Previous SectionIndexHome Page


Mr. Chidgey: Amendments Nos. 53 to 58 attempt to address concerns raised in parts of the British music industry. Vertical agreements are vital to the industry, particularly for songwriters, composers, music publishers, record companies and collecting societies. The success of the music business depends on its ability to license musical works effectively and efficiently to parties who wish to use them. The important point is the variety of agreements concerned, and I hope that the Minister can clarify the position.

One-off agreements may allow use of a piece of music in specific circumstances, such as for television advertisements. Agreements may comprise collective licences, allowing frequent music users, such as television or satellite broadcasters, to play a licence holder's repertoire without seeking authorisation for each composition. Vertical agreements concerning copyright are different from other vertical agreements, for several reasons. Unlike transactions involving other types of property, copyright licences do not transfer ownership from one party to another. They merely give permission for use of copyright work. It is right that such agreements should specify the circumstances in which the licensee is permitted to use the work. Anything else would render rights worthless.

European Commission case law already recognises that intellectual property contracts must contain conditions of use. Regardless of specific terms and conditions, licences grant freedom to those who wish to use music. Should the Bill result in uncertainty for rights holders about whether licence agreements are valid, they may choose not to enter into such agreements rather than risk losing control of their work, the source of their income. Members of British Music Rights, songwriters, composers and music publishers need certainty in their business relationships. We want the Government to assure rights holders that they do not consider agreements to be restrictive, and that the Director General of Fair Trading will not regard agreements as falling within the Bill's scope.

The National Consumer Council is concerned about clause 50. A balance needs to be struck between ensuring that the Office of Fair Trading is not overwhelmed by

8 Jul 1998 : Column 1188

dealing with vertical agreements, and making sure that the director general has adequate powers to act against malign vertical agreements. The NCC feels that that balance is not struck sufficiently in favour of consumers. Broadly, we are concerned that the powers will not be sufficiently robust to deal with vertical agreements and anxious about the use of the clawback power in clause 50(3), which is the key to protecting consumers from malign agreements. We are worried that, unless the director general has sufficient powers to consider all vertical agreements that have been exempted or excluded, the provision will fail.

Our amendments are designed to probe the operation of clause 50. The purpose of amendments Nos. 53 and 54 is to probe why it should be the Secretary of State who makes the relevant order. Why should it not be the director general, or even the Secretary of State on the advice of the director general? Will the director general have any role in making the order?

Those questions have been raised in the context of the other powers in the Bill, particularly the Secretary of State's exclusion powers in clause 3, the director general's power to make individual exemptions under clause 4 and the block exemptions under clause 6 that may be made by the Secretary of State at the director general's recommendation. In clauses 3, 4, and 6, there is a clear distinction between the roles of the Secretary of State and the director general, but it has been lost in clause 50.

In the past, the National Consumer Council has feared that there has been too much scope for unfettered Executive action on competition policy. The director general should have the final say on competition issues while the Secretary of State should have it when broader economic issues must be considered. Clause 50 confuses that distinction. We look to the Minister for clarity.

Amendment No. 56 provides that, before making an order, the Secretary of State should justify why vertical agreements should be excluded or exempted from the prohibition. In doing so, he should assess the benefits to consumers of the order. The assessment should be published as part of the consultation process. That should make the process of making the order as open and accountable as possible.

Openness is important because clause 50(1) does not specify the criteria for making exclusions or exemptions. The situation in the Bill is different from what has been proposed in the European Union document, "Draft communication on the application of the EC competition rules to vertical restraints". The EU proposals, by comparison, are based largely on market share triggering the blacklisting of prescribed practices.

The main thrust of amendments Nos. 55, 57 and 58 is to ensure that the director general's clawback power is not too limited. As currently drafted, clause 50 means that the order will have to specify whether the director general has such a power or not. We believe that he should be able to use it whenever he considers it appropriate and not only when specified in the Secretary of State's order. The worst case scenario is that the Secretary of State could exclude or exempt all vertical agreements under clause 50(1) without empowering the director general to use any clawback power at all. Should that happen, no vertical agreement would be exposed to competition scrutiny. That would be unacceptable and we do not believe that that is the meaning of the legislation.

