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Clause 186: Exercise of powers by authorised person
410. This clause grants the OFT the power to authorise any competent investigator who is not an officer of the OFT to exercise the powers conferred on the OFT under clauses 184 and 185. However, no person under investigation is bound to comply unless such authorised person produces evidence of his or her authority.
Clause 187: Privileged information etc.
411. This clause requires legal professional privilege - i.e. the principle that legal advice is confidential to the client to whom it is given - to be respected in the exercise of powers under clauses 184 and 185 and reproduces the requirements in respect of banking professional privilege in section 2(10) CJA 1987.
Clause 188: Restriction on use of statements in court
412. This clause provides that statements made under compulsion in response to powers exercised under clauses 184 and 185 may only be used in court in respect of a prosecution of the person who made them: (i) for making false or misleading statements under subsection 192(2); or (ii) for making an inconsistent statement in respect of a prosecution for another offence.
Clause 189: Use of statements obtained under Competition Act 1998
413. The Chairman will continue to have the powers of the former DGFT to require the provision of information by an individual on behalf of an undertaking under Part I, Chapter III of CA 1998 as part of a civil investigation. This clause amends CA 1998 to provide a safeguard with regard to the use of any such oral information obtained under CA 1998 by compulsion, for the purpose of the criminal offence under clause 179. This is intended to provide protection against self-incrimination.
Clause 190 & Schedule 26: Surveillance powers & Repeals and revocations
414. Clause 190 and Schedule 26 amend the Regulation of Investigatory Powers Act 2000 ('RIPA 2000') to grant the OFT access to intrusive surveillance powers for the United Kingdom. With these powers the Chairman of the OFT ('the Chairman') may issue an authorisation for the planting of surveillance devices in residential premises (including hotel accommodation) and private vehicles. (A designated officer may grant an authorisation in an urgent case if the Chairman is not available.) Acting on information received from an informant, the OFT could, for example, use these powers to record a meeting of cartelists in a hotel room.
415. Under section 32(3)(b) RIPA 2000, one of the criteria for which an authorisation may be granted is for 'the purpose of preventing or detecting serious crime'. All applications for authorisations are subject to the scrutiny and approval of the surveillance commissioners in line with the existing procedural safeguards in RIPA 2000. When an authorisation is granted, the OFT intends to outsource the technical deployment of the intrusive surveillance activity to other public authorities which already have access to these powers and practical experience of exercising them.
416. The OFT has applied separately to the Home Office for an Order to grant authorised officers access to directed surveillance (essentially monitoring the movement of people and vehicles) and covert human intelligence sources (essentially the use of informants) under sections 28 & 29 RIPA 2000. OFT has also applied to the Home Office for an Order to grant authorised officers access to communication data (primarily postal and telephone records) under section 22 RIPA 2000. These powers will be available for both civil and criminal investigations.
Clause 191: Authorisation of action in respect of property
417. This clause amends Part III of the Police Act 1997 to grant the Chairman and a nominated deputy the powers to issue authorisations to interfere with private property. Such authorisations are required to gain access to premises in order to undertake intrusive surveillance.
Clause 192: Offences
418. This clause makes it an offence for a person to fail to comply with any requirement imposed on him or her in an investigation by the OFT under clauses 184 and 185. It is an offence for a person knowingly or recklessly to provide false or misleading information to the OFT or for a person to destroy or falsify documents that he or she has been required to produce. It is also an offence for a person to obstruct a person exercising powers under a warrant issued under clause 185.
PART 7: MISCELLANEOUS COMPETITION PROVISIONS
Powers of entry under 1998 Act
Clause 194: Powers of entry
419. This clause amends sections 28, 62 and 63 CA 1998 to allow people who are not employees of the OFT to accompany and assist OFT officers on raids conducted under the auspices of a warrant. It is anticipated that such people will have expertise that is not available within the OFT but is required to fully exploit the terms of the warrant (e.g. IT experts).
