Examination of Witnesses (Questions 1020
WEDNESDAY 12 NOVEMBER 2003
Lord MacGregor of Pulham Market
1020. I would like to follow up one of the lines
of reasoning of Lord Jauncey in relation to other regulators and
the prices, the licences and so on. You indicated that you have
the capacity now to accept appeals from them if it were thought
desirable to do so. Would that mean expanding your technical resources
or do you feel you are already equipped to handle that extra workload?
(Sir Christopher Bellamy) It might conceivably require
some possible expansion. For example, one might want to reinforce
specialist knowledge of the members in some particular area, but
the basic principle upon which the Tribunal works is that the
parties bring before the Tribunal the main elements in the debate
and the Tribunal then adjudicates on what the parties bring before
it. If there are technical matters that need to be gone into further,
we have various ways of doing that. We spent Monday tramping across
the fields of Hampshire looking at mobile telephone masts and
local telephone exchanges to decide whether a radio base station
back haul circuit using a particular technology did or did not
fall within a particular provision of a particular Directive.
We have quite a lot of technical problems. First of all, you get
quite a lot from the parties or the parties' experts. If we need
to, we have power to appoint our own experts who would then discuss
the matters with the parties and with us and that would be an
additional element that we could take into account in reaching
our decisions. It is feasible to go down the road you mentioned
if one wanted to do so.
1021. As to appointing your own experts for
a particular case, you could go outside and then you make your
judgment on the basis of what they say and what the representations
are, could you not?
(Sir Christopher Bellamy) And what everybody else
1022. You will probably be aware that we have
had some representations about the lack of an adequate appeals
process for some of the regulators, so it is very interesting
to hear what you have to say about that. Would you extend that
to the FSA as well if it was thought desirable?
(Sir Christopher Bellamy) I have to say, my Lord,
that I am not qualified to comment on the FSA.
1023. Have you the technical resources or the
systems necessary to deal with appeals from the FSA if that were
(Sir Christopher Bellamy) I would have thought the
answer to that is yes, we have them or could put them in place.
How that would fit with the Financial Services and Markets Tribunal
I am not sure, but there is a Tribunal in that area. The exact
jurisdiction I am a bit hazy about.
1024. When you have to decide on the merits
of the case, obviously to some extent that is judgmental, different
people can take different views from the technical representations
that they receive. On what criteria do you judge the merits of
regulators to make what are sometimes technical decisions?
(Sir Christopher Bellamy) In our Competition Act jurisprudence
there is a general obligation on us to follow the principles of
Community law. There is quite a developed body now of competition
law principles which we seek to apply, although I have to say
that at this stage it is still fairly rudimentary. To some extent
we are developing it as we go along. I think you essentially bring
to bear the same kind of analytical skills that any judge trying
a technical issue brings to bear. He seeks to weigh the parties'
arguments, he listens to the cross-examination, if there is cross-examination,
he asks his own questions and at the end of the day you come to
a view. It is difficult to be more precise than that. One tries
to be consistent as one goes along from case to case.
1025. You mentioned some of the ways in which
you try to cut down the amount of time that is taken in appeal
and obviously one of the dangers of having too many appeals processes
is that it can be a form of filibustering by the parties. If your
role was extended, would you be in favour of trying to ensure
that you have fast track appeals where it is desirable?
(Sir Christopher Bellamy) Again I think the answer
is yes. My own view is that any appeals process in this kind of
area has to be managed, you have to keep it within certain bounds
otherwise it can just be used as a delaying tactic or a filibuster
or a nuisance. We would contend that in many ways our procedure
already is a fast track procedure in that we do aim to complete
appeals within six months from the day it was lodged. We do that
by keeping the parties to a tight timetable set in advance, by
having regular case conferences to hone the case down and by striking
out points at an early stage if they are not arguable points.
We would strike out frivolous appeals in a summary way if that
became a problem.
1026. As I understand it one of the changes
made in 1998 was that the appeal body as it then was was empowered
to look into due process and into the legality of what was done
and the interpretation of the law, but then there was added the
substance I think that is the same term as the merits.
