|
UNCORRECTED TRANSCRIPT OF ORAL EVIDENCE To be published as HC 701-i House of COMMONS MINUTES OF EVIDENCE TAKEN BEFORE EUROPEAN SCRUTINY COMMITTEE
Competition Policy and the Draft EU Treaty
Wednesday 16 June 2004 RT HON PATRICIA HEWITT, MR ANTHONY MURPHY and MR JONATHAN REES Evidence heard in Public Questions 1 - 42
USE OF THE TRANSCRIPT
Oral Evidence Taken before the European Scrutiny Committee on Wednesday 16 June 2004 Members present Mr Richard Bacon Mr William Cash Mr Michael Connarty Mr Wayne David Nick Harvey Mr David Heathcoat-Amory Angus Robertson
In the absence of the Chairman, Mr Michael Connarty was called to the Chair
________________ Witnesses: Rt Hon Patricia Hewitt, a Member of the House, Secretary of State for Trade and Industry, Mr Anthony Murphy, Director, Europe and World Trade Directorate, and Mr Jonathan Rees, Director, Consumer and Competition Policy Directorate, Department of Trade and Industry, examined. Q1 Mr Connarty: Once again, Secretary of State, can I formally welcome you back to the Committee; it is good to see that you are able to give up so much time to help us with our business. Can I first apologise on behalf of Jim Hood, our Chairman; he has some family illness and unfortunately cannot be with us. Can you introduce your team, please. Ms Hewitt: Thank you, Mr Connarty. I am delighted to be here again so soon after my last appearance and I am joined this morning by Jonathan Rees who is my Director of Consumer and Competition Policy, and Anthony Murphy who looks after Future of Europe issues within our Europe and World Trade Director. Q2 Mr Connarty: Every member of the Committee has had the pleasure of reading your correspondence with our Chairman over the issues coming out of this competition policy and it might be useful for you to update the Committee on where you think we are at this moment on competition policy. Ms Hewitt: If I could begin briefly by putting competition into the broader context because obviously the Irish presidency hopes to conclude an agreement on the proposed new Constitutional Treaty at the European Council this week and our view as a government is that, providing the Treaty protects the essential British interests that we have set out, it would be good for Britain and good for Europe to adopt a new Treaty that would make the European Union more efficient in its operations, simpler to understand, more accountable to both the National and the European Parliament and better able to function effectively with 25 Members and in future possibly more. Let me reiterate what the Prime Minister said yesterday, that of course we will not sign up to a Treaty that does not meet our red lines in those key areas such as taxation, foreign policy, defence and the charter of fundamental rights. Other Member States of course have their own red line areas and there are some key institutional issues including the weighting of votes which need to be resolved, but we hope that solutions can be found that will meet the concerns of all Member States and, if there is agreement on the Treaty, then we will of course introduce a bill for parliamentary scrutiny and, subject to the passage of that bill, we will then put the new Treaty to a referendum. As far as the subject we are looking at today is concerned, the draft Treaty says that the Union shall have exclusive competence in the establishing of the competition rules necessary for the functioning of the internal market. We think that is right. It is a prime function of the European Union to deliver an effective internal market and that goal of a dynamic, open and competitive market across the European Union is of huge benefit to the United Kingdom and that is one of the main reasons why we have been at the forefront in developing a pro-active and effective competition policy in Europe drawing on our own significant efforts to remodel and modernise our competition regime which of course we did with the 1988 Act, the 2002 Enterprise Act and the implementation of the modernisation regulations this year. Our view is that in a world where businesses and markets are increasingly global, most competition cases of concern to the authorities will have an impact beyond national borders. The European Commission and the national competition authorities including our own Office of Fair Trading already work very closely together on such cases. The framework for that of course is enshrined in significant recent reforms of the European competition regime through the modernisation of the application of Articles 81 and 82 and the amendments to the European merger regime. The changes that have been made clearly reflect the shared understanding between us and our European colleagues in the Commission that competition cases should be dealt with by the authority best placed to do so in accordance with the principle of subsidiarity. The new merger regime has introduced a simplified mechanism to reallocate cases between the Commission and the Member States. So, the Competition Directorate will consider cases with a significant European dimension, national authorities, those which are primarily orientated towards national markets. We do not believe that the Treaty will prevent us having additional domestic competition rules for other purposes that do not obstruct the effectiveness of the Community rules and are not aimed at the functioning of the internal market. Finally, the text of the Constitution as originally drafted by the Convention of the Future of Europe did raise some concerns in relation to competition. They were essentially of a technical nature; we sought to deal with them through the technical review in the IGC process overseen by Jean-Claude Piris, the Head of the Council Legal Service. We succeeded in our goal of getting that clause redrafted; we worked extremely hard with colleagues to get clarity into the text through that amendment and I think that the amendment we secured on competition does provide both the clarity we were seeking and the basis for the further effective operation of competition policy in the European Union. Q3 Mr Connarty: I think that is a subject that deserves clear elucidation but can I just say, before