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9 Feb 1998 : Column 967

9.45 p.m.

Lord Kingsland moved Amendment No. 49:

Page 47, line 20, at end insert--
("(2) If the Secretary of State is satisfied that an undertaking provides services of the kind referred to in this paragraph he may, on the application of an officer of that undertaking, certify that in relation to that service a particular task is one to which this paragraph applies.
(3) A certificate issued by the Secretary of State in accordance with sub-paragraph (2) that a particular task is one to which this paragraph applies shall be conclusive evidence of that fact.").

The noble Lord said: My Lords, in moving this amendment I should also like to speak to Amendments Nos. 50 and 51. All these amendments relate to paragraph 2 of Schedule 3 to the Bill dealing with "general exclusions". The paragraph reflects exactly the words of Article 90 of the Treaty of Rome, referring to the concept of "services of general economic interest."

Amendment No. 49 seeks to add the Secretary of State to the list of those who can grant exemption from the prohibitions under Schedule 3, paragraph 2. Under the Bill as drafted, the only two who can grant those exemptions from the prohibitions are either the Director General of Fair Trading or one or other of the relevant sectoral regulators. The amendment seeks to add to that list the Secretary of State so that the Secretary of State has power to certify that a service is one of general economic interest to which the exclusion applies and would make such a decision (or certificate) conclusive evidence in any subsequent proceedings. It simply widens the category of persons who can invoke the paragraph.

Amendments Nos. 50 and 51 ought to be read in the alternative. Amendment No. 50 simply refers to the Director General of Telecommunications. Amendment No. 51 widens that category to all regulators in all the relevant regulated areas. What both amendments seek to do, either specifically in relation to the Director General of Telecommunications or generally in relation to all regulators, is to say that, in determining whether or not a particular service is one of general economic interest, and therefore caught by paragraph 2 of Schedule 3, the Director General of Telecommunications or all the sectoral directors are entitled to have regard to obligations imposed on them under their respective Acts--in other words, the obligations contained in the remits under their respective Acts. I beg to move.

Lord Simon of Highbury: My Lords, the "services of general economic interest" exclusion has been drafted to follow the terms of Article 90 so that EU jurisprudence can apply in this area. Whether services fall within this exclusion should be determined by the director, tribunal or court according to EU jurisprudence under the governing principles of Clause 58 in the same way that they determine other matters according to the principles of Clause 58.

Amendment No. 49 would make the question as to whether services fall within the ambit of this exclusion determinable by the Secretary of State. In our view, whether services fall within the exclusion should not be determined by the Secretary of State. The Bill confers powers to make competition decisions on the director, tribunal and courts, and that is the appropriate place. In

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any event a determination of whether a task was one to which paragraph 2 of Schedule 3 applies would leave the question of how far the prohibitions necessarily obstruct performance of that task still to be decided.

It is worth noting that the Secretary of State does have a discretionary fall-back power of exclusion, the "public policy" exclusion power in paragraph 5 of Schedule 3.

But it is one thing to have a fall-back power to provide an exclusion in cases where there are exceptional and compelling reasons of public policy and quite another for the Secretary of State to get involved every time an undertaking wishes to claim that it should benefit from a general exclusion designed to attract the EU position. The Government would not wish the Secretary of State to have that role.

There may be licence requirements, for example, on common tariffs between urban and rural areas which might be considered to fall within the terms of this exclusion. But if they are strict requirements of the licence, they would in any event fall within the legal requirements exclusion.

The exclusion in paragraph 2 to Schedule 3 sets out a general principle to be interpreted when the need arises. If a company wishes to clarify that agreements or conduct do not infringe the prohibitions by virtue of paragraph 2, they can make a notification to the director for guidance or a decision.

As I have said, whether the exclusion applies is to be determined according to EU jurisprudence. I imagine that this House will turn to the question of regulators' statutory duties on the second day of the Report stage. But I see no reason why the position regarding duties should be different for decisions involving this exclusion, as Amendments Nos. 50 and 51 would provide. The test is whether undertakings are entrusted with services of general economic interest, not whether they should be so entrusted. In making decisions under the prohibitions, if the question arose, the director's and the regulators' role would be to determine whether (drawing on European jurisprudence) the undertaking was so entrusted. I therefore urge the noble Lord, Lord Kingsland, to withdraw his amendments at this stage.

Viscount Trenchard: My Lords, I wish to speak in support of Amendments Nos. 50 and 51.

A noble Lord: Order!

Lord Kingsland: My Lords, I am somewhat disappointed at the Minister's reply, although not entirely surprised. As he rightly said, these amendments anticipate a later debate on Schedule 10 and he will not be surprised to hear that in essence the points will re-emerge, the Minister might say under the guise of other amendments, but I shall say quite properly under other amendments. We can re-open the matter on the second day of Report. I beg leave to withdraw my amendment.

Amendment, by leave, withdrawn.

[Amendments Nos. 50 and 51 not moved.]

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Lord Ezra moved Amendment No. 52:

Page 47, line 28, at end insert--
("( ) In respect of conduct by a regulated utility, the fact that conduct is in compliance with its licence and the statute under which its licence was granted or treated as granted shall be evidence that it does not constitute a breach of the Chapter II prohibition.").

The noble Lord said: My Lords, with Amendment No. 52 are grouped Amendment No. 53 in the name of the noble Lord, Lord Kingsland and Amendment No. 54 which is in my name.

This an important amendment. It is the successor to an amendment tabled at Committee stage which would have ensured that there would be a rebuttable presumption that behaviour that complied with the licence did not infringe the provisions of the Act. The new amendment is an attempt to do that by a simpler and more explicit means.

As the Bill is drafted, the regulators will exercise prohibition powers for their own industry concurrent with the powers of the Office of Fair Trading. In each of the regulated industries there are already detailed rules set out in the licences that each company must abide by. These licences cover price controls, customer protection and how a company may respond to competition. In the case of gas, the licences had parliamentary scrutiny as recently as 1995.

Despite the comments made by the Minister in Committee, there is little mention of the licences in the Bill, so behaviour that complies with the licence could then be questioned by the regulator as anti-competitive. Alternatively a licence agreed by one regulator could then be challenged by another. The amendment tries to get round the problem by stipulating that behaviour which complies with the licence should count as evidence that the Act is not being infringed.

A strong theme throughout Second Reading and in Committee was the concern about the way in which utility regulators exercise their powers under the Bill. That was recognised in Committee when the Minister agreed to,

    "reflect strongly on the question of whether rebuttal is an appropriate concept as to the way that the guidance process may be undertaken".--[Official Report, 13/11/97; col. 335.]

The amendment simply states that the behaviour of a utility that complies with an existing licence provision should be counted as evidence that an abuse of a dominant position has not occurred. It is a simpler and more explicit version of the rebuttable presumption amendment previously put forward.

Currently there is little mention in the Bill of how the new provision should interrelate with existing licence conditions. Amendment No. 52 would provide some degree of consistency between the licensees and the new legislation by saying that if behaviour was permitted by licence, that would be counted as evidence that the behaviour was not infringing the Act. After all, the licence conditions are important. They cover areas such as customer protection, price control and how a company responds to the introduction of competition. It is essential that the utilities should be able to operate within the licence conditions which reflect the individual nature of the markets in which they are

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active. They must not have the uncertainty of finding themselves in breach of a potentially conflicting set of rules. It would therefore be wrong for the regulators not to consider licences in exercising their new powers.

I should add that the licence conditions under which the utilities currently operate are designed in themselves to prevent abuse of market power; for example, condition 13 of the gas licence includes strict conditions to prevent anti-competitive behaviour by the dominant power. I beg to move.

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