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Session 2001-02
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Standing Committee Debates

Enterprise Bill

Column Number: 363

Standing Committee B

Wednesday 1 May 2002


[Mr. Nigel Beard in the Chair]

Enterprise Bill

10.30 am

The Minister for E-Commerce and Competitiveness (Mr. Douglas Alexander):I beg to move,

    That the Order of the Committee [16th April] relating to programming be amended as follows:—

    for paragraphs (4) and (5) there is substituted—

    `(4) the proceedings on Clauses 20 to 66, Schedule 5, Clauses 67 to 81, Schedule 6, Clause 82, Schedule 7, Clauses 83 to 86, Schedule 9, Clauses 87 to 160, Schedule 8, Clauses 161 to 174, Clause 199, Clause 175, Schedule 10, Clauses 176 and 177, Schedule 11, Clauses 178, Schedule12, Clause 12, Schedule 2, Clauses 13 and 14, Schedule 3, Clause 15, Clause 19, Schedule 4, Clauses 227 and 228, Schedule 14, Clauses 229 to 231, Schedule15 and Clauses 232 to 238 shall (so far as not previously concluded) be brought to a conclusion at 7p.m on Tuesday 7th May;';

    in paragraph (6), for `5 p.m. on Thursday 9th May', there is substituted `7 p.m. on Tuesday 14th May'; in paragraph (7), for `7 p.m. on Tuesday 14th May' there is substituted `5 p.m. on Thursday 16th May'.

It is a privilege to serve on the Committee, and, of course, under your chairmanship, Mr. Beard. This is my first appearance before the Committee, and I shall be the Minister on the Front Bench for today's sittings. My ambition is to have as focused and as constructive a discussion as has been achieved in the previous nine sittings.

We have agreed to extend the Committee's proceedings by providing an additional two sittings, which will allow for the consideration of the remaining mergers and market investigation clauses. The motion removes the knives that would have fallen today at 1 pm and 7 pm, so as to conclude that portion of the Bill by Tuesday.

Mr. Nigel Waterson (Eastbourne): I welcome the Minister to the Committee. I am not sure that the Under-Secretary agreed that all our debates were focused and constructive, but we think that they were.

I am grateful to the Government for reconvening the Programming Sub-Committee this morning. It was a helpful initiative, but they brought that situation on themselves. We have been saying from the outset that the Bill needed a longer Committee stage than it had been given, and even a further day's sittings do not do it justice. We tried to press our views on the Government on how much time we should spend on each part of the Bill, but the usual channels and the Government were not remotely interested, so we have got into this mess.

In part, the position is remediable by the motion: we will be able to do more justice to the clauses under

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debate. However, nothing can bring back the clauses on consumer protection, which were simply not debated because of the knife in the programme resolution, so considerable damage has already been done. Many consumers and consumer organisations will be puzzled and distressed that we were not able to debate those provisions and others in the detail that they would have liked.

We readily agreed to the proposal at the Programming Sub-Committee because it seemed the sensible thing to do at this moment of the Committee's history. However, we put down a marker on the subject of insolvency, which is in the final part of the Bill. No massively important party political issues relate to insolvency, but there is a mass of technical, legal detail on which we have received a large number of proposed amendments and a great deal of briefing from a range of organisations, which were apparently consulted before the Bill was published. I am not trying to put the fear of God into the Minister, I am just saying that we have a lot to get through. I put down the marker that problems may arise again when we reach the subject of insolvency. I hope that the Government will be ready to remedy them should they arise. Only on that basis are we happy to agree to the motion.

Mr. Ian Pearson (Dudley, South): I am glad that the Opposition at least recognise that the Government have been flexible to a degree by altering the business to be considered today. I do not want to cover old ground, but it is a bit rich for Opposition Members to criticise the Committee for not considering all the consumer protection clauses. We had 16 hours 20 minutes of debate before the first knife fell on proceedings. Some 36 clauses were covered and 24 clauses were not covered, which, it is fair to say, was due to the Opposition not managing their time very well. Notwithstanding our feeling that they spent an awful lot of time on clause 20 and could have used their time better, we decided that we wanted to offer the extra sittings to allow more effective consideration of the Bill.

We are being reasonable and are prepared to look again at the matter if we find that the insolvency provisions are going to take longer to consider than has been allocated. Four full sittings have been allocated to the insolvency provisions, which is reasonable. We think that the original Programming Sub-Committee resolution was also reasonable, but we are prepared to be flexible and look at things to ensure good and effective consideration of the Bill.

Question put and agreed to.

Clause 66 ordered to stand part of the Bill.

Schedule 5 agreed to.

Clause 67 ordered to stand part of the Bill.

Column Number: 365

Clause 68

Initial enforcement orders: completed mergers

Mr. Waterson: I beg to move amendment No. 273, in page 49, line 41, after `created', insert—

    `(aa) the provisions of section 20(1)(b) have been satisfied;'.

The Confederation of British Industry originally raised this short but important point. Subsection (3) will, effectively, allow the Office of Fair Trading to make initial orders preventing parties proceeding with a completed merger merely because it qualifies for investigation. Obviously, that would happen before an investigation could conclude that a merger was contrary to the competition provisions in the legislation. We take the view, as does the CBI, that that is too stringent and that some sort of additional requirement should be inserted in subsection (3) to ensure that the provisions of clause 20(1)(b), which we were berated for debating so carefully, are fulfilled.

