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Mr. Boswell: I am grateful to my hon. Friend for giving way, as I want to deal with the matter by way of intervention, not in a substantive speech. Does he agree that there is a real risk that there will be a much higher incidence of appeals against a tribunal's decision to a higher court and that it would be counter-productive not to incorporate into the Bill a provision such as the one suggested in the amendments?

Mr. Lansley: I agree. Our intention is to make the process work in the best interests of British industry, but industry will not be well served if it finds that, because of tribunals' lack of legal credibility, it regularly has to have recourse to the higher courts. The tribunals must provide a forum in which economically and legally credible decisions can be made straightforwardly and inexpensively. It is difficult to see how that could be achieved without a High Court judge as president of the tribunals.

Mr. Ian McCartney: Like the hon. Member for South Cambridgeshire (Mr. Lansley), I am convinced that we need robust decision-making processes that have clarity as their central focus. I also believe that the membership

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of the panels must be credible in terms of the law, of business practice and of economics. The panels will be similar to the restrictive practice courts, where all three key pillars are consistent throughout the membership.

That is very important. If the process is to work, there must be a clear understanding from the outset that the membership must have a quality and credibility that ensure that people can accept a tribunal's decisions. We can all agree that access to full and independent appeal on the merits of the case is essential in ensuring that the new regime is fair and transparent. The Bill provides for precisely such a right of appeal.

Our proposals provide a clear separation between the body that has the investigative and original decision-making function and the body that hears appeals. Such a separation is essential to ensure a fair, independent and transparent appeals process. We achieve the separation by making the appeals tribunal a completely separate body from the Office of Fair Trading, which has the primary responsibility for investigating and dealing with infringements.

In its response to the consultation document, the Confederation of British Industry said:


Fairness demands that appeals can be dealt with efficiently and by people with the necessary expertise and experience. We believe that our proposals for a specialised tribunal will best achieve that aim. We are clear that the person appointed to be president of the tribunal will be a senior figure, with status at least equivalent to that of a High Court judge.

The tribunal itself will have equivalent status to the High Court and appeals from its decisions on points of law or levels of penalty will be direct to the Court of Appeal. It is clearly essential that the president should have appropriate legal qualifications, experience and standing, and strict minimum requirements are set out in schedules to the Bill.

We do not think that it would be right to limit further the range of people and expertise available to fill this vital post, as the amendments would do. General legal standing is vital, but so are special knowledge and experience of competition matters. We do not believe that it would be in the interests of the users of the appeal tribunal to limit the field of potential candidates to High Court judges alone, as the amendments propose. Our proposals will open up a much wider range of potential candidates. We believe that that is very important in what is, after all, a complex and specialist field.

I hope that, having heard that explanation of our position, the hon. Gentleman will be prepared to withdraw the amendment.

Mr. Lansley: I am grateful to the Minister for that reply. He has made clear the Government's intention to meet the tests of legal credibility that were implicit in the amendment, rather than limiting the tests to other kinds of credibility that will be vested elsewhere, in the activities of the director general and the commission. I therefore beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

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Clause 50

Vertical agreements and land agreements

Mr. Lansley: I beg to move amendment No. 41, in page 26, line 4, at beginning insert 'Subject to subsection (1A)'.

Mr. Deputy Speaker: With this, it will be convenient to discuss the following amendments: No. 53, in page 26, line 4, leave out


'The Secretary of State may by order provide'

and insert


'The Director may recommend that the Secretary of State by order provides'.

No. 54, in page 26, line 4, leave out 'Secretary of State' and insert 'Director'.

No. 42, in page 26, line 8, at end insert--


'(1A) Subject to subsection (1B), the Chapter I prohibition does not apply to a vertical agreement.
(1B) If the Director is satisfied that there is a vertical agreement which, but for the exemption in subsection (1A) would infringe the Chapter I prohibition, he may issue a notice to each of the parties to the agreement bringing that exemption to an end in relation to that agreement on the date specified in that notice.'.

No. 55, in page 26, line 14, leave out from beginning to 'is' in line 15 and insert


'The Director shall have power to give directions that an exclusion, exemption or modification made under subsection 1'.

No. 57, in page 26, line 15, leave out 'in prescribed circumstances'.

No. 58, in page 26, line 17, at end insert 'or category of agreement.'.

