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Lord Kingsland moved Amendment No. 5:

Page 2, line 23, at end insert--
("(3A) An agreement, decision or practice to which subsection (1) applies shall not, for the purposes of this Part, be within the scope of--
(a) section 18(1);
(b) the Fair Trading Act 1973; or
(c) the provisions of, or any licence granted under,--
(i) the Telecommunications Act 1984;
(ii) the Gas Act 1986;
(iii) the Electricity Act 1989;
(iv) the Water Industry Act 1991;
(v) the Electricity (Northern Ireland) Order 1992; or
(vi) the Gas (Northern Ireland) Order 1996,
and any question whether such an agreement, decision or practice is to be prohibited on competition grounds shall be determined in accordance with this Chapter and not in accordance with the conditions of any such licence irrespective of whether such conditions are expressed in similar terms to subsection (1).").

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The noble Lord said: The purpose of the amendment is to invite the Minister to accept that implementing a single prohibition through two different regimes operated by two different sets of individuals is a recipe for both excessive cost and immense confusion. I beg to move.

Lord Borrie: For the benefit of those--of whom I am one--who do not know quite what the noble Lord is getting at, would it not be appropriate for him to say just a few more sentences?

Lord Kingsland: I have already moved the amendment.

Lord Simon of Highbury: The noble Lord has moved the amendment. The point raised is the relationship between two prohibitions, the Fair Trading Act and the legislation regulating the utility sectors. It may be helpful if I explain how the Bill is intended to operate in this respect. I shall deal with each of the relationships in turn.

The two prohibitions introduced by the Bill will operate hand in hand. Essentially they will have the same relationship to one another as do Articles 85 and 86 of the treaty. That relationship is well established and works satisfactorily in practice. Accordingly, for example, in considering whether to give an individual exemption for the Chapter I prohibition, the Director General of Fair Trading will have to take account of the Chapter II prohibition. He should not grant an exemption if in doing so he would be exempting under that prohibition something that appears to him to be prohibited under the Chapter II prohibition.

These matters must necessarily be considered in tandem as an agreement may constitute an abuse of the dominant position. Similarly, it would be wrong for a firm to be allowed to abuse a dominant position because an agreement benefited from a block exemption. Enjoyment of the benefit of a block exemption under the Chapter I prohibition should not bring immunity from action under the Chapter II prohibition. The inter-relationship between the two prohibitions ensures that that will not be the case.

More generally, a jurisdictional dividing line between the two prohibitions would conflict with the Government's desire to see the prohibitions applied consistently with Articles 85 and 86. As the noble and learned Lord, Lord Fraser, noted, and as I have already said, consistency in interpretation will bring significant administrative benefits to business.

The relationship between prohibitions and the Fair Trading Act monopoly provisions is the subject of a separate amendment which we shall debate in due course. However, the Fair Trading Act provisions enable wider market investigations than are possible under the prohibitions. Essentially they enable investigations where competition issues arise fundamentally from structure of the market rather than from restrictive agreements or the specific abuses which we discussed with regard to the alignment of Articles 85 and 86. We

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do not think it right or practical to circumscribe the monopoly references and investigations under the Fair Trading Act. That may be a point to which we shall return. We do not believe that a strict jurisdictional separation would work well.

It is important to say that, before framing a reference, the director general might have to examine every aspect of the behaviour of, and relationships between, the players in a market in order to decide what could be examined by the competition commission on a reference; or the competition commission would have to determine what fell within the prohibition regime in order to exclude it from its considerations. The prohibitions will be the primary tools for dealing with anti-competitive behaviour in the market place. The Fair Trading Act provisions will be reserve powers to deal with certain limited market circumstances.

As regards the relationship between the prohibitions and the Fair Trading Act merger provisions, Schedule 1 to the Bill provides for a clear demarcation between the two. We can debate that demarcation when we reach the relevant parts of the Bill.

I think that at this stage I am along the road to addressing the noble Lord's point.

Lord Kingsland: Does the Minister feel that he has addressed the final part of the amendment with sufficient clarity and detail to respond to my own amendment?

Lord Simon of Highbury: Of course, the noble Lord spoke but briefly and his clarity was magnificent. I spoke at some length and I hope that I clarified the position.

Lord Kingsland: I would like to thank the Minister for his extremely full reply to my brief question. As to the question of the Fair Trading Act, the Minister will recall from our exchanges at Second Reading that he can expect at some later stage in the proceedings an amendment proposing that the activities of the competition commission, in so far as they refer to complex monopolies and monopolies of scale, ought to be transferred to the Office of Fair Trading. I accept that this is not the moment to go into detail on that point.

As far as the individual public utility regimes are concerned, and considering that there is so little in the Bill so far to show how costs will be saved in respect of the application of these regimes and that certainty will be guaranteed, does he think that the maintenance of a dual regime will redound to the benefit of competitiveness in the United Kingdom? There is nothing on the face of the Bill to ensure that the operation of two separate regimes in relation to the single prohibition will not lead to lengthy procedures and problems of double jeopardy. I would like him to deal with that matter in a little more detail.

Lord Simon of Highbury: That fuller question deserves a fuller answer. Perhaps I can now turn to the relationship between the prohibitions and the utility legislation because that will be helpful and we can talk about the implications subsequently.

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The two prohibitions introduced by the Bill are general prohibitions appropriate to the whole economy, and we believe that it is right that they should apply equally to the utility sector. Indeed, the amendments that we are discussing do not challenge that presumption.

It is important that competition is developing in the utility sectors. I believe that when we talked about it previously we talked of the dynamism of these particular market places being different from the general market place because we are creating markets in the utility sector. However, for that reason, there is still a strong case for retaining more detailed sector specific regulation of such matters as pricing, including the price caps. The access to networks is a crucial issue, as the dynamics of that marketplace develop, if we are talking about some of the energy sectors, the electricity sector and the gas sector.

We think it is right in the utility areas that the prohibitions apply and this seems to be part of the purpose behind the noble Lord's amendments. However, it is already the effect of the Bill. In other words, if one or other of the prohibitions is breached, action to be taken under the Bill would be possible, irrespective of the licence regime, so the general prohibition would apply. If the company is required to do something by law--and by this I include by a licence condition--then it is right that it should not be prohibited from complying with that requirement. The Bill achieves this result as well.

I hope in some way that much of what is sought in the amendments is achieved by the Bill. However, where the amendments seek to impose strict jurisdiction barriers, the changes, in my view, are unnecessary and probably undesirable. In practice, we believe that the Bill will ensure that the different regimes that we have discussed--the utility regime and the general regime--will apply in a complementary and common sense way.

The point in common-sense terms is the differing nature of the market places and the particular dynamism of the utility markets as they develop. Therefore, we need to see special capacities developed to understand those markets. Double-banking within the system would cause another kind of overload and would perhaps not be the best use of the valuable and scarce resources available for making the important judgments about the issues we have just discussed.

If that was a full enough answer to the second, rather fuller question, I ask whether the noble Lords is prepared to withdraw the amendment.

4.15 p.m.

Lord Ezra: Before the noble Lord, Lord Kingsland, answers that point, perhaps I can say that I am a little confused because it seems to me that that section of the amendment dealing with the privatised utilities legislation does provide the opportunity for the enterprises to act under licenses under the law. I would have thought that it was perfectly straightforward to say that so far as they do so they would not be subject to

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the impact of the prohibitions under this Bill. I am not absolutely clear why the Government seem to have any doubts about that.

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