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Lord Fraser of Carmyllie: My Lords, the Minister will know, if no one else knows, that during the passage of the Bill through this House at an earlier stage, if we had a consistent theme it was that the regulatory regime set out in the Bill should be as simple and coherent as possible. Accordingly, for that reason, from time to time we resisted what we saw as unnecessary overlaps of regulatory regimes, particularly in relation to the utilities, in an attempt to achieve that objective.

Our position on this amendment is that the existing law, and the law that is presently contained in the Bill, is sufficient to deal with the issue of predatory pricing in the newspaper industry. We may be wrong about that, but it is, I say to the noble Lord, Lord McNally, a consistent position that we have taken throughout the Bill and one to which we intend to stick.

I am bound to say that when such a distinguished lawyer as the noble and learned Lord, Lord Ackner, says that the law is not clear, it undoubtedly troubles me. I should like to think about that carefully. However, the conclusion of his doubts lead me not to believe that we should include Clause 19 in the Bill but, if anything, we should be looking rather more carefully at Clause 18 to ensure that if predatory pricing in the newspaper industry is to be covered, it is properly and consistently covered in that provision. I do not intend to take up much time with that. That is our position and we maintain it.

I say to the noble Lords, Lord McNally and Lord Razzall, that we take some exception to the rather grand view that this debate has become slightly anti-Murdoch. The noble Lord, Lord McNally, indicated that the position we were adopting was not one of consistency or one we have taken throughout the Bill but arose from some hope that we might re-secure the affections of the Murdoch press. I come from Scotland. It is a long time since I thought the Sun in Scotland espoused, with all the historical duplicity of Braveheart, the Scottish national cause. I have long abandoned any belief that the Tory party in Scotland will secure its support again. No, we act on the basis that we consider that the Bill should be kept as simple and clear as possible.

There is only one good reason for sending the Bill back to another place and that is, once again, to enjoy the malicious pleasure of seeing Labour Members of Parliament, both new and old, having to troop through the Lobbies in support of Murdoch.

Lord Simon of Highbury: My Lords, yet again I rise after a very high quality debate enlightened by opposition from all sides of the House. This is now becoming a regular occurrence in a very short career. However, I shall battle on because I was heartened by the early entreaty of the noble Lord, Lord McNally, that we should make this an intellectual debate. Indeed, for

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some time we were on the right track. Unfortunately, we lost the track when we started to debate how the amendment, which is what we are currently discussing, could be applied to the Bill. I shall return to that point. I make it forcibly because many people have been debating the clause as it stands. That is not what we are debating. That has been rejected. We are debating the "McNally amendment". Many of my colleagues, I think inadvertently, have spoken to the clause, which we should not be doing.

The clause has been rejected but we all recall the issues raised by it which were discussed at length in the House in a debate of very high quality. I shall try to take into account arguments that the Government have been trying to develop which are effective, in my view, in making both the clause as it existed and this amendment untenable and unworkable.

Perhaps I may say straightaway to noble Lords that the Government recognise that the newspaper industry requires and indeed receives special treatment. That is not at issue. There has been no U-turn from the Government on that point. In all our debates the Government have, I hope, been very clear about the importance of having a strong, diverse and independent press in this country. That is why we have the special merger provisions for newspapers in the Fair Trading Act. They are there precisely to protect plurality of ownership and diversity of content. Clearly, there are specific public interest issues--not least accurate presentation of news and free expression of news--which need to be considered in merger cases involving newspapers. That is why we keep the special provisions in the Fair Trading Act.

As my noble friend Lord Borrie reminded us, it is also true that many industries are treated differently. That is absolutely correct. That is why the newspaper industry is treated differently in terms of its ownership and the requirement to meet the test of a strong, diverse and independent press. I have no doubt that the question from my right honourable friend in another place, Robin Cook, which was raised by the noble Lord, Lord McNally, is answered entirely by that point.