that, though you are applauding the amendment, it was not the position of the British Government when you went into the negotiations and therefore, in not achieving what we set out as our position, in a sense you failed. Article 12 of the draft Treaty confers an exclusive competence on the Union to adopt competition rules necessary for the functioning of the internal market, as you have said. As I understand the concept of exclusive competence, this means that the UK may not legislate at all in this area unless authorised to do so by the Union. Are you not concerned that Article 12 will prevent the UK from adopting legislation to prevent or regulate anti-competitive practices in the UK which may also have effects outside the UK if in fact the Union does not give you that competence? Ms Hewitt: I do not share that concern. There was of course an argument - and indeed we made it in the Convention - that we could have treated competition as a shared competence under that article. If we had persuaded colleagues of that view, there would have been a need for pretty considerable redrafting because there are aspects of competition law, notably state aids, that have always been an exclusive competence and, in our view and in everybody else's, should remain so. So, it would not have been possible simply to shift the whole of competition law to a shared competence base and a lot of redrafting would have been needed to retain that distinction. So, the view we took instead once we got into the technical review was that the exclusive competence should operate where it was necessary for the functioning of the internal market and we believe that clarifies the interface between domestic and community law, particularly when the draft Treaty, for the first time in European treaties, makes it clear that any power not specifically conferred upon the Union or the Commission rests with Member States. So, we do not, I think, share the concerns about restricting the powers of the UK Government and Parliament in the way in which you are suggesting in the future. Q4 Mr Connarty: I hear what you say but it may be, given the Euro 2000 atmosphere, some of the electorate might think that you had sold the jerseys when it came to the debate. Ms Hewitt: Mr Connarty, they talk of nothing but European competition law in the pubs in my constituency! Mr Cash: Certainly so far as beer is concerned, I should think they do! Q5 Mr Heathcoat-Amory: I was on the Convention of the Future of Europe and I listened to the two Government representatives arguing very strongly that competition policy should be a shared competence as it is at the minute and they tabled a number of amendments, supported by myself, to try and ensure that that position remained because the overall aim of the Constitution is to bring clarity and certainty to the division of powers particularly for businesses, but the Constitution as drafted now makes it an exclusive competence and you have just relied very heavily on the subsidiarity principle and the conferral of powers principle. These of course do not apply for exclusive competences. The draft Constitution is absolutely explicit on that. The subsidiarity is inapplicable for exclusive competency. So, I think it rather strange that you are relying on something that is inoperative if competition policy does become an exclusive competence. Can you tell us who will finally decide whether the competition policy can be removed entirely from national control, in other words who will be the arbiters of this new division. Ms Hewitt: I have explained why we take the view that, with the amendment we secured after the ending of the Convention, we are perfectly happy with the draft as it stands in this respect because the exclusive competence only applies to competition rules that are necessary for the functioning of the internal market. If ultimately there is a dispute about that, presumably it will be resolved in the courts, but we do not believe and nor do our colleagues, either in the Commission or in other Member States, that this draft disturbs the arrangements that have been put in place with the modernisation of Articles 81 and 82 and Regulation 1/2003 which have themselves clarified and I feel strengthened the relationship between EU law in this matter and the national authorities. For instance, the competence of the sectoral regulators at a national level operating, where appropriate, within a European framework as we do for instance in telecommunications, is not disturbed by the draft that is proposed in the Treaty. Q6 Mr Heathcoat-Amory: This was not the view taken by the two Government representatives, Baroness Scotland and Mr Hain, on the Convention. They argued absolutely emphatically that the present situation must remain the case, that is shared competence, and Baroness Scotland said that in a plenary session in my hearing on 5 June of last year. So, there has been a big change in Government policy and you seem to be relying entirely on the phrase that the Commission can only bring in rules necessary for the functioning of the internal market, but surely all competition policy is about the functioning of the internal market. This Committee sees a stream of Commission proposals under Article 95 where they claim that even health policy is a single market issue now. So, the Commission and the European Court of Justice always interpret anything that can be moved or traded across borders as a single market issue. Can you tell me what aspect of competition rules will be excluded by that phrase "necessary for the functioning of the internal market". Ms Hewitt: It seems to me to be very much a matter of the market within which a particular business operates and therefore, if one is looking at the operation of a market or if one is looking at anti-competitive behaviour or if one is looking at the implications of a proposed merger, it will depend upon the size and the nature of the market within which that business operates. Q7 Mr Heathcoat-Amory: Economic activity, almost by definition, is a single market issue. That is the intention of the European Union, that we flow and trade and move across borders entirely free, it