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Lord Simon of Highbury: I was enjoined a while ago by my noble friend Lord Graham to listen--and indeed I have. I have learned something rather important: that Llandysnl is a place that more than one person knows well in this House. I am also sure of another thing: whilst now knowing of it, I cannot spell it.

The discussion that we were all privileged to hear on the difficulties of balancing competition and value and service to the community at a cost--which is the real nub of this question--were excellently debated from both sides on the other side of the Committee. That of course makes the position a little more complex for me but it is interesting in terms of balance of advice. I do not wish to open a debate on our views on health policy when I am debating the Competition Bill, I could forebear perhaps to make a glancing reference to the

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point that the noble and learned Lord, Lord Fraser, made about one of my colleagues taking a neutral position. Perhaps "neutral" was used in the sense of "balance".

I will not go further on health policy but I will take the opportunity of welcoming him to the fraternity of the oilers. I miss that. I wish him great good fortune and as much happiness as I had in my brief period in the business--brief to the extent of 36 long years.

I came to the crucial question of the balance that we are thinking of very carefully and trying to strike. First--and I do not mean this in any way as a pun-- I have to issue a health warning. The noble and learned Lord, Lord Fraser, mentioned and made clear that the Director General has announced his intention to refer retail price maintenance of over-the-counter medicines back to the restrictive practices court.

I am sure the Committee is aware that the Government have no role in decisions of the court or in the Director General's decision to refer. However, despite the intention to refer, we have thought it right that agreements which have been approved by the court should gain, on a transitional basis, exclusion from the relevant provisions of the Bill. That would be achieved by the cross referencing that the noble and learned Lord, Lord Fraser, mentioned, in Schedule 13. That would avoid repeating the scrutiny at too early a stage.

The period would start from the time the prohibition came into force, or, in the case of continuing proceedings, when the proceedings come to an end. The Bill sets that transitional period at five years. I refer here to the issue which the noble and learned Lord raised with me, which is the time issue relative to a reference. I hope that I have given you a clear answer on how that would follow. Members of the Committee will no doubt note that I have the extraordinary weakness of saying "you" on occasions. It is, I am afraid, my version of "um", as I think, but is in no way meant to show disrespect.

Similarly, decisions under the Bill will be a matter for the Director General, subject to appeal to the new competition commission and, on points of law and the amount of penalties imposed, to the courts. I am now taking us back to the relationship under the new agreements. I am sure that the Committee will understand that it is not right for Ministers to comment upon the position under the Bill of any particular agreement on an arrangement such as resale price maintenance for medicines.

My noble friend Lord Graham's amendment, and his speech to which I listened carefully, raised important issues as to how the framework set down in the Bill--and, in particular, the criteria for exemption which the noble and learned Lord, Lord Fraser, mentioned--will operate generally. That is a matter which should properly concern us and which we need to get right.

By virtue of Clause 58 the interpretation of the exemption criteria by the Director General is to be along the same lines as the interpretation made by the EC Commission. Although the exemption criteria may seem narrow, the Bill requires them to be interpreted in the light of the general principles (Clause 58). I shall

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mention that clause frequently. It is the linking clause between EC law and our own in our new prohibition in the Bill.

In practice--this is important--the Commission has taken into account a wide range of countervailing benefits when making decisions under Article 85. In particular, the Commission has taken into account the public health benefits of agreements when reaching decisions. However, the issue goes wider, as we have discussed, than public health. The Commission has, for example, taken into account environmental benefits of agreements. Many have spoken of the environmental importance, in the broadest sense of the words, of the chemist's shop.

It is clear that under the Bill the Director General and competition commission can be expected to do likewise: to form the same judgments against the body of law that I have mentioned which have existed in the interpretation by the Commission under Article 85. Because we recognise that that is an important issue the department has commissioned a study on the case law of the ECJ and the Court of First Instance, and the practice of the European Commission in respect of Article 85(3). That was carried out by Professor Whish of King's College, London, who is a distinguished authority on competition law, and it confirms the analysis which I have given the Committee. I shall send a copy to my noble friend and will place a copy in the Libraries of this House and another place.