Clause 195: Disqualification
420. A person who is subject to a disqualification order made under the Company Directors Disqualification Act 1986 ('CDDA 1986') may not:
for the period specified in the order. It is a criminal offence to contravene a disqualification order. Civil liabilities may also be incurred in respect of such contravention.
421. This clause inserts five new sections into CDDA 1986 to enable the courts to disqualify a person for his or her involvement in an infringement of competition law.
422. New section 9A provides that the court must make a disqualification order against a person for a period of up to 15 years if two conditions have been satisfied. The first condition is that the person is a director of a company that has committed a breach of competition law. This is defined as an infringement of either the prohibitions in CA 1998 or the EC Treaty relating to agreements preventing, restricting, or distorting competition or abuse of a dominant position. The second condition is that the court considers the person's conduct was such as to make him unfit to be concerned in the management or control of a company. Applications for a disqualification order may be made by either the OFT or a specified regulator.
423. New section 9B provides that a person whom the OFT or regulator considers unfit may consent to a period of disqualification without the need for court involvement by giving a disqualification undertaking to the OFT or regulator. The maximum period of disqualification is 15 years.
424. New section 9C provides the OFT and regulators with powers of investigation to enable them to decide whether to make a disqualification application. These powers are the same as those that are available for an investigation into a suspected infringement of CA 1998. It also provides that, before it can make a disqualification application, the OFT or regulator must give prior notice to the person likely to be affected by the application, and give him or her the opportunity to make representations.
Clause 196: Super-complaints to regulators other than OFT
425. This clause empowers the Secretary of State to impose super-complaint duties on any of the sectoral regulators able concurrently to exercise powers under CA 1998, in connection with super-complaints made to them relating to their sectors (see also clause 11). The Secretary of State will be able to amend the list of regulators specified where necessary thereafter.
Clause 197: Power to modify Schedule 7
426. This clause allows the Secretary of State to amend or add to the list of remedies that can be used in final orders. This new provision is intended to allow the list to evolve over time in response to market developments.
Clause 198: Repeal of Schedule 4 to the 1998 Act
427. Subsection (1) removes section 3(1)(d) of and Schedule 4 to CA 1998. These provisions create a special regime dis-applying the Chapter I prohibition to the professional rules of those bodies listed in Part II of Schedule 4 and that have applied for designation of their rules under the Act.
Clause 199: Repeal of Part 6 of Fair Trading Act 1973
428. This clause repeals sections 78 to 80 FTA 1973, which made provision for Ministers to refer to make general references and restrictive labour practice references to the CC.
Clause 200: Reform of Community competition law
429. Since the reforms made by CA 1998, a major part of the regulation of competition in the UK is modelled on the EC competition rules. Thus the prohibitions in Articles 81 and 82 of the Treaty correspond to the 'Chapter I' and 'Chapter II' prohibitions in CA 1998, and many of the powers of the OFT under that Act correspond to the powers of the European Commission contained in the EC implementing legislation made under Article 83 of the Treaty.
430. The European Commission has made a proposal for a Council Regulation under Article 83 that would substantially revise the way EC competition law is enforced (the 'Modernisation' regulation). This proposal is currently under discussion in the EU Council.
431. If adopted by the Council, the Modernisation regulation would give national competition authorities and courts a much greater role in the enforcement of Articles 81 and 82, and would also transform the way in which the exception provided by Article 81(3) is applied. Under the current system (the 'notification system'), agreements may be notified to the Commission in order to obtain an individual exemption granted under Article 81(3), and agreements or conduct may be notified in order to obtain a decision that the agreement or conduct does not infringe Article 81(1) or Article 82. Under the new system, such procedures would be abolished. Instead, Article 81 in its entirety would be applied directly by national courts and authorities (as well as by the Commission), and businesses would no longer be able to apply to the Commission to obtain such exemptions or decisions.
