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Lord Simon of Highbury: I agree with the noble and learned Lord, Lord Fraser, and the noble Lord, Lord Ezra, that the competition regime should concern itself only with a situation where the anti-competitive effects of an agreement are significant or appreciable. That is the intention of the Bill as drafted. I accept that it will have the effect of reducing administrative overload if those points are clear. However, as the noble Lord, Lord Borrie, said, EC jurisprudence states that Article 85 applies only where an agreement has an appreciable effect on trade and competition. "Appreciability" is already part of EC jurisprudence. We consider therefore that the chapter 1 prohibition will apply only if an agreement has an appreciable effect on competition.

On that basis an explicit significance test written into this clause is unnecessary, and, moreover, we believe could be harmful in indicating a departure from the established European principles where this is not the intention. An explicit appreciability test does not fit well with our approach of reliance on European case law except in areas where it is clear a different approach is required. Worse, there is a risk that in apparently departing from established European principles, we might inadvertently create so high a threshold for action that we could impede the effective tackling of anti-competitive agreements.

As we stated at Second Reading, the reason for bringing in the changes is that, as we all agreed, the current system is not working well as an approach to competition. I believe, therefore, that it is better to stick with the established principles in the jurisprudence in this area.

I will nevertheless reflect most carefully on the points made by the noble Lord, Lord Ezra, and the noble and learned Lord, Lord Fraser. I hope that at this stage they are prepared to withdraw the amendment.

Lord Fraser of Carmyllie: I can immediately tell the noble Lord that I intend to withdraw this amendment. I am grateful for the approach that he took, and in particular his remarks about the intent on the part of the Government in promoting this legislation, that it is only those arrangements that have either appreciable or significant effect that will be caught.

The noble Lord, Lord Borrie, referred to Clause 58. It is a very important provision. We shall need to examine it very carefully--not today, I regret to say, but perhaps in a week or two when we reach it.

I am grateful to the noble Lord, Lord Simon, for his recognition that there is a risk of administrative overload if business is uncertain whether or not the arrangement into which it has entered is of such a nature that it needs

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to be notified. I am sure the noble Lord will acknowledge through that recognition that that is a problem which has confronted the Commission in the past. The inclusion of the word "significant" would at least provide business with a clear appreciation as to what is required of it and seems desirable. The noble Lord indicated that he would reflect on the amendment, and I am grateful for that. We may return to the matter at a later stage. However, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Lord Fraser of Carmyllie moved Amendment No. 2:

Page 2, line 23, leave out ("implemented") and insert ("acted upon").

The noble and learned Lord said: This amendment is grouped with Amendment No. 3. Unlike my first amendment, which I consider to be important, this one is simply a matter of drafting.

The amendment relates not only to undertakings or decisions. In those circumstances the use of the word "implemented" in the United Kingdom would seem a perfectly natural piece of drafting. However, the noble Lord will notice, in line 2 of Clause 2, that "concerted practices" is the third activity that is covered. In our view the words "acted upon" would be preferable to "implemented". It is purely a drafting matter but would seem to us to be an improvement.

The purpose of the second amendment is to ensure that if agreements have effects on competition in the United Kingdom, and a party to that agreement is located in the United Kingdom, the agreement should be within the scope of Clause 2, even if the decisions or concerted practices are not to be implemented or acted upon within the United Kingdom itself. It is a short point. It would seem to us to have the effect of widening the scope of the prohibition; however, the circumstances are such that in our view it would be desirable. I beg to move.

Lord Campbell of Alloway: I support the third amendment--with respect to my noble and learned friend, the second is neither here nor there. The third, if it goes to jurisdiction, could avoid certain disputes, certain difficult administrative problems and arguments over jurisdiction. It is a good safeguard and a useful amendment. I hope that the noble Lord will keep an open mind before rejecting it out of hand.

Lord Simon of Highbury: I thank the Committee again for the way in which the debate is being conducted at this stage. Questions of administrative overload, to which we referred previously, are matters for discussion as the Bill proceeds. It is well understood, and the point is well taken. That theme will continue through our discussions.

