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Lord Simon of Highbury: As I tried to say in answer to the previous line of questioning, I think that that is the intention where a licence applies. Complying with the licence would, in general terms, not be outside the law. However, as I mentioned when we discussed a particular detail of a price cap which might be implicit in a licence arrangement, you could have a position where someone cut prices significantly in a price cap regime and, in fact, undercut the market to such an extent that they would be in an abusive position in terms of their market dominance in the relevant market. Therefore, what we are saying is that the overlap with the general prohibition, the two prohibitions, must stay in place despite the regime of licence being in general terms appropriate for the definition of good behaviour, if I can so put it, for a utility. There will be occasions when the prohibition will enter into effect; I have just mentioned one. I do not believe therefore that we can be absolute in drawing, if that is the appropriate phrase, the jurisdictional boundary.

Baroness Oppenheim-Barnes: Before the noble Lord sits down, as he originally said that there is now increased competition among the utilities, I wonder if he will acknowledge that it is no thanks to the party opposite that this position has occurred and that its claim to be a great supporter of competition has a few legs to grow before it can be taken seriously.

Can the noble Lord, on this important matter, tell the Committee whether he was referring to the possibility of discriminatory discounting practices, which are not at present subject to regulation in this country, except possibly under competition legislation, or was he speaking of different types of price cutting?

Lord Simon of Highbury: First, may I assure the noble Baroness that, as one whose title in my new career is half based on competitiveness, I can only applaud any progress made under any government to increase the competitiveness of our industry and of our people to do the things we know that we must do to create value in the world. I acknowledge that whoever has achieved that has served us proud.

As to the issue of pricing, it is important to note, as the noble Baroness rightly said, that discriminatory pricing is something which can be caught under the existing practice, but equally it is caught under both the prohibitions in the EC law. At the moment it can apply in both. When we discuss later, as I am sure we shall, the issue of pricing, we shall find that it is already covered in the general instance by the EC provisions. We have a separate law on that, as the Committee will be aware as we are about to discuss the impact of the Resale Prices Act, which applies to one sector currently but is generally being repealed. The answer is yes, I was talking about discriminatory pricing and it is currently covered by both regimes.

Lord Kingsland: The Minister will not be surprised to hear that we do not intend to press the amendment at

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this time. However, I hope he will accept that there is more to be said about it. In particular, we have taken note of his remarks about how sector specific these prohibitions are. If we are to accept that remark, perhaps we ought to be looking at this problem from the standpoint of the noble Lord, Lord Ezra, which is to leave the prohibitions in place in the individual sectors but to remove the prohibition from the Bill. At this stage, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Baroness Nicol moved Amendment No. 6:

Page 2, line 24, after ("any") insert ("provision of an").

The noble Baroness said: I propose to return to a more conventional way of moving an amendment. In moving Amendment No. 6, I wish to speak also to Amendment No. 7. I should perhaps first declare an interest in that I am chairman of the All Party Retail Group. I hasten to say that it is not a pecuniary interest.

The Bill as drafted provides that an agreement which contains provisions which infringe the Section 2 prohibition is void in its entirety. The proposed amendment, which follows the clause in the draft Bill published in August 1997, has the effect of rendering the offending provisions in an agreement void, but not striking down the agreement in its entirety. In such cases, if the offending provisions can be severed from the lawful part of the contract, the relationship between the parties can be preserved. Parties to commercial agreements frequently insert an express provision in their agreements providing that the unenforceability or illegality of one clause will not affect the enforceability of the remainder of the agreement.

The provisions in the Bill reflect those in the Treaty of Rome, but the Committee will recall that that particular European provision has been subject to criticism. In particular, the provision has been used by parties seeking to avoid obligations they willingly entered into, arguing that one of the provisions in the agreement is unlawful and therefore the entire agreement fails, and they are excused from all their obligations. The amendment would remove that opportunity in English law in circumstances where the offending provision can be severed from the agreement.

