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Competition Bill [H.L.]

3.20 p.m.

The Minister of State, Department of Trade and Industry (Lord Simon of Highbury): My Lords, I beg to move that the House do now again resolve itself into Committee on this Bill.

Moved, That the House do now again resolve itself into Committee.--(Lord Simon of Highbury.)

On Question, Motion agreed to.

House in Committee accordingly.


Clause 25 [Director's power to investigate]:

Lord Kingsland moved Amendment No. 94:

Page 13, line 9, leave out ("a reasonable suspicion") and insert ("reasonable grounds for belief").

The noble Lord said: The Opposition have rather rashly entrusted me with the task of dealing with amendments to Clauses 25 to 28. Before I begin, perhaps I may make a general comment on the philosophy that lies behind our amendment.

As the Minister is aware, his Government seek to incorporate the European Convention on Human Rights into domestic law. He is further aware that that will

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require officials in this country to meet the standards of conduct laid down in Article 6 and Article 8 of that convention.

As matters stand, a competition official can enter the premises of a business without notice; can address questions to anyone in the premises; does not need to tell that person before he addresses a question to him or her what is the purpose of the investigation; can require any relevant document to be produced to him where the question of relevance is a matter for him and him alone; and there is no requirement for a period to pass during which the relevant official can call on his legal advisers.

It is clear to me from the jurisprudence of the European Commission of Human Rights and the European Court of Human Rights that in many respects that conduct falls below the level set by the convention. Whatever one's views might be about the merits or otherwise of incorporating the convention, it is the Government's intention to seek to incorporate it. Therefore it is not unreasonable for the Opposition to expect the standards that the Government set themselves to comply with the convention.

With those opening remarks in mind, I turn to Amendment No. 94. It seeks to substitute the expression "reasonable suspicion" (at line 9 on page 13) with "reasonable grounds for belief". That is a stiffer test for the director general. I need not explain the implications at great length. In our submission the director general should have grounds that are stronger than mere suspicion in order to exercise his powers. "Reasonable grounds for belief" means that there is at least some evidence for what he is about to do. I beg to move.

Lord Borrie: This is an important amendment, and is part of a series, as the noble Lord, Lord Kingsland, mentioned. For the moment, I merely wish to refer to Amendment No. 94, which is quite straightforward. To my mind it is not an amendment that the Committee ought to accept, since it perpetuates the very unsatisfactory position that has lasted for many years in which the Office of Fair Trading has had inadequate investigative powers. I remind the noble Lord, Lord Kingsland, that the previous government, in a White Paper and a Green Paper, asserted that the existing powers of the director general were inadequate in order to combat serious price-fixing cartels and other restrictive trade agreements.

The phrase in the existing law is, "reasonable cause for belief". The noble Lord, Lord Kingsland, wishes to say, "reasonable grounds for belief". Those phrases are immensely similar, and the existing phrase, "reasonable cause for belief", has been interpreted by the Court of Appeal as meaning that the director general must have firm evidence of, for example, a price-fixing agreement before he can investigate whether there is one. That seems to be a Gilbertian situation; it has caused the director general great difficulties in the past--both myself, when I held that office, and my successor--so that one had to rely on the word of whistle-blowers who were employees or perhaps participants in the cartel and who would emerge out of the woodwork possibly years

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after the cartel or other misconduct had been operating. The history of this matter over the past 20 years and more suggests that a stronger power is needed.

There is always a balance in these matters. There has to be some element of trust, combined with an element of accountability, in whatever official has significant powers of investigation. The noble Lord must be right in that the Government will wish, as tomorrow they continue their debate on the Human Rights Bill, to conform to the Convention on Human Rights.

I hope that the noble Lord will feel able to withdraw this particular amendment, simply because it would allow a very unsatisfactory situation to continue when, for the first time in many years, we are trying radically to improve the law in relation to competition and trying to ensure that those who have the responsibility for enforcing it will have adequate powers--not, as has been the case in the past, inadequate powers--to investigate.

Lord Peston: In speaking to this amendment, I apologise to the Committee for not taking part in earlier deliberations on this very important Bill, which, as we are all agreed, is long overdue. In responding to the noble Lord, Lord Kingsland, one ought to point out that the general philosophy--which I hoped all noble Lords would share--stems from Adam Smith's dictum that competition is a very good thing and competitive market structures are fundamental to the protection of consumers. When one talks about human rights, those are the kind of ideas that I, at least, think about. The Bill goes some way in the right direction. As it happens, I should have adopted a more draconian approach, and regard the Bill as too much of a compromise. However, this is not the occasion for a Second Reading speech.