is a single market. Therefore, any aspect of competition policy touches the internal market. That is certainly the view of the Commission as this Committee know. So, I am not clear what will now be excluded by that phrase which you say is a total redraft of the article. It is clear to me that the intention is to make the whole thing an exclusive competence and that is a very marked change from what we have enjoyed up to now and does threaten our own competition rules and brings dramatic uncertainty into the picture to the detriment of British industry and the public. Ms Hewitt: I have to say that that is not our view and it certainly is not a view that the CBI or other business organisations have expressed to me either. We are very clear, and so I think are they, that, with the redrafted provision in the draft Treaty, we will be able to continue precisely as we are doing at the moment. We played a very significant role in arguing for strong competition laws and indeed a strong sectoral framework on telecommunications at the European level; we have ourselves modernised our own competition regime particularly with the 2002 Act and, because of the influence we were able to exert in the European Union, our law is entirely consistent with European competition law. We simply do not see the difficulties or ill effects that I think you are anticipating here. What we were concerned about in the Convention was an earlier draft of the Convention. If we had persuaded other Member States that it was worth going through a very extensive redraft to provide as appropriate for some shared competence, some exclusive competence, for instance on state aid as I have said, then I think that would have been a tidier solution, but the solution that we have here and that we achieved in the technical review I think serves British interests very well indeed. I will just see whether my officials want to add anything to that. Mr Rees: I would simply say that the Competition Act 1998 modelled our new domestic regime on the application of Articles 81 and 82. Modernisation, the implementation of Regulation 1/2003, has taken that a step further in giving the domestic competition authorities the right to apply Articles 81 and 82 and, in response to the specific question, there are very many cases which are purely of domestic interest. So, one of the first cases that the Office of Fair Trading took under the 1998 Competition Act concerned a bus cartel in Leeds. I think that those will continue to be dealt with under our national competition authority as now. The Constitutional Treaty will have no impact whatsoever. Q8 Mr Heathcoat-Amory: This is hopelessly innocent because it is precisely the running of buses and the possible tendering potential for other Member States and the design of buses which exactly gives the Commission an angle on what we have previously considered to be purely domestic issues. It is fantastically naïve to suppose that this is not something that will come up as a European Union issue in the future. It is no good relying on existing regulations when we are talking about a constitution for the future. Present intentions are irrelevant if what powers we are giving to the Commission and to the new Union is clear here: we are giving an exclusive competence when up to now they have had at best a shared one. That is the issue. Ms Hewitt: I do think that Mr Heathcoat-Amory is ignoring Regulation 1-2003 which will stay in force under the new Treaty and which makes it very clear that Member States are entitled to oppose additional controls that, if I may quote from the regulation, "prohibit or sanction unilateral conduct engaged in by undertakings in their national territories." Mr Connarty: We will come specifically to that issue later. Q9 Mr Bacon: While you are on that, can you confirm that Regulation 1/2003 is subject to qualified majority voting. Mr Rees: It has been agreed. Q10 Mr Bacon: What I meant is, were there to be an attempt to change it, would that attempt be subject to qualified majority voting? Ms Hewitt: I believe so. Q11 Mr Bacon: That is exactly what I thought too. I share the concern of Mr Heathcoat-Amory and others about this and I find the example of the bus in Leeds an illuminating one because you may recall that the bendy buses which Mr Livingstone has imported into London were imported from Germany and it is hard to think of any area of commercial life that could not, in certain circumstances, come under the ambit of cross-border trade at some level. The signal biggest - and I do not know whether you are aware of this - lever to expand the federal power in the history of the growth of the United States was the interstate commerce clause and it seems to me that the provision of competition policy here as an exclusive competence is going to have exactly the same effect and I have to say that the answers you have given so far do not reassure me in the slightest. Ms Hewitt: I am sorry if I have not been able to reassure you but I have to say that I do think that behind the questions and scepticism that you are expressing is this, frankly, I think, absurd fear of a Federal Europe and I think one of the great strengths of this draft Treaty, much commented upon in the continental press, is the fact that we have strengthened the role of Member States and I think the benefits that we get as a country from the European Union and, in particular, from our ability to operate as consumers and through our businesses in a single market are enormous and the influence that we exercise through argument and through our votes in the Council of Members on the regulations that properly govern the country with that internal market, we exercise those in the British interest and I think the record shows that we have done so pretty well. Q12 Mr Bacon: If it is so fine and dandy, why did Mr Hain and Baroness Scotland argue as they did? Ms Hewitt: Because we were seeking to get the best possible draft convention in every possible respect and we took the view that going to the trouble of considerable redrafting along the lines that I have just explained would have been worth doing. That view was not shared by other Member