Previous Section Back to Table of Contents Lords Hansard Home Page

Lord Borrie: My Lords, in rising to support Amendment No. 24--indeed, my name is attached to it--I must declare an interest as a non-executive director of the proprietors of the Independent and the Independent on Sunday newspapers. Because of that interest I seriously considered whether I ought to attach my name to the amendment. I concluded that, particularly because of my involvement over many years with the workings of competition policy as Director General of Fair Trading, it would be perverse were I to refrain from demonstrating clearly on this occasion my commitment to strengthening the provisions of the Bill dealing with conduct amounting to an abuse of a dominant position.

News International, publishers of The Times, has been engaged in a price war in the daily newspaper market since September 1993 when it slashed the price of The Times from 45p to 30p. Since then it has engaged in a persistent policy of predatory pricing--that is, selling below the marginal cost of production--thereby distorting competition and seriously damaging not just the Independent but also the Daily Telegraph and of course creating a climate in which any potential competitor is seriously deterred.

News International holds a substantial degree of market power in the United Kingdom national newspaper market and is able, for long periods, to cross-subsidise its loss-making newspaper sales from its

9 Feb 1998 : Column 916

highly profitable operations in satellite television. News International's price cutting tactics have taken a variety of forms in the past four-and-a-half years. It has not been a short-term marketing or promotional exercise but a permanent feature of the market place. Recent manifestations, as your Lordships will know, include selling The Times on Mondays for 10p as from September 1996, raised last month to 20p, and selling Saturday's edition with several sections and a magazine at 20p. Estimates I have seen of the Saturday edition show costs of production of 90p per issue, offset by advertising revenue of about 40p. Until there is some sort of official investigation into the accounts of News International, it is impossible to know the extent of its current loss making, let alone the totality of its losses over the past four to five years.

Only last week, in a letter to the Guardian, the director of corporate affairs at News International--Miss Jane Reed--did not deny the allegation that The Times lost considerable sums of money last year. In a carefully drafted sentence she wrote that,

    "the current pricing policy of The Times is leading to profitability for the first time in living memory".

At the Committee stage of this Bill, my noble friend Lord Haskel, for the Government, responding to concerns expressed by each of the four whose names appear on Amendment No. 24, sought to argue that the broad provisions of Clause 18--it is still Clause 18 in the Bill today--which in effect incorporate Article 18 of the Treaty of Rome into our law and prohibit conduct amounting to an abuse of a dominant position, are themselves sufficient to cover predatory pricing tactics. My noble friend said that,

    "such practices carried out by a dominant undertaking may constitute an abuse under Article 86 of the treaty, depending on the particular circumstances of the case".--[Official Report, 13/11/97; col. 313.]

It is my belief that the Minister was right to be cautious as to whether Clause 18 of the Bill, as it stood then and as it stands today, covers the kind of conduct about which we are concerned in the newspaper market. As he admitted, the clause merely provides a framework against which the competition authorities--the Director General of Fair Trading and the competition commission--will assess whether or not any specific conduct is prohibited. In any case, those authorities are independent and autonomous. They cannot be directed by Ministers as to whether any specific conduct is a breach of Clause 18. Moreover, the principles of European Union law, which are in effect brought into our law through the Bill by Clause 58, are not at all clear as to whether Article 86 necessarily applies where dominance exists in one market but there is an abuse in another.

My noble friend Lord Simon of Highbury, on another amendment earlier today, made some points on this matter. It seems clear that News International is dominant in the satellite TV market. But the abuse through cross-subsidy has its anti-competitive effect in another market--the newspaper market. If one examines European Union case law, emphasis has been given--the Minister himself said this in response to a debate on another amendment a short time ago--to whether the

9 Feb 1998 : Column 917

two markets have to be "neighbouring" or "related", or the abuse must be in a market that is "ancillary" to the market where dominance exists. There is surely no way in which Ministers can reassure the House that the broad provision in Clause 18, eked out by such European Union case law as there is through Clause 58, will lead to a conclusion by the Director General of Fair Trading that the distortion of competition evident in the newspaper scenario I have described is prohibited.

Indeed, it seems inconsistent for Ministers to assert that Clause 18 covers the ground adequately, while accepting and maintaining, as they have done, that it is for the Director General of Fair Trading, the competition commission and the courts to determine specific cases.

The Government believe that it would be wrong-- I am relying on what was said at the Committee stage--for the Bill to have a specific provision dealing with one industry or product. I leave aside the fact that there are many exemptions in the Bill dealing with specific industries and products. There is agriculture; there is civil aviation; and there are other professions. What is being suggested in the amendment is that there should be a special provision dealing with the newspaper market.

