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The Deputy Speaker (Lord Allenby of Megiddo): My Lords, before calling Amendment No. 127, I should draw to your Lordships' attention that if this amendment should be agreed to, I cannot call Amendments Nos. 127A to 130A inclusive.

Clause 34 [Interim measures]:

Lord Ezra moved Amendment No. 127:


Page 17, line 7, leave out subsections (1) and (2) and insert--
("(1) This section applies if--
(a) the Director has reasonable grounds for belief that the Chapter I or the Chapter II prohibition has been infringed but has not completed his investigation into the matter, and
(b) it is necessary for the Director to act under this section as a matter of urgency--
(i) on a complaint made in relation to the agreement or conduct under investigation, for the purpose of preventing serious, irreparable damage specified in the complaint to the complainant or a category of persons which includes the complainant, or
(ii) for the purpose of preventing intolerable damage to the public interest,
where the damage is likely to occur in consequence of the agreement or conduct under investigation before the Director is reasonably able to complete that investigation.

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(2) The Director may give such directions as are necessary for the purpose of preventing any occurrence of the damage referred to in subsection (1)(b)(i) or (ii) in the period between the giving of the directions and the date when he is reasonably able to complete that investigation.
(2A) The Director shall not take action under this section where subsection (1)(b)(i) applies unless he has first considered whether--
(a) the person (or persons) to whom he proposes to give the direction would be likely to suffer serious irreparable damage if the direction is given and his investigation subsequently establishes that the Chapter I or the Chapter II prohibition has not been infringed and, if so, whether he is satisfied that on balance it is still appropriate to give the direction, and
(b) the complainant should be required to provide, in a form specified by the Director, adequate security to the person (or persons) to whom the Director proposes to give the direction for any costs incurred or damage suffered by that person if the direction is given and his investigation subsequently establishes that the Chapter I or the Chapter II prohibition has not been infringed.").

The noble Lord said: My Lords, we come to the important subject of interim measures under Clause 34. Quite rightly, the clause allows the director general or the sector regulator to issue interim measures which prevent potential abuse while an issue is being investigated. That is not something to which we can object. However, what is a matter of concern is that the clause does not include any checks or balances as incorporated in European law to ensure that these measures are implemented only in exceptional circumstances. In EU law a prima facie case must be established before interim measures are imposed. I refer to Article 83(2) of the Rules of Procedure of the Court of Justice, as supported by European case law.

At present Clause 34(1) allows the director general or sector regulator subjectively to impose such measures merely if he has a reasonable suspicion that Chapter I or Chapter II prohibitions have been infringed. Subsection (1)(a) of the amendment seeks to introduce objectivity comparable with EU law by requiring the director general or the sector regulator to have reasonable grounds for belief before interim measures are imposed. Certainly, interim measures should not exceed what is necessary in the particular situation. The director should be required to weigh the interests of the company alleged to be infringing before deciding whether to grant interim measures; that is, to undertake a balance of convenience test. In addition, in line with EU case law--for example, National Carbonising Co. v. Commission--it must be considered whether the complainant should be required to give a cross-undertaking in damages or a bond guarantee. For all these reasons, I ask the Government seriously to consider Amendment No. 127. I beg to move.

Lord Kingsland: My Lords, the Opposition also have a number of amendments along these lines, including Amendments Nos. 128, 129, 129A, 130, 130A, 130B, 133A and 133B. Those amendments very much follow the amendment just moved by the noble Lord, Lord Ezra. The European Commission has powers to impose interim measures but the circumstances in which they can be exercised have been strictly constrained by the European Court of Justice. Our amendments seek to introduce into the Bill the same

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kind of criteria as British courts have developed in interim injunctions. I believe that the language follows quite carefully our own case law.

The only amendments to which I draw particular attention are those on page 17, in line 17, which seek to replace "the public interest" with "competition" and to place before it "preventing serious and irreparable damage to." We were particularly struck by the enormous breadth of the power given to the director general in Clause 32(2)(b) to protect the public interest in circumstances in which presumably he is the only person who determines what is the public interest. That appears to us to be unnecessarily wide. If one accepts that there must be a set of rules in the Bill that narrows the circumstances in which interim measures can be applied by the director general, one must also accept that the expression "public interest" requires very careful examination before it is allowed to become law.

Lord Mishcon: My Lords, I follow the comments of the noble Lord with an apology to the House if I introduce a minor point into a matter of obvious major principle. The noble Lord who has just sat down referred to "public interest" as important wording that might create a degree of doubt as to whether it was a truly objective test. The noble Lord, Lord Ezra, was extremely keen in making clear to the House that objectivity was very much in this mind when he moved his own amendment which he said followed European law. I was somewhat aghast when I read the wording of the amendment so eloquently moved by the noble Lord, Lord Ezra. In paragraph (b)(ii) one reads:


    "for the purpose of preventing intolerable damage to the public interest".

I pray that this will never be copied in any Act of Parliament passed by this House or the other place. I draw it to the attention of the noble Lord because to think in terms of objectivity in the context of what should be tolerated and what should not is a little alarming.

Lord Simon of Highbury: My Lords, these amendments deal with the important area of the director's powers to take interim measures pending his final decision in a case. It would of course be a truism to say that in this area we need to balance adequate safeguards in respect of the exercise of the powers to order interim measures against enabling the director to act quickly to bring temporary relief to those affected by seriously anti-competitive agreements and behaviour so as to prevent irreparable damage or protect the public interest.

