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Lord Haskel: My Lords, I welcome this opportunity to address the concerns of small companies, particularly newsagents. However, we have dealt with loss leaders earlier in the Bill. The issue arose in relation to an amendment tabled by the noble Lord, Lord Kingsland, to the clause providing immunity from penalties for small agreements. Then, as now, we maintain our view that the Bill should not introduce any automatic rule in relation to loss leading. Our view is that the Competition Bill will properly address what constitutes anti-competitive behaviour. Special exclusions are unnecessary because anti-competitive behaviour will be assessed on the basis of the effects of the behaviour in question. Prohibiting anti-competitive behaviour as judged by its effects is an approach which should generally apply. It should apply in the case of newsagents and loss leaders.
In an individual case, whether or not the Chapter I prohibition applies to restrictions placed by a supplier on a retailer to prevent loss leading will depend on the effects on competition in the individual circumstances. The same is true for the supply of goods to a retailer in the knowledge that it will loss lead. Quite rightly this will ultimately be a question for the director--or on appeal to the tribunal or the courts--to decide in accordance with the governing principles clause.
Support for this Bill on all sides of the House has arisen because the current competition regime under the Restrictive Practices Act and the Resale Prices Act is considered to be too formalistic. That is one of the main criticisms of the current position. One of the purposes of the Bill is to move away from that formalistic approach and instead to concentrate on the effects of behaviour. This amendment would add to this much criticised formalism. It would mean that we would move backwards. On that basis, I suggest to the noble Lord that he might want to withdraw his amendment.
Lord McNally: My Lords, I thank the Minister for that reply. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Lord McNally moved Amendment No. 5:
After Clause 3, insert the following new clause--
(" .--(1) The Chapter I prohibition does not apply to agreements made between a relevant trade association and its members, or to decisions or practices of such an association which have the object or effect of enabling the members of that association to--
(a) compete effectively with other undertakings; or
(b) negotiate or conclude agreements with manufacturers, producers, distributors or suppliers for the supply of goods or services on competitive terms.
(2) For the purposes of this section a trade association is a relevant trade association if all of its members are small enterprises or micro-enterprises.").
The noble Lord said: My Lords, Ministers may be pleased to know that the end is nigh as regards my moving amendments. The origin of this clutch of amendments lies with small businesses which are concerned that this Competition Bill is concerned with big business and that somehow small businesses will be squeezed by some of the Bill's provisions. I hope that Ministers can put their minds at rest.
This proposed new clause would provide exemption from the Chapter I prohibition for agreements which are made between a trade association representing small businesses and its members. Such an exclusion is important to allow small businesses to compete effectively or to negotiate agreements for the supply of goods and services on competitive terms. Certain industries are complex oligopolies. This means that one part of the vertical supply chain is dominated by a small number of powerful companies while another part consists of a large number of small businesses. Clearly the large players are often able to impose terms on the many small businesses. I believe this is the case in the newspaper distribution industry. That causes problems. Small businesses' only defence is to combine together in a trade association, but when they do so small businesses find that their opportunities to combine are severely restricted by the current Restrictive Trade Practices Act which takes no account of the relative "muscle" in the market-place of the different parties.
I refer to Amendments Nos. 28 and 29. It is common sense that small agreements are those between small and micro-businesses. These amendments seek to confirm that that is the case. Amendments Nos. 42 and 43 are consequential to the proposed new clause relating to trade associations and the amendments to Clause 38. However, they also provide a general clarification. I beg to move.
Lord Haskel: My Lords, as the noble Lord, Lord McNally, has indicated, the purpose of these amendments is to provide protection in varying degrees from the Chapter I prohibition for agreements between small firms which are members of a trade association and such association and decisions/practices of the trade association. Before turning to the detail of the amendments, it may be helpful if I make three points which are relevant to the position of small firms under the Chapter I prohibition. That is the concern of the noble Lord, Lord McNally.
First, as a matter of principle, it seems to me to be wrong to attempt to make additional specific exclusions on the face of the Bill unless there is good reason to do so rather than relying on the mechanisms already provided in the Bill. This is the same argument that I put forward regarding loss leaders.
Secondly, it is only where there are appreciable effects on competition and trade that the Chapter I prohibition can come into play. Therefore many agreements between small firms should not be caught in the first place.
Thirdly, even where there are appreciable effects on competition and trade, the Bill already provides a mechanism for dealing with them. Where there are countervailing benefits within the exemption criteria, the director-general may issue an exemption. In addition, the Bill provides a process for block exemptions to be made. Agreements falling within the terms of a block exemption would not have to be notified to ensure there was no infringement of the Chapter I prohibition. There may well be a case for a block exemption relating to, for example, co-operatives.
We are seeking in the Bill to put right the defects of the existing regime to ensure that there is adequate deterrent against anti-competitive behaviour and to provide effective remedies where it occurs. Even though the chances of small firms falling foul of the Chapter I prohibition must be lower than that for large enterprises, the size of the perpetrators is not conclusive. It is the effects on competition which count. As my noble friend the Lord Borrie commented during Committee, "When one talks about small businesses one should not assume that they are all good boys". Why should persons who have suffered as a result of anti-competitive agreements only be able to seek protection or redress if the perpetrators are big business? We have to have a balance.
We are alive to minimising as far as possible compliance costs on small businesses. That is why we have provided the additional comfort of immunity from fines for small agreements within the terms of Clause 40 if they happen to infringe the Chapter I prohibition. The threshold for limited immunity under this clause is to be set by secondary legislation. As I said at Committee, the Government's present view is that the threshold should be the combined turnover of the parties at a level between £20 million to £50 million. It is not possible to be more precise at this moment because we shall need to make a judgment nearer the time and we shall wish to consult on the detailed provisions.
Any discussion of the treatment of small firms must be seen against that general background.
I hope that I have demonstrated to the noble Lord that the Bill takes into account the particular vulnerability of small and medium-sized companies and seeks to protect their interests.
I am not satisfied that it is right to make specific or special provisions in the Bill for certain classes of agreement. The Bill provides for the threshold for limited immunity to be set by secondary legislation. I am sure that that is the better approach. We shall need to see how the new competition regime works in practice. It
I hope that I have been able to give the noble Lord assurances regarding his concerns for the small and medium-sized companies and that he will feel able to withdraw the amendment.
Lord McNally: My Lords, I do not think that anyone is beguiled into believing that all small firms or small retailers are good boys. But it is equally true that the capacity and opportunity for sinning are all the greater among the big boys.
I am reassured. I hope that those who motivated me to move the amendments will read what both Ministers have said in their replies. The Government are sensitive to the needs of small retailers and small firms in particular. They play such an important part not only in our economy but in our social fabric that it is right that the Bill should be alert to their needs. In the spirit in which the Minister responded, I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Clause 4 [Individual exemptions]:
5.45 p.m.
Lord Haskel moved Amendment No. 6:
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