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Lord Fraser of Carmyllie: My Lords, I leave it to the noble Lord to answer that series of complicated questions. For my part, I simply thank the Minister for introducing the amendment in another place. It certainly meets the concerns which we expressed in this House.
Lord McIntosh of Haringey: My Lords, I am grateful for the observations of the noble and learned Lord, Lord Fraser of Carmyllie. I am grateful to my noble friend Lord Borrie for writing to us yesterday and giving us notice of his concerns. He is right to draw attention to the implications of this change to the Bill. When I started in business--far too long ago--we were taught that, if we signed a letter, it had to be "for and on behalf of" the company. When I started my own business, in 1965, I was told by our legal advisers that that was no longer necessary because the law as it stood then meant that anything we wrote on the company's letterhead was tacitly "for and on behalf of" the company. It is not entirely clear to me whether the ready-mixed concrete case to which my noble friend referred overturns that position. As I understand what my noble friend said, the agreements that took place between the ready-mixed concrete companies were not necessarily in writing, so areas of doubt remain. However, I can assure the House
that acceptance of Amendment No. 23 will not undermine the effectiveness of the new regime in deterring anti-competitive behaviour or tackling it vigorously when it does occur.The amendment introduces an important new safeguard for undertakings, reflecting the concerns expressed in this House. Penalties cannot be applied unless the director is satisfied that the undertaking has infringed the prohibition intentionally or negligently. However, I must point out that this limitation is on the imposition of penalties, not on the application of the prohibition itself. If the director is satisfied that the prohibition has been infringed by an undertaking, then he will be able to take enforcement action under the Bill to bring that infringement to an end. Only if he is satisfied that the infringement is intentional or negligent will he be able to impose penalties.
The amendment is not a licence for cavalier behaviour--not that my noble friend suggested that it was. It is clear from the principles set out in the decision of your Lordships' House in the case of the Supply of Ready Mixed Concrete (No2) that an employee, acting for an undertaking within the scope of his employment, who makes a prohibited agreement will be doing so as the company. The company will therefore be in breach of the prohibition and be liable accordingly.
The test as to whether an infringement is "intentional or negligent" mirrors that in Regulation 17/62 under which the European Commission acts when imposing fines for breaches of Articles 85 and 86. The director, in applying the test, will therefore be bound to apply European Community jurisprudence in applying the test to the Bill. Clause 60, with its purpose clause, sets this out clearly. The director will have to identify the legal person who is responsible for operation of the undertaking which has breached the prohibition. That will usually mean the company carrying on the business in respect of which the breach has occurred.
In deciding whether the undertaking has acted intentionally or negligently, the director will have to consider the degree of culpability for the infringement. For example, in the case of Deutsche Phillips the company was held liable for negligent infringement for including in agreements an export ban in error after the parent company had ordered its removal. The Commission determined that the company had not taken sufficient care to remove the offending restriction from agreements. A compliance programme which is ineffective to prevent infringements may be a mitigating factor but will not relieve the company from the imposition of penalties.
I hope that what I have said reassures my noble friend to some extent.
On Question, Motion agreed to.
24
Clause 39, page 20, line 4, leave out ("an appeal tribunal or the appropriate court").
Page 20, line 12, leave out ("subsections (8) and") and insert ("subsection").
Clause 41, page 21, line 19, leave out ("it is likely that the conduct infringes") and insert ("the conduct is likely to infringe").
Clause 43, page 22, line 10, at end insert--
Clause 47, page 24, line 5, leave out ("is") and insert ("has been").
Clause 47, page 24, line 6, leave out ("is") and insert ("has been").
Lord McIntosh of Haringey: My Lords, I beg to move that the House do agree with the Commons in their Amendments Nos. 24 to 29. These amendments were spoken to with Amendments Nos. 6, 9 and 23.
Moved, That the House do agree with the Commons in their Amendments Nos. 24 to 29.--(Lord McIntosh of Haringey.)
On Question, Motion agreed to.
25
26
27
("( ) to provide information,").
28
29
7.15 p.m.
30
Clause 50, page 25, leave out lines 32 and 33.
Lord Simon of Highbury: My Lords, I beg to move that the House do agree with the Commons in their Amendment No. 30. In doing so, I shall speak also to Amendments Nos. 31 to 33 and 62 to 73. These are all minor or technical amendments intended to enhance the efficient and effective operation of appeals under the Bill. The main substantive amendments are Amendments Nos. 64 and 71.
Amendment No. 64 replaces the power of the tribunal to "reverse" the decisions of the director with the power to "set aside" such decisions. We concluded that this change was merited in light of our consultations on the Bill.
Lord Fraser of Carmyllie: My Lords, perhaps I may interrupt the noble Lord and say that we are powerfully persuaded by the arguments that lay behind these amendments.
