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Lord McNally moved Amendment No. 19:
The noble Lord said: The most hostile audience I ever addressed when I was a Member of Parliament for Stockport was when I was introduced with the memorable words:
The last mover of amendments before the dinner hour faces an equally hostile audience. So perhaps I can calm the Committee by saying that I intend to move only Amendment No. 19, and to use the opportunity to speak to Amendments Nos. 22, 23 and 28 which I shall not move.
As was indicated earlier, my intention in moving the amendment is to deal with issues within a particular industry--the newspaper industry. The amendments are couched in general terms. As the noble Viscount, Lord Waverley, said, some of the issues raised may relate to other sectors and other industries. In short, the purpose of Amendment No. 19 is to prevent a firm from purposely making a loss to damage weaker competition.
Amendment No. 21 replicates the wording used in the US Sherman anti-trust laws. Amendment No. 22 addresses the problem of predatory pricing which, as currently defined, requires the predator to be the dominant undertaking in the same market in which the abuse is carried out. Amendment No. 28 is similar
My clear intention in moving the amendment is to deal with the particular problems of the newspaper industry. We in this country are proud of the diversity of our press and of the high level of readership. We see such diversity as underpinning our democracy. The relationship between a free Parliament and a free Press should never be comfortable but they should be mutually supportive. That is why I want to use the opportunity of the Competition Bill to enable us to consider what I believe to be a deep malaise in the newspaper industry, which stems from weaknesses in our competition law and which threaten its diversity and choice.
It is only to be expected that the amendments may be seen in terms of being anti-Murdoch or anti-News International. Indeed, yesterday in his own paper, The Times, Mr. Murdoch is quoted as saying:
Mr. Murdoch is an aggressive competitor. He steps on a lot of toes, but I am not in the business of protecting anyone from fair competition from the Murdoch press. What I am concerned about is that we have allowed to grow up in the newspaper industry a competition regime more lax than anywhere in the world. That laxity is based upon the definition of "dominant position", which takes no account of the ability of major media conglomerates to cross-subsidise, loss-lead, and predatory price in a way which would not be tolerated in any other industry.
I hope sincerely that the Minister will respond constructively to the amendments. In opposition, the Labour Party showed itself to be most robust in these matters. I could delay the Committee by giving some long quotes from Mr. Nigel Griffiths. I would recommend to the Minister that he looks hard and long at his speeches, because I fear that he will have them quoted at him ad nauseam over the next few months and years. I think I would ask to move to the Foreign Office in the next reshuffle.
The problem is that in the newspaper industry it seems that it is not enough for a victim to be bleeding. Apparently our present legislation requires a corpse before the OFT will act. Such a response is just not good enough if we are not to see irreparable damage done to the newspaper industry. Let us look around. The Independent is no longer independent, but needs the support and protection of larger groups. The idea of a similar venture being attempted against the background of present day newspaper economics is unthinkable.
Not one of our major broadsheets operates on anything like a commercial basis. Yet The Times sells regularly on Mondays at a price which is blatantly below cost. Media analysts believe that that aggressive price cutting is aimed at undermining the Daily Telegraph. It certainly seems to be working, with Daily Telegraph profits down from over £60 million to under £1 million. It is estimated that The Times itself is losing
There is something rotten at the heart of our newspaper financing. What other industry, which generates revenue of over £700 million, produces overall losses of £50 million, and is still supposed to be operating commercially? Big issues and powerful forces are at work here. They go to the heart not just of the economics of our newspaper industry but the functioning of our parliamentary democracy. This is a government who came to office with a powerful mandate to improve our system of government in all its aspects. Included in that programme of reform must be a healthy and truly competitive press. I urge Ministers to accept the amendments, not just as good competition law, but as a fulfilment of that wider mandate to reform. I beg to move.
Viscount Astor: Amendment No. 23 is grouped with the amendment moved by the noble Lord, Lord McNally. My amendment has a similar purpose, but is slightly different. If I may describe it as such, it is the vertical approach rather than the horizontal one. With great respect to the noble Lord, my amendment may be preferable as it would clearly not reach other sectors of business. The horizontal approach could apply to other businesses, and so it could be argued that that could produce unacceptable curbs on price competition in other industries.
I do not believe that the law can prohibit the acceptance of losses, deliberate or otherwise. Market conditions can sometimes force all the participants in an industry into loss and give them no alternative but to accept the result. If a market is overcrowded, prices are likely to fall until the surplus is eliminated. In such conditions it will be hard to set prices that did not have the result of possible losses.
It could be argued that my approach is contrary to the statement made by the Secretary of State in her White Paper in August, that there was a good case for excluding most vertical agreements. It is important to stress the word "most" with regard to vertical agreements. I agree with the sentiments. That is why my amendment, unashamedly, signals that the press is different. I make no apologies for making an exception of it. It is different. Competition, plurality, and diversity in the press are even more important than they are in other industries. They are part of the fabric of democracy, and the Government should recognise that.
