Previous Section Back to Table of Contents Lords Hansard Home Page

Lord Ezra: I am most grateful to the noble Lord, Lord Simon, for that answer and also for drawing our attention to the director general's letter. However, as regards his quotation from the letter, although there was reference to the intention of the director general to consult with industry and practitioners--I believe that those were the words used--there was no reference to enforcement agencies. I hope that that omission will be repaired and that the director general will feel a special responsibility for being in touch with the two bodies that I mentioned; namely, ITSA and LACOTS. They are the co-ordinating bodies for local enforcement agencies upon which, as the noble Lord, Lord Borrie, pointed out, the director general will be dependent for local enforcement as he will be unable to carry it out himself. Can I have an assurance that that will be so? If I can have that assurance, I shall be very happy to withdraw the amendment.

Lord Simon of Highbury: I shall take the noble Lord's suggestions back to the working party and the director general for their consideration.

Lord Ezra: I thank the noble Lord. With that assurance I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Baroness O'Cathain moved Amendment No. 203:

Page 25, line 28, at end insert--
("( ) In preparing general advice and information in accordance with this section, the Director shall, notwithstanding the exclusion of any cases pursuant to sections 4 and 20, take into account the effect of vertical restraints on competition on the relevant market, in particular where suppliers independently or collectively have significant market power.").

The noble Baroness said: I need to declare an interest in that I am a director of Tesco. The amendment applies not only to that company because it is very wide-ranging. In fact, it is supported by the National Consumer Council.

In moving the amendment, I greatly welcome the provisions of Clause 50 which require the director to prepare and publish general advice and information about the prohibitions. It is imperative that business is provided with certainty and this can only be enhanced by clear, authoritative and early guidance from the director on the interpretation of the prohibitions.

It is worth noting that the widely recognised Dobson and Waterson Report on vertical restraints and competition policy, which was commissioned by the OFT, contained detailed economic analysis of effects on the market. I would commend this report to the director when he in turn is giving guidance.

While recognising the generality of the provisions of Clause 50, I believe that the director should be specifically required to have direct regard to the economic effect on the market of these agreements.

25 Nov 1997 : Column 904

That would be particularly valuable to the director when considering the effect of selective distribution arrangements and in exercising his right to vary, remove or cancel parallel exemptions under the provisions of Clause 10(5).

Is the Minister satisfied that the prohibitions within the Bill enable the director to deal effectively with selective distribution arrangements that act contrary to the consumer interest? I suppose that he will say yes. If that is so, does the Minister accept that the time and cost of pursuing such a claim, without clear guidance, could be extremely damaging to business, particularly to small and medium-sized enterprises? I fear that this is a replay of my old record about costly burdens.

While acknowledging that certain selective distribution arrangements may result in a consumer benefit in those product sectors where technical or specialist sales advice or after service are required--that has been referred to already in discussions in Committee on this Bill--does the Minister agree that where those agreements are concerned only with the preservation of "image", or "allure" as I referred to it on the first day of Committee on 13th November, they are, in reality, acting contrary to the consumer interest? I beg to move.

Lord Haskel: We have already had many discussions on the subject of selective distribution agreements and on vertical agreements generally. We had such discussions on the first day of Committee stage. I believe that the noble Baroness is trying to ask how advice and information from the director might bear on the issue of vertical agreements. I think that that is the point of the amendment.

Baroness O'Cathain: I thank the noble Lord for giving way. The amendment seeks to ensure that we take account of the economic effect. That is very important.

5.30 p.m.

Lord Haskel: I thank the noble Baroness for that elucidation. We have said that we hope to exclude vertical agreements from the scope of the Chapter I prohibitions. We will only be doing this, however, on the basis that any harmful competition problems associated with them can be considered under the Chapter II prohibition or the Fair Trading Act. As my noble friend Lord Simon explained on the first day of Committee:

    "A refusal by a dominant supplier to supply certain outlets, a problem sometimes associated with selective distribution agreements, would, if found to be abusive, remain subject to the Chapter II prohibition. Equally, I am advised that there is EC jurisprudence that differential pricing by dominant firms which is abusive may be tackled under Article 86 ... such jurisprudence will apply in the interpretation of the Chapter II prohibition as a result of Clause 58".--[Official Report, 13/11/97; col. 284.]

We are confident, therefore, that the problems the noble Baroness has described would be dealt with under the Chapter II prohibition. In framing his advice and information in respect of the Chapter II prohibition, I have no doubt that the director will be covering the definition of relevant markets and how market power may effectively be exercised, whether independently or

25 Nov 1997 : Column 905

collectively, both issues having been raised by the noble Baroness. In view of these assurances and our earlier discussions, I hope that the noble Baroness feels that we have her concerns very much in mind and that she will feel able to withdraw her amendment.

Baroness O'Cathain: I am glad that the Minister has these concerns very much in mind, but quoting the continental European experience has not benefited us in terms of this problem. The European Commission has allowed special exemptions to the competition rules for both Yves St. Laurent and Givenchy in respect of fine fragrances despite the fact that those agreements can impact on price competition between retailers. That happens to be a fact. The Commission has not come down strongly enough. I suppose that I am trying to make our competition legislation stronger than the European legislation because, although the European legislation looks strong, it is not being supported.

There are issues at stake which militate against consumers. I shall not run through again all the arguments that I have put previously, but this is a question of the economic effect. I can see no evidence to date that competition authorities are having serious regard to the economic effect and I honestly feel that there would be advantages in the director being specifically directed to have regard to the economic effect, hence this amendment. Does the noble Lord wish to reply? As he does not, I shall read in Hansard what has been said, but I must alert the noble Lord to the fact that I shall return to this matter at a later stage if I feel that the point has not been properly covered. In the meantime, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendments Nos. 204 and 205 not moved.]

Clause 50 agreed to.

Lord Fraser of Carmyllie moved Amendment No. 205A:

After Clause 50, insert the following new clause--

Relevant tribunal to have regard to rules or guidance by Director

(" .--(1) In determining any matter under this Act a relevant tribunal shall take account of any--
(a) rule made by the Director under section 49; or
(b) advice or information prepared and published by the Director in accordance with section 50.
(2) For the purposes of this section "relevant tribunal" means any court or the Competition Commission Appeals Tribunal.").

The noble and learned Lord said: This is essentially a probing amendment. It may be that the noble Lord, Lord Simon, in answering the Committee on Amendments Nos. 202, 204 and 205 has at least partially answered my concerns, but it would nevertheless be helpful to know from the Government just what status there would be in legal proceedings attaching to rules made by the director under Clause 49. I doubt whether there is much difficulty about the rules. In Clause 50 I would prefer to use the language of the Bill, which is "advice and information" rather than "guidelines". We are keen to discover also what legal status, if any, such published

25 Nov 1997 : Column 906

advice and information might have in any subsequent legal proceedings either before the appeal tribunal of the competition commission or any other court.

The purpose of the amendment is to introduce an express requirement on the relevant tribunal to take into account such rules or advice and information when determining matters before it. Accordingly, I should be grateful if the Government could spell out exactly what they intend if such legal proceedings should occur and if such rules, advice and information are before the court. I beg to move.

Next Section Back to Table of Contents Lords Hansard Home Page