The amendment would shift the balance too far in the direction of making it too difficult for the director to act in cases where we believe that he should properly be able to do so. I recognise, as noble Lords have said, that in some respects their amendments reflect existing Commission law and practice in that area. But this is an area where we believe we can improve on the position at Community level. Interim measures have proved to be a difficult tool for the Commission to use. We are determined that they should provide a way of tackling anti-competitive behaviour quickly, before serious

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damage has been inflicted, which has been a great failing of the current system. I am talking about our current system and the European system.

However, I believe that I will be able to offer noble Lords some comfort as to the extent to which the director is obliged under the existing clause to take into account the interests of a party who would suffer from interim measures.

I turn now to the specific issues raised by these amendments. Both the noble Lords, Lord Ezra and Lord Kingsland, seek to raise the threshold of "reasonable suspicion" that either prohibition has been infringed, to the significantly higher threshold of "reasonable grounds for belief". We have of course discussed those wordings in a number of different contexts.

The context here is that this is merely a preliminary threshold. The director must go on to satisfy further conditions before being able to impose interim measures. I do not believe the threshold of "reasonable grounds for believing" there to be an infringement is right where it provides simply the initial hurdle which must be cleared before the director can proceed to examine whether the further conditions for the exercise of the power are satisfied.

The three most important changes that would be made by Amendment No. 127 in the name of the noble Lord, Lord Ezra, would be to require the director: first, only to take action to prevent--and we have heard the views of my noble friend Lord Mishcon on the words--"intolerable damage to the public interest"; I take note of his experience in these matters; secondly, to take action on receipt of a complaint only and after considering the damage that would be inflicted on the recipient of the direction and balancing the pros and cons; and, thirdly, to consider whether the complainant should be required to provide adequate security for costs incurred and damage suffered should the director in the event conclude that a prohibition has not been infringed.

The first and last of those I recognise as, in essence, the position under Community law and practice. To the first, I must say that with regard to the effect on the public interest, though not required to be intolerable, as is the case under EC law, the matter must be one of urgency before he can act. With regard to the last of the three rubrics, I believe that in only one case in 1976 has the Commission required a bond to be given. In the case of abuse of a dominant position, interim measures would be required to protect small companies which are being damaged. Requiring them to provide a bond would remove a major advantage of asking the director to exercise those powers over their applying to the court for an injunction.

As regards the second point, although it does not appear on the face of the Bill, the director must obviously have some reason to act, which may be a complaint or the result of his own inquiries uncovering an agreement or behaviour that he suspects contravenes the prohibition. I have some sympathy for the point that any damage suffered by the subject of interim measures

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should not be disproportionately greater than the damage which the complainant is likely to suffer if interim measures are not taken.

However, the director will be required to give notice to the undertaking to be the subject of the measures, and to consider its representations as to the effect the measures will have upon it.

The clause sets out the hurdles the director must clear before he gives directions. That is intended to ensure that he hears the views of the offender, so to speak, and does not act in a way which causes disproportionately greater harm to the offender than the victim.

The director must have a reasonable suspicion that infringement of prohibition has taken place, must consider it necessary for him to act as a matter of urgency for the purpose of preventing serious, irreparable damage to a person or category of person or the protection of the public interest, and the directions must be appropriate for the purpose. Action which causes disproportionately greater damage to one party is unlikely to be appropriate. Moreover, the director, in exercising his powers, would be subject to the principle of proportionality. Any action he takes should not exceed what is necessary to achieve the objective sought; that is to say, the prevention of serious, irreparable damage or the protection of the public interest.

Perhaps I could now turn briefly to a couple of other issues raised by this group of amendments.

Amendment No. 130A appears to be aimed at transferring the responsibility for deciding upon interim measures to, I presume, a tribunal of the competition commission. Certainly I agree that a tribunal has a role to play. We have provided that a decision to impose interim measures will be appealable to a tribunal of the competition commission. We have also provided, in paragraph 13 of Schedule 8, that the tribunal rules may make provision for a tribunal to suspend the effect of an interim measure imposed by the director before taking a final decision on whether the interim measure should be upheld. In those circumstances, I believe that it is right that the power to impose directions should remain with the director, subject to the safeguard of an appeal to a tribunal.

The noble and learned Lord, Lord Fraser, in his amendment, seeks to substitute


    "preventing serious and irreparable damage to competition"

for the public interest test. I think the broader test is preferable. Perhaps I could give one example why "competition" is too narrow. The Chapter II prohibition of the abuse of a dominant position goes wider than just competition. There is clear authority from its European counterpart, Article 86, that it prohibits excessively high prices. High prices are not in themselves anti-competitive--indeed, in so far as they encourage new entrants, they are pro-competitive. So the director would need to bear in mind the need to tackle exploitative behaviour as well as anti-competitive behaviour.

Finally, both the noble Lord, Lord Ezra, and the noble and learned Lord, Lord Fraser, have proposed that interim measures should be subject to a three-month limit. I understand the concern that an interim measures order should not remain in place for an undue period of time.

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However, the three months' limit proposed in which to reach a final decision may not be sufficient where complex and detailed analysis of the economic and legal issues for the final decision is required. Nevertheless, as we said in Committee, we expect to bring into force, when the system has bedded down, the provision in paragraph 7 of Schedules 5 and 6, enabling an application to the court to ensure that there is no undue delay in determining applications for decisions. Behaviour subject to interim measures can of course be notified to take advantage of that procedure.

I hope that with that reflection on the balance that we are trying to achieve in interim powers between swift and effective action, which has not been the strength of our current law base or the Commission's in carrying out the implications of Articles 85 and 86, and the capacity of the tribunal to judge on those matters and the appropriateness of the action, the noble Lord will be able to withdraw his amendment.


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