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Lord Lucas moved Amendment No. 15:

Page 3, line 6, leave out ("or removing").

The noble Lord said: I simply wish to inquire of the Minister which bits he is thinking of removing; and if he is not thinking of removing any bits, why he needs this power. I beg to move.

Lord Simon of Highbury: The powers in Clauses 3 and 19 of the Bill are important and extensive. Their broad purpose is to ensure that the prohibitions remain targeted efficiently and effectively on areas of real concern in the light of changing economic circumstances and practical experience of the operation of the prohibitions.

In the case of the exclusions provided in respect of Schedule 1, their more specific purpose is to ensure that the exclusion for certain mergers and concentrations dealt with elsewhere under the competition law, which, as we shall doubtless see in our discussion on a later group of amendments, is a very difficult line to draw, can be refined if their operation shows that there are gaps or overlaps.

The ability to amend or remove a case in Schedule 1 with respect to the Chapter I prohibition at present extends only to new cases added under the power in Clause 3 and to the planning obligations case. This is because that is the only specific exclusion of particular agreements as opposed to exclusions based on general propositions or on powers to exclude which the rest of Schedule 3 provides. If, during the course of our deliberations, we were to add further specific exclusions to the schedule--and, as I shall explain in the debate on a later group of amendments, I am continuing to receive representations for them--the Government may propose that the Clause 3 power to amend or remove should apply to them.

The Government have no proposals in mind to exercise the powers to remove exclusion cases, but we believe that the ability to refine the exclusion for the purposes I have mentioned must include the ability to remove a case. As the noble Lord will be aware, your Lordships' Select Committee on the Scrutiny of Delegated Powers has specifically reported that these

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powers are acceptable. If the Secretary of State were, however, to propose to remove a case under Clauses 3 or 19, or otherwise exercise her powers under those clauses, the Bill contains a significant safeguard. By virtue of Clause 67, the order cannot be made unless a draft of it has been laid before Parliament and approved by a resolution of each House. Your Lordships would therefore have the opportunity to debate, and if necessary divide, should noble Lords be concerned about the exercise of the power to remove an exclusion case which we are incorporating in the Bill.

In the light of that safeguard, I hope the noble Lord is able to see the case for the withdrawal of the amendment.

Lord Lucas: I am grateful to the Minister for that extensive explanation. It satisfies my every desire and indeed goes further in confirming the right of this House to divide on affirmative resolutions. I am delighted to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 3 agreed to.

Clause 17 [Enactments replaced]:

Lord Fraser of Carmyllie moved Amendment No. 16:

Page 10, line 16, after ("practices)") insert ("and those sections of the Fair Trading Act 1973 relating to monopoly investigations").

The noble and learned Lord said: This amendment sets out to ensure that the provisions relating to complex and scale monopoly investigations will cease to have effect. The effect of the present proposals in the Bill for a wide-ranging general prohibition on the abuse of market power combined with the retention of both the complex and scale monopoly provisions of the Fair Trading Act will be to impose a more extensive regime for regulating the competitive behaviour of firms than presently exists in the United Kingdom. Indeed, as we understand it, it would provide for the imposition of a more extensive regime than anywhere else in Europe or North America, and, for all we know, anywhere else in the world.

We see no pressing need for such heavy regulation. The Minister knows of our agreement with the approach that has been taken on matters of ensuring competition, but we really must do what we can to avoid an unnecessary degree of regulation. This may be the most important area where that seems likely to be imposed. What is of particular concern to us is that this combination of powers seems to have been undertaken without any real research into its potential effects on the United Kingdom economy. If I am wrong about that, and the Government have undertaken a careful assessment of how these sets of powers will interplay and can come to the conclusion that, contrary to what I am saying, there is not an unnecessary degree of heavy regulation, I hope the Minister will spell that out.

The concern I express has been put to us from a wide range of business interests. Even if the Minister cannot indicate immediately that he will look again at the way

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these provisions interplay, I hope he will at least leave the Committee with an undertaking that before we return to the matter at Report stage he will have looked at it.

Lord Borrie: I should like quite strongly to oppose the amendment. I have wrestled with my conscience in case this was in part due to some long-standing affection for parts of the Fair Trading Act which, as Director General of Fair Trading, I, from time to time, employed in asking the Monopolies and Mergers Commission to make studies of particular industries under the scale monopoly or complex monopoly provisions of the Fair Trading Act. But I do not think it is just that view, which might be personal to myself.

