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Lord Harris of Greenwich: My Lords, I, too, welcome the fact that the noble Lord, Lord Williams of Mostyn, has repeated the Statement. I intend to be extremely brief. The Government announced that there will be a consultation period followed by the introduction of permanent legislation. I believe that to be highly desirable, particularly in the light of the report of the noble and learned Lord, Lord Lloyd of Berwick. It will also give Parliament the opportunity to consider the details of that legislation, which is quite impossible in the circumstances where we merely have a renewal order once a year which is, of course, unamendable.

Having said that, I thank the noble Lord. We shall reserve our position until we see the details of the Government's legislation.

Lord Williams of Mostyn: My Lords, I am deeply grateful for the approach which has been adopted by

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both the noble Lord, Lord Henley, and the noble Lord, Lord Harris of Greenwich. The noble Lord, Lord Henley, asked whether there was danger in lapsing the powers. The powers having lapsed, if the Secretary of State comes to the conclusion that it is necessary to bring them back into force as a matter of urgency, I am happy to reassure your Lordships that the Act allows the Home Secretary to make an order reactivating the powers. There is the in-built mechanism in the Act that the order must then be confirmed by both Houses within 40 days or the powers will lapse again.

I entirely echo what the noble Lord, Lord Henley, said about terrorism not being limited to a certain part of the United Kingdom. Perhaps one's mind is particularly put to that when one goes to the party conferences and realises, rather dismally, that in a mature, civilised democracy party conferences are unable to be held without the assistance of armed police and very heavy security. A further dismal consequence of terrorism is that we almost come to accept it without question.

The noble Lord, Lord Henley, also asked about consultation, as did the noble Lord, Lord Harris of Greenwich. The intention is that we should have the consultation paper out in the early part of next year. The present thought is that a consultation period of about three months would be appropriate. We do not want the timescale to slip. On the other hand, we want the opportunity to have informed consultations with everyone who has a legitimate interest in these matters, bearing in mind the very useful basis provided by the Lloyd Report to which I referred earlier. It is not possible for me to speculate on the timescale for the introduction of a new Bill.

All that I can reiterate to your Lordships--I hope that this finds favour--is that this is something that we must build which must be capable of lasting a significant period of time. One of the problems historically has been that we have responded on a piecemeal basis, often entirely understandably and perhaps inevitably, to specific terrorist outrages. Legislation has often been introduced within a very short period of time. I have been a witness to that even in the five years that I have been a Member of your Lordships' House. That was inevitable and when we were in opposition we supported the Government while expressing reluctance. As the noble Lord, Lord Henley, said, we want to bear in mind that this is not a limited problem; it is a global problem and we want to equip ourselves with the tools with which we can deal with this great vice of our time.

4.11 p.m.

Lord Callaghan of Cardiff: My Lords, the Government's approach is entirely appropriate and ought to command our support. At the risk of labouring the obvious, may I ask the Minister whether it is quite clear that on the day the Home Secretary decides that it is necessary, if unfortunately it should be, to reactivate the so-called "Temporary Act", he can reactivate it by signing an appropriate order which will operate

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immediately and continue for up to 40 days, during which time the Home Secretary will ask Parliament to support him in what he has done?

Lord Williams of Mostyn: My Lords, my noble friend is right. The Home Secretary has that power. I have referred to a mechanism in the Act which requires confirmation within 40 days. Failing such confirmation, the powers lapse. I entirely accept that the important point is that in the meantime the Secretary of State is entitled in law to make any exclusion orders which may be required.

Lord Molyneaux of Killead: My Lords, I support the point made by the noble Lord, Lord Callaghan, who has vast experience in these matters because otherwise he and I would have been able to picture terrorists reading about--and they can now view it on television--a lengthy debate on the introduction of replacement measures. It is good to know that the Government have retained the power to introduce measures immediately and without the need for further debate. I commend the decision to maintain the permanent powers, which is something that my colleagues and I have advocated for a long time. It will bring a great deal of satisfaction to people in all parts of the United Kingdom to see that the powers will be applied uniformly throughout the United Kingdom. Although it has been said that the main terrorist bodies are for the time being observing a ceasefire, the reality is that there is no shortage of what I might call "sub-contractors" to continue carrying out the evil deeds.