What are the criteria that you apply in order to arrive at a decision
on the merits? A decision on the merits I take it is where you
take a different view from the authority as to what should happen
in the general interest.
(Sir Christopher Bellamy) In terms of the Competition
Act, to take that specific statute as an example, one is asking
oneself a specific question, that is has the regulator established
that there is an abuse of a dominant position here or has he established
that there is some infringing agreement. That is a question of
fact, so you have to look at what the evidence is and the evidence
may be in documents, in witness statements or in other circumstantial
evidence or whatever. You have to base a judgment on the facts.
You are not asking whether this was a judgment that a reasonable
regulator could have arrived at, you are asking has he got it
right on the facts. You then have to apply the law as you understand
it to those facts and there is quite a body of case law in this
particular area which one tries to apply or fill in. So you put
the law and facts together and you decide whether you think the
decision-maker has proved his decision in whole or perhaps in
part, or whether there is some slightly different decision that
is proved, not the one he originally took but one quite close
to it that can be established. If the matter is duly established
you then have to decide, if it is a penalty case, whether there
should be a penalty and, if so, how much. When you get to that
stage there are various criteria laid down in guidelines and so
forth, but you are essentially doing the same operation that any
court is doing when it is deciding what the penalty should be
for a certain infringement. In that context the criteria one is
applying are largely to be found in decided cases and you try
to bring common sense and judicial judgment.
1027. That is very helpful. What percentage
of cases that are brought to you come to a conclusion different
to that of the authority appealed against?
(Sir Christopher Bellamy) It is early days yet and
I think everybody so far has found the transition from the old
rather administrative-based system to a more judicial-based system
a transition that has involved a certain learning curve.
1028. On whose part?
(Sir Christopher Bellamy) On the part of the regulated
authorities. I am not able to give you a very clear answer. We
have upheld some decisions, others we have sent back. We have
a power to remit the decision for the regulator to reconsider
it and I think in two cases at least so far we have said, "Look,
I am sorry, this is not quite good enough. It is in the public
interest that this case proceeds, but we are going to send it
back to you to have another go."
1029. Do you suggest in what direction that
(Sir Christopher Bellamy) In those cases we have not
so far suggested it though we have power to do so and in some
cases we have said the regulator has not proved his allegation
and we think the appeal therefore succeeds.
1030. Although you premised your remarks by
saying you are not a regulator, in effect you do have considerable
influence on how the regulation is done.
(Sir Christopher Bellamy) I think that is a fair comment,
yes. I think in this kind of area the ground rules ultimately
have to be decided by somebody and the various cases eventually
funnel into the Tribunal and are subject to the control by the
Court of Appeal. We are the body that develops the grounds on
the basis of the decisions that a regulator takes and whether
we uphold them or not.
1031. Do you look on the framework of law within
which you are operating as being something which you are comfortable
with or is it something that could be improved?
(Sir Christopher Bellamy) I personally feel relatively
comfortable with the framework within which we are operating although
I would like to see the rights of third parties, particularly
under the 1998 Act, given consideration because my own view is
that third parties and complainants are very often the grist to
the mill of the system, they provide the energy and the initiative
and in my view they are an important element. Under the regulatory
system from which we are moving away there was in effect a kind
of system of regulatory monopoly, that is to say the regulator
had a monopoly as to whether he could take an initiative or not.
If you could not get the regulator to do anything you were more
or less stuck. As a third party, a small business or whatever,
you do at least have the chance, if the regulator does not act
or he acts in your view inadequately, to go to the Tribunal and
say he has not done his job. I regard that possibility, speaking
personally not officially, as a healthy development in the system.
1032. What we are undertaking in this inquiry
is not a general look at regulation as such that has been undertaken
by bodies like the Better Regulation Task Force; our focus is
accountability and essentially one of the questions is who regulates
the regulators and in a way your answer to Lord Elton may have
told us it may be you. The reason a body like yours exists is
essentially to hold regulators accountable, you are fundamental
to the mechanism of accountability. To what extent do you think
the changes you have outlined have enhanced the accountability
of regulators? I can see the benefit of the process you have outlined
because you try to deal with these matters expeditiously and I
can see from the point of view of those bringing those cases that
is an enormous advantage in terms of time and presumably there
is a cost implication as well. It is far less costly than one
that drags on. I can see how you operate and it is enormously
beneficial in that respect. I wonder whether the Acts that you
have outlined and the implications there you would see as benefiting
accountability in terms of the breadth of powers encompassed by
the different Acts?
