Enterprise Bill

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Mr. Alexander: I would not endeavour to intrude on a private squabble over the relevance of the amendments. With admirable candour, the hon. Member for Eastbourne conceded that the thinking behind the amendments was an explicit attempt to restrict the scope of investigations. I shall try to deal with the substantive points that he raised on the structure of the market and on the Government's thinking with regard to being outside a particular market.

Drawing on the remarks of the hon. Member for Eastbourne, the thinking behind the first two amendments seems to be that competition problems that warrant a market investigation can arise only from the conduct of particular firms or customers in that market. However, the conduct of firms and their customers may not be the whole story if competition is not working properly. For example, high barriers to entry into a market may have nothing to do with the conduct of firms already operating in that market, including regulatory obstacles to entry and constraints that can make it difficult for new entrants to gain

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information. [Interruption.] I knew that my speech was exciting, but I am overwhelmed by the response.

When such structural causes of competition problems exist, the OFT should be able to take account of them when taking reference decisions. It is also important that the Competition Commission should be in a position, as far as possible, to take action to address such structural problems—something that the amendment would make impossible, because clause 126 relies on the definition of ''feature of a market'' in clause 123(2).

Opposition Members may agree that structural features of a market can, in theory, cause competition problems, but they may still say that it is unfair to burden businesses with an investigation into matters that are not a consequence of their actions. If that is the reason for the amendments, I would offer this explanation.

Monopoly inquiries and market investigations are not a one-way street for business—one that it always finds itself worse off for going down. They often improve the process of competition in the market by removing the all too often cosy and protected positions enjoyed by the incumbents. That should give small firms a better chance of entering the market, and it would expose businesses and consumers alike to the benefits of more vigorous competition. We have no intention of saying to potential entrants into an uncompetitive market, ''Sorry; the Competition Commission cannot help you because the problems that are keeping you out of the market are structural rather than discrete to the actions of an individual company.'' That would not seem appropriate, not least given our determination that the OFT's role in advancing competition should be proactive, as narrated in the White Paper.

I turn to the proposal in amendment No. 301 to restrict the OFT, when considering whether the conduct of firms acting in a particular market has prevented, restricted or distorted competition, to consideration of what those firms do in that market. The conduct of firms in a given market may prevent, restrict or distort competition not only within that market but in other markets, such as those in which their immediate suppliers and customers operate.

I was asked to give an airing to the Government's thinking on the clause. Perhaps the best example at such short notice is the Competition Commission's investigation into supermarkets. That found that the large supermarkets' buying power meant that some of their purchasing practices adversely affected the competitiveness of their suppliers, and distorted competition in the supplier market. That meant that suppliers were likely to invest less and spend less on product development and innovation, which would lead to lower quality and less consumer choice in the retail market. The Competition Commission also found that there were likely to be fewer entrants into the supplier market regardless of the issue in relation to the supermarkets.

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Mr. Waterson: I may be missing the point, but surely that does not tackle my question. They would still be in the market concerned—supply of foodstuffs or whatever—to the public. The bit of the vertical chain that they are in is not relevant. With respect to the Minister, I do not think that that deals with the issue.

Mr. Alexander: I am concerned if I have not made the point clear. The effect of the supermarkets within that supplier market was so significant as to affect its structure. Therefore, there was cause to look not only at the supermarket environment because the effect for suppliers, while they were able to sell products more widely, was significant.

Mr. Field: On the point about supermarkets, the way in which the report took place was somewhat disingenuous. Effectively, it redefined the market for the purposes of being able to clobber the supermarkets, which struck me as a good example of a politically oriented investigation. There was a lot of furore in the press about the ''Rip off Britain'' campaign—that seemed to bring out the very worst of what we have been trying to expose in the debate, specifically in the amendments on this clause. The worst instincts were revealed. Common sense, as opposed to detailed statistical and academic analysis, will tell anyone that supermarkets run a good show, offer inexpensive food and give consumers masses of choice. However, it is easy, statistically, to justify an argument by redefining the marketplace, in this case by considering the suppliers' market rather than that of the supermarkets. That is the sort of problem that we envisaged—large and small business hamstrung by masses of regulation and by having to go through inquiries when many of them are politically motivated. I apologise for having made an intervention that was longer than many of my speeches.