Lord Simon of Highbury: My Lords, I was about to say that the change was made in light also of the amendment tabled by the noble and learned Lord, Lord Fraser, and the noble Lord, Lord Kingsland, on Report which proposed that the tribunal should have the power to quash decisions.
Amendment No. 71 makes it an offence to fail. I should draw attention to Amendment No. 70, because it includes aspects of the appeals procedure. Amendments Nos. 63, 65 and 67 respond to points made by the noble and learned Lord, Lord Fraser, at Third Reading, and the noble Lord, Lord Kingsland, in Committee.
Moved, That the House do agree with the Commons in their Amendment No. 30.--(Lord Simon of Highbury.)
On Question, Motion agreed to.
31
Page 25, line 39, after ("to") insert ("proceedings before a tribunal in").
Page 25, line 40, after ("to") insert ("proceedings before a tribunal in").
Page 25, line 41, after ("to") insert ("proceedings before a tribunal in").
Lord Simon of Highbury: My Lords, I beg to move that the House do agree with the Commons in their Amendments Nos. 31 to 33.
Moved, That the House do agree with the Commons in their Amendments Nos. 31 to 33.--(Lord Simon of Highbury.)
On Question, Motion agreed to.
32
33
34
After Clause 50, insert the following new clause--
.--(1) The Secretary of State may by order provide for any provision of this Part to apply in relation to--
(a) vertical agreements, or
(b) land agreements,
with such modifications as may be prescribed.
(2) An order may, in particular, provide for exclusions or exemptions, or otherwise provide for prescribed provisions not to apply, in relation to--
(a) vertical agreements, or land agreements, in general; or
(b) vertical agreements, or land agreements, of any prescribed description.
(3) An order may empower the Director to give directions to the effect that in prescribed circumstances an exclusion, exemption or modification is not to apply (or is to apply in a particular way) in relation to an individual agreement.
(4) Subsections (2) and (3) are not to be read as limiting the powers conferred by section 70.
(5) In this section--
"land agreement" and "vertical agreement" have such meaning as may be prescribed; and
"prescribed" means prescribed by an order.").
Lord Simon of Highbury: My Lords, I beg to move that the House do agree with the Commons in their Amendment No. 34. This amendment is grouped with Amendment No. 45.
Noble Lords will recall that we spent a considerable time in Committee and on Report on the treatment of vertical agreements and, to a lesser extent, land agreements. This new clause allows the Government to provide special treatment including exclusion from the Chapter I prohibition of vertical agreements and land agreements. I should like to outline in some detail the Government's thinking in respect of these types of agreements and how we intend to use the power to be granted by this new provision.
I shall deal, first, with vertical agreements. We have said on a number of occasions that we believe that there is significant merit in granting exclusion or other special treatment for vertical agreements under the Chapter I prohibition. We believe that the new power proposed is
We have already provided an initial draft of the order excluding vertical agreements to a few contacts, such as the CBI and the National Consumer Council, on an informal basis to see whether they agree that we are on the right track. We propose, in the light of these informal contacts, to issue formal consultation documents to a wider audience of business and other interested parties.
Finally, I should perhaps say a word on how the new power will be used after the consultation period. I am happy to explain now how we propose to define vertical agreements in the draft order to be made under the provision in the new clause. As many noble Lords may be aware, the European Commission has been conducting a review of the treatment of vertical restraints. The Commission has circulated a paper setting out its findings following its review. The paper contains possible descriptions of vertical agreements which could form the basis for a description of vertical agreements which would benefit from the special treatment under the Chapter I prohibition. The Commission is still working on these proposals. However, one definition used in the papers which we propose to adopt in our first draft is:
The European Commission proposal for a new wide ranging block exemption is, however, still subject to numerous qualifications. We recognise that not all vertical agreements are benign and some can cause serious competition concerns. We do not intend to copy all the various qualifications and conditions that the EC propose. Nevertheless, we recognise that some vertical agreements can cause competition concerns which may not be readily dealt with by reliance on the Chapter II prohibition or the complex monopoly provisions of the Fair Trading Act.
Therefore, we need the consultation process and will continue with it. That the European Commission is still refining its proposal emphasises how right we are to deal with vertical agreements in secondary legislation.
Moved, That the House do agree with the Commons in their Amendment No. 34.--(Lord Simon of Highbury.)
"agreements between two or more undertakings, each operating on a different level of the supply chain ... and in respect of the delivery and/or purchase or marketing of goods destined for resale or transformation or in respect of the marketing of services".
We see great merit in using the same language as that proposed by the Commission. Many UK businesses are already subject to EC competition law and it may be burdensome for them to apply two different tests at the EC and UK level when deciding whether they come within the scope of the UK and EC prohibitions.
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