Lord Williams of Mostyn: My Lords, I am most grateful for those comments from the noble Lord, Lord Molyneaux. Friends and colleagues in Northern Ireland have expressed the same view to me--that the powers should be United Kingdom-wide. I believe that the way forward is on the basis of consultation. There may be occasions when it is more prudent not to discuss on the Floor of your Lordships' House the thinking of the party of either the noble Lord, Lord Henley, or of the noble Lord, Lord Harris of Greenwich, or the thinking of any other interested party with legitimate concerns. I am always open to private consultations if any noble Lord thinks that that would be a wiser and safer course which is in the general public interest during the discussion period which is bound to be delicate and difficult.

Viscount Waverley: My Lords, I congratulate the Government on addressing this world-wide phenomenon in this manner. This country has for too long been considered a safe haven for terrorist organisations. Will the Minister please consider at the appropriate time those 30 organisations listed by the counter-terrorism section of the United States State Department and clarify whether, if it is ever considered or determined that they have a presence in the United Kingdom, a mechanism exists to deport those individuals whether or not they have applied for asylum in the UK?

Lord Williams of Mostyn: My Lords, the existence of designated organisations in the United States

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legislation is well known to my right honourable friend. One of the points of the consultation exercise is to identify precisely the problem of which the noble Viscount spoke; namely, international terrorist groups. We tend to think of international crime too narrowly and perhaps in the context of international drugs crime, which I know is a particular concern of the noble Viscount, but we have to be vigilant against prospective terrorist attacks apart from what we know about historical actuality. One of the purposes of the consultation exercise is to consult with law enforcement agencies overseas. Obviously, we are in close liaison with many friendly nations on this matter and we want to learn from the experience of others to see whether we can improve upon our present armoury of weapons.

Public Processions etc. (Northern Ireland) Bill [H.L.]

4.16 p.m.

The Parliamentary Under-Secretary of State, Northern Ireland Office (Lord Dubs): My Lords, I beg to move the Motion standing in my name on the Order Paper.

Moved, That the order of commitment of Tuesday last be discharged and that the Bill be committed to a Grand Committee.--(Lord Dubs.)

On Question, Motion agreed to.

Competition Bill [H.L.]

4.17 p.m.

The Minister of State, Department of Trade and Industry (Lord Simon of Highbury): My Lords, I beg to move that this Bill be now read a second time.

I am delighted to be bringing forward legislation to reform and strengthen competition law. I am pleased to be able to do so so soon after the Government have come into office, fulfilling the manifesto promise to make it an early priority.

It has been widely acknowledged for a decade that our competition laws are not working well and that reforms are needed. Over the years, there have been Green Papers and a White Paper, consultation documents and even a draft Bill last year, but legislation has not been forthcoming. I am very pleased that this Bill will now take the process forward.

The Bill shows our commitment to ensuring effective and fair competition. It would benefit both consumers and business.

It is perhaps more obvious that competition provides value and choice for consumers. But, as Minister responsible for trade and competitiveness in Europe, I feel just as strongly about the spur which strong competition in the UK and continental Europe provides to the competitiveness of our companies in overseas markets outside the European Union; that is, in the global market. The European Union should be the most competitive joint market in which our companies can

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prepare for global competition, particularly in the fast developing markets in the Americas and Asia. Time is short and, as we all know, world competition is accelerating.

In our manifesto we said that we would adopt a tough prohibitive approach to competition law to deter anti-competitive practices and abuses of market power. This Bill would fulfil that commitment. It would do so by introducing two prohibitions, following closely the models set out in Articles 85 and 86 of the Treaty of Rome, with which those companies whose business affects trade in Europe already have to comply. Indeed, they have done so for many years.

To ensure smooth interaction between the EC legal and business environment and the UK prohibitions, we intend that the UK prohibitions would be interpreted in a manner consistent with the equivalent provisions under EC law. Clause 58 of the Bill has this effect. Such consistency would be of great benefit to so many of our businesses that currently have to worry about two different approaches to competition policy. It delivers a level playing field for our business community in the UK as firms become more and more engaged in European home markets.

