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Mr. Lansley: Before the Secretary of State leaves the matter of the independence of the competition authorities, will she confirm that those authorities will not be subject to the same accountability procedures as apply to other public bodies? Will she take this opportunity to say that the OFT should have accepted in full rather than in part the views of the parliamentary ombudsman regarding the compromised investigation of the Colorvision case?
Ms Hewitt: I am afraid that I am not aware of the details of the case to which the hon. Gentleman refers. However, he raises an important point, and I shall have a look at the matter. The Bill will establish that, in future, the OFT will be supervised by a board, so that its decisions will not be made solely by the director general. As I have said, we are also ensuring that there will be a new statutory right of appeal to the Competition Appeal Tribunal in mergers and markets cases. Those reforms, and the others made by the Bill, will establish a much stronger and properly independent system of competition decision making, but one with proper accountability to the law and to the House.
Mrs. Angela Browning (Tiverton and Honiton): Will the Secretary of State clarify the status of the boards of the OFT and of the Competition Commission? What plans does she have to ensure that the composition of the boards is representative? When a specific inquiry is in hand, what will the right hon. Lady do to ensure that the Competition Commission board has the relevant market expertise? There has been considerable concern about the number of
former Government officials who are placed on such boards. That renders somewhat suspect their ability to scrutinise markets.
Ms Hewitt: I am aware of the concern to which the hon. Lady refers. We will ensure that the boards of the OFT and the Competition Commission contain members with the competition expertise necessary to deal with competition cases. We will also continue to have available the broader panels, which can be drawn on for specific investigations. Together with the increase in resources for the OFT and the Competition Commission, our reforms will ensure that the bodies have the range of expertise that will enable them to arrive at well informed and robust decisions in their investigations.
The second principle of our reforms is to establish a strong deterrent effect for anti-competitive behaviour. The Competition Act 1998 introduced fines for firms that operate cartels, but did not provide a deterrent for those individuals who dishonestly engage in hard-core cartels.
As I hope that the whole House will agree, those hard-core cartels do serious harm to consumers, businesses and to the economy as a whole by forcing up prices or keeping them high artificially, and preventing new entrants from gaining access to markets. Recent cartel cases include the price-fixing arrangements in the global vitamins industry, which cost consumers in the UK and the rest of the European Union millions of pounds, and the Sotheby's-Christie's price-fixing cartel, which was the subject of considerable publicity. Indeed, American competition authorities believe that cartels raise prices by some 10 per cent. on average.
We therefore propose in the Bill to introduce a new criminal offence of dishonestly entering into cartels, backed by sanctions that include the possibility of up to five years' imprisonment. We regard forming cartels as very serious offences, and the threat of imprisonment is important to deterring them. The new criminal offence will send out a strong message to the perpetrators, their colleagues in business, the general public, and the courts. We envisage that a prison sentence would be imposed in cases of serious cartel activity. Alternative sanctions, such as a suspended sentence or a fine, would be available to deal with the less serious cases where there are mitigating circumstances.
Mr. John Burnett (Torridge and West Devon): Who will police or monitor those cartel activities and how they will be brought before the courts? Which agency will be responsible?
Ms Hewitt: The Office of Fair Trading will continue to investigate cartels. Indeed, it has 25 alleged cartels under investigation already. In general, prosecutions will be the responsibility of the Serious Fraud Office, as is the case with other offences of dishonesty.
In the Bill, the offence is tightly drawn and properly so, but it will create a real deterrent effect. Again, I quote David Lennan of the British Chambers of Commerce, who said
- "I do not believe that many business people will end up in jail as a result of the goverment's proposal. But introducing a criminal sanction should provide a strong disincentive, which will focus minds and help to create a competitive environment in this country."
Our third principle is that people who are harmed by anti-competitive behaviour—whether other businesses or consumers—should have a genuine opportunity to obtain redress. The Bill will enable harmed parties to bring claims for damages before a specialist body—the Competition Appeal Tribunal. That will establish a cheaper, more streamlined route to obtain redress from companies that have broken the law.
