OFCOM itself determines it is a fully market competitive area of activity, perhaps not the whole communications sector by any means but some part of it, and therefore regulated by the OFT rather than OFCOM?
  (Mr Vickers) Just so I am clear about your question. In your example it would be regulated by the OFT at some point after which—

  159. Yes, but in effect OFCOM, while enjoying concurrent powers, would say that this aspect of the sector that we regulate is now fully in the competitive market-place and it can be regulated by the OFT, so that there is a degree of consistency to be had from the industry recognising that the OFT will regulate in future rather than OFCOM?
  (Mr Vickers) If one speaks of the Competition Act, first of all, it is often an open question as to whether or not a point such as that has been reached. There is no magic formula number in terms of market share or whatever which says there are going to be no more competition problems in this sector, because threats to competition or concerns about collusion might come and go. I do not see a readily defined threshold in those terms. It is a perfectly sensible way of organising things according to the principle of "best placed acts" that when OFCOM replaces Oftel and the other regulatory bodies that will go into OFCOM that concurrency is extended beyond the Oftel remit as now to the somewhat wider OFCOM remit.

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