I would not suggest that the legislation should try to deal specifically with all the possible abuses that might arise in all possible industries and in all circumstances in the future. Legislation must be for the general. But this amendment does not deal with any product. It does not deal with beer, or buses, or building materials, each of which industries have featured in the concerns of the UK competition authorities over the years. They may be important industries--they are important industries--but competition and diversity and choice in those industries are not as vital to democracy as they are in the media.

In the principal competition legislation, the Fair Trading Act 1973, there are specific provisions over several sections dealing with mergers and takeovers in the newspaper industry. Why are those special provisions there for the newspaper industry? They are there for the simple reason that mergers and further concentrations of ownership in the newspaper industry can seriously reduce the availability of choice and diversity of opinion that a range of newspapers helps to ensure. The continued availability of a range of newspapers and a diversity of news and views is surely at risk not just from mergers but from the persistent tactic of price-cutting by a newspaper group with pockets deep enough to enable it to go on doing that year in and year out from another business to the extent that other newspapers are either eliminated or badly crippled in the service they can provide to their readership.

This amendment is designed to strengthen and clarify the Chapter II prohibition in Clause 18 in the field of newspapers. I hope that Ministers will see their way to accepting the value of Parliament making the law more

9 Feb 1998 : Column 918

certain rather than leaving the competition authorities and the courts to wrestle with this matter and to wrestle with an uncertain message over the years to come.

Lord Mishcon: My Lords, before my noble friend sits down, I wonder whether for me personally he will kindly clarify one thing. Why does not Clause 18(2)(a) cover the position that he has just been talking about?

6.30 p.m.

Viscount Trenchard: My Lords, I should like to speak briefly in support of the amendment tabled in the names of the noble Lords, Lord McNally and Lord Borrie, the noble and learned Lord, Lord Ackner, and my noble friend Lord Astor, who is unable to be in his place today. My noble friend has asked me to apologise to your Lordships for his unavoidable absence and to speak on his behalf in support of this amendment, which I believe has widespread support on all sides of the House.

I should have thought that what has been going on in the newspaper industry is precisely the kind of abuse of a dominant position which the Bill is intended to prohibit. On Saturdays and Mondays the Independent and the Daily Telegraph suffer a damaging circulation fall as a result of the predatory pricing policy which The Times has maintained consistently for some four years. As noble Lords may have seen if they watched BBC Television's "On the Record" yesterday, Mr. Alistair Darling, now Chief Secretary to the Treasury, tabled in another place on 5th July 1994 an Early Day Motion that,

    "reaffirms the belief that the newspaper industry is not only an important business but also a vital organ of the democratic process, and further believes that predatory pricing with the intention of forcing rivals out of the market will reduce choice and undermine competition".

It was signed by 81 MPs, of whom I believe 79 are Labour Party members, including Mr. Nigel Griffiths, the Minister responsible for competition. In fact I believe that 21 of the signatories to the Motion are members of the Government. The noble Lord, Lord McNally, has already reminded us of the words of Mr. Robin Cook at the same time. Speaking in support of the intention of the Motion, he said in another place on 20th July 1994 that he unequivocally did not want to see an increase in the market share of News International.

The Government are not doing in office what they proposed in opposition. In the absence of anti-competitive agreements or abuses such as those which this Bill is intended to prohibit, I would tend to side with those who would protect the rights of undertakings to charge what they will for their products and services. However, this Bill is intended to tidy up competition law and, inter alia, prevent the abuse of a dominant position, whether or not it is financed by cross-subsidy.

As I believe the noble Lord, Lord Simon, has acknowledged, the Government themselves are not clear that the Bill will actually catch the kind of consistent and sustained predatory pricing that has been and is being perpetrated in the newspaper industry. In a

9 Feb 1998 : Column 919

democracy, competition, plurality and diversity in the press are of the utmost importance, as your Lordships are well aware. That was recognised in the Fair Trading Act 1973, which provided a specific regime for the press, and for very good reasons. That legislation is not being repealed, and for the sake of consistency and clarity the Competition Bill should therefore also provide a specific regime for newspapers.

Today's Guardian editorial states:

    "Today's amendments are intended to import elements of the US Sherman anti-trust legislation to outlaw predatory pricing and to put the onus of monitoring newspapers back with the Office of Fair Trading".

The Government are opposing this amendment even though it simply reflects what the Labour Party itself was saying before the election. I understand that a spokesman for the Department of Trade and Industry has said that the amendment would create more difficulties in the market place. I should like to ask the noble Lord the Minister to explain why he thinks that is so.

Your Lordships' House has an opportunity this afternoon to protect and preserve the richness and diversity of our national press for which we are admired throughout the world. I hope that noble Lords, without regard to narrow and temporary party advantage, will support this amendment and thereby assist the Government in their declared aim of strengthening and clarifying competition law.

Next Section Back to Table of Contents Lords Hansard Home Page