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Lord Skelmersdale: The Minister has given us a full explanation and proved that I was wrong--or half-wrong--in what I asserted earlier. My attention has been drawn to sub-paragraphs (3) and (4) of paragraph 6 of Schedule 4 on page 49, particularly to the end of sub-paragraph (3). That shows quite clearly that I was wrong and that the Secretary of State may by order revoke the designation if certain acts have taken place. However, the Minister has still not explained whether the Bill contains a procedure for adding to the list should that be necessary in the future. Surely one does not want primary legislation?
Lord Simon of Highbury: I think the appropriate answer is that one must always have the list under review. The appropriate balance will have to be struck
between what is required within a designated profession to protect the consumer and the requirement for competition to ensure that the marketplace is protected and not abused. There is currently no procedure for adding to the list. The issue is whether we should review it. I think that we can consider and review procedure.
Lord Berkeley: Before the noble Baroness, Lady Wilcox, rises to speak to her amendment, perhaps I could say that I very much welcome the Minister's comments on these amendments, which I shall read very carefully. I believe that we should restrict our comments to the restrictive practices, if any, between members of the same profession. This is not about other, unqualified people joining the profession but about whether there is opportunity for fair competition between members of the profession, be they public limited companies, professionals or whatever. We should consider carefully whether the professions can and do regulate themselves in the interests of consumers.
6.15 p.m.
Baroness Wilcox: I thank Members of the Committee for the debate. I am sorry that the noble Lord, Lord Borrie, felt unable to take part. I have great respect for him and the work that he did at the Office of Fair Trading. Perhaps it was sufficient for me to refer to his achievements.
I am very grateful for the points that have been made, some of which I had missed. When I made enquiries to find out why there was a problem I was given all sorts of fudges, such as that under European law there is no ruling that professional rules constitute an agreement and that professional rules are part of public law or quasi public law. It was all pretty unsatisfactory and it does not sound much better now.
I will admit to an interest. I am the mother of a barrister, so I understand what the noble Viscount, Lord Bledisloe, said. However, I find it odd that people who make rules for themselves would be admonished by someone else and would then consider whether they should change their rules. In the meantime, a member of the general public who has been hurt, maimed, done-badly-to, has to sit back while the professionals consult themselves on their own rules. It is like putting children in a sweet shop and telling them to make up the rules as to how many sweets they should eat. I do not accept that argument.
I hope I am right in believing that the Minister said that he would consider the procedure following the request of my noble friend Lord Skelmersdale. I welcome that. I was pleased to see the amount of work being done in the corner following my questions. It was gratifying to see civil servants, and indeed some Ministers, on their hands and knees with bits of paper. I can only assume that some of the questions were interesting and exciting, though some of the answers that I received were not very satisfactory.
I do not understand why we cannot keep professional rules within the Chapter I prohibition so that the OFT has power to investigate and take action over rules that are anti-competitive. I do not understand why the
Government, who are so keen on being in Europe, which is very much against any form of self-regulation, intend to continue with the rules as they are now. I hope that the Minister will give further consideration to this point. I am prepared to withdraw the amendment at this time but reserve the right to speak again on the subject.Amendment, by leave, withdrawn.
Lord Kingsland moved Amendment No. 13:
The noble Lord said: Amendment No. 13 seeks to add to Clause 3(1) a fifth category of exclusion for vertical agreements. Amendment 53 sets out an appropriate definition of "vertical agreements", which will form the new schedule. Essentially it proposes that all vertical agreements be excluded save for two categories: those which have the character of price-fixing agreements and those made in contemplation of a parallel agreement between competitors.
I believe it was accepted by the Minister during the debate on Second Reading that the Government were contemplating the possibility of that approach but felt themselves in difficulties about how to put it into execution. The alternative approach would be to include vertical agreements and then have a raft of parallel exemptions and home-grown block exemptions, which--if the experience of the European Community is anything to go by--would be numerous and complex and would have to be renewed at frequent intervals.
I am aware that the European Community is currently looking at the question of vertical agreements. We do not know what conclusions it will reach, but it is highly likely that what will emerge will be, if not a new regime based on the one proposed in these amendments, an extremely light regime. In those circumstances, and given that we are talking about smaller enterprises than those that will be subject to the Community regime, I hope that the Minister will be sympathetic to these amendments. I beg to move.
Lord Lucas: Perhaps I may speak briefly to Amendment No. 14 which is along the same lines, but drafted differently to incorporate my concerns that, first, the Government should be able to draw in general classes of these agreements which are seen at the time to be anti-competitive and, secondly, that the director general should have that power with regard to specific agreements when they are brought to his attention, but, if so, that there should be no retrospection in the penalty which he imposes.
I have one particular concern which I suspect arises from the drafting of Amendment No. 53, where the concept of "connected" is introduced. Perhaps it goes back to a lack of understanding of the definition of "undertaking". Is "undertaking" defined in this Bill in such a way that it is necessary to introduce this concept of connection? I cannot find a definition, so perhaps the Minister could elucidate on that.
Baroness O'Cathain: Generally, I support the proposition that vertical agreements are largely benign.