432. Although some provisions of the regulation would be directly applicable in UK law, others would require further implementation to be given effect. Measures that are required in order to give effect to the EC provisions (e.g. by setting out the powers of the OFT in applying Articles 81 and 82) can be made under the powers given by the European Communities Act 1972.
433. If, however, it is judged desirable to keep UK competition law in step with the EC system, as so reformed, it will be necessary to make appropriate changes to the UK system, and in particular to CA 1998. The powers provided by this clause are designed to enable the appropriate amendments to be made. Thus the Secretary of State will have the power to eliminate or reduce any differences that would result from Modernisation, or from any subsequent further changes to EC competition law following a regulation or a directive made under Article 83 of the Treaty.
434. The following are examples of how the power may be used:
435. Subsection (1) sets out the basic power to modify CA 1998. The modifications that can be made are those considered appropriate in order to eliminate or reduce such differences between UK competition law (as contained in CA 1998) and EC competition law as may result from the making of a relevant Community instrument. The power may also be used to avert the creation of such differences, by ensuring that the appropriate changes to UK competition law move in synchrony with the changes to the EC system.
436. Subsection (2) defines expressions used in subsection (1), in particular those which provide the basis of the comparison that must be made in exercising the power under that subsection. Thus the differences that may be dealt with under subsection (1) are those between the 'domestic provisions' of CA 1998, on the one hand, and EC competition law, on the other. For those purposes, EC competition law will include not only, for example, the directly-applicable provisions of a Council regulation, but also any provisions of UK law that implement or give effect to the EC competition rules. Conversely, 'domestic provisions' of CA 1998 will exclude any measures implementing or giving effect to the EC rules. When an instrument is made under Article 83 of the Treaty and implemented in UK law (for instance using the powers given by section 2(2) of the European Communities Act 1972), it is clear that a difference may then arise, in particular, between domestic provisions of CA 1998 previously modelled on the EC competition rules, and those rules as amended in consequence of the new Community instrument. In those circumstances, the power in subsection (1) may be used in order to reduce or eliminate such differences.
437. Subsection (3) provides a power to make certain additional changes to legislation, arising from the use of the power in subsection (1).
438. Subsection (5) specifies that the affirmative resolution procedure applies to any use of the powers given by this clause.
Schedule 8: Certain amendments of sectoral enactments
439. This Schedule sets out amendments to sectoral regulatory legislation. Part 1 sets out amendments to the sectoral enactments to extend the power to make an enforcement order that amends licence conditions to the CC. Under FTA 1973, the Secretary of State can make enforcement orders that do this. Part 2 sets out the consequential amendments to the sectoral regulatory legislation that will be required to be made in order to give sectoral regulators the same concurrent powers in relation to the market investigations regime as they do under the FTA 1973 monopolies regime.
PART 8: ENFORCEMENT OF CERTAIN CONSUMER LEGISLATION
440. This Part of the Bill is intended to improve consumer protection by giving enforcement bodies strengthened powers to obtain court orders (similar to injunctions) against businesses who do not comply with their legal obligations to consumers. It will replace Part III of FTA 1973 and the Stop Now Orders (EC Directive) Regulations 2001 ('the SNORs') in relation to Great Britain.
441. Part III of FTA 1973 was intended to provide a means of dealing with traders who, ignoring the constraints imposed by civil or criminal law, operate their business in a way that is unfair to and detrimental to the interests of consumers. Under FTA 1973 the DGFT can apply for an order that the trader refrain from continuing a course of conduct that is unlawful and detrimental to consumers.
442. Three principal defects have been identified with the Part III enforcement regime.
443. First, most traders whose behaviour raises concerns for the purposes of Part III operate at local level. Consumer protection legislation is largely enforced by local authority trading standards officers, but at the moment they have to refer cases suitable for action under Part III to the DGFT.
444. Second, the DGFT can only apply for a court order if, after using his or her best endeavours, he or she has been unable to obtain a satisfactory written assurance from the trader in question that he or she will refrain from continuing that course of conduct or a similar one, or that such an assurance has been broken. This has given traders scope for delay by entering into lengthy discussion about the terms of the assurance.