Essentially, the Bill provides a legal underpinning for the law and for investigation enforcement. As my noble friend Lord Borrie pointed out, the director general must have a basis for doing the work that he, or one day, as we hope, she, will have a chance to do. What worries me about the amendment as it is formulated is that it is assumed that the director general has already carried out the investigation that Chapter III of the Bill enables him to do. In other words, it must logically be asked: what would it be reasonable for the director general to have to do before he can go on to the next stage? It seems to me that what is reasonable is that the director general and his office should have a suspicion that there have been infringements. We must not forget that, in the context of the Bill, infringements are an extremely important matter. I believe that my noble friend Lord Borrie is right. If the director general had to have reasonable grounds for his belief, it would follow that he had already done the work that this is all about.

Although it is useful for an amendment of this kind to be put down and one should not criticise the Opposition for doing so, it seems to me that, as was my practice when I sat on the Opposition Benches, the purpose of the amendment is to make clearer than might otherwise be the case why the Bill is drafted in its present form. I hope that my noble friend is not of a mind to accept the change of wording. I make the point

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that it is precisely the wording in the Bill that is needed if we are to have an active and serious competition policy. That is what I hope for.

3.30 p.m.

Lord Campbell of Alloway: The issue is simple. Ought the director general to have some evidence before he exercises these draconian powers? It is not to the point to say, "Oh, he knows all about it already", or "He has to know about it already", before he exercises the power and he has to know what is the object of it. That is not the situation at all.

The question is whether the director general should have some evidence, some grounds for belief, or whether there should be mere suspicion, albeit reasonable, which imports a fundamental element of doubt. It may be a difficult matter of debate, but on the whole I support the amendment.

Lord Simon of Highbury: First, I wish to try to respond to the noble Lord, Lord Kingsland, as to positioning and the first four schedules. I can announce to him that he can now proceed in total relaxation because I shall handle them from this side of the Chamber.

The first positioning concerned compatibility with the European Convention on Human Rights, since in these clauses we are talking about the protection of individual rights in the investigation process. We believe that the regime is fully compatible with the European Convention on Human Rights and that the Bill would pass that test. In any event, as the noble Lord rightly mentioned, the Government have recently introduced the Human Rights Bill into your Lordships' House which will require, so far as possible, primary and secondary legislation to be read and given effect in a way that is consistent with the European convention. So on both tests--the existing shape of the Bill and the future direction of legislation--we feel that the Bill is well positioned.

Perhaps I may extend the very interesting general debate and the points that have been made. It is worth noting that Clause 25 is the first of many important clauses dealing with investigations. The number of amendments proposed to the clauses confirms their importance. I know also, from our earlier debate at Second Reading, that these clauses have raised a number of concerns. I look forward to detailed discussion of some of the concerns as we continue through the Committee stage.

It is important, however, for the general positioning that we do not lose sight of the overall purpose of the legislation in all the detailed consideration of individual clauses and the weighing of the balances.

One of the key aims of the Bill is to deter anti-competitive behaviour. An effective way of doing that is to ensure that if anti-competitive behaviour takes place it will be identified. That is the purpose of having vigorous and effective investigatory powers. I make absolutely no apology for that. The Government's position is that the current regime is inadequate and ineffective--points which my noble friend Lord Borrie

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has just made--particularly in its failure to tackle cartels. We know that change is long overdue and, as the debate continues, I shall, of course, listen carefully to all the points that are made. I shall certainly not want to rule out making improvements to the Bill, but I believe it will be very difficult to persuade the Government to accept amendments that would damage the deterrent effect of the regime.

So much for general positioning. Let me now turn specifically to Amendment No. 94. Clause 25 sets a threshold which must be reached before the director general may conduct investigations. It is right that there should be a threshold. It is not our intention that the director general should go on "fishing expeditions", as I believe they are colloquially called, just in the hope of turning up something.

Clause 25 sets out a threshold appropriate for starting an investigation. The director general must have reasonable suspicion that either of the prohibitions has been infringed. Let me emphasise that this is the threshold for the director general to start his investigation. It should be judged in that light.

We discussed the issue at Second Reading and I have had the benefit of being able to reflect on what was said. I recall that the noble Baroness, Lady O'Cathain, spoke of the importance of those powers. I was also particularly struck by the words of my noble friend Lord Borrie. He said then, and he said much the same again today--and it is a powerful point--

    "Up to now the law has been that the Office of Fair Trading can only demand and require ... documents from suspected companies if it has 'reasonable cause to believe' that there is a cartel. But that has been interpreted by the courts in such a way that it creates a Catch-22 situation. [It seems absurd to have a] requirement for the Office of Fair Trading to have firm evidence of the existence of a cartel before it can issue a notice in order to find out whether the cartel exists".--[Official Report, 30/10/97; col. 1170.]

I agree with the sentiments expressed by my noble friend Lord Borrie. Acceptance of the amendment would probably seriously impede the investigation of suspected cartels and other anti-competitive behaviour. It would be quite wrong to have a high threshold of reasonable grounds for belief before allowing an investigation to commence. On that basis, the noble Lord, Lord Kingsland, will not be surprised to learn that I urge him to reconsider and to withdraw his amendment.

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