However, the Bill deals with matters, as many of my noble friends have observed, which are common across the entire industry. That is the critical point. The Bill is not about ownership; it is about dealing with abuses of dominance and other anti-competitive behaviour which are wrong wherever they occur. That is essentially why we do not need or want to treat newspapers differently under the Bill--the very point made by the noble and learned Lord, Lord Fraser. In that sense the Bill is inclusive. It is about prohibiting abuse across industry at large.

Why do we think it is important? I turn to the point made by my noble friend Lord Judd. He asked if we have a strategic view of why this is important. I have a very strong strategic view, and that is that competition is the essence here. That is what is important in the newspaper industry, as in any other industry, because competition breeds innovation and excellence. If the noble Lord does not believe that, he does not understand our strategy. I believe that in many areas in our nation,

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the competitive instinct needs to be developed. That is why the Bill is about competition in every sector of the business. In saying that we do not want to treat newspapers differently. Do not get me wrong. It does not mean that we are complacent about the newspaper industry--far from it. This Government have acted on the need for a stronger competition law. To crack down on anti-competitive behaviour is one of our first priorities. We are serious about competition. There are no special favours. Newspapers will not be exempt from that.

Of course, as many of your Lordships will know and as the noble Lord, Lord McNally, reminded us, the Director General of Fair Trading is already investigating complaints against The Times made by other newspaper companies. If he concludes that there is a case to do so, the director may make a reference to the Monopolies and Mergers Commission under his existing powers. If he does make a reference, the MMC will investigate and report on whether there are any adverse effects to the public interest. If it finds that there are adverse effects, it may make recommendations to the Secretary of State, who would then have wide powers to impose remedies.

I say particularly to my noble friend Lord Borrie--whom we all agree is an expert in this area--that we should wait for the facts of that case to be found. No one should draw conclusions in regard to individual cases until the facts have been found. Of course, once the prohibitions come into force, the director general will have stronger powers to investigate anti- competitive behaviour and to enable him to bring it to an end much earlier.

It is absolutely clear that the prohibition in Clause 18 covers firms abusing their dominance by predatory pricing. The case law shows that beyond doubt. As the noble Lord, Lord McNally, foresaw, the case of Tetra Pak in the European Court of Justice is not only a "fig" for what I am about to say, it is also at the very root, if I do not mix my culinary metaphors, of what we are saying. Following the earlier court decision on AKZO, where prices are below the average variable cost of production, predation should be presumed. In other words, proof of intent is not required. That is an objective test. The ECJ also held that if prices are above average variable costs but below total average costs, conduct is to be regarded as predatory where it can be established that the purpose of the conduct was to eliminate a competitor.

It is clear where the case law stands. But I should also like to examine a second point--the issue of dominance--to which many alluded. Again the jurisprudence is clear. The European Court, for example in the case of Michelin, defined dominance as a

    "position of economic strength which enables an undertaking to hinder the maintenance of effective competition in the relevant market by allowing it to behave to an appreciable extent independently of its competitors and customers and ultimately of consumers".
That definition is well established and well understood. It addresses the right competition concerns. There is no case for applying something different.

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Those principles, which are established in European case law, will apply under the Competition Bill by virtue of Clause 60. As your Lordships are well aware, subsection (2) of Clause 60 makes it clear that there must be no inconsistency in the principles applied by courts in applying the domestic prohibition and those laid down by the European Court and any relevant decision of that court. So the principles on predatory pricing established in AKZO and Tetra Pak, and the meaning of dominance established in Michelin and other cases, will apply under the Competition Bill.

It is important to have that clearly in our minds because I should now like to address Amendment No. 7A as debated tonight in some parts, and not Clause 19, which was rejected in the other House.

First, I say to the noble and learned Lord, Lord Ackner, that it is our submission that the clause is not necessary. I understand that to be a legal term, though I use it in the way in which it was put to me. What is more important is our belief that it is unworkable and that is one of the points that I should like to make.