Perhaps I may remind the Committee that the doctrine of severance in English common law provides that where you cannot sever the illegal from the legal part of a covenant, the contract is altogether void, but where you can sever them, whether the illegality be created by statute or by the common law, you may reject the bad part and retain the good. It seems sensible to recognise that in the Bill. I beg to move.

Lord Simon of Highbury: I agree with my noble friend Lady Nicol that the application of the prohibition to a contract should not always lead to the entire contract being void. I am advised that the best way to avoid such a possibility is to mirror the language of Article 85(2) of the European treaty, which deals with the consequences of an agreement being caught by the EC prohibition. That is what we have done in Clause 2(4).

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The European Court of Justice has held that it is only those elements of an agreement which are prohibited under Article 85 that are void. This principle of European Community law will apply to the interpretation of the Chapter I prohibition as a result of Clause 58 of the Bill, the clause relating the treaties to our own law base. Whether those elements are severable from the agreement as a whole is a matter for the normal rules of national law. Indeed, we consulted on the basis of the language set out in the amendment and we received comments from legal practitioners that it would displace normal UK rules of severance and prevent the possibility of severing offending parts of whole provisions. Moreover, it would risk divergence from EC law and therefore would create more burdens on business.

Advice has been taken. If my noble friend understands the legal construct we are putting--from her question it was clear that she did--I would ask her to withdraw the amendment.

Lord Graham of Edmonton: I declare an interest as secretary of the all party group, an interest properly registered in Part 3 of the Declaration of Interests. Is the Minister saying that the case made out by my noble friend is already covered and that, despite what we consider to be a blunderbuss or scattergun approach, the advice that has been given is to the effect that what we have proposed is not only undesirable but not possible? If what we have here is a sledge-hammer to crack a nut, which sometimes can be used to avoid obligations, and can lead to the calamity of the whole contract being declared null and void, that is not acceptable.

I note that the Minister relies heavily on Article 85(2) of the European treaty in this respect. However, given the circumstances pointed out by my noble friend Lady Nicol, where it is possible to make a clean break between an offending part and the whole, I wonder whether the Minister would care to look again at this point. If the wording we are using is not quite right perhaps the Minister can come up with another form of words to take care of the points that have been made.

Lord Simon of Highbury: I thank my noble friend Lord Graham for giving me the opportunity to comment again. The way in which the Bill has been redrafted, following the consultation process and the August document, has the effect that the noble Lord wishes. The reason for the change was to meet the circumstances which the noble Lord was saying might cause a large number of problems.

Baroness Nicol: I am grateful to my noble friend Lord Graham for adding to the arguments. I was convinced by the Minister's first answer and I certainly do not intend to press the amendment. However, I should like to read carefully what he said and to take advice on it. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendments Nos. 7 and 8 not moved.]

Clause 2 agreed to.

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4.30 p.m.

Lord Graham of Edmonton moved Amendment No. 9:

After Clause 2, insert the following new clause--

Medicinal products etc

(" . The Chapter I prohibition does not apply to any agreement, decision or practice relating to the price to be charged on the retail sale of any medicinal product, or any food comprising vitamins or minerals or both, which is at any time commonly sold in pharmacies without prescription.").

The noble Lord said: In moving this amendment I raise what I believe is a burning issue in a great many cases. I do so with considerable support outside the House. The Minister is aware, but I shall remind him, that there is a body called the Community Pharmacy Action Group (CPAG). When I look at the names of the bodies behind this group I am enormously impressed. They are the Royal Pharmaceutical Society of Great Britain, the National Pharmaceutical Association, the Pharmaceutical Services Negotiating Committee, the Scottish Pharmaceutical General Council, the Company Chemists Association, the Proprietary Articles Trade Association, the British Association of Pharmaceutical Wholesalers, the Proprietary Association of Great Britain, and last but not least, the Co-operative Pharmacy Technical Panel. That last body impresses me greatly. I declare an interest as chairman of a body called the United Kingdom Co-operative Council.