Turning to Amendments Nos. 2 and 3, it is perhaps best if I refer to the third and then comment on the drafting implication of the second. It may be helpful to set out the Government's thinking behind the territorial limitation provision in Clause 2(3). The prohibition is

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cast in terms of effects. Therefore, its territorial scope is extremely wide-ranging, even with the limitation that the effects on trade and competition actually be in the UK. It does not follow that we should depart from the normal UK policy of territoriality and follow the so-called "effects doctrine", where jurisdiction is claimed on the basis of the economic effects felt within a state resulting from behaviour outside that state, however indirect that link might be. I am advised that that could be the result of the second amendment tabled by the noble and learned Lord, Lord Fraser. The Government believe that to be too wide a basis for jurisdiction for the prohibition.

However, it is recognised that the place where an agreement having an anti-competitive effect is made is not always a determinate factor. We would not want to create a loophole whereby parties could avoid the prohibition by simply executing their agreements outside the UK.

We therefore decided that the best approach was to follow the current jurisprudence of the European Court of Justice based on the term "implementation" as set out in the case known as Woodpulp. That test requires that the agreement be implemented in the EC for the prohibition to apply. Similarly, the UK prohibition will apply only if the agreement is implemented in the UK.

Following the test set out in the Woodpulp case, there is also the advantage of allowing business to tap into European jurisprudence on the meaning of the term. I am advised that adopting the first amendment of the noble and learned Lord, Lord Fraser, would lead to uncertainty as to its meaning and therefore create an additional doubt in the mind of business.

By, in effect, copying out the test in Woodpulp on the face of the Bill, we are also ensuring that in the event that EC jurisprudence develops and creates a pure effects-based doctrine, the application of the UK prohibitions will not follow suit. I therefore ask the noble and learned Lord if he is prepared to withdraw his amendment, given the implications of the word "implementation" and the existing jurisprudence.

Lord Campbell of Alloway: Before the noble Lord sits down, perhaps I may ask a question on the point about extra-territorial jurisdiction to which the noble Lord referred. I am fully conversant with the nature of our concept of claim and the American concept of such claim. But with the greatest respect to the noble Lord, that is not quite what is involved in this amendment. We are not claiming extra-territorial jurisdiction:

    "a party ... is located within the United Kingdom".

The concept of this dispute as to territorial claim is very interesting but, with the greatest respect, as far as I can see, it is not relevant as an objection to the amendment. The noble Lord may wholly disagree with me but perhaps he will consider that point?

4 p.m.

Lord Simon of Highbury: The point I am trying to make is that we want to be absolutely clear of the relationship between the European jurisprudence and our own. The linkage with the United Kingdom as the

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location for the effect in this instance is the most important issue. We do not wish to put ourselves into a position where we have linkage in the extra-territorial effect and thus throw doubts into the mind of the business concerned. That may be a drafting point to which we shall wish to return. I am clear in my own mind as to what we are trying to achieve; but, if we need to discuss the matter further, so be it.

Lord Fraser of Carmyllie: Once again, I shall withdraw the amendments. As I indicated, they are drafting points. There was a recognition that Amendment No. 2 would have the effect of marginally widening the scope of the prohibition. I shall read carefully what the noble Lord said but I am surprised that the view is taken that it introduces an unacceptable degree of extra-territoriality. In speaking to the amendment I hope I indicated that it was important, as we too recognise, that it had to be in relation to an agreement which had an effect on competition within the United Kingdom. The only extension--if that is the right way to describe it--is that the agreement to achieve that effect might be implemented beyond our shores. I shall withdraw the amendment but we might return to it, together with the following amendment, at a later stage.

I am relieved to say that I shall not be batting on the next few groups of amendments. However, perhaps I may take this opportunity to signal a point in relation to Amendments Nos. 17, 19, 20, 21, 22, 23, 24 and 28. I should like to have a broad debate on predatory pricing. I understand that within that group of amendments a number of noble Lords wish to address the issue of predatory pricing in relation to the newspaper industry in particular. Before we reach that point perhaps we might reflect on whether it would be desirable to separate the two debates. It is of no great consequence to me but such a separation might be helpful for a more coherent debate. In the meantime, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendments Nos. 3 and 4 not moved.]

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