There is an echo of our previous debates on the dominance test, of which the Opposition are still in favour. We should like subsection (3) to be tied in with the amendments we tabled on the dominance test, which would have allowed the OFT to act if it had grounds to suspect that a dominant position would be created or enhanced and competition would be significantly reduced. The Government have set their face against the dominance test as a matter of principle—I will not pursue it in detail now as we debated it as a matter of principle—but we still think that there should be an additional requirement in the provision, and are open to argument from the Minister as to how our concerns, and those of the CBI, might be met in a different way. I hope that that helps to illustrate the concerns that lie behind what is, after all, a probing amendment.

Mr. Alexander: Perhaps I can help the hon. Gentleman by clarifying our response to both the CBI and the probing amendment. The amendment would prevent the OFT from introducing an initial order unless it has a reasonable suspicion that the creation of the relevant merger situation has resulted, or may be expected to result, in a substantial lessening of competition. In practice, however, if the OFT were to hear about a merger that clearly has no competition implications—for example, two businesses in very different markets—it would be highly unlikely to make an order preventing further integration of the merged entity. The OFT will act only if it is concerned about the merger's likely impact on competition. I am confident that the additional criterion required by the amendment will be applied automatically in practice.

We have not formally introduced such a requirement in the Bill because, not least, we foresee difficulties in drafting it in a workable way. The problem is that it is difficult not to set the test too high and thereby render the clause unworkable in practice. To make a reference, the OFT must believe that a relevant merger has resulted or may result in a substantial lessening of competition in any market or

Column Number: 366 markets. Any test would have to be sufficiently lower than that belief in order to allow the OFT to act while it establishes whether there is a case for a full reference. I assure the Committee that we have considered that carefully and we are not convinced that we can create a workable formula.

Mr. Waterson: I am pleased to hear from the Minister that the matter has at least occurred to the Department and been considered. I do not want to detain the Committee unduly, so I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 68 ordered to stand part of the Bill.

Clause 69 ordered to stand part of the Bill.

Clause 70

Effect of undertakings under section 69

Mr. Alexander: I beg to move amendment No. 181, in page 51, line 12, after `notified', insert

    `(whether in writing or otherwise)'.

The Chairman: With this it will be convenient to take Government amendments Nos. 188 and 193.

Mr. Alexander: Through these amendments we seek to clarify that where the Bill refers to information that should be notified, such notification need not be in writing.

Amendments Nos. 181 and 188 amend the clause and schedule 6, which is the equivalent provision covering the exceptional public interest enforcement regime. Material facts about the reference must be notified to the OFT prior to acceptance of undertakings in lieu. The amendments confirm that such notification need not be in writing.

Amendment No. 193 amends schedule 7, which sets out the remedies that may be included in a final order.

Mr. Waterson: I want to intervene before the Minister moves on and we lose this crucial moment. I accept that these are minor amendments, but I want to comment on notification in writing. I am puzzled about the circumstances the Minister has in mind in which such an important matter would not be communicated in writing. Surely it is in everyone's interest to have a record, and matters are put in writing to provide that record. These are key issues for all involved. Does the Minister envisage a chance conversation or a telephone call about them? I am trying to tease out of him whether that is what he has in mind.

Mr. Alexander: The example that comes to mind is when parties cannot fulfil requirements to notify information on prices, for example, without having to publish everything in writing in great detail. I hope that there is unanimity in the Committee on wanting to minimise the burdens on businesses, and that amendment No. 181 is seen for what it is: an attempt to support the broad thrust of the Bill, which is to

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assist businesses and, when it is unnecessary, not to require vast wads of paperwork.

Given the concern about and interest in amendment No. 181, I should comment on amendment No. 193. It amends schedule 7, which sets out the remedies that may be included in a final order. Under the schedule, an order may require the notification of prices. The amendment ensures that notification has the same meaning in the schedule as elsewhere in the Bill: it need not be in writing.

These are primarily technical amendments, but the changes are important to protect businesses in their dealings with the authorities and to give them the comfort with which we want to provide them.

Amendment agreed to.

Clause 70, as amended, ordered to stand part of the Bill.

Clause 71

Order-making power where undertakings under section 69 not fulfilled etc.

10.45 am

Mr. Waterson: I beg to move amendment No. 276, in page 51, line 37, after `7', insert

    `and essential to avoid the creation or strengthening of a dominant position'.

This is another small but important point that was initiated by the CBI. As we read it, subsection (4) allows the OFT to make all the orders under schedule 7. That is the entire range of measures, including an order for divestment under paragraph 14 of that schedule in the event of a breach of an undertaking given to avoid a reference to the Competition Commission. Conservative Members agree with what I am sure the Minister will say: undertakings are to be taken seriously, not given lightly and any failure to fulfil them must be treated very seriously by all concerned, particularly the companies that are giving them.

Having said all that, the effect of the provision is that one could have divestment ordered—it is a pretty extreme measure—in respect of an acquisition that had never been subject to a full review by the Competition Commission. That seems somewhat harsh to us. A better approach would be to limit the power under subsection (4). The amendment details how we chose to put that when we tabled a whole raft of amendments. There may be other ways of putting it that would improve the amendment; I am not necessarily wedded to the wording. However, we hope that the Government have considered the issue, or will consider it further. It seems at the very least odd, and potentially unfair, that something as serious as divestment could in theory—one would hope that it would not arise in practice—be visited on a company without the matter being reviewed thoroughly and fully.



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Prepared Wednesday 1 May 2002