Some vertical agreements can act against the interests of the consumer. I would draw my noble friend's attention to the fact that, as I read it, a blanket exclusion would prevent the Director General of the Office of Fair Trading from investigating cases where there are clear abuses.
I should like to see some amendment whereby the effect of this exclusion of vertical agreements could be judged by the Director General of the Office of Fair Trading; in other words, to give him some power to make an economic assessment, to investigate the real effect of the exclusion of vertical agreements, rather than looking at these vertical agreements themselves. I hope I have made myself clear.
Lord Borrie: I have some sympathy with what the noble Baroness, Lady O'Cathain, has just said. We did have a consensus around the Chamber earlier on and the noble Lord the Minister, if I do not understate what he said, indicated that the prohibition in Chapter I of this Bill is a prohibition of agreements which have meaningful and appreciable adverse effect on competition. If that is so, and if there are vertical agreements apart from price fixing agreements that might have an appreciable adverse affect on competition, then why should they not be within the prohibition? For reasons similar to those of the noble Baroness I am not keen on a blanket exclusion.
The other point which I should like to make is that if at some point in the near future there is a greater definition given by the European authorities to what vertical agreements should be exempt, then it seems rather odd if we devise or agree in this Bill to have a definition of vertical agreements, which are excluded from the prohibition, which may be out of line with that forthcoming exemption that the European authorities may devise.
At this stage, I feel it may be unwise to agree an exemption of this sort.
Lord Simon of Highbury: A great deal has been said in this debate with which I can agree. I accept that if we can adequately exclude vertical agreements, the new competition regime will operate with more certainty, and the administrative burden on the Office of Fair Trading, caused by people seeking clearance of their agreements for safety's sake, is going to be reduced. We have all agreed that that is devoutly to be desired.
It will enable the director general to concentrate his resources on the kinds of agreements and conduct which are a real source of competition concern. We all know, and it has been mentioned, that many vertical agreements are benign and only become a source of concern when the party has market power, in which case they can be dealt with under the Fair Trading Act or under Chapter II prohibition. So that follows.
That being said, it would be as well not to overstate, as I fear some noble Lords may be at risk of doing, the impact of the Bill on vertical agreements, such as an agreement between an undertaking and its customer or supplier. Many such agreements are in no sense anti-competitive and a Chapter I prohibition in the Bill, therefore, would not apply to them.
Furthermore, many of those agreements that may have an effect on competition should be perfectly capable of individual or block exemption. Indeed, many will, without further ado, be exempted under the Bill since they will have been exempted under Article 85 and provisions in Clause 10 on parallel exemptions. That will ensure that they are automatically exempt from the Chapter I prohibition.
As many noble Lords will know, the treatment of vertical agreements under Article 85 is currently under review in Europe. The noble Lord, Lord Kingsland, mentioned that fact. If, for example, the Commission were to provide for wider exemptions for vertical agreements, agreements to which those exemptions applied likewise should automatically be exempt from Chapter I prohibition under the terms of the Bill.
Nevertheless, as I have said, I can see that there would certainly be an advantage in excluding vertical agreements from Chapter I prohibition. That is why the Bill provides the power to make exclusions from the Chapter I prohibition, in certain circumstances, by order. The Bill also provides for an exclusion, once made, to be varied. This is to help ensure that any exclusion remains appropriate in the light of developing experience.
The difficulty is, of course, how to frame a definition which is of real practical benefit in giving comfort to businesses that their agreements are not at risk from the prohibition, without at the same time allowing seriously anti-competitive agreements to avoid the application of the Chapter I prohibition. We cannot claim to have cracked the conundrum yet although the noble Lord, Lord Kingsland, encouraged me to crack it as fast as I could. I do regret that. However, we have made progress in discussions with business in identifying the considerations that will need to be taken into account in the drafting. In accordance with our approach of close and detailed consultation in order to bring forward this Bill, we shall be continuing the dialogue so that we draw up a suitable definition.
I will certainly reflect carefully on the points which have been made by the noble Lords. Unfortunately, the process of consultation will necessarily take time. I believe that it is right that it should because we know the difficulty of what we are attempting here. I would hope that noble Lords will feel able to withdraw the amendment to allow that process to continue. In summary, I would say that as an ex-businessman, and after listening to noble Lords' arguments, I attach considerable importance to finding a solution and a suitable definition regarding this problem.
In turning to definitions--this may not encourage the noble Lord as much--I should like to respond to the query of the noble Lord, Lord Lucas, about the definition of an undertaking. The definition of an
Lord Kingsland: Perhaps the noble Lord will undertake to crack this conundrum before the Report stage of the Bill. It would make such a difference to business if there were real certainty in this area. It is not so much the fear that if there is not an exclusion a great many firms will be caught by the rules--I do not think they will--but the uncertainty that will continue if there is not an exclusion, which will lead to compliance costs being needlessly expended by those firms. However, in the spirit of the Minister's answer, I am happy to beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
[Amendment No. 14 not moved.]
Page 2, line 42, at end insert ("or
(e) Schedule (Exclusion for vertical agreements)").
6.30 p.m.
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