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Lord Fraser of Carmyllie: My Lords, I am grateful to the noble Lord for what he said about Amendment No. 27. He has succeeded in wearing me down. I did not hold out too much hope of a positive response and have learnt that on occasions the Minister is satisfyingly unpredictable. I am grateful to him for that answer.

As regards Amendment No. 26, I should like to see a wider definition of what is to be the subject of penalty. However, I recognise that there are a number of difficulties in securing a precise definition. I believe that if one imposes a penalty it is desirable to have as wide a definition as possible.

I shall not press the amendment, but urge the Minister to look at Clause 39, as he has indicated, and bear in mind our real reservations about Clause 37. I invite the Minister to contemplate amending that clause when the Bill reaches another place. In the meantime, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendment No. 27 not moved.]

Clause 40 [Limited immunity for small agreements]:

[Amendment Nos. 28 and 29 not moved.]

Clause 43 [Offences]:

Lord Simon of Highbury moved Amendment No. 30:

Page 22, line 17, leave out ("show") and insert ("prove").

On Question, amendment agreed to.

5 Mar 1998 : Column 1345

Lord Kingsland moved Amendment No. 31:

After Clause 45, insert the following new clause--

Due diligence

(" .--(1) It shall be a defence in any proceedings brought under or in connection with this Act for a person to show that he exercised due diligence.
(2) The Director shall not impose a penalty under section 37 on any person if that person shows that he exercised due diligence.
(3) For the purposes of this section a person has exercised due diligence if he shows that in all the circumstances he exercised all due diligence to avoid an infringement of the Chapter I or Chapter II prohibitions.").

The noble Lord said: My Lords, this is an amendment which provides protection to anyone if they have shown due diligence in seeking to avoid an offence under either prohibition I or II. It would give a complete defence to the imposition of a penalty. In other words, it goes to penalties and not to the contraventions themselves. I beg to move.

Lord Simon of Highbury: My Lords, we discussed at Report an amendment tabled by the noble and learned Lord, Lord Fraser, which would have introduced a similar defence in proceedings, one based on whether it was reasonably foreseeable that an agreement or conduct would constitute an infringement. Here the defence would be available where a person could show he had exercised all due diligence to avoid an infringement of either of the prohibitions.

Our view of this amendment is similar to our view of the earlier one. As my noble friend Lord Haskel said on that occasion,

    "It is for the courts to determine whether an agreement or conduct breaches the prohibitions with all the consequences that that may have in civil law. It should not be a matter that depends on the parties foreseeing such an infringement".--[Official Report, 19/2/98; col. 364.]

Similarly, we consider that the decision whether there is an infringement should not depend on the parties having exercised due diligence to avoid an infringement.

The Bill itself provides amply for the opportunity for businesses to take precautions against infringing a prohibition. In particular--and this is especially relevant to the point made about penalties--firms may seek guidance or a formal decision from the director on whether agreements or conduct infringe the respective prohibition. The effect of such guidance or decision is that immunity from penalty is conferred in respect of the agreement or conduct concerned and that immunity cannot be removed except in very limited, justifiable circumstances.

Turning to the issue of penalties under Clause 37, the director must, under Clause 39, publish guidance on the appropriate level of penalty to be applied. We have already discussed that clause. As I have explained, we will examine how the degree of culpability is to be taken into account in decisions as to the imposition of penalties. Intent or negligence are a prerequisite under Regulation 17 in result of penalties for breach of Article 85 and we would expect to follow that practice.

Appeal may be made to the competition commission against a wide range of decisions by the director, including a decision whether there has been an

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infringement of a prohibition and the imposition and level of a penalty. Again, we expect the extent of any due diligence would be a factor to be taken into account. We see no need for a blanket provision, of the kind proposed, on the face of the Bill. The Bill itself already provides sufficient avenues by which account can be taken of a firm having exercised due diligence. I would therefore ask the noble Lord to withdraw his amendment.

Lord Kingsland: My Lords, I am not entirely happy with what the Minister has said. I believe that I see his point on the issue of contravention. However, as regards penalties, there is a very strong case, in circumstances where someone has shown all reasonable care to avoid committing an infringement under prohibition I or II for him not to be penalised. If the Minister is saying to me that, through the guidance on penalties, in effect, there will be a similar consequence, then I am grateful for that information. In those circumstances, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 47 [Appealable decisions]:

Lord Fraser of Carmyllie moved Amendment No. 32:

Page 24, line 29, at end insert--
("( ) as to whether a dominant position exists for the purposes of Chapter II,
( ) requiring the production of a specified document under section 27(1),
( ) as to whether the requirements of section 55(3) have been met in relation to the disclosure of information without the consent mentioned in section 55(2),
( ) on a Director's finding within the meaning of section 58,
( ) as to whether he has complied with the requirements of section 60,").

The noble and learned Lord said: My Lords, Clause 47, as it now is, deals with appealable decisions. While we would not wish to see opened up unnecessary sets of grounds on which a decision might be appealed, nevertheless we are concerned that, as the clause is laid out at present, it is too restrictive. This amendment suggests a number of additional circumstances in which,

    "Any person in respect of whose conduct the Director has made a decision may appeal to the Competition Commission against, or with respect to, the decision".

Those circumstances are set out in Amendment No. 32. I am not sure that I attach equal weight to every one of the proposed additional bases on which an appeal might proceed, but they are clearly important. It would be of advantage if all of them were included within the clause as presently drafted.