There is a two-edged argument: there is the philosophy of competition--I am not arguing against that--but in this amendment we are arguing against the application of this particular Bill and its effects on the consumer and the high street besides a great many other places. No one here has less experience than anyone else as regards observing what has happened in the high street over the years. We have all had the same experience.

I shall use as a general illustration a village or a small town which, many years ago, boasted a number of bakers, butchers, greengrocers, hardware shops and chemists. With the advent of the car-borne shopper and affluence, together with freedom and time and competition, the greengrocers have gone and in their place there is one big supermarket. I do not make a case against them because I believe in supermarkets which provide a very efficient form of retailing. Then one shrugs one's shoulders and says, "There used to be three very good butchers and now there is one which is struggling. There is now a very good supermarket which provides the meat". The same thing has happened to the baker. At the end of a period, say, 20 years, one finds that in the village high street there may very well be good overall provision of an efficient service, but the heart and nature of the village has declined. As a result of competition and people's choice--I do not argue about them--the village is the poorer and the life of the people in the village is the poorer.

The case made out in this amendment is that at the present time there is a modest attempt to keep in existence the agreements that have been made, but which this Bill will remove. That will inevitably lead to a diminution in choice for the consumer. By creating choice--I mean the ability to shop in the supermarket--

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the consumer may very well say that that is a better use of his or her time and opportunity. I have been told that out of 12,000 community chemists we may very well lose 3,000. That is not a guess, but the result of a properly carried out survey. I say to the Minister that we should reflect and we should stop.

What will be the effect of RPM on OTC? It is retail price maintenance on over-the-counter supplies. The effect of that is that there is a range of people who have relied for a long period of their lives on going to the same little chemist and getting service. They are not only comfortable in doing that, but they also have a rapport with, and sympathy, confidence and belief in the integrity of the chemist. Sometimes they are almost surrogate doctors. The customer asks for advice, he or she gets it and it is taken.

Therefore, I ask the Minister and his ministerial friends to reflect very seriously on the fact that there are large groups of people who will find that their access to an essential primary healthcare service will be restricted; namely, the elderly, infirm, carers, mothers with young children and the like.

I use my own town of Loughton as an example. I have lived their happily for seven years. When my wife and I decided to move there it was because there was a choice. It was not just the choice of a big supermarket at each end of the high street, but there was also a choice of little shops. Over the period of time that I have lived in Loughton there has been a steady diminution in the number of small shops. I almost do not argue against the general good, but far too often, after the event, people regret the fact that by being slothful and careless they have allowed something to happen which will result in a facility never returning. People might say, "You can start up another chemist or another bakers or butchers". But that is not the way it is. I hope very much that the Minister will recognise that this is a situation that can be stopped or deflected.

The Office of Fair Trading has carried out research. It found that 36 per cent. of those asked would switch to buying from supermarkets rather than pharmacies if RPM and OTC medicines were removed. That is consumer choice, but in exercising it one is also staring at the fact that one diminishes the number of smaller units that can provide the service.

I believe that this Government and others have had enough experience of wanting to see hypermarkets and large stores on the edge of towns, and good luck to them. They also do not want town centres to disappear, but they have become the poorer. I say to the Minister that there is a case for re-examining the intentions of the Bill.

I mentioned my interest in the Co-op which I declare. It has over 400 pharmacies and they go back a very long way. Originally they were part of a network with the philosophy and belief of providing for the needs of ordinary people as near to them as possible. We are as interested as anybody else in establishing larger stores, supermarkets, hypermarkets and stores of that kind. I believe that the Minister and his colleagues might have missed a trick. Although the removal of RPM

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per se and philosophically may be a good thing, in social terms and in this instance, the removal of that modest protection will have enormous consequences.

I should not like to stand up in this House in 10 years' time when the impact has been felt and have either to make or defend a case in the knowledge that we might have done something to ameliorate the effects in 1997, and not to have to bemoan the fact in 2007 that we did not. I very much hope that the Minister is in a listening and giving mood and can say something of comfort to those outside who believe that my amendment is worth supporting. I beg to move.

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