No. 56, in page 26, line 17, at end insert--


'(3A) Prior to making an order in relation to vertical agreements under subsection (1) the Secretary of State shall carry out and publish an assessment of the benefits to consumers of such an order.'.

No. 43, in page 26, line 21, at beginning insert "'connected" and'.

No. 44, in page 26, line 21, leave out 'and "vertical agreement" have' and insert 'has'.

No. 45, in page 26, line 23, at end insert--


'"price fixing agreement" means an agreement which seeks to control the price charged for the goods or services which are the subject of that agreement, whether or not by purporting--
(a) to fix a particular price, a minimum price or a price band, or
(b) to impose a requirement, make a recommendation or offer an incentive,
other than an agency agreement under which the principal establishes the price at which the agent sells the goods or services which are the subject of the agreement or an agreement which relates exclusively to the price of an interest in land.
"vertical agreement" means an agreement between two or more undertakings (other than connected undertakings) under which one undertaking acts as purchaser and another acts as supplier of the goods or services which are the subject of that agreement and includes an agency or distribution agreement but does not include a price fixing agreement.'.

Mr. Lansley: The amendments are designed to clarify the characteristics of vertical agreements and to restructure the clause to give effect to the Government's apparent intentions. I think that it is common ground on

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both sides of the House that, like any other aspect of the activity, one has to judge whether the impact of vertical agreements on competition and consumer benefits is beneficial. Whereas one would judge many other classes of agreement simply on their effects, there is more of a presumption that vertical agreements are benign, and the President of the Board of Trade stated earlier that she would try to find a mechanism by which such agreements could be excluded from the scope of the prohibition.

10.45 pm

The difficulty is that, throughout the passage of the Bill, we have been waiting for the Government to tell us by what means they propose to exclude vertical agreements. We have been awaiting the views of the task force established between the Government, the Confederation of British Industry and other bodies to look into the matter. In Committee, we were told that there was a further reason for delay because we had to take on board the Commission's final view of the matter. When we began to understand the thinking behind the Commission's approach, there was all the more reason to amend the legislation so that the House could lead the Commission to an appropriate definition of vertical agreements, rather than simply wait for what it would tell us.

I will not dwell on all the other incidental matters, but, for me, what gave rise to most concern in Committee was the Under-Secretary of State making it clear that the Commission was considering a definition of vertical agreements that would encompass operations at different economic levels. Rather, therefore, than having an effects-based approach, we would have a narrow, form-based approach to the exclusion for vertical agreements. It seemed an unhappy precedent for the Commission to go down that path as it would be perfectly possible to define such agreements differently. Indeed, the purpose of the amendments is to undertake that definition. For example, price-fixing agreements will clearly be excluded from the vertical agreements that should obtain the benefit of exclusion from the prohibition; one amendment would achieve that.

Clearly, there must be a proper clawback provision. If the director feels that a vertical agreement that has the benefit of the exclusion would infringe the prohibition, he must have the right to take that agreement back under the terms of the prohibition. All that is set out in the amendments, including the requirement that vertical agreements should relate to two or more unconnected undertakings.

There are a number of benefits, on which I will not dwell at great length as they were set out well in Committee. However, it is important to recognise that, the vertical agreements that the Commission seems to be moving towards are necessarily those that operate at different economic levels, whereas those that we meet in practice often have horizontal aspects. One instance weighs heavily on my thinking and that is that, where a franchise agreement forms the vertical agreement, the franchise holder will often have a small number of units in his own control at a particular level to protect the brand, demonstrate the franchise and show how the agreement should be manifested. The sort of definition that the Commission is considering would exclude such vertical agreements. We do not have the benefit of its final

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document, so it is not clear how it will disinter such an agreement to separate out the vertical and horizontal aspects.

If Ministers intend, as they stated at the outset, to provide an exclusion for vertical agreements, we should give effect to that provision, but with suitable safeguards and definitions. The amendments pick up on those points and would give effect to them. In contrast to their stated intention to exclude vertical agreements, all that Ministers have come up with--in months--is a bold enabling power, with no specifics. Nor have they, as yet, given us any clear definition of the terms on which they would be likely to produce statutory instruments to give effect to their intentions.

The amendments have two purposes. They challenge Ministers to tell us, even at this late stage, the basis on which they propose to handle vertical agreements, and they ask the Government to incorporate in the Bill an exclusion and subsequent definitions of the kind they ought to have proposed in the first place.


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