Amendments Nos. 36 and 55 are grouped with this amendment. I have been helpfully corrected in that I understand that Amendment No. 55 deals with the meaning of Section 45 and reflects a previous stage of the Bill. It should be Section 47. My noble friend Lord Kingsland may wish to speak to that amendment. I beg to move.

Lord Kingsland: My Lords, Amendments Nos. 36 and 55 make a very simple point; namely, that decisions

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made by the director general as a consequence of alleged infringements under prohibitions I and II are likely to be decisions involving mixed fact and law issues. The purpose of these amendments is to ask the Minister to make it clear that this class of decision will be appealable to the Court of Appeal.

Lord Simon of Highbury: My Lords, this group of amendments concerns different aspects of appeals. I note that we debated a number of these amendments in Committee, but it is perhaps no bad thing to have another opportunity to discuss this complex area. It may be--who knows?--that another shaft of unpredictability may appear.

Amendment No. 32 seeks to add a number of items to the list of appealable decisions in Clause 47(3). Clause 47 enables appeals to the tribunal against decisions taken by the director or the sector regulators under the prohibitions. As I explained in Committee, it is our intention that substantive decisions should be appealable to the tribunal. I will go through the subsections in the amendment in turn. New subsection (1) deals with the question of whether a dominant position exists is not a substantive decision. We addressed this issue at an earlier stage, when the Committee discussed the proposal that the DGFT should be asked to give decisions on whether an undertaking held a dominant position. As my noble friend Lord Borrie said on that occasion, this is an academic question. The substantive issue is whether there has been an infringement of the prohibition. The prohibition applies only where there has been both dominance and an abuse of that dominance.

We also debated in Committee the matter covered by the second paragraph in this amendment. The point about allowing appeals against substantive decisions is that it allows people and businesses to appeal against decisions which, if put into effect, will damage their interests; for example, a decision to impose a penalty, or a direction to stop engaging in a particular business practice.

Requests for documents by the director under his powers are not substantive decisions. An individual or business is not going to suffer any harm by producing a document, or explaining a document, to the director--not, of course, unless the document reveals that there has been wrongdoing, in which case the document is obviously relevant.

The third paragraph of the amendment proposes that there should be appeals to the tribunal on whether a disclosure of information under Clause 55(3) properly meets the requirements of that clause. There are two points here. First, this is not a substantive decision within the meaning of the Bill. Secondly, unlawful disclosure of information is a criminal offence by virtue of Clause 55(8). If the director disclosed information unlawfully he would be liable to criminal prosecution.

The fourth paragraph of the amendment returns to a point on which I promised in Committee to reflect further. This was a point raised by the noble Lord, Lord Kingsland (col. 450), speaking to a similar amendment, which he explained referred to the

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possibility of an appeal--after a final decision had been taken--in relation to the factual underpinning of that decision. He said that in his view it was important that there should be a right of appeal in those circumstances.

I have sought advice on the effect of the Bill in this respect. The advice that I received is that the wording in subsections (1) and (2) of Clause 47, and in particular the words "with respect to," ensure that a party may appeal in circumstances where he is happy with a decision, but not with the reasoning underpinning that decision. This is an important point, and I am grateful to the noble Lord for having raised it. I hope that this explanation meets his concerns.

Turning now to the final point in this amendment (the fifth paragraph), I explained in Committee (col. 447) that Clause 60 is no more and no less than an interpretation clause which feeds through into the rest of Part I of the Bill. Hence the fundamental principles of EC law feed through into the relevant provisions of the Bill. There is no separate obligation in relation to Clause 60. The question is therefore not whether an appeal lies under Clause 60, but to which other clauses in the Bill appeals apply. As I said in Committee, it will be possible to appeal against a decision of the director on the grounds that his decision was not in accordance with the requirements of Clause 60. I hope that these explanations meet the noble and learned Lord's concerns in relation to this amendment and that he will be prepared to withdraw it.

Turning to Amendment No. 36, the parties may of course appeal a decision of the tribunal that either or both of the prohibitions had been infringed, provided there is a point of law in issue. For example, a party will be able to appeal on the question of whether his refusal to supply was an abuse of a dominant position within the meaning of the Chapter II prohibition. EC jurisprudence on the point would of course be highly relevant.

However, in appealing an infringement decision to the Court of Appeal, it will not be possible to contest findings of fact. We have considered this point very carefully. We need to balance safeguards for the parties faced with a decision under the prohibition system, with the need to ensure the workability of the appeals system by making it sufficiently streamlined.

In striking this balance we felt it right that the Court of Appeal and this House should be able to rule on the interpretation of the prohibitions and on the level of penalty. However, we decided against allowing the director or the parties to contest every single finding of fact. The parties already have the guarantee that findings of fact made by the director can be challenged before an appeal tribunal headed by a lawyer of High Court standing. Allowing appeals on findings of fact beyond the tribunal could lead to serious clogging of the appeals system. For those reasons we are not persuaded that this is the right course and I would invite the noble and learned Lord to withdraw his amendment.

Turning finally to Amendment No. 55, this amendment would streamline paragraph 2(2)(c) in Schedule 8. Simplification of legislation is an attractive

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prospect in itself, but the matter needs further thought, and it will need to be considered in another place. We think that it is a positive suggestion and we should like to consider it. I hope that the noble and learned Lord will agree to withdraw the amendment on that basis.

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