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Lord Fraser of Carmyllie moved Amendment No. 117A:

Page 16, line 15, leave out ("he considers appropriate") and insert ("are requisite").

The noble and learned Lord said: My Lords, this is a small and short amendment but in our view it is not without its importance. The clause, as currently drafted, provides for the director to give,

to end an infringement of a Chapter I prohibition. We are concerned that that power is too widely drawn and might permit directions to be given which extend beyond the action needed to bring an infringement to an end. The proposal that we offer is that the phrase as "he considers appropriate" should be replaced by the phrase "are requisite". That would in some measure limit the power to give directions which are no more than is necessary or required in the circumstances to end the infringement.

We have adopted that approach because in our view such a change would ensure that the remedy is proportionate to, and is thus consistent with, EC jurisprudence, as is set out in Clause 58 and of which so much mention has been made. It would also conform to the notion of severability--that only those provisions or features of an agreement or practice which violate Article 85(1) are void. That would be in line with decisions of the European Court of Justice. I beg to move.

Lord Simon of Highbury: My Lords, I do not believe there is anything to be gained by seeking to amend this test. The director will have considered the case carefully and reached a decision. He is very well placed to make a judgment as to what directions are appropriate to bring the infringement to an end. We would not expect the director to give directions which exceed what is necessary to bring an infringement to an end. If we are not to place some faith in his judgment, we should not be proposing to give him the powers which the Bill proposes to give to him. As it is, the giving of a direction under Clause 31 is, of course, an appealable decision under Clause 45. I do not see the necessity to tighten the wording in this instance and I trust that the noble and learned Lord will not be pressing this amendment.

Lord Fraser of Carmyllie: No, my Lords, I certainly shall not be pressing the amendment, although it might have been valuable for the Government to accept it. Where the director general has a number of routes to bring an infringement to an end, provisions worded as we have suggested might focus his mind more clearly on the duty incumbent upon him to do so but not in any way that would be unduly onerous for the infringing party. Having expressed that continuing misgiving, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendments Nos. 118 to 120 not moved.]

19 Feb 1998 : Column 350

Lord Fraser of Carmyllie moved Amendment No. 120A:

Page 16, line 22, at end insert--
("( ) In circumstances where the Director is entitled to exercise functions both under the Fair Trading Act 1973 ("the 1973 Act") and under this Part, he shall exercise his functions under the 1973 Act and not under this Part if it appears to him that any enforcement action which may need to be taken includes the imposition of a structural remedy.
( ) In this section "structural remedy" means an order made in accordance with Part II of Schedule 3 to the 1973 Act.").

The noble and learned Lord said: My Lords, the Government have indicated that the provisions of the Fair Trading Act 1973 relating to scale monopolies are not to be repealed in order to retain flexibility in dealing with structural factors which inhibit competition and because they are necessary to allow for the imposition of structural remedies, reorganisation and divestment. It is claimed that adequate powers to deal with such monopolies will not be conferred by this Bill.

The amendment would require the relevant powers under the Fair Trading Act to be exercised, and not those conferred by the Bill, in relation to any case where a structural remedy may be required. That is to avoid the prospect of action being taken under the powers provided by the Bill and then separate procedures under the 1973 Act being commenced after the need for a structural remedy has been identified.

During the first day of Report stage, the noble Lord, Lord Simon, indicated that an exemption from the Chapter I prohibition would not be granted if it would exempt something that appears to infringe a Chapter II prohibition. He said that at col. 956 of Hansard. We were grateful to him for that because it clearly identified the relationship between the two prohibitions.

However, in contrast, the interaction of the powers under the Bill and those in the 1973 Act are not totally clear. The amendment seeks to ensure that the powers in the 1973 Act to provide a structural remedy are exercised in a manner which avoids any confusion between the two regimes. Throughout the passage of the Bill, the Minister has sought to emphasise the desirability, as he sees it, of there being no risk of such confusion. Even if the noble Lord is not prepared to accept the amendment, I hope that, as he did with regard to the interrelationship between the prohibitions under Chapter I and Chapter II, he will take this opportunity to clarify the position. I beg to move.

