Previous Section Back to Table of Contents Lords Hansard Home Page


Lord Graham of Edmonton: My Lords, perhaps I may assist the noble Lord, Lord Ezra. It is for the party which has tabled the debates to decide how much time should be given to them. Yesterday evening when I looked at the lists of speakers, there were certainly fewer people to speak on the first debate than appeared this morning and at least half as many to speak on the first debate as on the second. The Labour Benches do not like debates to last for more than five hours. We felt that two two-and-a-half hour debates would be unfair, because the second debate had more speakers than the first. That is why we decided that the debates should be timed as they are.

On Question, Motion agreed to.

Business Regulation and Consumer Protection

3.21 p.m.

Lord Borrie rose to call attention to the manner in which United Kingdom business is regulated and the manner in which the interests of the consumer are protected; and to move for Papers.

The noble Lord said: My Lords, in opening this debate, perhaps I may declare an interest in that I am a non-executive director of a number of UK businesses. Each of them in various ways is, of course, subject to quite a lot of regulation. I should add that I have been a regulator in that I was Director-General of Fair Trading from 1976 to 1992 and I am currently honorary president of the Institute of Trading Standards Administration which is the professional body charged with ensuring that there are high standards in the market place at local level.

In recent years we have heard a great deal about the burdens of regulation upon United Kingdom business and, indeed, we have heard quite a lot about deregulation. Like most of your Lordships, I am very keen on getting rid of unnecessary, out-of-date, over-pernickety regulation. But I think that it would be a pity if the case for regulation goes by default because I feel that regulation is absolutely essential for a number of important economic and social objectives. For example, in my view regulation is essential to ensure

8 May 1996 : Column 114

the health and safety of both workers and consumers. It is important for fair trading. It is important for honesty of dealing. It is important for the future of the environment. I dare say we could all add to the list.

Of course, regulation must be administered sensitively. I am very glad to say that trading standards officers, for example, are extremely concerned to create local business partnerships in their area to ensure a strategy not of rushing into prosecution in the courts but of having discussions and giving advice and information to businesses to enable them to conform and comply with the regulations which they have to follow. Businesses can be led to understand and appreciate that regulations are not just there for someone else--for the consumer or for the general public--but are there for businesses because they help to ensure that there is a fair trading environment in which their rivals and all players in the market must play by the same rules as themselves.

The competitive interplay of rival businesses is a vital ingredient in getting businesses to perform well to the satisfaction of consumers and the general public. But every developed country has found it essential to have a certain amount of basic law, basic regulation--I use the word in the Motion--to ensure that businesses do not engage in price-fixing cartels, in anti-competitive practices excluding others from the market place and so on. The United Kingdom was well ahead of the field at one stage but it is now well behind many other countries in the effectiveness of its competition law.

I was pleased last year that fines were imposed by the UK courts totalling some £8 million upon 17 ready-mixed concrete companies, the leading companies in the UK industry. They had been involved in price-fixing cartels going back to the late 1970s. The companies admitted that they had broken undertakings given to the restrictive practices court in 1978-79 that they would not take part in price-fixing deals to the detriment of their customers. Therefore, they were in contempt of court and heavy fines were imposed.

But my pleasure was somewhat tempered by the fact that in my capacity as Director-General of Fair Trading, I had brought proceedings against those companies in the late 1970s and it had taken 17 or 18 years to reach the point at which they were finally brought to book. My experience of trying to enforce United Kingdom anti-cartel law was that it was exceedingly slow to operate; its sanctions were incredibly weak; and the Office of Fair Trading lacked sufficient investigative powers.

The most amazing thing for any visiting German or American examining those matters in this country is that it is not illegal in this country for even the most blatant price-fixing agreement to come into operation unless it happens to affect inter-state trade across the other countries of the European Union. Then they are subject to the tougher rules of the Treaty of Rome. The United Kingdom law merely provides that a cartel must be put on a public register on public display at the Office of Fair Trading. It is not even a criminal offence and nor does it attract any penalty of any kind to fail to do that. In consequence, the United Kingdom law is an

8 May 1996 : Column 115

exceedingly ineffective deterrent to price fixing to the detriment of customers, whether they be business or private customers.

In 1989, the United Kingdom Government, led by the noble Baroness, Lady Thatcher, published a White Paper which I, among others, warmly welcomed. It proposed a radical overhaul of the law, including the prohibition of cartels on the lines of Article 85 of the Treaty of Rome, increased investigatory powers for the Office of Fair Trading and heavy sanctions of substantial fines for breach of the prohibition. Unfortunately, seven years have passed since that White Paper and there has been no attempt to incorporate it into United Kingdom law. Not surprisingly, last year the all-party Trade and Industry Select Committee in another place felt that the Government's excuse of lack of parliamentary time was, as they put it, wearing thin.

