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Lord Ezra moved Amendment No. 68:

Page 6, line 13, at end insert--
("( ) An agreement is exempt from the Chapter 1 prohibition if the European Commission has granted a comfort letter clearing or exempting the agreement.").

The noble Lord said: In moving Amendment No. 68, I should like to speak also to Amendments Nos. 69 and 70. The purpose of these amendments is to ensure that where an agreement falls within the term of a European Union block exemption or has been granted an individual EU clearance (whether formally or informally) it should be regarded as valid under UK law and scrutiny of the same agreement by the UK authorities should be barred. That accords with the desired aims of consistency with the EU and of keeping the burdens on business to a minimum. The amendments would provide that informal comfort letters, which have been received from the European Commission in response to a notification, would be recognised as binding in the UK and that the DGFT will not be able to vary or cancel the terms of an EU exemption.

As noble Lords are probably aware, the vast majority of cases notified to Brussels do not receive a formal decision granting exemption but are dealt with by means of a comfort letter. In 1996, for example, out of 386 cases, 365 were dealt with informally by means of comfort letters and other forms of communication and only 21 by formal decision. If a firm has gone to the expense of submitting a notification to Brussels and then receives only a comfort letter, that should be regarded in the UK as equivalent to a formal notification.

Furthermore, we do not believe that the director should be able to change the terms of, or to cancel, an EU exemption by imposing stricter domestic law to the same agreement. We feel that that runs counter to the aim of consistency with the EU. If exemption decisions by the EU are considered inappropriate by the UK authorities, action should be taken to remedy that at EU level rather than causing confusion by subsequent conflicting domestic action. I beg to move.

Lord Haskel: I share the views of the noble Lord, Lord Ezra, on the need to seek consistency in the application of EC and UK prohibitions. This clause is

13 Nov 1997 : Column 352

designed to assist consistency. It provides automatic exemptions from Chapter I prohibition of agreements which are exempt from the EC prohibition of anti-competitive agreements or the EEA prohibition of anti-competitive agreements. This automatic exemption from Chapter I prohibition is referred to in the Bill as a parallel exemption. The parallel exemptions provided by Clause 10 are very wide ranging. Agreements that are not subject to the EC or EEA prohibition of anti-competitive agreements because they do not affect trade between the relevant member states, but which otherwise meet the conditions for an EC or EEA block exemption, are also to be parallel exempt from Chapter I prohibitions. Therefore, agreements with purely domestic effects can benefit from parallel exemptions.

I am sorry to go on at length at this late hour, but the noble Lord, Lord Ezra, has raised an important point. I turn to his Amendment No. 68. This would extend the principle of automatic parallel exemption to European Commission comfort letters which fall short of a formal EC exemption. Comfort letters will be relevant in the application of UK prohibitions. The Director of the European Commission will be applying a consistent prohibition test and therefore a European comfort letter will be of persuasive authority to the UK system. However, it would be dangerous to confer a blanket automatic exemption from the UK prohibition on agreements that had received comfort letters. For example, such letters may state that the agreement is not caught by Article 85 because there does not appear to be an effect on trade between member states, while leaving open the possibility that the agreement produces harmful anti-competitive effects within the UK.

Amendments Nos. 69 and 70 proposed by the noble Lord would deprive the director of the ability to tackle agreements that raised particular UK competition concerns. Of course, there might be particular circumstances in which the director should be able to take action against an agreement which was parallel exempt under the clause. Take, for example, an agreement which had purely domestic effects but was nevertheless parallel exempt because if it affected inter-state trade it would meet the conditions of an EC block exemption. Such an agreement might raise particular UK competition concerns, and the director would be able to impose conditions on its operation, perhaps an obligation to provide market update information. The parties might have had to provide such information to the Commission if their agreement had affected inter-state trade. The director should also retain the ultimate sanction of cancelling the exemption.

I also draw the attention of the noble Lord to subsection (5) which provides that the circumstances and manner in which the director may impose conditions in relation to, or cancel, a parallel exemption will be set out in the director's rules which will not come into effect until they have been approved by order made by the Secretary of State. These orders are the subject of annulment by resolution by either House.