Lord Simon of Highbury: My Lords, I am full of admiration for the noble and learned Lord's ingenuity in responding to my arguments about the scale monopoly provisions during last week's debate. Let me make one thing clear, I hope, from the outset. It is not the Government's intention that the prohibitions and the Fair Trading Act monopoly provisions should be used in parallel on the same matters. There is no question of such double jeopardy. The prohibitions will be the primary weapons against anti-competitive behaviour in the future. If the director suspects that there has been an infringement of the prohibitions, we would expect him to investigate the matter in relation to the prohibitions and not to make a reference under the monopoly

19 Feb 1998 : Column 351

provisions. I would expect the Secretary of State to veto a monopoly reference in relation to matters that were the subject of current proceedings under the prohibitions; nor would I expect the director to wish to make such a reference.

There may, however, be circumstances where the prohibitions are not the appropriate means of dealing with competition issues. As we have debated before, the Fair Trading Act complex monopoly provisions may enable the authorities to deal with problems that fall outside the Chapter I and Chapter II prohibitions, particularly where there is parallel behaviour by companies in a market but no actual agreement. In these circumstances the prohibitions would not apply, but the director would have the option of a monopoly investigation if he felt that there were effects adverse to the public interest.

The position in relation to the scale monopoly provisions is rather different. I explained the Government's policy on the use of these powers in Committee (at col. 300 of Hansard). We believe that these powers should be used in the future only in circumstances where there has already been proven abuse under the prohibitions and where the director believes that there is a real prospect of further abuses by the same firm. In these circumstances, as the noble and learned Lord recognised, the more flexible powers to impose structural remedies available under the scale monopoly provisions may be the only effective means of preventing further abuses. I should at this point remind the House that, as I said in Committee, the use of the scale monopoly provisions as regards the regulated utility sectors is being considered separately under the utility review.

It seems to me that the policy I have described is a more significant and, if I may say so, a clearer way to focus the use of the scale monopoly powers than that proposed in the amendment. The amendment would require the director to second-guess the findings that the MMC would come to following its investigation of a reference. It would require the director to second-guess the view that the Secretary of State would take in the light of those findings. It is, of course, quite rightly the responsibility of the Secretary of State, subject to parliamentary control, to decide on the application of the wider powers available under the Fair Trading Act. It would not be right for the director to indicate whether structural remedies were needed.

There is one further important point I wish to make. The amendment seems to suggest that if there is a possibility that structural remedies would be appropriate, these should be tried first. I suspect that this is not actually the noble and learned Lord's view, but it would seem to be the consequence of the amendment. It is our view that the penalties and directions available under the prohibitions will be effective remedies in the vast majority of cases. Wider structural remedies would be contemplated only in circumstances where this does not prove to be the case.

That is the Government's position as established in the Bill and in their policy statements. The amendment however perceptively drafted cuts across that position

19 Feb 1998 : Column 352

and would have the highly undesirable consequences that I have mentioned. I suspect that those consequences are ones that the noble and learned Lord would not himself have intended. I hope that my answer clarifies the Government's intention in their last statement. I therefore urge the noble and learned Lord to withdraw his amendment.

6 p.m.

Lord Fraser of Carmyllie: My Lords, this is a probing amendment. I would have been astonished had the noble Lord indicated that it would be accepted. The noble Lord is aware that we would prefer the provisions relating to scale monopoly to be repealed altogether. That remains our position. We still harbour a faint hope that the Government may yet come round to the view that they are unnecessary. If they are to be retained I take it from the Minister's answer that he accepts there should be as little confusion as possible.

I was grateful to the Minister for setting out how he expected the director general to approach these matters. I should like to reflect further on how it would be possible to allow for the retention of a structural remedy (to put it in that shorthand form) without having to subject undertakings to the risks that they would first have to be tapped in this way and a further change made under the Fair Trading Act 1973. That seems to me to be unnecessarily cumbersome. However, I am grateful to the Minister for what he has said. I shall reflect upon it. In the meantime, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 32 [Directions in relation to conduct]:

[Amendments Nos. 121 to 124 not moved.]

Clause 33 [Enforcement of directions]:

[Amendments Nos. 125 and 126 not moved.]

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