The Chapter I prohibition, as stated several times when we were dealing with that part of the Bill, concerns agreements and concerted practices. Agreements have to be established in order to suggest that they should be prohibited. I suggest that there has to be evidence of concerted practices before one can say that there are such between two or more firms. Sometimes there is similarity of conduct of a fairly remarkable kind between firms in the same industry but no evidence of agreement, of meetings in hotel back rooms, or of anything to show that they have concerted deliberately in the activity of, let us say, keeping up prices. Nevertheless there is a parallel activity between the companies concerned which inhibits competition and is damaging to customers. At the present time and, indeed, for the past 40 years, it has been possible for that kind of parallel conduct between firms to be examined by the Monopolies and Mergers Commission on a reference of complex monopoly provisions from the Director General of the Office of Fair Trading.

It would be a pity to get rid of those provisions when there is a gap between what can be proved as an agreement or concerted practice under Chapter I and what can be regarded as an abuse of a dominant position of a single company under Chapter II. That is my case for suggesting that we should retain the possibility of complex monopoly references being made to the Monopolies and Mergers Commission which in future will be called the competition commission.

As regards scale monopolies, the case is less strong: nonetheless I make it because if one examines the remedies in the Bill where an abuse of a dominant position is established and proved one does not find among those remedies the possibility of a structural remedy such as a demerger or the separation of certain activities of one firm from another in order to create a more competitive situation. While being a remedy which, in this and other countries, has been very rare indeed, it is one which is available in our law at the moment. It would be a pity if it were lost in order to deal with the more extreme kind of abuse of monopoly power. What is wanted is not the simple imposition of a penalty for conduct but a much more sophisticated structural remedy imposed by the competition authority.

My final point is that this is a new Bill. I know that we are following the method of dealing with anti-competitive practices in the European Community. There is a great deal of experience there from the

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European authorities. But this is a new Bill for the United Kingdom. It seems to me undesirable that we should throw overboard the possibility of references under the Fair Trading Act in order to rely solely on what is for United Kingdom law something entirely new; namely, the prohibitions and their particular wording in Chapters I and II.

Lord Simon of Highbury: I am grateful to the noble Lord, Lord Borrie, for the voice of experience in what is quite a complicated and important part of the debate, as we recognised at Second Reading. There is no doubt that the new prohibition will be the principal weapon against abuse of dominance. It is also clear that the current regime under the Fair Trading Act and the Competition Act, as the noble Lord, Lord Borrie, has pointed out, based on his experience, has very significant failings and badly needs strengthening. I do not believe that we would wish to throw out the baby with the bathwater.

As the noble Lord, Lord Borrie, says, this is a new Bill and at this stage we believe there is a very strong case for retaining the Fair Trading Act monopoly provisions to enable investigations to be conducted into markets in cases where competition issues arise from the structure of the market rather than from anti-competitive agreements or specific abuses by a dominant company. The current regime under the Fair Trading Act enables wide-ranging and impartial investigation of such situations by the Monopolies and Mergers Commission. It also provides scope for a wide range of remedies--and that is important--to be imposed if matters are found to be contrary to the public interest. With that sort of approach it is right that the imposition of remedies should be subject to parliamentary scrutiny and that the responsibility should rest with Ministers.

I believe that it is widely recognised that the complex monopoly provisions fill a gap between the two prohibitions. The Chapter I prohibition will deal very effectively with anti-competitive agreements and the Chapter II prohibition with abuses by single dominant companies. But the complex monopoly provisions will continue to be a more effective tool for dealing with anti-competitive parallel behaviour by companies where there is no agreement between them.

We also believe that the scale monopoly provisions will continue to have value although we do not intend that their use should be limited with the introduction of the new prohibitions. In future we do not expect references to be made of scale monopolies except in circumstances where there has already been proven abuse under the prohibition and where the DGFT believes that there is a real prospect of future abuses by the same firm. In these circumstances the structural remedies available under the Fair Trading Act may provide a more effective means of preventing further abuses.

The final point I need to make to the Committee is that it should be aware that the use of the scale monopoly provisions as regards the regulated utility sectors is the subject of separate consideration in the context of the current utility review. As Members of the Committee will know, that is due for report and

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consultation at the beginning of the new year so we need to take into account the timetable for that review in considering the progress of our discussions on this Bill.

In summary, the monopoly provisions of the Fair Trading Act will essentially become reserve powers to deal with situations where the problem is market structure rather than abuse. It is for that reason that I mention to the Committee the issue of the utility review and the issues which surround it specifically in terms of those scale provisions. We believe that the provisions will continue to have value in such limited circumstances. I have listened very carefully to the noble and learned Lord, Lord Fraser--

6.45 p.m.

Lord Fraser of Carmyllie: I shall respond more fully to what the noble Lord has said, but there is one matter I am interested in in relation to the utility review. When does he anticipate the reporting? Is it likely that that will happen before the Report stage of the Bill? Is there a prospect of seeing it before then?

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