8. Memorandum from the CBI on the Enterprise
The CBI has been supportive of certain provisions
of the Enterprise Bill but has expressed opposition to other aspects
of the proposals. Many measures in the Bill where we have concerns
do not necessarily give rise to issues under the European Convention
for the Protection of Human Rights and Fundamental Freedoms 1950
("the Convention") but some, arguably, do. We would
welcome your consideration of the following points.
(i) Section 123 (Power of OFT to make
references) confers insufficiently specific rights upon the
OFT to commence investigations of privately or publicly owned
businesses which have not infringed any rule of law. The significance
of this issue is enhanced not only by the intrusive nature of
such investigations (see Section 166Investigation Powers
of OFT), the cost and resources which they absorb, but more particularly
by reference to the extraordinary powers conferred upon the regulators
in Schedule 7 to make directions as to the future conduct of businesses
and even to order the divestment or partial divestment of businesses.
Any such order would, in effect, result in the "forced sale"
of such businesses potentially at a significant loss to the owners
or shareholders. The exercise of such extraordinary powers is
only justifiable in order to address some particularly significant
adverse effect on competition but, as drafted, the Bill only requires
"some" adverse effect on competition to be demonstrated.
Such broad powers to interfere with the conduct and ownership
of businesses which have not infringed any applicable laws are
inconsistent with Article 8 of the Convention. Similar issues
arise in relation to Section 124.
(ii) Section 184 (Powers when conducting an
investigation) fails to provide adequate safeguards for persons
under investigation in connection with a possible offence under
Section 179. In accordance with Article 6 of the Convention there
should be no obligation to provide information except in the presence
of a solicitor representing the person concerned and it should
be made clear in the Bill that in no circumstances can any person
be required to make potentially self-incriminating statements.
(iii) The powers taken in Section 195 (Disqualification)
are far too broad and as a consequence may be capable of application
in a manner which is entirely disproportionate to the conduct
in question. In making it a ground for disqualification that a
company of which the person concerned is a director has committed
some breach of competition law, whether that person knew about
it or not, could be applied in a manner which is grossly unfair.
Whilst the section requires that a Court must also find the person's
conduct makes him unfit to be concerned in the management of a
company, it should be taken into account that the consequences
of disqualification can be to deprive an individual of his livelihood.
On any reasonable basis this would be excessive other than in
the event of a serious infringement of competition law such as
direct involvement in one of the hard core classes of conduct
such as price fixing or bid rigging. As presently drafted the
Bill is arguably inconsistent with Articles 6 and/or 8.
(iv) Sections 233 and 234 (Overseas Disclosures)
confer rights upon "a public authority" to make disclosures
of information concerning UK businesses to any overseas public
authority apparently without limitation even if only for the purpose
of civil proceedings and not limited to competition issues notwithstanding
the limited exceptions referred to in Section 233(3). This is
an extraordinary power which purports to override the proprietary
rights of any business in its non-public business information.
Such disclosure could have consequences for UK businesses outside
this jurisdiction which the UK public authority discloser is not
in a position to fully appreciate or foresee, e.g. where the overseas
public authority has a poor record in maintaining confidentiality
or where competing activities are in public ownership in that
other country. Requirements that the overseas public authority
must not use such information for any purpose other than that
for which it is disclosed by the UK public authority are completely
unenforceable by the UK public authority. These powers infringe
Article 1 of the First Protocol.
(v) Part 8 - Enforcement of Certain Consumer
LegislationThe Enterprise Bill will introduce Enforcement
Orders: a new and potentially wide-ranging enforcement tool, exercisable
by the Office of Fair Trading (OFT), trading standards departments
and other designated bodies. They will allow activities of businesses
to be challenged, injunctive orders to be sought and ultimately
businesses to be closed.
The Orders will replace and extend the scope of Stop
Now Orders which were introduced in June 2001 to permit injunctive
relief to be sought against businesses alleged to be infringing
provisions of 9 specified EU directives (on issues such as unfair
contract terms, distance selling, consumer credit). This was a
measure principally about cross- border infringements. The Enterprise
Bill will extend the scope of this enforcement procedure to all
consumer protection legislation, whether it originates from the
Community or is domestic in origin.
Serious concerns have arisen on the part of business
about the way in which Stop Now Orders have been enforced by the
OFT. They have been operated, for 10 months, without the benefit
of definitive guidance, as required by the original legislation,
and with a complete lack of transparency of process. (CBI concerns
where set out in August last year in a letter to the Director
General of Fair Trading, a copy of which is attached).
There are almost no safeguards for business in part
8 of the Bill about the way Enforcement Orders will be operated
in the future. Human rights issues are involved in ensuring that
business knows the exact basis on which it is being challenged
and the procedures it can follow to ensure a full and fair hearing.
This is particularly the case where we are dealing with matters
which affect the way in which a trader can conduct his business.
Significant hurdles must be in place in the legislative framework
since an Enforcement Order can lead ultimately to a business being
We have therefore urged the DTI that the Bill, supported
by meaningful and clear guidance, should set out proportionate
safeguards to ensure that transparency of process and respect
for standards of justice are guaranteed. Such safeguards should
a clear timetable and transparent enforcement
process, distinguishing clearly between preliminary discussions
and the start of the formal period before proceedings are brought
comprehensive and clear guidance outlining
procedural steps, which must be consulted on and made available
well in advance of the new legislation coming into force
statutory underpinning of the guidance
by means of penalties attached to failure by enforcers to abide
by its provisions
a pre-action protocol to cover procedural
stages once court action is contemplated
limitations on the powers of the OFT
to call for information, to exclude "fishing expeditions"
assurances that the normal rules relating
to costs will apply in the event of an unsuccessful application
for an Enforcement Order.
These safeguards are necessary to ensure that enforcement
authorities abide by the general principles of good enforcement
when operating the Enterprise Bill and that the human rights of
business are not infringed.
We would welcome a full investigation by the Joint
Committee to ensure that these issues are thoroughly considered.
In short, our view is that certain aspects of the Bill would,
if enacted, lead to the potential abuse of civil rights of business
undertakings in this country and businesses are, of course, just
as entitled to rely upon the protection of the Convention as any