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In view of the late hour and my explanation, I hope that the noble Lord will withdraw his amendment.

Lord Ezra: Those are two persuasive arguments for me to do so, but I very much regret the response that I have received. I should like to study it with care. Since the bulk of the cases notified to Brussels are responded to by comfort letters, it is a bit hard for the UK authorities to say that they do not really count. That means that practically nothing that has been notified to Brussels will ever be regarded as having been dealt with. We must return to this and to the other points that the noble Lord has raised. In the circumstances, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendments Nos. 69 and 70 not moved.]

Lord Simon of Highbury moved Amendment No. 71:

Page 7, line 17, leave out subsection (12).

On Question, amendment agreed to.

Clause 10, as amended, agreed to.

Clause 11 agreed to.

Clause 12 [Requests for Director to examine agreements]:

[Amendment No. 72 not moved.]

Clause 12 agreed to.

Clause 13 [Notification for guidance]:

[Amendment No. 73 not moved.]

Clause 13 agreed to.

Clause 14 [Notification for a decision]:

[Amendments Nos. 74 to 76 not moved.]

Clause 14 agreed to.

Clause 15 [Effect of guidance]:

[Amendment No. 77 not moved.]

Clause 15 agreed to.

Clause 16 [Effect of a decision that the Chapter I prohibition is not infringed]:

[Amendment No. 78 not moved.]

Clause 16 agreed to.

Schedule 5 [Notification under Chapter 1: Procedure]:

Lord Fraser of Carmyllie moved Amendment No. 79:

Page 52, leave out lines 24 to 27.

The noble and learned Lord said: With Amendments Nos. 79 and 80 are grouped Amendments Nos. 91 and 92. They are well grouped; they deal with an identical point. The amendments would remove the power of the director to convert unilaterally an application for guidance into an application for decision. It is a small but important point.

Companies must be able to make applications for guidance on a confidential basis. The ability to convert an application for guidance into a formal decision without the consent of the applicant could result in third parties becoming aware of confidential proposals, with

13 Nov 1997 : Column 354

the end result that companies would be less willing to seek guidance or assistance in cases of uncertainty. That would be contrary to what the Government wish to achieve by this scheme of guidance and subsequent applications for decision.

I invite the noble Lord to reflect on that. It seems to run contrary to what would be an appropriate basis for taking forward such applications. All we ask of the Government at this stage is some signal that they will reflect on that before we return to it on Report.

We have considerable respect for the detailed and courteous way in which the Government Front Bench has dealt with some extraordinarily complex matters today. I hope that they appreciate that we have attempted to approach this in a co-operative fashion and that before we return to these provisions on Report--either informally or otherwise--they will seek to identify those points on which we are keen to ensure that we receive proper responses. If I get that short response from the Government, I give a solemn and binding undertaking that I will seek leave to withdraw these amendments.

Lord Haskel: A solemn and binding undertaking, certainly to reflect upon the issue. I hope that at this stage of the proceedings the noble Lord will accept that we will reflect upon the issue, but of course we cannot accept the amendment.

Lord Fraser of Carmyllie: On that solemn and binding basis I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendments Nos. 80 and 81 not moved.]

Schedule 5 agreed to.

Clause 20 [Request for Director to consider conduct]:

Lord Lucas moved Amendment No. 82:

Page 11, line 11, after ("prohibition") insert (", or which may amount to a dominant position,").

The noble Lord said: I move Amendment No. 82 and speak to the two other amendments in this group at the same time. They have a simple purpose. It is right that an applicant should be able to ask the director for a decision after a guidance as to whether he is in a position which amounts to a dominant position. It is essential that if the director issues such guidance he has the power to issue it; otherwise, it is something that can be challenged and overturned. So it is essential that somewhere in the Bill he is shown to have the power to issue such guidance. I cannot find it. I hope that the Minister can point me to it. I beg to move.

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