I am pleased that, in the short timescale available for the drafting of this Bill, in August we were able to publish a consultation document and working draft of the Bill. I am grateful to all those who have offered their comments. We have received over 150 responses, some from organisations themselves representing large numbers of companies. Many have suggested that we change particular provisions of the Bill. That is the purpose of consultation. But the thrust of our proposals has generally been welcomed by companies, consumer groups and legal practitioners.

I should like to emphasise that this is not only an important Bill but also a complex and technical one. It is vital for the health of the UK economy that we get it right. That is why we were determined to go out to consultation on a draft Bill, albeit a preliminary version. We said in the August 1997 consultation document that where we are persuaded by points from the consultation responses that have not been taken into account in the Bill as introduced to Parliament we would be willing to consider making changes by government amendment. We anticipate that with the benefit of the consultation the number of these amendments will be quite considerable. I shall be inviting opposition spokespersons of all parties to discuss this with me before Committee stage.

I believe that the right approach to a Bill of this kind is to take a flexible attitude based on the knowledge that there is much common ground given the previous government's past intention to introduce legislation in this area. In particular, we are still consulting on how the prohibition of anti-competitive agreements should apply to agreements relating to land. We are also consulting with interested parties on how our proposed exclusion of vertical agreements, such as those between a manufacturer and a dealer, distributor or concessionaire, might be framed.

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I turn now to the first prohibition: the prohibition of anti-competitive agreements. While Britain can be proud of its tradition in developing laws aimed at safeguarding competition and the public interest, we all recognise the need to update the framework in certain important respects. In particular, the regime operated under the Restrictive Trade Practices Act 1976, which was based upon legislation passed in the 1950s, has become ineffective and, in part, outdated. The Bill will repeal this Act and the Resale Prices Act 1976, replacing them with a prohibition of anti-competitive agreements between undertakings. Clause 2 of the Bill gives effect to the prohibition. As I have said, this is based on Article 85 of the Treaty of Rome. A domestic prohibition which operates consistently with Article 85 would keep the burden on business to a minimum. It would reduce some of the regulatory overload and paperwork.

As is the case under Article 85, the Bill would allow certain categories of agreements to be exempted on a block basis. It would also be possible for agreements to be exempted on an individual basis. The exemption criteria are set out in Clause 9. In addition, any agreement which already benefits from an EC exemption would be automatically exempted at the domestic level. This would also apply to agreements that would have qualified for exemption at the EC level if they had affected trade between member states. The effect on trade between member states is the key factor that brings Articles 85 and 86 into our legal system. This effect is achieved by Clause 10.

I now turn to the second prohibition: the prohibition of abuses of a dominant market position. The prohibition is modelled on Article 86 of the Treaty of Rome and is given effect in Clause 18 of the Bill.

The current regime under the Fair Trading Act needs strengthening. It does little to deter dominant firms from abusing their position. Worse, serious anti-competitive behaviour can continue unchecked while lengthy investigations are conducted. A period of nine years is not unknown. As a result firms can sometimes be driven out of business unfairly before abuses can be investigated and stopped. Consumers and competitors who are harmed by such abuses have no redress or right to compensation.

The new prohibition will put right these shortcomings and provide a strong deterrent against abusive behaviour. It will enable the Office of Fair Trading to impose interim measures to bring seriously damaging anti-competitive behaviour to an end rapidly, and it will give businesses and consumers effective rights of redress.

The new prohibition will become the primary weapon against abuses of dominance. However, we do not believe it is right to dispense entirely with the current approach to dealing with monopoly power. There is a strong case for maintaining powers to investigate markets in cases where competition issues arise from the structure of the market rather than from anti-competitive agreements or specific abuses by a dominant company. The current regime under the Fair Trading Act enables such situations to be investigated independently by the

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Monopolies and Mergers Commission and enables wide-ranging remedies to be imposed if matters are found to be contrary to the public interest.

We think that these powers would have value as a back-stop to the new prohibition regime. We therefore propose to retain the monopoly provisions of the Fair Trading Act. However, Sections 2 to 10 of the Competition Act would be repealed. In addition, with the introduction of the prohibition regime we believe that the use of the Fair Trading Act monopoly powers should in future be restricted to circumstances where there have been prior findings of abuse of dominance. If we are to have an effective system of competition law it is vital that we give the necessary powers to those with responsibility for enforcing the law.

