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9.45 pm

The Minister of State, Department of Trade and Industry (Mr. Ian McCartney): I congratulate those 23 right hon. and hon. Members who contributed to the debate. It was conducted to among the highest standards of any debate that I have had the privilege to listen to and be part of during 11 years in this place. Of course, there are some obvious exceptions, to which I may refer later--I see the right hon. Member for Wokingham (Mr. Redwood) is in his place. Hon. Members generally made a thoughtful contribution, and I apologise for the fact that time prevents me from addressing many of the technical issues that they raised. Those matters will be debated in Committee. I have been in Committee with the hon. Member for Daventry (Mr. Boswell) on numerous occasions, and he knows that I am prepared to discuss matters in Committee. We shall examine a range of issues in Committee in order to ensure that, when the Bill emerges from Committee, it deserves the support of the House--as it does tonight.

My hon. Friends the Members for Ealing, Acton and Shepherd's Bush (Mr. Soley), for North Durham (Mr. Radice) and for Sunderland, South (Mr. Mullin) set out their cases with a great deal of clarity and integrity. I welcome their contributions, as well as those of other

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Labour Members. My hon. Friend the Member for Crewe and Nantwich (Mrs. Dunwoody) referred to the proposed sale of Rolls-Royce. I take genuine note of her comments and the spirit in which she made them.

The Bill will achieve much-needed modernisation and strengthening of our competition laws. It will be a highly effective regime that is tough on cartels and other anti-competitive activities. It fulfils our manifesto commitment fully, effectively and quickly. Reform of the current weak laws is long overdue, and the Bill brings United Kingdom laws up to date after years of indecision on the part of the previous Administration.

The hon. Member for Daventry expressed his views in a soft and thoughtful manner. However, it sticks in my craw that, although the Conservative party was in power for 18 years and did nothing about competition law for the last 10 years, Conservative Members complain that, in nine months, this Government have proceeded only to the Second Reading of the Bill.

The fact is that the Bill has passed through its stages in the House of Lords and there has been major public consultation. The matter was considered in a non-partisan manner with the Opposition in another place. We tried to persuade our colleagues to our view and to promote changes that would improve the Bill. No one can say that the Government have sat on their hands in relation to this issue.

The previous Government did not have the bottle to do something about the difficult questions regarding competition, and they left it to my right hon. Friends and me to deal with. Therefore, I shall take no lessons from the hon. Gentleman when it comes to the timing of this legislation.

The Bill puts right previous failings. It will give the Director General of Fair Trading the powers that he needs to uncover cartels, abuses and other anti-competitive behaviour. He will have effective powers to stop anti-competitive behaviour quickly and to impose stiff financial penalties that provide an effective deterrent.

If I understood the right hon. Member for Wokingham correctly, he said that he was basically satisfied with the current regime. We do not agree. The essence of a prohibition regime is that the onus is placed on companies to avoid anti-competitive action. It is not good enough to allow anti-competitive practices to continue until they are reviewed or, to use a better term, found out. That is why the present regime needs reform. Time and again the director general has announced that he has caught up with an anti-competitive practice, such as price fixing in laboratory equipment, only to be able to do no more than ask the parties kindly to stop what they are doing.

Many hon. Members have talked about vertical agreements. Many of these agreements will automatically be exempt from the prohibition of anti-competitive agreements. The Bill provides that vertical agreements, such as petrol solus agreements and exclusive distribution arrangements that meet the conditions of EC block exemptions, will be parallel exempt from the domestic prohibition. In general, vertical agreements are not anti-competitive. On that basis, there is a case explicitly to disapply the prohibition from vertical agreements to ensure the most efficient targeting of the regime to areas of more serious concern.

There is already provision in the Bill to make exclusions. We are in discussion with the CBI and other interested parties on whether additional flexibility in the

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Bill would be desirable and how vertical agreements should be defined. I have no doubt that the issue will be discussed in Committee.

Mr. Owen Paterson (North Shropshire): Will the Minister give way?

Mr. McCartney: The hon. Gentleman may not have noticed that I am still on my feet. I apologise to the hon. Gentleman but time is short. As I have said, we have had a good debate.

The Government are clear that it is important to have a strong, diverse and independent press. The importance of that is reflected in the special merger provisions for newspapers in the Fair Trading Act 1973, which are there to protect plurality of ownership and diversity of content.

Let us be clear about the way in which the Bill will work. It will prohibit anti-competitive conduct. Penalties and third-party claims for damages may follow. The Bill is serious and tough. We are not softening the law, as some seem to think; we are greatly strengthening it.

Clause 60 requires European jurisprudence to be followed. Having taken legal advice, I shall explain what that means. On predatory pricing, in the case of Tetra Pak, the European Court of Justice followed its earlier decision in AKZO that, where prices are below the average variable cost of production, predation should be presumed. In other words, proof of intent is not required. That is indeed an objective test.