States. It was not one of our red line issues because we succeeded, we believe, in protecting British interests through the redrafting and amendment that has been agreed to the relevant clause in the draft Constitution and because we believe that what will continue to operate is competition law both at European and at national level in the way that it does at the moment to the great benefit of British consumers. Q13 Mr David: At the last hearing, you clearly argued the case for flexibility with regard to the operation of certain state aid rules in order to address weaknesses in the market. When we took evidence on the European Commission a few weeks ago, the argument they employed against that suggestion was that it would be a distortion of the single market and that it would lead to all kinds of anomalies which would underline the progress that had been made to date. Do you see a danger that if it is accepted in the Constitution that the Commission's argument would be strengthened against the policies which you and the Department are pursuing and would like to see happen in the future? Ms Hewitt: We have been talking to the Commission and indeed to other Member States about the state aid regime for some little while now and it has been our view for a long time that, frankly, having a much stronger regime bearing down on inappropriate state aids would be very strongly in our interests because we do not, frankly, want to engage in a subsidy race, if I can call it that, with other Member States and having stricter rules on the kind of subsidies that have been given particularly to large undertakings I think is helpful and having those strictly enforced by the Commission is helpful. What is important is that, in the new state aids framework, we do get, as you say, the flexibility to ensure that we can deal with market failures and, in particular, we and other Member States can deal with particularly disadvantaged areas within different parts of our country and we are responding in that light to the Commission's latest proposal on state aids but we ourselves, for instance when we created the regional venture capital funds, were actually in the forefront of thinking about how you deal with market failures, in this case the provision of funding to small firms, and we persuaded the Commission to rewrite the state aid framework to allow for exactly that kind of innovative approach to support the businesses and we won that argument and we have changed the state aid framework as a result. Q14 Mr David: I accept what you are saying and I agree entirely, but the point I am making is that if Article 12 came into effect in the Constitutional Treaty, then the Commission would surely use that as a basis to undermine what you have just said. Ms Hewitt: I do not think that is the case because obviously we will continue to make our arguments and win support both within the Commission and with other Member States, but it suits Britain to have a strong framework of rules for state aid right across the European Union and that has always been an exclusive competence for the Union, that is not something that is changed by this draft. Q15 Angus Robertson: Were the Government's representatives in the Convention wrong to argue that competition policy is and should remain a shared competence? Ms Hewitt: No and I thought I had just dealt with that point. Q16 Angus Robertson: Although your comment saying that the fear you detected was one of a threat of a Federal Europe, I think you will find that there are a number on this Committee who do not share that view but who are very concerned about this issue and I would like to get to the nub of when it was that the Government's position changed on this because, at one point, Government's representatives were arguing that competition policy is and should remain a shared competence. At what stage did the Government's position change and who decided that it should change? Ms Hewitt: As I said, we certainly argued in the Convention for, if you like, a maximalist position. We were putting forward every proposal we had in the argument we had on the very wide range of issues on which we had a view, but some were more important than others and this issue of shared competence in competition was never a red line issue. It is not one of the red line issues that we put out in the White Paper last year. When we failed to persuade our colleagues in the Convention to go through the redrafting on partly exclusive/partly shared, as I indicated earlier, we then took the issue into the Technical Committee and we were content with the outcome of those discussions and that was decided - and I am afraid that I cannot remember the exact date - very largely by my officials and, on their advice, by me and obviously approved by my colleagues in Government as part of our negotiating position on the Convention as we moved forward. Q17 Angus Robertson: On the basis that you are content with a directive which can be amended without unanimity which could change the whole basis of how competition policy is to be approached within the European Union and is then governed by the Constitution as an exclusive competence. Ms Hewitt: No. We are happy with the redrafted Article I-12 of the Constitutional Treaty and, as far as existing rules go including 1/2003, we were very strongly arguing for those changes to be made in the competition policy and those will continue. Q18 Mr Cash: In the course of the Convention, Germany and the United Kingdom tried to correct the error in Article 12 and tried to reclassify competition rules as a shared competence. I understand your difficulty here but it is quite clear from previous questions that there is no doubt at all that there was an attempt to try to re-orientate the discussion. Germany and the United Kingdom do in fact have the greatest experience of operating domestic competition policy and I think Sir Christopher Bellamy, for example, will be looking into all these matters as well together with other people and no doubt he will be in correspondence with you at some point. Were you concerned that the views of Germany and the United Kingdom did not command acceptance in the Convention