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Lord Ezra: My Lords, I thank the noble Lord, Lord Mishcon, for his important intervention and I take careful note of it. I also thank the noble Lord, Lord Simon, for his considered reply. He rightly identified the two reasons for the amendment. The first is to bring the clause more into line with European legislation and case law and the second is to avoid causing unreasonable damage to the enterprises concerned during the interim period. I shall take careful note of what he said and reflect upon it.

I am a little concerned about the considerable damage which could be caused to a firm if, after investigation, it were found that it had not infringed the rules. That could be the case. During the apparently unlimited period of the implementation of interim measures great damage could be caused to the firm. We must reflect on that matter between now and Third Reading but, in the meantime, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendments Nos. 127A and 127B not moved.]

Lord Kingsland had given notice of his intention to move Amendment No. 128:

Page 17, line 13, leave out ("considers") and insert (", having applied the same reasoning which a court would apply in determining an application for any interim measure, is satisfied").

The noble Lord said: My Lords, I listened with great interest to the Minister's reply on the question of interim measures. It is undesirable that the director should have the ability to apply interim measures on a more generous basis than our own courts. I shall read his comments in Hansard with interest and give notice that the Opposition might wish to return to the matter on Third Reading.

[Amendment No. 128 not moved.]

[Amendments Nos. 129 to 133A not moved.]

Clause 35 [Penalty for infringing Chapter I or Chapter II prohibition]:

Lord Fraser of Carmyllie moved Amendment No. 133B:

Page 17, line 38, at end insert--
("( ) In determining whether to require an undertaking to pay him a penalty in respect of an infringement in accordance with

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subsection (1) or (2), the Director shall have regard to the gravity and duration of that infringement.").

The noble and learned Lord said: My Lords, this group of amendments deals with the penalties which might be imposed. Amendment No. 133B would require the director to have regard to the gravity and duration of an infringement in deciding whether to impose such a penalty. The Minister might refer me to Clause 35(4), which in turn refers to Clause 39. Notwithstanding the arrangement in the Bill, we regard it as desirable that the director should be under the clear and express direction to have regard to the gravity and duration of an infringement.

As regards Amendment No. 134, we have considered the issue on at least one occasion. I am grateful to both Ministers for the further explanation that they have provided. It has gone a long way to allay some of the concerns which have been expressed to us. However, I have another concern on which I hope to secure a further degree of reassurance and possibly acceptance of the amendment.

Our contention is that the penalty of up to 10 per cent. of turnover should apply only to turnover in the relevant goods and services in the United Kingdom. If not, some large companies--it is not difficult to think of them--which may have several subsidiaries carrying on wholly unrelated activities independently of each other might be disproportionately penalised. The noble Lord, Lord Simon, stated that the penalty related to UK turnover. On 30th October, he referred to 10 per cent. of the turnover of the offending business. During Committee, the noble Lord, Lord Haskel, also made it clear that the provision related to UK turnover. We are not yet clear about whether the provision is restricted to turnover in the relevant goods and services. We have tabled the amendment to secure further clarification.

I am sure that the Minister will have noted that Amendments Nos. 135 and 135A are in part alternatives. We do not expect him to consider allowing both. Clause 37 requires the director to prepare and publish guidance on the appropriate levels of penalties to be imposed for infringement of Part I of the Bill. The amendment would widen the obligation imposed on the director and require guidance on the criteria to be applied in deciding whether to impose the penalty as well as the level of the penalty. In a different formulation, Amendment No. 135A seeks to achieve much the same end. In our view, it would be desirable that that is spelt out. It should be made clear that it refers not only to the amount of the penalty but whether the penalty should be imposed. I beg to move.

Lord Ezra: My Lords, I rise to speak to Amendment No. 134 and to support the noble and learned Lord. Clarification of the words "the relevant goods or services" is required. It is easy to think of companies operating in the UK. I was involved with a company making building materials. It dealt in a whole range of separate building materials operated by separate subsidiary companies. If one of those operations was suspect, in accordance with the competition rules it would be wrong that the whole of its turnover in

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different activities, even if carried on in the UK, were to be penalised. It is an important issue which requires clarification.

Lord Monson: My Lords, other than as a small shareholder, I have no connection with any company large enough to be caught by the provisions of the Bill. However, I believe that the amendments are not only well thought out, but some or all are necessary in order to prevent the possible imposition of unjust penalties.

Lord Simon of Highbury: My Lords, I recognise that Amendments Nos. 133B and 135B derive from requirements placed upon the commission in respect of its fining policy. I am sure that in drawing up guidance under Clause 37 the director will have full regard to these matters. However, I believe that the question of policy on penalties is best left to guidance following detailed consultation with interested parties. We should preserve maximum flexibility. I believe that we may be able to improve on commission practice. For example, I believe that the OFT has an ambition to be more predictable in its fining policy than the commission.

As regards Amendment No. 134, an identical amendment was discussed in Committee by, I believe, the noble and learned Lord, Lord Fraser. However, since I find it difficult to distinguish between the perspicacity and good sense which I hear from members of the Opposition on many amendments, it may have been the noble Lord, Lord Kingsland. As my noble friend Lord Haskel--and he I do recognise--said on 17th November (at col. 425 of Hansard), it is the Government's intention that the turnover will be confined to that which arises in the UK. I hope that the noble and learned Lord and the noble Lord, Lord Ezra, will accept our words on that. I do not believe that that matter should be specified in primary legislation.

The question of confining the turnover to the relevant goods and services is something which merits further consideration. While I can see the argument, and there is also the point that such a limitation might discriminate in favour of large companies with many different divisions, the ECJ has said that in setting the amount of fines, regard must be had to a number of factors which include the volume and value of the goods in respect of which the infringement was committed.

In the Pioneer case the court said that the 10 per cent. limit was an upper limit to prevent fines being disproportionate to the size of the undertaking concerned. The Commission cannot be required to take account of only the turnover on the market where infringements occur.

Therefore, those are not easy matters but they are important. I believe that the department should consult on them with interested parties before drawing up the order. I recognise that that may not be an entirely satisfactory answer to your Lordships, given that the amount of any penalty which may be imposed is an important matter in which noble Lords will rightly wish to take an interest. However, for the very reason that the Bill provides that no order under Clause 35(7) is to be

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made unless a draft of it has been laid before Parliament and approved by a resolution of each House, I believe that timely consideration can be given to the matter.

It is important to consult on that matter but I believe also that that important parliamentary safeguard will ensure that your Lordships are content with the results of our consultation.

On Amendment No. 135, I accept the noble and learned Lord's point that the director should issue guidance on the criteria to be applied in deciding whether to impose a penalty as well as on setting the appropriate amount of the penalty. I am assured by the OFT that the guidance under Clause 37 will cover that. No amendment is needed because the appropriate amount of any penalty would include cases where no penalty was appropriate. Therefore, with those assurances and my commitment to see the consultation truly take place, I hope that the noble and learned Lord will withdraw his amendment at this stage.

The Earl of Harrowby: My Lords, before the Minister sits down, I should say that I am a businessman like the Minister. I should like him to think again about mentioning on the face of the Bill the United Kingdom as part of the turnover as well as the separate subsidiaries. I should have thought that that was of significance to many companies. Like the noble Lord, I have been a chairman of companies which have subsidiaries all over the world, operating in different activities. Therefore, it is every bit as important to designate that the turnover referred to is United Kingdom or otherwise. It is not a matter which should be left to an understanding.

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