Subsection (2) of clause 60 makes it clear that inconsistency must be avoided in the principles applied by courts in applying the domestic prohibition and those laid down by the European Court and any relevant decision of that court. The principle established in AKZO and Tetra Pak will apply under the Competition Bill. If prices are above average variable costs but below total average costs, conduct is to be regarded as predatory where it can be established that the purpose of the conduct was to eliminate a competitor. The principle established in European case law will apply under the Competition Bill when enacted.

European jurisprudence makes it clear that dominance means a position of economic strength that enables an undertaking to act independently of competition. Market share does not determine dominance, but it is an important factor. The Commission has made it clear that, although, in general, companies with market shares below 40 per cent. are unlikely to be regarded as dominant undertakings, some undertakings with market shares as low as 20 per cent. may be dominant if the nature and structure of the market enables them to act independently of competition. Clause 60(3) requires our courts to have regard to relevant statements of the Commission in applying domestic prohibition, so the assessment of dominance will follow the EC approach.

The McNally amendment is not about competition. It relates to wide-ranging regulatory intervention into newspapers. It is pernicious. Any action that may reduce diversity is caught if a newspaper holds a substantial degree of market power. The amendment does not distinguish anti-competitive abuses from a case where a newspaper becomes dominant through its good journalism and the failings of its competitors. If we leave the amendment as set out in the Bill, we shall be storing up

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trouble for successful newspapers in future. As a consequence, we shall remove clause 19 from the Bill in Committee.

The Opposition amendment refers to over-the-counter medicines and the review of resale price maintenance. Agreements enforcing that practice, like other agreements, will in due course fall to be considered under the Bill. In recognition of the existing exemption for resale price maintenance in over-the-counter medicines, however, the Bill gives relevant agreements a special five-year transitional exclusion from the prohibition.

When Conservative Members had responsibility for those matters, they proposed in a draft Bill precisely what we advocate--allowing current proceedings to continue. They cannot have it both ways: they cannot pretend that the issue is new and complain about the director general's action now, as they do in the amendment. The director general announced in 1995 that he was to investigate the matter following the receipt of complaints. As long ago as October 1996, he said that he intended to bring proceedings, asking the restrictive practices court to review the matter.

Moreover, it is clear that we could not remove the matter from competition consideration, even if we wanted to do so. EU competition law has direct effect, and the Commission has not proceeded with complaints received on the basis that the Office of Fair Trading has proceedings under way in the court that could satisfactorily resolve the matter. The logic of that was most recently confirmed in a letter from Commissioner Van Miert to my right hon. Friend the President of the Board of Trade: that if the proceedings were stayed, the Commission would pursue its own investigation of the case.

Whatever the outcome, the public can be assured of our commitment to a national health service to which all people have access, regardless of who they are or where they live. We have published our proposals for creating a modern, dependable NHS which is there when people need it. My hon. Friend the Member for Middlesbrough, South and Cleveland, East made a passionate case. I can assure him that the community pharmacy is very much part of the Government's vision. Pharmacies provide somewhere to which patients can turn for advice and support as well as a place from which they can collect their prescriptions. The place of community pharmacies within the NHS is not in doubt.

The right hon. Member for Wokingham referred to the closure of pharmacies. Does he remember that 178 pharmacies closed during his membership of the previous Cabinet? If there is a rag bag, a muddle and a mess, it is the Opposition's position on the matter. For example, how will the hon. Member for Tunbridge Wells (Mr. Norman), the deputy chairman of the Tory party, vote tonight? Will he be in the Lobby supporting his right hon. Friend, or will he, as I suspect, take a different view, as do many Conservatives?

The right hon. Member for Wokingham also complained about powers of investigation. They are tough--there is no dispute about that--and so they should be. It has long been recognised that a major weakness of the existing regime is the inadequacy of powersof investigation. Strengthening is well overdue.

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Anti-competitive behaviour, especially anti-competitive agreements, is invariably concealed. Strong powers are needed to get to the truth. There are appropriate safeguards and limitations on the exercise of powers. The Bill aims at alignment with the EU regime, and the powers are broadly similar.

The policy of the right hon. Member for Wokingham is to be soft on corporate crime and soft on the causes of corporate crime. That is wrong: anti-competitive conduct is cheating and bullying. Small companies and medium-sized enterprises can be seriously damaged and even driven out of business. No wonder the right hon. Gentleman was described as the worst Minister responsible for competition in living memory.

Business supports the Bill. The CBI, Kingfisher, CIA--[Interruption] the Consumers Association, the Law Society--[Interruption.] I knew that that would get Conservative Members going: the CIA is the Chemical Industries Association, with which I have a long-standing involvement, unlike the other CIA, in which Conservative Members may have had a long and active interest.

I make it clear that the Bill represents a manifesto commitment by the Government. We are now delivering on it, as we are on our other promises. That may surprise the Opposition, who consistently failed to address reform of competition law when in government. We have not failed business or consumers. I commend the Bill to the House.

Question put, That the amendment be made:--

The House divided: Ayes 169, Noes 314.

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