and can you explain why their views were not accepted? Ms Hewitt: I was not a member of the Convention - Mr Heathcoat-Amory sat through, I have no doubt, hours of discussion and would be much more expert than I am on the details of that discussion - but, as I have explained and as you acknowledge, we made the argument in the Convention for treating competition partly as shared competence and partly in relation to state aid as an exclusive competence. There was agreement particularly and there was support particularly from Ireland, Sweden and Denmark on the need to improve the drafting of what had been put in front of the Convention and they and others were very helpful in achieving the redrafting in the Technical Review Group that took place after the Convention. Once that clarification had been achieved, my understanding is that there was no support at all for moving competition to the shared competence article. Q19 Mr Cash: You will appreciate that this is not just an academic argument or even one about jurisprudence, it actually has extremely important practical implications, not least of which is the fact that the French and the Germans are now openly pursuing the policy of industrial champions which I would regard as a pretty good signal that we want to be extremely careful that we do not end up with serious problems in competition policy throughout the European Union. The other thing which I would ask you is whether you have perhaps commissioned or you would commission a paper on the legal structure of German competition policy. We do not have time to go into it today but I would strongly recommend that you do actually get an analysis of the way in which German competition policy operates because that would tell you a good deal about what is actually going on in relation to competition policy in that country. So, basically, the Government have tried - and I suppose you deserve some sort of credit for that - and you have failed and you have given up. That is basically what it boils down to. The real question that I next want to ask you is, did you raise the matter again in the course of the IGC and was it raised by you and Germany? Ms Hewitt: I thought I was about to have an historic first of being complimented by Mr Cash on my negotiations within the European Union but you snatched it away! Q20 Mr Cash: The Chancellor of the Exchequer nearly had one the other day but I had to point out that it was despite your policies and not because of them that our economy was doing well! Ms Hewitt: I do not know the context of that but, actually, the Chancellor has been doing exceptionally well on the whole issue of the economy. Q21 Mr Connarty: It was a compliment. It may have been a backhanded one but it was a compliment. Ms Hewitt: Thank you, Mr Connarty. I am grateful for that clarification. We know your arguments within the Convention; we got agreement, crucially, that clarification was needed; we got that clarification in the Technical Review Group, so we succeeded. The other point I would make is that, on this issue of exclusive competence, our concern about the original proposal was of course shared by the OFT and the Competition Commission and the sectoral regulators. They supported us in seeking that amendment. They were certainly pleased and saw that as a significant improvement as did the various academics and lawyers whom we consulted on this issue. As far as the IGC is concerned, it did come up though I could not tell you at exactly what date, I am afraid. This, as I have said earlier, was not one of our first order issues. It was one of my Department's many concerns about the original proposals and earlier drafts of the Convention but it was not a first order priority and, certainly once into detailed ministerial meetings, there simply was not time to worry about second order priorities, particularly when they had been dealt with in the Technical Review Group, when we had far more important issues to deal with and Germany in particular did not want the text on competition to be reopened once we had achieved that clarification. Q22 Mr Cash: Minister, I am sure everyone will be extremely glad to hear that you have a sense of priorities in relation to this Treaty which is about, we think, to be signed up to. Referring back for a minute to Council Regulation 1/2003, that was only adopted in December 2002 and that does provide for greater involvement of national authorities and courts in the enforcement of competition policy under the existing Treaty, Articles 81 and 82, and for the coexistence of national and community competition laws. How, therefore, can the policy behind that regulation be reconciled when we have given the Union exclusive competence in this area and bear in mind that the issue really turns on the question of trade between Member States? Can you give me an answer to the first question but also, in doing so, indicate what you mean or what you think the meaning of the expression "trade between Member States" means because you are constantly telling us that you have actually managed to rewrite the wording to relate it to "the necessary function of the internal market". That means trade between Member States. What is your understanding of what that expression means and how can you reconcile that with giving the Union exclusive competence? Ms Hewitt: I do not see any inconsistency between Regulation 1/2003 and the wording of the draft Constitutional Treaty and by giving the national competition authorities and courts greater involvement in Articles 81 and 82, which is what that regulation does, we actually create a much better structure for enforcing EU law because the national authorities will have the responsibility to enforce Articles 81 and 82 within their jurisdictions. So, I just do not see the problem here. I do not know if my experts wish to speak. Q23 Mr Cash: I would love to hear what the experts have to say but I would like to ask you one last question on this and that is, do you not agree that the European Court will actually ultimately have jurisdiction over competition policy, and that really is the crucial question? Ms Hewitt: That was why it was so important to