(Sir Christopher Bellamy) It is not really very easy
for me to express a view on how well we have done, that is something
you would have to ask other people, but if one puts your question,
if I may, my Lord, in an abstract way, it seems to me that there
are three elements perhaps to bear in mind. First of all, the
scrutiny of the appeals system or perhaps even just the existence
of an appeals system should improve the quality of decision making
and I have the subjective impression that that has happened. Secondly,
the existence of a system and its operation should increase confidence
in the system as a whole. Because we operate in public, because
everybody can see what is happening and because our transcripts
go straight onto the websiteand as far as I can discover
it is visited all round the world by people who are watching closely
what we are doingeverybody knows what they are and I think
that helps people to understand and have confidence in the system.
Thirdly, it is a safeguard against regulatory capture, regulatory
inertia or regulatory timidity which with the best will in the
world may creep into any regulatory system from time to time.
I am not suggesting that it has but it might.
1033. People who want to bring a case not only
know they can but that it will be dealt with fairly expeditiously
and not drag on. On the third point, regulatory capture, would
that be reinforced by the scope of allowing third parties to bring
(Sir Christopher Bellamy) I would agree with you,
my Lord Chairman, I think it is the third party element that is
particularly important on that point.
1034. So in a way that is enhancing the accountabilities
of regulators because of the increased number of bodies that have
powers to bring cases. If we look at it in that sense then the
change that has taken place would appear to be beneficial from
the point of view of accountability within the system.
(Sir Christopher Bellamy) Yes.
Lord Jauncey of Tullichettle
1035. I want to take you a stage further. I
see that the decisions which are appealed to you under the 1998
Act are decisions where a prohibition has been infringed, whether
it is a Chapter 1 or Chapter 2 decision. As you say you are looking
at a question of mixed facts of law. In that decision the general
criteria for public interest would not enter into it. You would
look at the facts and see whether there had been an infringement
as an infringement has been defined in the law and then make your
decision. Is that right?
(Sir Christopher Bellamy) That is right in general,
my Lord, but in practice when you get to grapple with an issue
like whether certain conduct is an abuse an area of "appreciation"
comes into it and in making that appreciation matters that would
fall under a public interest heading tend to be part of the arguments
that are put to us. For example, we have had two cases so far,
one of which is pending, that in one way or another affect
the pricing of pharmaceutical drugs. That is an area where there
are various important interests at stake, the need to encourage
research and development in drugs and the need to ensure that
new drugs reach the market quickly and that people have an incentive
to develop them. So up to a point a certain balance needs to be
struck between those and pure competition issues. Those kinds
of questions can come into it as well.
1036. Any decision you make on whether or not
something constitutes an abuse will presumably be supported by
(Sir Christopher Bellamy) Indeed.
1037. And the judgment will be available and
read by regulators?
(Sir Christopher Bellamy) Yes.
1038. So to that extent you do have an influence
or certainly should have?
(Sir Christopher Bellamy) Yes, we do have an influence
and if they disagree with us they can appeal through the system.
Lord MacGregor of Pulham Market
1039. Could I just ask you about the footnote
in relation to paragraph 13 as it were in relation to privatised
utilities. The sentence is, "As a form of challenge to regulatory
action on the part of regulated undertakings and/or other affected
bodies or citizens, this type of inquiry represents at best an
oblique form of `appeal'." Could you just say a bit about
what that means, and do I detect that there is a criticism of
the present arrangements in that sentence?
(Sir Christopher Bellamy) I would not wish to make
any public criticism of the present arrangements. I think what
is being said here is that the word appeal can be used rather
loosely to cover rather different forms of process. I think I
have explained what we mean by an appeal, which is the classic
appeal mechanism. The traditional investigations by the Competition
Commission where something is referred to them take the form of
an administrative re-investigation of what the regulator has already
decided. They are conducting another investigation to a large
extent behind closed doors.