We believe that the Director General of Fair Trading should have prime responsibility for enforcement, with utility sector regulators having responsibility in their specific sectors. It would be a parallel system. They should have appropriate investigatory powers to enable effective enforcement. There would limits on these powers. They would be given a power to enter premises, by force if necessary. But forcible entry will be exercisable only under the authority of a warrant obtainable in specified circumstances--essentially where the parties concerned are hostile to the investigation, for example where it is reasonable to suspect that there are relevant documents on the premises but if they were required to be produced they would instead be concealed, destroyed or tampered with. The provisions relevant to investigations are contained in Clauses 25 to 30 of the Bill.

Furthermore, we believe that as a matter of equivalence of procedures the procedure for obtaining warrants authorising forcible entry and search in the UK in relation to EC competition investigations should be similar to that which is provided for in respect of domestic competition investigations, with variations reflecting only the different nature of the investigation at issue. This makes both administrative and regulatory sense. The DGFT would therefore be given powers to enter premises under a warrant, by force if necessary, in certain specified circumstances in connection with an investigation under Articles 85 and 86 of the EC Treaty.

The provisions relevant to EC investigations are contained in Clauses 59 to 62 of the Bill.

If the new regime is to work effectively and to command the confidence of business and consumers, it is essential that it is fair and transparent, and that there are effective rights of appeal. Appeals against the DGFT's decisions under the prohibitions would be made to a new body, the competition commission. Further appeal would be possible to the Court of Appeal on points of law, or on the level of penalty.

Any party with a sufficient interest would be able to appeal against the decisions of the DGFT or the tribunal. That includes consumers and consumer representatives. We believe it is right that consumers should have a clear voice under the new regime. The tribunal will, however, be able to reject frivolous or vexatious appeals.

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The competition commission would be established under the Bill as the successor to the Monopolies and Mergers Commission. It would take over the existing functions of the MMC. The MMC's staff and members will transfer to the new body. We are very conscious of the need to draw fully on the goodwill and expertise vested in the MMC.

Appeals under the prohibition would be heard by a new appeal tribunal within the competition commission. The tribunal will have its own president, and its functions would be separate and discrete from the rest of the commission. We believe that that arrangement would make the most efficient use of the expertise and resources available, and would serve to promote a consistent approach to all competition issues across the piece. We believe that it is important that the procedures and decisions of the DGFT and the tribunal should promote transparency as far as possible.

The Bill would require the publication of reasoned decisions, which would serve to elucidate the reasons for individual decisions, and the application of the prohibitions more widely in the community at large. It is important that there should be the maximum amount of clarity in the way that the prohibitions will apply. The Bill places a duty on the Director General of Fair Trading to publish guidelines, and for the regulators to do so for their sectors.

The Office of Fair Trading and the regulators have agreed joint working arrangements for the preparation of guidelines, and the process will involve thorough and extensive consultation with practitioners and other interested parties. The OFT expects to be able to issue guidelines well before the prohibitions come into effect.

As I have said, we also believe it is an important part of the new regime that businesses and consumers who have been seriously harmed by anti-competitive behaviour should be able to seek redress. To that end, we are including provisions to facilitate rights of private action in the courts for damages. As is the case with the EC competition laws, we would be setting much store in the deterrent effect of the prohibitions. The DGFT would have the power to impose financial penalties on businesses which are parties to behaviour which infringes the prohibitions. It would be possible to impose a fine up to a maximum limit of 10 per cent. of the turnover of the offending business. The provisions giving effect to that policy are contained in Clause 35.

On that point, I should like to draw your Lordship's attention to Clauses 38 and 39 which confer a provisional immunity from penalty in respect of small agreements and conduct of minor significance. That is a sensible sorting of the wheat from the chaff.

The benefits of the approach set out in the Bill are clear. We would be updating competition policy, as everybody agrees we should. We are doing that by aligning our system with the major parts of the EC competition laws in order to create a unified system of competition regulation. We are replacing the parts of the domestic system that have outlived their usefulness; and we would be retaining those aspects which have worked well and which are still relevant to today's commercial environment.