ensure that when European competition law was updated, we got the right definition, for instance, of anti-competitive behaviour and we persuaded the Commission and other Member States to move towards the tests that we were adopting and that we have already adopted in the United Kingdom of a significant lessening of competition rather than look at a sort of share of market test which had been their approach going into those discussions. So, we have exercised great influence for good on European competition law. Q24 Nick Harvey: Secretary of State, we have established that the regulation could be changed at any time by qualified majority voting. Do you not see that one does not have to be paranoid about a Federal Europe to envisage circumstances at some point in the future where the Commission might come back or anybody else might come back and decide to try and change that regulation and, in doing so, they would be armed with this revised formula in this Constitutional Treaty? I am not saying that it would happen immediately but just about anything can be argued with enough ingenuity of mind to be relevant to the operation of the internal market. This regulation is not going to provide us with a protection indefinitely or do you feel that it does provide great security for the longer term? Ms Hewitt: The Regulator has only just been appointed and we have gone through a very significant modernisation of European competition law in which, as I have indicated, we won very significantly the arguments on this. We have a very good national competition law framework consistent with the European framework and we have been at the forefront of arguing, for instance, for a much tougher pro-competition framework in telecommunications, extremely helpful to European consumers but also helpful to British telecommunication companies, and we are arguing very strongly with some real success for liberalisation of energy markets across the European Union. I do not think that we should fear strong competition laws across the European Union. We have seen from the consumer point of view with the fall in telephone prices, the fall in airfares and the Polish (?) cartel that was dealt with some time ago, the real benefit of strong European competition laws and I believe that if proposals do emerge in future for changes to be made in the current competition law, I have no doubt at all that we will continue to take a strong pro-competition stance and to win those arguments if we need to in dealing with the Commission or with other Member States. Q25 Nick Harvey: So, you are acknowledging that what I am describing might happen but you are working on an optimistic reading of what you think these new regulations will say. Ms Hewitt: There is no change from the current position in our view. The UNV applies at the moment to this area and we are confident in our ability to win these arguments because, as I think you will agree, having open competitive markets right across the European Union is of great benefit to British business and British consumers and indeed is increasingly urgent and important for the whole of the European Union in the context of a highly competitive global economy. Q26 Mr Bacon: Secretary of State, would you agree that the draft Treaty as it now stands appears to indicate that Member States would have no power to introduce competition rule if that rule were said to be necessary for the function of the internal market? "Yes" or "no". Ms Hewitt: If the rule were said to be necessary for the function, then it would become an exclusive --- Q27 Mr Bacon: And Members States would have, in those circumstances, no power to introduce a competition rule relating to that point. Ms Hewitt: That, I believe, is correct but we do not share your concern about that. Mr Rees: That is no different from the current position. The current position with Articles 81 and 82 gives the Commission exclusive competence for applying Articles 81 and 82. So, the Treaty does not change the current position. We could not introduce a law which tried to regulate inter-Member State trade now. Q28 Mr Bacon: It is hard to imagine - and this is the central point - any aspect of commerce that could not be said to have an interstate component. That is the problem, surely. Mr Rees: I do not accept that and I think that the case you raised about buses is not in fact the case. There is no interstate component to a cartel operating in buses. The case you raised was about the purchasing of buses which is a totally different thing. Q29 Mr Bacon: I happened to raise the case of purchasing buses but what about the letting of the contract to run buses in Leeds and, if a Polish or a Swedish or a German bus operator wanted to let into that market? It would immediately become an interstate battle. Mr Rees: That would not change from the present Treaty position where there are public procurement rules which were negotiated over very many years which already provide for that. Ms Hewitt: And which we have adopted under Conservative Governments. That is no change. Public procurement has to be open across the European Union. There are arguments about how well that is done in different countries but there is no change to that rule and your own Government adopted it. Q30 Mr Bacon: I was not in power at the time. Ms Hewitt: Nor was I! Q31 Mr Cash: Competition policy is not just a question of inter-Member State trade, it also affects global markets. In other words, this is part of a much bigger picture, a bigger landscape. Would you agree that it would be extremely dangerous if in fact the industrial champions idea was to be somehow rather converted through the overarching jurisdiction of the European Union through the European Court as a wedge to create serious problems with, for example, the United States or the Asian countries or whatever, the consequence of which would be that we would get caught up in a battle that was being conducted by France and Germany running for the benefit of their industrial champions but we, on the other hand, were left tagging along behind because we had allowed them, that is the European Union, to obtain too much in the way of control over the