Now, at long last, published only last month, we have a consultation paper. It is rather curious to progress from a White Paper to a Green Paper but the Government have produced a consultation paper entitled Tackling Cartels and the Abuse of Market Power. It promises implementation of the 1989 White Paper and I trust that when the Minister replies, she will assure us that that is some sort of earnest for the 1996-97 parliamentary session, assuming that Ministers are in a position to control the legislative programme for the coming session.

I would go further than the consultation paper because, after all these years, it is still disappointing in one respect. It intends to deal effectively with cartels; but it does not intend to deal effectively with the abuse of market power. While something like Article 85 of the Treaty of Rome would become part of UK law, Article 86 of the same treaty would not. However, leaving aside what non-specialists among your Lordships may feel is some detail, there is at least some broad agreement about the law against those who wish to restrain, control, monopolise and avoid competition. Competition is a good thing for consumers and is a safeguard for the consumer interest. But I should like to add something to that point. While competition policy provides a necessary safeguard for the consumer interest, it is not sufficient.

If, as sometimes Members of this House on the opposite Benches might suggest, competition was the complete answer, why is it that in, say, the second-hand used car market (where there is plenty of competition) or, indeed, in the market for financial services in the City of London, such competition is not adequate to protect the consumer or the investor? Why is it that we need legislation like the Trade Descriptions Act and the Financial Services Act? I suppose that the core of the issue in such apparently unrelated subjects is that in those fields, and many others, where complex goods and services are being sold, there is an asymmetry of information, knowledge and know-how between the provider of the services and the customer.

Moreover, in relation to the privatised industries, if there are Members opposite who feel that the advent of competition in the field of gas or electricity may mean that the specific industry regulators of Ofgas, Oftel, and

8 May 1996 : Column 116

so on, can be abolished or done away with, I would suggest that their role is not just to control prices (a process which is at present needed to prevent overcharging by monopoly suppliers) but is, or should be, to ensure what the consumer wants above all, perhaps even above price; namely, adequacy, regularity and assurance of supply. In both the water and electricity industries there has been rightful concern about those matters in recent times. I believe that the objectives of the regulator must also include such environmental concerns as energy conservation and equity between different types of customer. The way things are going, I am a little worried in case domestic customers may have to pay the costs of large discounts to industrial customers.

I welcome the fact--at least, modestly--that some competition is being introduced into the various privatised industries, including, although they do not seem to have gone terribly well, the trials in the West Country for the supply of gas. If competitive gas suppliers emerge, it will be a good thing. But, unfortunately, that seems to have been rather badly managed. Indeed, my friends in the Devon Trading Standards Department publicly made available a report last week showing, for example, that companies were allowed to push householders into signing up with new suppliers before all the potential players had declared their intentions and before any independent advice was available.

The noble Lord, Lord Ezra, who is to speak later, initiated a debate in this House on 13th December last. Like him, I would argue that many of the problems besetting the regulation of the privatised utilities arise from the way in which they were privatised in the first place. Unfortunately, in the main, great monoliths were created which faced little or no competition. If I may personalise it, it seems to me that Sir George Jefferson in British Telecom and Sir Denis Rooke in British Gas should never have been allowed to have their way.

Moreover, although some competition is now coming in, it is difficult to discern any consistency in government policy. The noble Lord, Lord Ezra, asked a Question earlier this afternoon and I listened to the response. In fact, we have seen events go wider than those mentioned in the Question: we have seen cross-utility mergers being allowed between the electricity companies and the water companies. They may adversely affect competition or the consumer interest, yet they were not even allowed to be referred to the Monopolies and Mergers Commission before consideration. We also saw a merger between Scottish Power and ManWeb which, similarly, did not go to the MMC. Then, to the astonishment of all, including Members of this House who heard the Minister's response to that Question earlier today, the President of the Board of Trade barred the two English power generators from acquiring regional electricity companies. Neither the City nor the Financial Times--nor, indeed, many others--would have been able to understand what was going on had it not been for the fortuitous fact that the reports of the MMC in those cases were leaked and two powerful politicians of the government party, Mr. Norman Lamont and Mr. John

8 May 1996 : Column 117

Redwood, made clear that they were not in favour of the view of the MMC and not in favour of the generator merger going ahead.

I regret that I was not able to take part in the debate on 13th December, but at that time I was only a Peer in embryo. I believe I can say that I was expected but that I had not yet arrived. Therefore, I should have liked to say a few words at the conclusion of my comments on price regulation for the utilities and on regulatory institutions for the privatised utilities in order to complement what the noble Lord, Lord Ezra, said. However, I see from the clock that I have run out of time so I had better cease at this point. I shall listen to what other speakers have to say about that and, indeed, about other matters. My Lords, I beg to move for Papers.


Next Section Back to Table of Contents Lords Hansard Home Page