Draft Enterprise Act 2002 (Protection of Legitimate Interests) (Amendment) Order 2014
Draft Enterprise and Regulatory Reform Act 2013 (Competition) (Consequential, Transitional and Saving Provisions) Order 2014
The Committee consisted of the following Members:
† Doughty, Stephen (Cardiff South and Penarth) (Lab/Co-op)
Drax, Richard (South Dorset) (Con)
Farrelly, Paul (Newcastle-under-Lyme) (Lab)
Harris, Mr Tom (Glasgow South) (Lab)
Jackson, Glenda (Hampstead and Kilburn) (Lab)
† Offord, Dr Matthew (Hendon) (Con)
† Prisk, Mr Mark (Hertford and Stortford) (Con)
† Rudd, Amber (Hastings and Rye) (Con)
Sharma, Mr Virendra (Ealing, Southall) (Lab)
Simpson, David (Upper Bann) (DUP)
Sutcliffe, Mr Gerry (Bradford South) (Lab)
† Thornton, Mike (Eastleigh) (LD)
† Uppal, Paul (Wolverhampton South West) (Con)
† Watkinson, Dame Angela (Hornchurch and Upminster) (Con)
† Wiggin, Bill (North Herefordshire) (Con)
† Willott, Jenny (Parliamentary Under-Secretary of State for Business, Innovation and Skills)
† Wright, Mr Iain (Hartlepool) (Lab)
† Zahawi, Nadhim (Stratford-on-Avon) (Con)
Fergus Reid, Committee Clerk
† attended the Committee
Sixth Delegated Legislation Committee
Tuesday 25 March 2014
[Jim Sheridan in the Chair]
Draft Enterprise Act 2002 (Protection of Legitimate Interests) (Amendment) Order 2014
2.30 pm
The Parliamentary Under-Secretary of State for Business, Innovation and Skills (Jenny Willott): I beg to move,
That the Committee has considered the draft Enterprise Act 2002 (Protection of Legitimate Interests) (Amendment) Order 2014.
The Chair: With this it will be convenient to consider the draft Enterprise and Regulatory Reform Act 2013 (Competition) (Consequential, Transitional and Saving Provisions) Order 2014.
Jenny Willott: Welcome to this friendly and full Committee, Mr Sheridan—I am ever an optimist.
Taken alone, the orders are highly technical pieces of legislation, characterised by various consequential and transitional provisions, but their significance is in their context as part of our wider reforms to competition law. Specifically, they are the two final pieces in the legal jigsaw that implements the competition elements of the Enterprise and Regulatory Reform Act 2013, which creates the Competition and Markets Authority from 1 April. In its competition elements, the 2013 Act laid the foundations for the establishment of the CMA and a major reform of the UK’s competition regime. The CMA will be responsible for promoting effective competition in markets across the UK economy and for delivering major benefits for consumers. It will have strengthened responsibilities and powers, taking on the work of the Competition Commission and a number of responsibilities of the Office of Fair Trading.
This afternoon’s debate gives me the opportunity to provide hon. Members with an update on what has been achieved since the 2013 Act received Royal Assent. The CMA was launched in shadow form last October and the Government have appointed a well respected board for the new organisation. We have also published our strategic steer for the CMA, setting out the key benefits that it should bring for consumers and a performance framework that explains how we will measure its impact. We are on course for the full launch of the CMA next week on 1 April.
Both orders are, as their titles suggest, largely concerned with consequential and technical amendments to other legislation. They are required to give full effect to the range of administrative and legal changes to the competition regime that Parliament enacted in the 2013 Act. It is important to stress that there is nothing novel or unexpected in what we are asking the Committee’s approval of today. The changes that these orders make were both foreseen and intended as a result of the 2013 Act.
By way of a very brief recap, part 3 of the 2013 Act abolishes both the Office of Fair Trading and the Competition Commission and creates the new CMA to assume their competition functions from 1 April. Part 4 of the 2013 Act makes various changes to those competition functions. It amends the provisions on mergers in part 3; the provisions on market studies and market investigations in part 4; and the definition of the cartel offence in part 6 of the Enterprise Act 2002. It also amends the anti-trust provisions in part 1 of the Competition Act 1998.
The Enterprise and Regulatory Reform Act 2013 (Competition) (Consequential, Transitional and Saving Provisions) Order does not exactly have a snappy title, but, as its name suggests, it makes consequential amendments to a wide range of primary legislation. Many of these amendments simply replace references to the OFT and to the Competition Commission with references to the CMA. Others ensure that changes in the 2013 Act to the regime for market investigations apply across the regulated sectors, such as gas, water and rail. Where the sector regulators share powers to refer markets for investigation with the national authorities, the amendments ensure that the streamlining and modernisation in the 2013 Act apply to the regulators as appropriate.