With regard to the point made by the noble and learned Lord, Lord Fraser, in his preamble on the exemption and how it would be seen, in the light of that, if an assessment is to be made by the Director General of the case for an exemption in respect of agreements for resale price maintenance in over-the-counter medicines, I would expect any public health benefits, the ready availability of over-the-counter medicines to consumers, and the benefits of local distribution, to feature in the assessment. I therefore believe that the Bill will provide the right, balanced framework for the Director General and the competition commission to deal properly with the complex issue that we have been discussing.

In those circumstances, I hope that my noble friend will accept that special provisions for over-the-counter medicines would be neither necessary in special terms nor desirable, given the legal framework that I have outlined. I hope, therefore, that he will feel able to withdraw his amendment.

5.15 p.m.

Lord Lucas: I do not see how the nuances of interpretation avail the Minister when Clause 9, which is the governing one on exclusions, provides--if I may paraphrase it--that the clause applies to any agreement which does not,

    "afford the undertakings concerned the possibility of eliminating competition in respect of substantial part of the products in question".

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In the case about which we are talking that clause is clearly breached. Therefore there can be no exemption under the Bill, whatever nuance of interpretation is applied.

Lord Simon of Highbury: This is a swift interpretation and I take note of it. My case rests as it is; that we believe that the legal framework here allows us to strike a correct balance. If we need to discuss this matter further perhaps we can do so at a later stage.

Lord Graham of Edmonton: I am grateful to my noble friend the Minister because he has clearly listened. He has put up a good defence to show that the fears and worries of those whom I seek to represent are misplaced. That may or may not be the case. We shall have to wait to see. I am also grateful to the noble and learned Lord, Lord Fraser, for having linked what might be the defence, the outcome, or the manner in which those whom I seek to represent might have their fears allayed. That remains to be seen.

I had seen on a piece of paper the various points made by the noble and learned Lord. The Committee is indebted to him for putting the matter carefully and cogently. I understood what he said much better than what I read. That is an advantage in a debate such as this.

I welcome the noble Baroness, Lady Ludford, on the Liberal Benches to a debate like this. It is refreshing to have a new face and a new voice. The case she was making was that she did not like special exemptions. If the only way to protect a business or a sector of the community is to give a special exemption, I am all for it. It may not be necessary in this case. For the past 30 years the public have believed it to be necessary and we want the present position to continue.

The noble Baroness, Lady O'Cathain, said, in summary, that the criterion was price, price, price--not location, location, location!

Baroness O'Cathain: I thank the noble Lord for giving way. Of course it is not the overwhelming criterion. I merely said that it should be brought into the equation. We were talking about location, location, location, but there is another element. We must strike a balance between the high mark-ups and availability. I genuinely worry about those who are less able to pay high prices for over-the-counter drugs and I simply wished to add another spoke, so to speak.

Lord Graham of Edmonton: I agree that we are talking about the people who, on the one hand, say "I want to be able to shop in a smaller shop, even though the price may be higher", and the 36 per cent. of people who say, "Even though the distance is further, if the price is cheaper I am prepared to go there". I know that this is not an empirical study and that interpretations must be made.

I was most taken with the case made by the noble and learned Lord, Lord Fraser, that when the Minister and, more importantly, those outside the House look at the explanation they may well take the view that there is no need to proceed down this route.

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I wish to draw one issue to the Minister's attention and to follow on from what was said about it by Labour Party spokesmen before the election. Nigel Griffiths, who is a good friend of mine, spoke honestly and sincerely in repeating what had been said by Chris Smith, now a Minister. Chris Smith said:

    "the question of RPM on non-prescriptive medicines is important and Labour believes that RPM plays a valuable role in safeguarding the position of local pharmacies.".

If that is not the road down which we are going I shall be happy to withdraw the amendment. But we need assurances from others, the Minister having served us well at this stage. I advise him to keep taking the tablets, but in the meantime I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

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