445. Third, the OFT have reported that the courts considering applications for Part III orders require evidence of a large number of instances of unlawful conduct before they will find that a person has 'persisted in a course of conduct'.
446. The 1999 Consumer White Paper 'Modern Markets: Confident Consumers' included a commitment to legislate to rectify the principal weaknesses in the Part III enforcement regime.
447. Partial reform of Part III has already taken place through the SNORs, which implement Directive 98/27/EC of the European Parliament and of the Council of 19 May 1998 on injunctions for the protection of consumers' interests (known as the 'Injunctions Directive'). The purpose of the Injunctions Directive is similar to that of Part III: it permits consumer protection bodies ('qualified entities') designated by the Member States to apply to the courts or competent administrative authorities for orders to require traders to cease conduct that constitutes a breach of any of the consumer protection directives listed in the annex to the Injunctions Directive and that harm the collective interests of consumers. Qualified entities can bring proceedings in their own Member State and in another Member State if an infringement there has effects on consumers in the qualified entity's home State.
448. The Injunctions Directive was added to the European Economic Area Agreement by Decision No 121/1999 of the EEA Joint Committee, which came into force on 1 July 2000.
449. The effect of the SNORs was to replace the grounds for an order under Part III with that required by the Injunctions Directive and to correct other perceived defects with the Part III process, in so far as Part III applies to the UK legislation implementing the specified consumer protection directives. The SNORs:
450. The result has been the creation of two separate enforcement regimes aimed at rectifying similar conduct by similar offenders. The SNORs, which were made under section 2(2) of the European Communities Act 1972, could not have dealt with the perceived defects in Part III in respect of unlawful behaviour outside the scope of the Injunctions Directive.
451. This Part is intended to create a single, unified enforcement regime across the consumer field. The remedies to be available to enforcing bodies and the procedures to obtain them will be based on those presently provided for in the SNORs. However, this Part will also enable a court order to be made to secure enforcement of domestic law requirements not covered by the SNORs but available under Part III only to the DGFT ('domestic infringements').
452. If requested to do so by the DGFT, the statutory regulators for the gas, electricity, water, rail, and telecommunications industries have the power to make applications under Part III within the fields they regulate. All of these statutory regulators are qualified to bring proceedings under the SNORs, and it is proposed to designate them under this Part.
Clause 201: Consumers
453. This clause defines the class of consumers who are to benefit from the protection provided for in this Part. A distinction is made between a 'consumer' for the purposes of a 'domestic infringement' and a 'consumer' for the purposes of an infringement of the legislation to which the Injunctions Directive applies (a 'Community infringement').
454. A 'consumer' in relation to a domestic infringement is an individual who receives, or seeks to receive, goods or services other than in the course of his or her business or with a view to setting up a business, from a person who supplies them in the course of business (subsections (2) to (4)). It does not matter if the supplier has a place of business in the UK or not (subsection (5)).
455. The purpose of including prospective business people within the above definition of 'consumer' is to ensure that an enforcement order is available in respect of domestic infringements that harm the collective interests of individuals who participate in, for example, 'homeworking schemes' or who contract with so-called 'vanity publishers'. As soon as an individual begins trading he or she will cease to be within the definition in respect of purchases for the purpose of their business, so business customers in general are not covered.
456. Subsection (8) defines a 'business' for the purpose of the definition of a consumer for domestic infringements. Any undertaking carried on 'for gain or reward' and any that charges for the supply of goods or services are businesses within the definition. This retains the existing definition in FTA 1973.
457. For the purposes of Community infringements, 'consumers' must include all persons who are consumers for the purposes of the individual directives listed in the annex to the Injunctions Directive; otherwise the Injunctions Directive would not be properly implemented. Subsection (6) accordingly provides that the meaning of 'consumer' is to be determined by the Injunctions Directive and the listed directives.
