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Baroness Farrington of Ribbleton: My Lords, I beg to move that the House do now adjourn during pleasure until 8.40 p.m.

Moved accordingly, and, on Question, Motion agreed to.

[The Sitting was suspended from 8.23 to 8.40 p.m.]

Competition Bill [H.L.]

House again in Committee on Clause 18.

Lord Lucas moved Amendment No. 20:

Page 10, line 30, after ("no") insert ("necessary").

The noble Lord said: This amendment is intended to address what I find to be one of the most tiresome abuses of a dominant position, and that is bundling. The noble Lord, Lord Borrie, whom I believe is enjoying a long supper, referred to it earlier as making the customer who wanted to buy one good take another good with it if he was going to get the first good. This is an abuse of a dominant position which goes back to biblical times, when the poor man was not allowed to marry Rachel until he had married her older sister. This is prevalent also in modern times with the way in which Microscoft is alleged to have been dealing with its rival Netscape.

There are many more domestic examples of this abuse. Without naming names, I can think of a major company which is in a dominant position in the supply of a raw material which insists that its customers also buy transport from it if they wish to buy the raw

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material. I can think of a dominant supplier of a consumer good who insists that if you want one of their goods you have to buy another half-dozen as well.

These are all practices which, it seems to me, should fall squarely within the prohibitions of Clause 18 of the Bill. However, the example given in Clause 18(2)(d), illustrating how this sort of abuse would be tackled, is restricted to,

    "acceptance by the other parties of supplementary obligations which, by their nature or according to commercial usage, have no connection with the subject of the contracts".

Clearly, that is far narrower than is intended by this prohibition and far narrower than European practice. If we have an example in this Bill which is so narrow it will surely encourage our courts to define abuse narrowly, which is not what we wish to achieve. I know that this follows the wording of the European Treaty, but since we are dealing here, not with a piece of definitive law, but merely an example, it would be advantageous to render it into English rather than Eurospeak. It would be advantageous to render it nearer to what we mean and to put the word "necessary" between "no" and "connection" so that where companies are indulging in a practice where there is some connection, as indeed Microsoft would be able to say there was with its Internet Explorer and where there are indeed the domestic abuses I have illustrated, they would be able to claim that there was some connection and thereby they did not come under the example. I am sure the example was drafted to show the sort of abuses that were intended to be caught, and that therefore they should not be caught by this provision, but surely we should use wording more in line with our intentions rather than the particular wording that has arisen through copying a European statute. I beg to move.

8.45 p.m.

Lord Simon of Highbury: The noble Lord has given me the defence which I am afraid I must plead. Subsection (2) of the clause sets out an illustrative list. It is based, as the noble Lord rightly suggests, exactly on the corresponding illustrative list in Article 86. While I can see that the noble Lord, Lord Lucas, may wish to change its emphasis, I believe that the right course is to follow Article 86 as closely as possible.

Although the noble Lord may think that it is Eurospeak, it has the advantage of being absolutely clear, and for that reason reduces the business burden. I emphasise that the list is illustrative and amendments would not affect the substantive effect, prohibition of the abuse, but that is a secondary issue. We are talking about the clarity of the statement and I am afraid, as the noble Lord observed, we believe that it is better to stay as closely attuned to the Article 86 text as possible for reasons of clarity and lack of doubt for business.

I hope, on that basis that the noble Lord is prepared to reconsider and to withdraw the amendment.

Lord Lucas: I expect to end up by withdrawing the amendment but I would hope that the noble Lord could address himself, if not to the technical aspects of the amendment, to the substance of it. I would appreciate confirmation of the sort of anti-commercial practices

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outlined by the noble Lord, Lord Borrie, previously. I took the noble Lord's name in vain because the noble Lord, before supper, gave, as an illustration of an abuse of a dominant position, being forced to take one good when you wanted to buy another. I hope the noble Lord the Minister can confirm that that is very much the sort of thing which the clause is aimed at and that it is his hope and expectation that the Director General of the Office of Fair Trading will come down hard on such abuses when he has the ability to do so.