That is, of course, not a new concept. There is a precedent to accept that the press is a special case in competition legislation. The Fair Trading Act 1973 has different monopoly and merger conditions for the press and for other sectors of industry. Predatory pricing is accepted as an abuse, whether or not financed by cross-subsidy, but there are differing ideas of what it is. Dominance can be in one sector, and abuse can be in another. It is unlawful only if a company prices its goods below cost in the market in which it has dominance, not in other markets. That is the nub of the problem which is not addressed by the Bill.
If one is dominant in an industry there may be no need to embark on a predatory price war. Perhaps the only companies which do so wish to become dominant. I believe that in those cases such action should infer a presumption of dominance, whether in the same market or a separate one.
A recent editorial in the Evening Standard put the case well when it stated that newspapers, like other businesses, have competed by persuading the consumers that their product was better or better value for money. Bad competition is where those who distort the market while trying to eliminate competition entirely force their rivals to fight dirty to stay in the business, a problem that has recently been much in evidence in the press.
Interestingly, News International, despite having such a large share of the newspaper market, is reported to be sceptical that this type of amendment to the Bill, if it were accepted, would make any difference to its company's pricing policy. It denies that its pricing policy is predatory, but claims that it is market promotion and not a permanent feature. If that is its view it has nothing to fear from the amendment. However, I find its defence of its pricing policy difficult to accept. It is true that by lowering prices it has increased readership, but at a huge cost. This promotion looks pretty permanent to me!
I am not anti-Rupert Murdoch--I admire him. He sorted out the problems which afflicted Fleet Street when I worked in that industry 20 years ago. He created BSkyB, which is a huge success. News International is rightly exploiting a gap in the competition law. Murdoch likes to be successful and who can blame him? We all accept that plurality is beneficial to industry and to consumers. For this industry and for this country, it is vital.
I hesitate to bring a note of politics into the debate, but I ought to point out to Ministers opposite that Robin Cooke, when shadow Secretary of State for Trade and Industry, said in another place that Murdoch was able to cut prices only because of his profits from other interests and that we were now faced with blatant predatory pricing. That line was echoed by Mo Mowlem, when shadow Heritage spokeswoman, who said that unless action is taken Murdoch will weaken his British competitors to the point where he will dominate the market.
The noble Lord, Lord Simon, opening for the Government on Second Reading, said:
If the Minister really believes that, then he ought to be able to consider my amendment favourably, or will this be the case of another government U-turn?
Lord Borrie: In taking part in this debate I must declare an interest in that I am a non-executive director of Newspaper Publishing plc, which is the publisher of the Independent and the Independent on Sunday.
One of the most important areas of competition law which the Bill leaves untouched is the law relating to mergers between companies in general and newspapers in particular. As the noble Viscount, Lord Astor, rightly said, the Fair Trading Act 1973 makes special provision for newspaper mergers. Then the swallowing up of a major newspaper by another newspaper or newspaper group was properly considered to be of particular significance in a democratic society beyond mergers and takeovers in general because newspaper mergers could seriously reduce the availability of a diversity of opinion. Under the Fair Trading Act it is mandatory for reference to be made of a major newspaper merger. The Monopolies Commission is specifically required to take account,
Over the years, the Monopolies Commission in a variety of reports on newspaper mergers has frequently emphasised the importance it attaches to choice of newspaper and diversity of views. All that is existing law, but I suggest that the continued availability of diverse organs of news and opinion can be ended not just by merger and takeover but by a persistent campaign of below-cost price cutting on the part of one newspaper group which is well able to cross-subsidise from other businesses to the detriment of certain newspaper groups.
The pricing policy of The Times newspaper, referred to by the noble Lord, Lord McNally, regularly to sell at 10p on Mondays, has repeatedly threatened the continued existence of the Independent. That distorts competition with the Daily Telegraph and other broadsheet newspapers and, I have no doubt, has a serious exclusionary effect because it is likely to deter those who might otherwise think of entering the market. Who today, I ask, would dare to start a new broadsheet newspaper, as was done by Mr. Andreas Whittam Smith and others when the Independent was started in 1986? It seems to me that such persistent conduct should be regarded as seriously damaging to the competitive process and as an abuse of dominant position. Therefore, I feel favourably disposed--and I hope that the Minister will feel favourably disposed--towards either or both of the amendments that have been proposed today.
Page 10, line 23, at end insert ("or deliberately accepting losses in order to reduce competition").
"Before we start the bingo, we will have some words from our Member of Parliament".
"No way will I call a truce. No one else wants to call a truce. They insult me everyday, so they can go to hell. People do not much seem to like competition in this country".
"The Bill shows our commitment to ensuring effective and fair competition. It would benefit both consumers and business".--[Official Report, 30/10/97; col. 1144.]
7.30 p.m.
"of the need for accurate presentation of news and free expression of opinion".
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