running of competition policy? Ms Hewitt: I am very glad you came back to the issue of national champions because I did not pick up on it when you mentioned it earlier and I agree with you that the idea of national champions seems to be increasingly inappropriate and old fashioned --- Q32 Mr Cash: I am very glad to hear you say that. Ms Hewitt: ... not just in the context of the European Union but in the context of the global economy and I did indeed say that publicly and was reported as saying so in the Financial Times a couple of weeks ago and I would be happy to send you the reference. I think it is utterly the wrong approach and I think that one of the best safeguards against that sort of thinking is to have strong competition rules that require for businesses involved in trading across the European Union open and competitive markets and bear down not only upon the activities of cartels but also upon mergers that might, for instance, result in a significant lessening of competition. Q33 Mr Cash: Can I just say that I agree with you about that. Ms Hewitt: I am getting seriously worried here about the degree of agreement between myself and Mr Cash! I will have to check with my own colleagues on this matter! I think we do agree on this point and I think it is a very important point. If I can use the example of telecommunications, we have enjoyed in Britain one of the most open and competitive telecommunication markets in the world, particularly of course in mobile telecommunications which is the newer area. Q34 Mr Cash: My constituent is John Caldwell, if I could just mention that as an example. Ms Hewitt: Indeed. I think that, as a result of having this very open competitive and innovative market, we have actually produced a world-beating company in the form of Vodaphone and, without wanting to tread on any national sensibilities here, Vodaphone was of course able, in a pretty controversial merger, to take over Mannesman and to create a very, very sizeable not just European but now global player. You are also right that of course increasingly markets and businesses will be global and not even simply European let alone national. We have seen the very interesting case of Microsoft where both the competition authorities and the commerce authorities in the United States and the competition authorities in the European Commission have gone after Microsoft to deal with allegations of anti-competitive practice and I think that reinforces the point that we have a framework across the European Union which we have played a leading part in negotiating that enables us to deal with these pan-European issues but, increasingly, just as we have cooperation between our national and sectoral regulators, we will need the European and the United States and other international competition authorities to work together to understand their approaches and where those are different, why they are different and what the relative merits and demerits of the different approaches are because, for those global companies, they will be operating under several different competition regimes and, where it is possible to align those regimes, it is not always that helpful. Q35 Mr Heathcoat-Amory: Secretary of State, this discussion about the desirability of competition rules is very interesting but completely irrelevant. We all agree that we need to have them but the issue here is who passes the laws and who cannot pass the laws. Mr Rees made the remarkable assertion just now that there is no change under the Constitution. It is completely untrue. At the minute, we cannot pass laws which conflict with EU directives but we can pass our own competition laws. It is completely different in the draft Constitution which, under the definition of shared competence, means that we are forbidden by Treaty law from passing competition rules if they have anything to do with the internal market and the internal market is anything that happens within the EU borders. I think that, in the interests of accuracy, he ought to correct himself on that apart from anything else. What does he think the Government representatives were doing last year? They were presumably briefed by the DTI and they were absolutely emphatic and I was quite impressed by the persistence of Mr Hain and Baroness Scotland who said that it must remain the case that these issues remained a shared power. They were emphatic. Is the DTI's present position that they were all mistaken in that and that, because there was no change, they need not have worried? Ms Hewitt: We sent our representatives into the Convention extremely well briefed as always on this and a whole range of other issues. As I indicated earlier, we had much higher priorities including of course the Charter which remains a red line issue for us and is being discussed at the Council today, tomorrow or Friday. I am delighted to hear that Baroness Scotland and Peter Hain made the argument so strongly and we believed that it was --- Q36 Mr Heathcoat-Amory: They failed. It was a comprehensive failure. Ms Hewitt: No, not at all. We believed it was well worth making and, as a result, we secured the support from other Member States to the amendment and the clarification that we secured. We did not win the argument about shifting this stuff into the shared competence and doing a rewrite which I explained in answer to several questions earlier on. Jonathan may wish to say something for himself but let me just underline the fact that we do not see this as a change. The Commission, if they wish to, will be able to propose amendments to competition law in the future and the Council of Ministers will have to agree them under the normal legislative arrangements. That will be qualified majority voting and so it is at the moment. Mr Rees: I wish simply to underline that Article 83(2)(c) already provides for the rules to determine the relationship between national laws and Articles 81 and 82 and for European regulations adopted pursuant to Article 83 to be adopted by qualified majority. That is in the existing Treaty. There is no change to that. That is the point that I was making. Mr Heathcoat-Amory: I was not talking about qualified majority