In the Bill, we are also providing that representative bodies will be able to bring claims for damages in front of the tribunal on behalf of named and identifiable consumers. That will help consumers to bring claims where a large number of parties have each suffered a relatively small level of harm.
I shall turn now to the measures in the Bill specifically designed to protect consumers. As strong competition is the best form of consumer protection, all our competition reforms are good news for consumers. In particular, we are putting consumer interests at the heart of the new system with our new super-complaints, where the OFT must make a considered response within 90 days to properly investigated complaints from designated consumer bodies.
As a strong competition regime is not always enough by itself, however, we are also introducing specific new powers to empower and protect consumers. The stop now orders that we introduced last year were widely welcomed by consumer organisations.
Margaret Moran (Luton, South): I am sure that my right hon. Friend is aware that, by pure coincidence, my first ten-minute rule Bill concerned those orders, which shows that lowly Back Benchers are taken into account when legislation is drawn up. The measure is welcome, but there are concerns that it may cover not all rogue trading, but only that covered by existing legislation. So practices that are designed to get around the law may be excluded. I am referring specifically to pyramid money gifting, such as the women empowering women scheme, which extracted large amounts of money from women in my constituency and throughout the country and left many of them in grave debt. Will my right hon. Friend assure us that the Bill will deal with those sorts of schemes as well as the consumer protection issues that are covered by the law?
Ms Hewitt: Of course, the stop now orders, which were indeed initiated by my hon. Friend, are designed to deal with rogue traders and others who are in breach of existing statutory provisions that apply to their sector. She raises an important matter and I am sure that we can deal with it in Committee.
Mr. Nigel Waterson (Eastbourne): Before the Secretary of State leaves that matter, will she confirm that, despite the urging of such bodies as the National Consumer Council, the Government have apparently set their face against introducing a general duty not to trade unfairly, which would be a catch-all method of dealing with exactly the matters raised by the hon. Member for Luton, South (Margaret Moran)?
Ms Hewitt: We have looked carefully at the proposals for a general duty not to trade unfairly, but as I hope the
hon. Gentleman will accept, we have decided that such a duty—particularly if it is cast in negative terms—would be so vague and general that it would create real uncertainty for business and difficulties for enforcement. For that reason, we have not included it in the Bill. Instead, we are extending the protection of stop now orders to other areas, in particular in the service sector, where consumer interests are harmed by traders who do not meet their legal obligations.I guess that all of us in this House, and our constituents, have suffered from cowboy builders, incompetent plumbers, poor car servicing and so on. The reformed system of stop now orders, and the extension proposed in the Bill, will be clearer for businesses to understand and will create a single, coherent enforcement structure that will replace the parallel regimes that currently exist for different issues.
Mr. Jonathan Djanogly (Huntingdon): The proposals on rogue traders will be generally acknowledged and respected. However, the key to the effective enforcement of the Bill will be to ensure that trading standards bodies within local authorities are improved. I do not understand their omission from the Bill, and I should be grateful if the Secretary of State explained it.
Ms Hewitt: I welcome the hon. Gentleman's support for the extension of stop now orders and he is right to draw attention to the vital role of trading standards officers. There is some variation in the quality and resourcing of trading standards officers around the country. That is why the Under-Secretary of State for Trade and Industry, my hon. Friend the Member for Welwyn Hatfield (Miss Johnson), the Minister responsible for consumer protection, is using funding from the modernisation fund, and working with the OFT and trading standards officers, to ensure that they are properly resourced and able to implement their extremely important responsibilities towards consumers.
The National Consumer Council—to which reference has been made—has said in relation to the stop now orders and more general matters:
- "These measures will complete the crackdown on anti-competitive practices that for too long have damaged the interests of consumers."
I should now like to turn to the measures on insolvency and the insolvency reform proposals within the Bill. Failure, as well as success, is an integral part of an enterprise economy. But the fear and consequences of failure should not be so disproportionate that they act as a disincentive to entrepreneurs. We need to encourage honest risk-takers, while dealing with the minority of bankrupts who are thoroughly dishonest.
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