458. Schedule 13 lists the individual directives, or parts of individual directives, to which the Injunctions Directive applies (subsection (7)). Subsection (9) provides the Secretary of State with an order-making power to modify Schedule 13 by adding or removing directives to reflect further amendments to the Injunctions Directive.
Clauses 202 and 203: Domestic infringements & Community infringements
459. These clauses deal with the types of detrimental conduct in respect of which an enforcement order under this Part can be made.
460. Because the intention is that this Part should replace the SNORs while continuing to fully implement the requirements of the Injunctions Directive, the starting point for the scope of this new enforcement regime is the infringements to which the Injunctions Directive applies. The Injunctions Directive applies to any act contrary to the directives listed in the annex thereto as transposed into the internal legal order of an EEA State, and that harms the collective interests of consumers (Article 1.2). It also applies to breaches of national provisions that go beyond the minimum level of the listed directives as permitted by the directives (see below).
461. Furthermore, the Injunctions Directive does not contain rules as to the applicable law in cross-border cases (see Article 2.2). It would not, therefore, be sufficient for this Part to apply only to UK law transposing the listed directives because the Injunctions Directive would not then be properly implemented. It must be capable of providing for the situation where a UK court decides that the law of another EEA State should apply. This may happen where a trader's unlawful conduct in the UK harms consumers in another EEA State. In most cases, the laws of the EEA States will be the same for the purpose of these cases, because they will all give effect to the listed directives. It is only where an EEA State's legislation provides greater protection for consumers as allowed for under the 'minimum clause' contained in most of the listed directives that there is likely to be a significant difference in the outcome, depending upon which State's law the court decides to apply.
462. Subsections (1) and (2) of clause 203 provide a definition of a Community infringement that reflects the requirements of Article 1(2) of the Injunctions Directive. The definition refers to 'acts or omissions' that contravene provisions of listed directives as transposed by an EEA State. The concept of an omission is implicit in the Injunctions Directive because for some of the individual directives a contravention will arise (and in some cases will only arise) because of an omission. Schedule 13 lists the individual directives, or parts of individual directives, to which the Injunctions Directive, and therefore the definition of a Community infringement, applies (clause 203(4)).
463. Clause 203(3) provides the Secretary of State with an order-making power to define UK law for the purpose of the definition of Community infringement, including UK law that provides 'additional permitted protections'.
464. 'Additional permitted protections' are provisions that have been adopted or retained by an EEA State pursuant to the so-called 'minimum clause' contained in most of the directives (clause 203(2)). These clauses enable EEA States to adopt provisions that provide greater protection for consumers, provided the protection does not breach the rules in the EU Treaty on, for example, the free movement of goods. A measure that provides a type of protection that is different in kind from that afforded by a listed directive is not an 'additional permitted protection' because it cannot be said to rely on the minimum clause in the directive: the provision would not be within the scope of the directive and would not therefore be affected by the directive at all. But it is sometimes difficult to distinguish between national measures that rely on a minimum clause in a directive and measures that are not within the scope of a directive.
465. The Department will use the power in clause 203(3) to specify the legislation, and, in some cases, common law provisions, that give effect in UK law to the requirements of the listed directives. This will be helpful to enforcers and the courts in dealing with cases.
466. For a Community infringement to have occurred it is not sufficient that there has been an act contrary to the listed directives, etc. The act must also 'harm the collective interests of consumers'. The Injunctions Directive does not itself contain a definition of the 'collective interests of consumers'. But this term must be retained for the purposes of Community infringements if we are to continue to fully implement the requirements of the Injunctions Directive. For consistency, the same test has been applied for domestic infringements. For both Community and domestic infringements, the Department considers that a continuation or repetition of an act or omission contrary to any of the national measures implementing the listed directives (or acts or omissions specified as domestic infringements) could harm the collective interests of consumers, since the interests of future customers of the trader are actually or will potentially be affected. For example, if a trader has not complied with the requirement to inform consumers of their rights to cancel under the Consumer Protection (Distance Selling) Regulations 2000 when they purchase by mail order, we would expect the court to find it would be harmful to the collective interests of consumers for the trader to repeat the omission. The Department believes that the reference to the 'collective interests of consumers' will exclude use of the procedure to provide a remedy for individual consumers affected.
