Examination of Witnesses (Questions 152-159)|
MONDAY 27 MAY 2002
152. Mr Vickers, would you introduce your colleagues.
(Mr Vickers) I am John Vickers from the OFT. On my
right is Margaret Bloom, who is Director of our Competition Enforcement
(Dr Morris) I am Derek Morris, Chairman of the Competition
Commission. I have colleagues but they have been forced onto the
row behind me! I may need to refer to them, particularly on legal
Chairman: Welcome to you all. Paul?
153. There have been some concerns about OFCOM's
concurrent position and the less voiced concerns that OFCOM takes
on too many of the responsibilities that have been the preserve
of the OFT traditionally and that this might affect OFCOM's ability
to be nimble and indeed a light touch regulator. We have asked
these questions of other regulators. Could you explain to us how
you see the roles of OFCOM, the OFT and indeed the Competition
Commission and the EU Commission once this Bill and the Enterprise
Bill become law? I know such a general question is very difficult
to answer, so please feel free to relate your answer to alleged
anti-competitive practices in satellite broadcasting in particular,
because I have got a few supplementaries in other sectors for
which you might have responsibility in the media industry.
(Mr Vickers) I shall feel equally free not to do that!
I shall leave Competition Commission matters to Derek and his
colleagues, but let me try to address the other aspects. The first
thing to say is that concurrency is not new. Under the Competition
Act it has been going for some time including in relation to Oftel.
It is a concept that is relevant not only in the competition area;
in fact we have some consumer protection powers where again there
are concurrency arrangements. The fundamental principle, as I
see it, is that the one who is best placed acts, and it avoids
duplication, as David Edmonds was describing earlier on. I think
the effect of the Communications Bill, assuming it becomes law,
would be that the sphere of activity where Oftel has up until
now had concurrency under competition law will widen to some related
matters where the presumption is that OFCOM will take cases in
that area rather than ourselves. We could do so, but that presumption
will clearly be there. You also mentioned the European system.
In relation to mergers, if I could comment on that, there concurrency
does not apply and will not apply. Of course, the European Merger
Regulation catches mergers that cross certain trans-national thresholds
and that Regulation itself is under review at the moment. We have
a role under that process and mergers that have gone to Brussels
can sometimes be repatriated , again very much on the principle
of the best placed acts, where there are primarily national issues
arising. Also our own Competition Act provisions mirror European
law in Articles 81 and 82, and there trans-national cases, as
it were, could be taken forward by the European Commission. Private
actions are possible too, so it is not just the competitions authorities.
154. Is there anything that can be learned from
the OFT's experience of competition issues and related issues
of dominant TV operators in the sky that could be incorporated
usefully in this Bill that are not already in there? Are OFCOM's
powers deficient in any respect, in your experience?
(Mr Vickers) Our experience under the Competition
Act is in its early days, but it ranges across a diverse set of
industries. With that Act we are taking forward a number of cases
under that legislation. In the Communications Bill there are also
what are sometimes called the ex ante provisions coming
from the European Directive. Those have been in the Oftel bailiwick
up until now rather than our own sphere, so we would not be well
placed to form judgments on the basis of that experience.
(Ms Bloom) The Competition Act has a very important
section, Section 60, under which the jurisprudence under 35 to
40 years' worth of EC competition law is carried through into
UK law. That is very important in the way that competition powers
work. These are powers that are concurrent with Oftel and will
be with OFCOM in future. So if you ask should we improve it, in
a sense we are asking should we also improve 40 years' worth of
EC competition law? I think that has worked well.
155. Who do you think should police the media
ownership rules that remain as this Bill goes through Parliament?
Should you do it concurrently together or should either OFT or
OFCOM do it?