Mr. Alexander: I discern from the hon. Gentleman's longer contribution that he is making two points. The first concerns the entitlement to investigate something such as the supermarket market and the consequential impact on the suppliers market. The functions and powers that are given to the relevant authorities in the Bill reflect the fact that sometimes the test is not common sense; hugely complex financial and market matters have to be addressed. That is why we are keen to ensure that the authorities are underpinned not just by expertise but by resources that will enable complex negotiations and discussions to be taken forward in an appropriate manner.

I would agree with the hon. Gentleman if he were highlighting the importance of removing an overtly political motivation from many of the competition matters that we are addressing—that is the basis on which I hope that he would feel willing to support the Government. One of the principal underlying rationales of the Bill is to remove what has all too often in the past been an arbitrary position of politicians and to give a degree of comfort and certainty to the businesses involved, not least on the basis of the expertise and resource that I have described for the Competition Commission.

The definition of conduct in subsection (2) (b) is not as excessively wide as some speakers have suggested. It

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includes only firms and customers who are active in the market that is the focus of the investigations of the OFT or the Competition Commission. The OFT will not be able to make a market reference on a whim. I sense a fear that might underpin some of the contributions to the debate; the OFT will have to be confident that it has reasonable grounds for suspecting that the conduct that it has identified prevents, restricts or distorts competition in the market concerned. I therefore hope that the hon. Member for Eastbourne will feel willing to withdraw the amendment.

Mr. Waterson: I hope that the Minister will not take it amiss if I say that I am no more reassured than I was to start with. I do not follow his rationale. However, for the sake of progress, I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 123 ordered to stand part of the Bill.

Clause 124

Ministerial power to make references

Question proposed, That the clause stand part of the Bill.

6 pm

Mr. Waterson: When I first saw this clause, I wondered whether it was just one of those quirks that computers sometimes throw up and whether it had been included in error. I hoped that a raft of Government amendments would follow to show that it was all a horrible mistake. Only a few moments ago, acting as my straight man, the Minister referred to the rationale behind the Bill. Those who take a more superficial interest in the Bill may have noticed that removing Ministers from the process appeared near the top of most press releases that trumpeted the wonders of the Bill as it neared the House. That has been welcomed by everyone, including Conservative Members, not least because it is what happens anyway in most instances, it is the right thing to do and it will command widespread confidence in the process.

Mr. Harry Barnes (North-East Derbyshire): There are exceptions to those who support this clause.

Mr. Waterson: Since the hon. Gentleman set up his office in the corridor this morning, I had almost forgotten that he was a member of the Committee. I apologise profusely to him for suggesting that he supports the Government's proposals. As a former Whip, it remains a mystery to me how he was selected to be a member of the Committee in the first place. I am sure that you will sympathise with that, Mr. Conway.

Clause 124 bears re-reading because it leaps off the page. The Bill has been promoted as taking political decisions out of competition policy, which everyone agrees is wonderful, yet this clause, unashamedly, allows a Minister to intervene when he is not satisfied. I suspect that Ministers of all political persuasions are not satisfied a great deal of the time. However, the Minister will be able to intervene when the OFT decides not to make a reference under clause 123. Curiously and paradoxically, it makes not a blind bit

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of difference how dissatisfied the Minister is, if the OFT has decided to make a reference with which he does not agree, because it appears that he or she can do nothing about that. I would be interested to know why the clause provides for such a one-way system.

It is remarkable that the clause flies in the face of the general philosophy of the Bill. Even if we allow for the public interest aspect—which, on any view, is a tiny part of the equation and can be left to one side in the great mass of cases—the clause gives the Minister a power to intervene when the OFT has carried out its investigations and reached the conclusion that there is no case to refer under clause 123. No matter what the OFT has done, the Minister can step in and say that there should be a reference. If that looks and sounds like ministerial interference, it probably is. It flies in the face of all the Government's claims about the Bill. Why is the provision included? What is the rationale? Why is the system only one way? Surely it is a drafting error.

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