voting. Mr Connarty: I am not sure this is really going to take us anywhere. Q37 Mr Heathcoat-Amory: It is a factual matter. Mr Rees, I am not talking about qualified majority voting, I was saying that there was a change. The definition of exclusive competence is a qualitative change and Mr Rees earlier said that there is no change and we cannot pass laws, but we can. They cannot conflict with existing directives but we are perfectly entitled and indeed it is underlined by the new regulation that we can. The definition of exclusive competence means that we cannot pass laws by Treaty law and that is the definition of exclusive competence and I think that we need to get that at least conceded and I am just saying that the questioner concerned read the draft Treaty and what the definition of exclusive competence is. Ms Hewitt: I think we have dealt with that point; I do not think that we need to go over it again. Q38 Mr Connarty: I think the point being made by a number of members of the Committee is that when - and it is in fact when rather than if - this new Constitutional Treaty is agreed, then the basis of the interpretation of what should be done under qualified majority voting might change and I wish to remind you, Secretary of State, of your own reply to our Chairman on 10 February 2004 when you said that what is not wholly clear is the interaction between Regulation 1/2003 and Article I-12 and you go on to say after explaining where individual Member States to bring in internal decisions that if a Member State wishes to do anything to introduce controls in competition, that those that are necessary for internal market offices, provided they do not conflict with community rules. In other words, what you confirm is that, yes, a country can bring in regulations as long as the community rules allow them to, in other words if the community rules do not allow them to. Ms Hewitt: Exactly. Q39 Mr Connarty: So, there will be fundamental change since the community rules are about to change. In the Treaty, they are going to go from shared competence to exclusive competence, and surely anyone judging what should and should not continue in the regulation will judge on the new agreement and not on the old agreement. We are talking in a kind of limbo here where we are talking about without the change. Once the change comes through, how it will be interpreted and what it can do to the regulations could be markedly different and that is the point and that is our concern. Would it not have been better to put something on the face of the Treaty? You plead in your correspondence using Article IV-3 of the draft Constitutional Treaty which would preserve the effect of the Council regulations but, on a matter of such importance, would it not have been better to have something on the face of the Treaty? I remind you what is in the Treaty at the moment in Article 87, the simple phrase at the bottom of paragraph 1, "insofar as it affects trade between Member States ... with the Common Market." If that were in fact put in and maintained ... You seem to be pleading that it would be such a terrible administrative task to redraft all of these things. That simple phrase going in would in fact protect us from what we fear and that would be that the EU will be getting to decide what we can do internally in our country about regulations in competition and that is a great fear, I believe, of many of the businesses as well as many of the politicians. Ms Hewitt: Mr Connarty, I do come back to this point that I do not - and I will correct myself subsequently if I am wrong - recall in any of my very frequent meetings with Digby Jones and his colleagues at the CBI and other business organisations this being raised. As I indicated, we were and remain happy with the clarification that we secured and we do not believe that this changes the position from what we already have under Articles 82 and 83 or indeed under the exclusive competence on state aids. Q40 Angus Robertson: Just to follow up, there is an analogous situation there with the issue of the energy chapter which was not raised by a great many people until it was happened upon by various organisations and concerned by Members of Parliament on all sides of this Committee. So, if were to the case that business organisations raise this matter with you, you might look at it again even at this late stage. Ms Hewitt: It is a little late in the day and I know from my lengthy discussions about the draft Constitutional Treaty with the CBI and with other business organisations that they have gone through this with a fine toothcomb and they are concerned as we are about the Charter, that is their number one concern. On the energy chapter, if I may say so, you have repeated this view that we did not do anything about this until the industry came along. This is simply not true. We ourselves were consulting and had gone out to consult with senior people in the oil industry about the impact in the proposed energy chapter before the IGC process began and before Sir Ian Woolf wrote to the Prime Minister last year. We drew on our consultations and our knowledge of the industry to reach a view about what changes were central; we argued that case extremely strongly and effectively; and we and the oil industry are now happy with the energy chapter. Q41 Mr Connarty: I did allow you to go into a completely new subject ‑‑ Ms Hewitt: I did not want to let that one go unnoticed! Q42 Mr Connarty: I think we all know from the correspondence we have what dates people were elected and what people thought of our government when they voted. Can I thank you, Secretary of State, for the time you have given us; I am not sure we have resolved the concerns of this Committee but we certainly have allowed all sides of the argument to be given and I am sure, despite the fact you think that it is not a matter of controversy in the pubs in your constituency, it just may be that some of the public will read these minutes and realise this Parliamentary Committee does express concerns that may, in fact, be echoed in the public domain. Thank you very much. Ms Hewitt: You do a very important job, Mr Connarty. Thank you. |