467. In addition to Community infringements this Part will also apply to domestic infringements as defined in clause 202. The definition of a domestic infringement is a composite, consisting of three elements: an act or omission must be done by a person in the course of business; it must fall within subsection (2) of clause 202; and it must harm the collective interests of consumers in the UK. The 'harm test' is the same as that for Community infringements as described in the previous paragraph.
468. Subsection (2), which provides the second element of the definition, is an order-making power for the Secretary of State to specify the legislation and common law obligations, breach of which would constitute an act or omission for the purpose of the definition of a domestic infringement, where it consists of anything done or omitted to be done, as set out in clause 202(2)(a)-(d).
469. Clause 202(2)(a) provides that an act or omission falls within this definition if it consists of a contravention of an enactment that imposes a duty, prohibition or restriction enforceable by criminal proceedings. It is immaterial whether the duty, prohibition or restriction is imposed in relation to consumers or not, so that, for example, breaches of legislation that serve equally to protect businesses as well as consumers will qualify (clause 202(4)(a)). It is not necessary for a person to have been convicted of any offence in respect of the act or omission (clause 202(4)(d)).
470. Clause 202(2)(b) and (c) provides that also within this definition are things done, or omitted to be done, in breach of contract or in breach of a non-contractual duty (for example, a statutory duty or a duty under the common law of negligence). It is immaterial whether civil proceedings in respect of the breach of contract or breach of duty have been brought or not (clause 202(4)(c)). It is also immaterial whether or not that breach is waived by the purchaser (clause 202(4)(e)). For example, the purchaser may decide to keep goods despite the fact that they were not supplied in the condition required by the contract.
471. Subsection (2)(a)-(c) reflects the existing scope of Part III. Clause 202(2)(d) further includes within this definition acts or omissions for which legislation provides a remedy or sanction enforceable in civil proceedings, although no duty is expressly placed on a person not to engage in such conduct. It is immaterial whether or not any remedy or sanction is provided for the benefit of consumers or not (clause 202(4)(b)). For example, a provision may require that a person must be compensated if another person does, or omits to do, something required by the provision.
472. Subsection (3) makes clear that, when specifying acts or omissions within the legislation or common law provisions covered in an order under subsection (2), the Secretary of State may exclude a subcategory of the act or omission concerned from the scope of the order.
473. The Department intends to make statutory instruments defining UK law for the purpose of the definition of a Community infringement and listing the UK legislation and civil law obligations to which the definition of a domestic infringement will apply before this Part of the Act comes into force. The intention is that the list for domestic infringements should initially be limited to breaches of legislation and of the law of contract intended to protect the economic interests of consumers, including legislation intended to deal with those trading in counterfeit or pirated goods.
474. As a general rule it would not be the Department's intention to include UK law implementing the listed directives in the domestic infringements regime as breach of these will be a Community infringement. However, there will be some cases where this will be necessary, for example, where the Department wants to be sure of covering more than what could be said to transpose listed directives in reliance on the minimum clause. For example, it is not possible to draw a clear distinction between some of the provisions of the Consumer Credit Act 1974 that implement the consumer credit directive and others that are outside the scope of the directive. It is therefore the Department's intention to list the Consumer Credit Act 1974 in both the Community infringements regime and the domestic infringements regime.
475. A useful weapon against homeworking scams has been the Control of Misleading Advertising Regulations 1988 (CMARS), which implement Directive 84/450/EEC on misleading advertisements. Although prospective business people are protected by Directive 84/450/EEC, they may not necessarily be 'consumers' for the purpose of the definition of a Community infringement. The Department therefore also intends to include the CMARS under the domestic infringements regime as well as the Community infringements regime.
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