I should add that the order also amends the Enterprise Act 2002 to reflect the CMA’s role in the enforcement of consumer legislation. The CMA will have primary expertise on unfair contract terms, which will enable it to take enforcement action where there are structural market failures. The CMA will also have access to other enforcement powers to ensure that consumer choice is not restricted. That being said, the great majority of consumer law enforcement will continue to be carried out by trading standards services, with the National Trading Standards Board responsible for co-ordination and prioritisation. As competition is a reserved matter, the order also makes similar amendments to Scottish, Welsh and Northern Irish legislation. Article 3 and schedule 2 make transitional and saving provision in connection with the transfer of functions from the OFT and the Competition Commission to the CMA.
The draft Enterprise Act 2002 (Protection of Legitimate Interests) (Amendment) Order amends a previous order from 2003 and, again, many of its changes reflect the abolition of the Office of Fair Trading and the Competition Commission, and the transfer of their competition functions to the CMA. It relates to one of the three situations in the Enterprise Act 2002 when the Secretary of State may intervene in a merger case that raises potential public interest concerns. Specifically, it amends the 2003 order, which sets out what happens when the Secretary of State issues a European intervention notice or EIN. That may happen when the Secretary of State wishes to examine particular potential public interest concerns raised by a merger case when the competition aspects of the case fall within EU jurisdiction.
The changes in the draft order to the EIN process replicate those already made in the Enterprise and Regulatory Reform Act 2013 to the other two public interest regimes: the public interest intervention notice regime, which enables to Secretary of State to intervene in merger cases when the CMA has jurisdiction, and the special public interest intervention notice regime, which enables the Secretary of State to intervene in a merger case on particular public interest grounds when the
threshold for CMA jurisdiction is not met. The changes have been made to, for example, the powers to deal with pre-emptive action. Powers to accept undertakings have been repealed, and powers to make orders have been strengthened.I repeat that approving these orders today will reflect Parliament’s will to establish the Competition and Markets Authority and the new competition landscape that it will oversee from 1 April. I am confident that these reforms will enhance the competition regime and deliver greater benefits for consumers. I hope that hon. Members will support the orders.
2.36 pm
Mr Iain Wright (Hartlepool) (Lab): It is a pleasure, Mr Sheridan, to serve under your chairmanship again. It is good to see the Minister in her place after the statutory instrument we discussed yesterday, and I know that she also responded to the Adjournment debate in the Chamber. Her cough sounds slightly, but not completely better.
It is a joy to see the hon. Member for Hertford and Stortford here. He had the challenge of taking these provisions through the Committee stage of the Enterprise and Regulatory Reform Bill, and he did so with great panache. He tended not to agree with me about the Stone Roses but, never mind, we can move on.
The Labour party does not have an issue with the orders before us, so I do not wish to divide the Committee. However, we are keen to ensure that consumers have good, well regulated markets that work in their interests rather than those of an oligopoly. As I understand it, the CMA’s purpose is to provide competition for the benefit of consumers, and we would be very unhappy if the CMA was less consumer focused than the Competition Commission.
The Minister mentioned trading standards as the principal vehicle by which quality can be enhanced. I do not want to make a party political point, but she will be aware that local authorities, whatever their political persuasion, have had significant reductions in their budgets and are having to make incredibly difficult decisions. Trading standards is a vital part of what local authorities can do, but it could be down the list of highlighted functions that councils are supposed to provide. Will the Minister give some idea of the help and assistance that local authorities will be given to ensure that the CMA’s functions, translated through trading standards, can be provided to the best of their ability? How will the CMA, the overriding competition body for the UK, work with the Financial Conduct Authority, which is charged with promoting competition in financial services, and what will success look like?
I said that the CMA is the overriding competition body for the UK. What will happen if Scotland votes yes for independence? What will happen to the competition regime? Publication of the OFT’s inquiry into finance for small and medium-sized enterprises is incredibly important. SMEs are saying that they do not have access to finance to grow, to create opportunities and to provide more employment, so this is a big issue holding back businesses in our country.