This amendment addresses some of the deficiencies of Clause 19. However, it has problems of its own, as any amendment which seeks to impose a different prohibition in one particular sector is bound to do, as the noble Lord, Lord Harris, reminded us. First, this amendment throws out the whole concept of dominance and introduces a rigid market share test instead. It is simply not right to introduce what is a threshold for investigation in the Fair Trading Act into the very different prohibition-based approach in the Bill. The right test for a prohibition approach is the one we have under the Bill, in which dominance means a position of economic strength which enables an undertaking to act independently of competition. That principle is established in EC case law, for example in the Michelin case.

The opinion of Richard Fowler QC was mentioned as being an open opinion which we must respect. It is interesting that he says we may have to modify the Bill to address newspaper pricing. I return to something I said earlier. Whether or not The Times is dominant depends on the facts. It is surprising that that opinion can reach a view on that position without proper investigation and I wonder whether the eminent QC had the facts in front of him when drawing up the opinion. We are not aware of that. The DGFT could only assess the matter following a thorough investigation. The implication of the opinion is that The Times cannot operate independently of competition. In my view that is a matter to be determined on the facts.

I repeat that we believe the dominance test, as brought from EC law, to be the right test. It is companies which are able to act without worrying about their competitors who are liable to be able to abuse their position. The Bill will deal with such abuses.

By contrast, the rigid market share test in the amendment means it would apply to any national newspaper business with 25 per cent. of the market. There is indeed a 25 per cent. market share threshold in the Fair Trading Act, as the noble Lord, Lord Razzall, pointed out. But that is not the threshold for imposing a

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prohibition. It is the minimum threshold for allowing an investigation by the MMC. Under the Bill, the threshold for investigation is that the director should have reasonable grounds for believing that there has been an infringement of the prohibitions. There is no market share threshold. Nor should there be. The test for dominance is based on the real economic circumstances of the case in question, not some arbitrary percentage figure.

Under the Fair Trading Act nothing is prohibited per se. We need to remember that important distinction. The prohibition approach in the Bill is a much more serious proposition. Infringements will be unlawful, liable to stiff financial penalties and to civil actions for damages. This is the strength of the prohibition approach: it provides a much stronger deterrent and more effective remedies.

The other side of the coin is that it must be clear what "abuse" means, and that companies which are not dominant will not be caught. Otherwise businesses which are not dominant, but which are, on the contrary, vigorously competing in a very competitive environment, will not know whether or not what they are doing is lawful. The unintended result of the amendment would therefore be to create uncertainty, stifling legitimate competition and innovation.

The amendment will also create uncertainty by introducing a new definition of prohibited conduct. Clause 18 prohibits the same type of conduct which is prohibited under Article 86, and is to be interpreted according to EC jurisprudence. By contrast, there is no case law on which to draw in interpreting this amendment. Again, business will be left wholly uncertain as to what is lawful and what is not. Noble Lords talked of a Klondike for lawyers. This would be bigger than the Klondike ever was. It could be, in oil terms, another Alaska. If there were that much doubt about how the clause was to be applied, by golly, our loyal friends in the profession would have a good time! These are fundamental objections.

Finally, Parliament has given a great deal of close and careful scrutiny to the question of how the Bill will apply to predatory behaviour. I have tried, because it is important, to place on the table some of the legal doubts about the application of the amended clause. The debate has been very detailed, serious and well-informed. I thank the noble Lord for that.

The conclusion reached in another place in the light of all these deliberations was that Clause 19 should be removed and that an identical amendment to Amendment No. 7A, which we are now debating, should be rejected. Although I shall not go through the arithmetic of the vote in any detail since it may not be necessary, it was a very clear decision of the other House, however many 20s one may count. We may be satisfied that the arguments have been thoroughly and carefully examined during the Bill's passage and that the concerns raised by this House have been thoroughly addressed. On that basis, I urge the noble Lord to withdraw his amendment.

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