8 Jul 1998 : Column 1189

Amendment No. 57 would ensure that the director general does not have to be too constrained in his use of the clawback power. Clause 50(3) limits the use of the power to "prescribed circumstances". What are the prescribed circumstances likely to be? If such circumstances were confined to a merger inquiry identifying problems, it would be far too restrictive. The director general should have the power to consider any vertical agreement brought to his attention as being potentially malign. He should then be able to assess it, judge its anti-competitive effects and, if necessary, use the clawback power under clause 50(3) to bring it within the chapter I prohibition.

I have set out as clearly as I can our concerns about clause 50 by tabling probing amendments and providing background information on the specific concerns of the National Consumer Council and of the music rights fraternity, in particular British Music Rights. I expect the Minister to address the issues seriously and I hope that he will give some words of encouragement when he winds up the debate.

11 pm

Mr. Letwin: I should begin by reassuring hon. Members that I do not intend to dwell on this matter at the length at which I dwelt on a previous matter this evening.

Clearly, at some point after I found myself dislodged from the Committee, my hon. Friends had an attack of extreme moderation, for they have tabled amendments that are minimalist. From an early stage in the Bill's progress, we were assured by the Secretary of State that action of a firm and decisive nature would be taken to remove vertical agreements from the scope of the Bill. We were assured repeatedly throughout the Committee stage--I have checked the Official Report of the later part of the Committee's proceedings--that we would be given a judgment of Solomon, if not something better, on the issue as a result of the prolonged deliberations of the Government and their chosen parties that would tell us exactly how that would be done.

Yet what do we find? We find provisions in the Bill that are simply a replication of the Government's general tendency to insert clauses that either are, or bear a striking resemblance to, Henry VIII clauses--clauses that give the widest possible discretion under regulation. My hon. Friends have tabled amendments that would make provisions that might be described as presumptive--they would still allow a considerable degree of discretion. The Minister owes it to the House to explain how he intends to use clause 50 as it stands; and why he would not be prepared to accept amendments that slightly constrain that regulation-making power.

I shall go further, because there is a point here that connects with proceedings earlier this evening. If myhon. Friend the Member for South Cambridgeshire (Mr. Lansley) is right and the reason why the Government have wholly failed to bring forward a clear and concrete definition of the sorts of vertical agreement that will be exempt and those that will not is that they await the views of the Commission on the matter, the Government are once again guilty of entirely failing to distinguish between interstate and intrastate commerce. The views of the Commission on this matter are of exactly the same academic interest as might be the views of a range of economists: if the Commission has superior

8 Jul 1998 : Column 1190

economists, its views are of greater interest; if inferior, as is all too often the case, its views are of less interest. The Commission has no jurisdictional interest whatever in this matter. As we have been repeatedly assured, it is precisely the purport of the Bill to deal with intrastate commerce. In such matters, the Government cannot hide behind the views of the Commission.

Therefore, we have before us the straightforward spectacle of the Government having spent many months considering an issue only to bring before the House something that they could perfectly well have brought before the House six months ago--provisions that enable the Government to decide in due time what the Government want to do. I would venture to say that my hon. Friend the Member for Daventry (Mr. Boswell) could have drafted such provisions immediately--indeed, his research assistant or secretary could have done so.

The clauses tell us nothing, so, if the Minister intends to reject the amendments, he owes it to the House to tell us exactly why he is doing so. He owes it to the House to tell us how he will go about exercising the wide latitude given to him; and why he would not be able to exercise sufficient latitude if he accepted the amendments tabled by my hon. Friend the Member for South Cambridgeshire. If the Minister cannot give that explanation, we owe it to the country to explain that this is yet another case in which the Government intend to abrogate responsibility over intrastate trade to an external power that ought not to have jurisdiction in that matter.


Next Section

IndexHome Page