The inquiry was delayed until the CMA took over the OFT’s functions and is now expected to report in the summer. That is an important point and I have two
questions about it. First, the CMA, under the Enterprise and Regulatory Reform Act 2013, has enhanced information-gathering powers, particularly for market studies. Can the Minister confirm, and reassure us, that the CMA will have time to use its additional powers effectively?Secondly, on a broader point, but using the OFT inquiry as a case study, is she concerned that there has been an element of navel gazing with regard to the OFT and the competition issue, given that there has been organisational change and people are thinking about what will happen with the new regime under the CMA? Will the Minister reassure us that other inquiries are not being delayed as a result of this transition? In her role as a Minister, how has she made sure that the focus has always been on better competition for the benefit of consumers? I hope that she can answer those questions. I am interested in what she has to say. I do not intend to divide the Committee, but I want to ensure that consumers are well served by the CMA.
2.40 pm
Jenny Willott: I would like to reassure the hon. Gentleman first about the CMA’s consumer focus. It is already working closely with consumer groups, including Citizens Advice and Which? before its official launch and it has a stretching target in its benefit test. It has to prove £10 of consumer benefit for every pound spent, which is much more stretching than the current test, so it has a real focus on the benefit to consumers of its activity. Part of that will be knowing what issues consumers are concerned about, and it is working closely to ensure that it gets feedback and input into its operation. I am confident that this will be a key part of how it operates.
The hon. Gentleman also asked how the CMA would work with the FCA. It works actively with trading standards and the FCA as part of the UK competition network and in the consumer protection partnership. These arrangements are proving to be effective and are pulling organisations together. The CPP in particular has good intelligence and information sharing and, although the CMA is not in full flow yet, I am confident that the arrangements are in place to ensure that they work together and identify where they can add value to each other’s operations.
Mr Wright: The Minister says that there is good information sharing and that the organisations are working together. Is she concerned that a certain competition issue regarding financial services might fall between two stools? What protocols are in place to make sure that that does not happen?
Jenny Willott: The different organisations are working together closely. Some elements in the orders deal with instances of when different regulatory regimes are in operation, and they do mesh together. There is a strong will on the part of the regulators to make sure that issues do not fall through the gaps. The CMA in particular has such a strong consumer focus in its make-up that it would be difficult for it not to make sure that issues do not drop into the gaps. The regulators have not raised any concerns with me about that, so I think they are reasonably confident that the set-up will operate fine. The FCA will also take on enhanced competition powers
next year, which will enhance the way that it works alongside the CMA. They already have a close working relationship.The hon. Gentleman asked about trading standards. This came up a number of times in the debates, which the hon. Member for Cardiff South and Penarth will have enjoyed, on the Consumer Rights Bill Committee, where we spent a number of weeks considering issues such as this. It is really important that trading standards can operate effectively. They are a crucial part of the consumer landscape and that is one of the reasons why the Government have invested quite a significant amount of money in setting up the National Trading Standards Board—£14 million—to try to help trading standards operate more efficiently, share information and operate much more effectively across local authority boundaries, so that they do not duplicate effort and things do not drop in the gaps between.
It is a difficult financial climate for local authorities and there is no doubt that it has been tough for trading standards officers as well. The Government are doing what we can from the centre to try to ensure that we are putting in resources to help trading standards services operate more efficiently, and to add a layer of expertise and a layer of intelligence gathering to help them deliver their services more effectively.
The hon. Member for Hartlepool also highlighted issues about potential delays in some of the work being undertaken by the OFT. I have not seen any sign of delay in the work of the OFT or the Competition Commission. They have kept up a very high work load during the transition period, and the idea is that this will pass seamlessly to the CMA. The CMA will inherit
a strong pipeline of cases, including some of the work that the hon. Gentleman highlighted. They intend to take that and run with it.The CMA actually has tighter time frames than the OFT and the Competition Commission for the different stages that they must achieve. That will hopefully mean quicker resolution of some of these issues in the future, to make sure that things do not drag on for long periods and consumers can see things happening quickly. I think that I have answered all the hon. Gentleman’s questions.
Mr Iain Wright: The independence question?
Jenny Willott: The independence of Scotland is not an issue at this stage. The referendum is later this year, so depending on the outcome, we will have to reconsider, if necessary, at that point.
I hope that I have answered the hon. Gentleman’s questions and that hon. Members are happy. I commend the orders to the Committee.
Draft Enterprise and Regulatory Reform Act 2013 (Competition) (Consequential, Transitional and Saving Provisions) Order 2014
That the Committee has considered the draft Enterprise and Regulatory Reform Act 2013 (Competition) (Consequential, Transitional and Saving Provisions) Order 2014.—(Jenny Willott.)