(Mr Vickers) That question has two parts. The first
has to do with the application of general competition law. The
Enterprise Bill that is before Parliament at the moment is reforming,
among many other things, the general merger regime where the OFT
has a role at the first phase of cases. As it is now we advise
on referral. In the Enterprise Act world, if that legislation
is enacted, reference decisions would be made by us and those
references would go to the Competition Commission at the second
stage. The second aspect is should there be media ownership rules
which go beyond the provisions of the general merger framework
and it is a question for Government and Parliament to decide what,
if any, sector specific measures are required on other grounds,
ie, plurality and diversity. I would say that competition is positive
for those goals but that is not to say that it is sufficient for
the achievement of those goals.
156. There is a reason for this line of questioning
which goes back to the concern that if OFCOM takes on too much
it is going to be so unwieldy that it is not going to address
the questions that many people feel are of crucial importance
to this country like broadband. Should OFCOM get involved in looking
at things like newspaper mergers or should we leave that to the
OFT and the Competition Commission as previously?
(Mr Vickers) At the moment there is a newspaper regime
which the Competition Commission are better placed to talk about.
The newspaper area is also one where the proposals for the reform
of communications legislation would give OFCOM a role in some
cases involving plurality issues. We as the OFT would see ourselves
as the competition analysts. That would be our role there, as
157. Just on that line of questioning, there
is an old saying that "justice delayed is justice denied"
and in an industry with fast technical changes and with convergence,
there is a danger that if OFCOM is not nimble enough then anti-competitive
practices can be put in place and by the time a slow-moving regulator
gets round to correcting them, the abuser will have killed off
the competition. Do you think that the Bill we are putting in
place and the powers that we are giving OFCOM are going to give
us a nimble, fast-moving regulator that can deal with that kind
of tactical abuse?
(Mr Vickers) There are different aspects of public
policy which bear on that. Some can be put under the ex ante
labelmerger control is an example, or the measures which
Oftel applies at the moment involving significant market power
and so on. As far as the Competition Act is concerned (sometimes
described as ex post) the first thing I would say about
that is that the Competition Act has penalties as part of the
system in a way that used not to be the case under UK competition
law and therefore part of the benefit of the Act comes through
the deterrent effect. It is not as though it has no influence
on cases until cases are concludedthis is a pan-economy
point, not a point specific to this sectorbecause of the
sanctions which are attached to this measures. You spoke of justice.
Another thing that justice requires is due process. Taking forward
a case under the Competition Actor referring to the three
or four decades of experience under European competition law,
or indeed the century plus experience of the US anti-trust casesnecessarily
takes time for that reason as well.
158. Could I put to you something very akin
to what I was asking David Edmonds earlier, which is given the
experience of concurrency and obviously the implication is thatand
I do not want to put words in David's mouthif people cared
to look hard enough at what had been already said by way of the
regulations, your guidance on concurrency and the working party
and so on, they would know how it all worked, in practice what
would be your view about there being any advantage in OFCOM exercising
powers in relation to a section up until the point where OFCOM
itself determines it is a fully market competitive area of activity,
perhaps not the whole communications sector by any means but some
part of it, and therefore regulated by the OFT rather than OFCOM?
(Mr Vickers) Just so I am clear about your question.
In your example it would be regulated by the OFT at some point
159. Yes, but in effect OFCOM, while enjoying
concurrent powers, would say that this aspect of the sector that
we regulate is now fully in the competitive market-place and it
can be regulated by the OFT, so that there is a degree of consistency
to be had from the industry recognising that the OFT will regulate
in future rather than OFCOM?
(Mr Vickers) If one speaks of the Competition Act,
first of all, it is often an open question as to whether or not
a point such as that has been reached. There is no magic formula
number in terms of market share or whatever which says there are
going to be no more competition problems in this sector, because
threats to competition or concerns about collusion might come
and go. I do not see a readily defined threshold in those terms.
It is a perfectly sensible way of organising things according
to the principle of "best placed acts" that when OFCOM
replaces Oftel and the other regulatory bodies that will go into
OFCOM that concurrency is extended beyond the Oftel remit as now
to the somewhat wider OFCOM remit.