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We are taking a balanced approach to the requirements of both business and consumers, competitors and customers: stronger investigatory and enforcement powers and increased third party rights on the one hand; adequate checks on the use of those instruments and a proper appeals procedure on the other. In doing that we have listened carefully to a wide range of views that have been aired. The reforms the Bill would introduce are important and long overdue. I commend the Bill to the House.

Moved, That the Bill be now read a second time.--(Lord Simon of Highbury.)

4.35 p.m.

Lord Fraser of Carmyllie: My Lords, when it was announced in the Queen's Speech that the Government proposed to introduce a Competition Bill, it was reasonable to assume that the President of the Board of Trade was going to build on the work that her predecessor in office had undertaken. Indeed, I recognise the provenance of some of the provisions in the Bill. It was reasonable to assume that she would then produce a Bill upon which there would have been extended consultation and an emergent consensus. When she then produced in August a consultation paper, together with a draft of the Bill, it was reasonable to assume that once she had received all the responses to that consultation, we would have a Bill which prevented and remedied anti-competitive behaviour more effectively, and which did so efficiently, avoiding placing unnecessary burdens on business. That was, after all, the test that she had set for herself in the foreword to the consultation paper.

However, I am bound to say that applying the test that the President of the Board of Trade set herself to the Bill as presently drafted--it is a test not without merit--she has so far failed dismally. The proposals are half-baked and ill thought out. In many key areas they are thin on detail, create more uncertainty than they resolve and overlap. In at least one crucial area there is a complete absence of any detailed provision or test for its solution.

It will not do to introduce such important legislation in that state. As the Minister rightly observed, this is undoubtedly an exceptionally complex area of our law. Of course, we are bound to have regard to the relevant articles of the treaty. Going through the Bill, one is left with the uncomfortable impression that the Government are still desperately indecisive about the particular model they wish to introduce and, faced with tough choices, have opted for all of them. The consequence is that in relation to those provisions modelled on Article 86, they are at least duplicatory in effect, and in relation to those utilities which are subject to a regulator, the provisions as they currently stand are possibly even triplicatory in effect.

The Government might think that that is an excessive response from me. They might wish to discount it. But I hope that they might be more troubled that one of the most eminent legal

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practitioner groups in this country, particularly well-versed in this area of the law, has stated:

    "One major drawback of the Competition Bill is the hydra which it has produced".

It will be the proper function of this House to subject the Bill to the keenest of scrutiny to eliminate as best we can that duplication, that uncertainty, and the disproportionate assumption of new powers.

In her press release of 16th October, the President of the Board of Trade made much of the 150 responses that there had been to her consultation paper. Indeed the Minister repeated that point. The President of the Board of Trade claimed that the Government's approach, or "thrust", as the Minister described it, has been widely welcomed. That is a fair assessment of the opening paragraphs of representations that we have received from a wide range of groups. But I am also bound to observe that the publication of the Bill provoked a torrent of responses to rival those which the Secretary of State claimed welcomed her Bill. There is serious alarm over the structure of parts of the Bill and the detail within it, or, as I indicated earlier, the absence of detail.

What must be most disconcerting for the Government is that representations expressing unease do not come from those who in their heart of hearts are monopolists or closet members of cartels; they come from a wide range of companies, business organisations, consumer groups and legal practitioners. Perhaps I may give an example--that of the CBI--because in part it coincides with the Minister's comments. It indicated in its briefing that the reform of UK competition law is long overdue. It stated that a clear and effective framework benefits consumers and business alike. Thus far, the Government can derive some comfort from its statement. However, going further into the detail of the Bill, the CBI stated, in particular with regard to the generally worded prohibition on abuse, modelled on Article 86 of the treaty:

    "Uncertainty as to the reach of the prohibition will not contribute to its intended deterrent effect and could have a chilling effect on commercial activity and innovation".
The Government may be indifferent to the additional costs and burdens which the over-elaborate provisions may impose on businesses, both large and small, but in the national interest they cannot afford to be indifferent to such a chilling effect on commercial activity and innovation. We must scrutinise the Bill in order to ensure that no such unintended consequence arises from it.

I do not wish to labour the matter, but a similar point arises in respect of possible damage to the innovatory impetus within large companies. That point has been made repeatedly to Members on this side of the House.

I turn to what we see is the most extraordinary omission from the Bill--

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