Lord Simon of Highbury: I understand the point that the noble Lord is making. In no way was I intending to suggest that the drafting should give any doubt as to the severe penalties that will be available if abuses of this nature can be proved.

Lord Lucas: I shall have to be content with that. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendments Nos. 21 to 26 not moved.]

Lord Simon of Highbury moved Amendment No. 27:

Page 10, line 33, leave out ("in the market").

On Question, amendment agreed to.

[Amendments Nos. 28 to 30 not moved.]

Clause 18, as amended, agreed to.

[Amendment No. 31 not moved.]

Clause 19 [Excluded cases]:

[Amendments Nos. 32 and 33 not moved.]

Clause 19 agreed to.

Schedule 1 [Exclusions: Mergers and Concentrations]:

Lord Simon of Highbury moved Amendment No. 34:

Page 39, line 25, leave out (", or would if engaged in result,").

The noble Lord said: This amendment is grouped with Amendments Nos. 36, 37, 39 and 40. Schedule 1 excludes mergers from the prohibitions to avoid overlap with existing merger control regimes at the UK and EC level. Exclusions under this schedule cover mergers both above and below the thresholds for investigation at UK level. The Government have listened carefully to comments from legal practitioners and others that the draft Bill published in August needed to provide for a wide exclusion of all mergers, including those involving the taking of effective control over a company. As a result of the consultation the schedule now provides for that wider exclusion, which I think has been much welcomed by the business community.

The schedule provides a general exclusion from the Chapter I prohibition for mergers that fall within the description of enterprises ceasing to be distinct in Part V of the Fair Trading Act 1973. However, to provide an objective definition for the exclusion, certain arrangements that may be treated as mergers for the purposes of the Fair Trading Act must be treated as mergers for the purposes of the exclusion. These are

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arrangements--broadly the acquisition of control or material influence by one business over another--to which the exclusion has been extended in response to the consultation. But this extension of the exclusion creates some risk of providing a loophole for anti-competitive agreements. The schedule therefore provides that the director may, with notice, remove the benefit of the exclusion from an agreement where he considers it would infringe the prohibition and would not merit an additional exemption. This approach has been developed in consultation with practitioners.

The Government intend that this ability for the director to remove the benefit of the exclusion should apply only in respect of mergers that are mergers by virtue of Section 65(3) or 65(4)(b) of the Fair Trading Act and should not apply to mergers cleared by the Secretary of State or which the competition commission has decided, on reference, qualify for investigation. The Bill as introduced provided for these limitations to be prescribed in regulations made by the Secretary of State. However, we want to give certainty from the outset for those kinds of mergers where there is no ability for the director to remove the benefit of the exclusion and we wish therefore to set out on the face of the Bill the categories of protected agreements in respect of which the director is not able to withdraw the benefit of the exclusion. Amendments Nos. 39 and 40 give effect to this and remove the order making power. The department's memorandum to the Select Committee on Delegated Powers and Deregulation signalled our intention to do so, as noted in the committee's report.

Amendments Nos. 34, 36 and 37 make drafting amendments. Amendment No. 34 removes unnecessary wording. We do not believe that the Chapter II prohibition would catch contemplated conduct. Amendments Nos. 36 and 37 amend the exclusion for newspaper transfers to limit the extent of the exclusion from the two prohibitions to agreements and conduct to the extent that they constitute such a transfer. They incidentally remove the Chapter II exclusion from provisions directly related and necessary to the implementation of a newspaper transfer.

I am conscious that this raises an issue that is relevant to Amendment No. 35 in the names of the noble and learned Lord, Lord Fraser of Carmyllie, and the noble Lords, Lord Kingsland and Lord Lucas. I would prefer to deal with the issue when we discuss Amendment No. 35 but I can assure the noble Lords that I will keep an open mind on that. I beg to move.

On Question, amendment agreed to.

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