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Baroness Miller of Hendon: My Lords, perhaps I may make one more point on housekeeping. The four days were agreed on provisionally; not finally. I believe that that could be confirmed.
Lord McIntosh of Haringey: My Lords, that is news to me. But we shall have to work hard, bearing in mind the complexity of the issues before us.
I shall deal separately with competition, consumer affairs and insolvency. I want to introduce my remarks on competition with a little of my own experience. In the early 1960s I was market research manager for one of the largest lamp and lighting companies in the country. We belonged to an organisation called the Electric Lamp Industry Council. It had magnificent premises in Bedford Square with an Angelica
Kauffmann ceiling above the magnificent staircase and a splendid boardroom where the committees met. On the mantelpiece was a motto from John Ruskin:
- "There is hardly anything in the world that some men cannot make a little worse and sell a little cheaper, and the people who consider price only are this man's lawful prey".
That was the most blatant excuse for price fixing and cartelisation that I have ever known. In the electric lamp business in the 1960s the price of every single lamp was determined by agreement by all the manufacturers. There was a red book which set out the discounts which might be allowed to super wholesalers, wholesalers and small wholesalers. That went on, rampant and unchecked, and nobody did anything about it until Mr Heath did something with resale price maintenance. I am sure a lot of that still goes on and I am sure that we shall be learning more about it as the cartel provisions come into effect.
In the competition section I shall start by talking about the competition test because the noble Baroness, Lady Miller, questioned whether the competition test was the right alternative to the public interest test. I think that a competition test is more practical. I believe that the phrase, "public interest test", sounds good, and it works in some areas—for example, the Crown Prosecution Service—but in this case surely it is more realistic to be talking about competition as a principal factor in UK merger policy that should now be a legislative requirement. It is time to bring the legislation into line with practice. That is what the competition test in effect does. The test will be whether the merger is expected to result in "a substantial lessening of competition". That is the nearest to the competition analysis which is applied at present and that will be the concept which will guide the Office of Fair Trading and the Competition Commission and they will have to explain that in guidance.
Perhaps this is housekeeping, but we were criticised for not allowing the Competition Act enough time to bed in. The point here is that the Competition Act 1998 did not address merger and monopoly powers and many of those were seriously dated. My noble friend Lord Borrie gave evidence on that point. When he said that this legislation follows on naturally from the 1998 Act I think that is the correct way to look at it.
A number of comments were made about the Office of Fair Trading itself, a general welcome for it being established as it is rather than as a creature of the Director General of Fair Trading. I was asked for some assurances about that. In particular my noble friend Lord Borrie asked me to ensure that we would not have the part-time members of the Office of Fair Trading board undertaking individual investigations. I can certainly give him that assurance. The conditions for the board are very clear, although they are to be found in the "consumer" section of my briefing notes. They are that the board should focus on the OFT's strategic vision and direction, prioritisation and monitoring progress against targets. We expect the board to delegate most operational decisions to the Chairman and OFT officials. I hope that that will give my noble friend the assurance that he needs.
The noble Viscount, Lord Astor, expressed great concern about the existing delays in the Office of Fair Trading and I hope that he will be reassured by the need for the new OFT to approve a service delivery agreement, objectives and targets on which it will have to report on a regular basis to Parliament, because of course the OFT will be a body responsible to Parliament.
I may be skipping around a bit but the noble Lord, Lord Hodgson, asked whether companies would be able to continue to approach the OFT for confidential advice about mergers. The answer is that they certainly will.
The noble Viscount, Lord Astor, was concerned particularly about delays in broadcasting decisions, and I sympathise with him about that. He asked particularly about double jeopardy for sectoral regulators. The answer is that we are extending the concurrency working party agreements which have worked well under the existing Competition Act regime. The principle is that the best body to act should do so and if there is no agreement it goes to the working group to decide who should take it forward. There ought not, under those circumstances, to be a problem of double jeopardy.
There was a general welcome, although muted in the sense that it was hardly mentioned now I think about it, for the competition appeals tribunal. The noble Lord, Lord Brennan, made the valuable point that it needs to be as informal as possible. Of course, it has to be an independent tribunal and for that reason the chairman and the president will be appointed by the Lord Chancellor and appointments will be for a single longer term so that there are no issues raised by re-appointment. I agree with him that the proceedings have to be informal and that is the basis on which ordinary members of the tribunal will be able to hear appeals.
Inevitably there were questions about the cost of the market provisions increasing cost to business, raised by the noble Lord, Lord Boardman, and my noble friend, Lord Borrie. It is not necessarily the case that more markets will be referred to the Competition Commission than at present. The reference criteria are no more permissive than under the current monopolies regime. The Office of Fair Trading only refers when it thinks that there is a real likelihood of a serious competition problem and this is demonstrated by the fact that the Competition Commission has recommended remedies in all but one of the last 12 monopoly cases which have been sent to it.
Everybody except the noble Lord, Lord Phillips, welcomed the diminution of ministerial involvement in decisions about market investigations. We shall no doubt hear from the noble Lord, Lord Phillips, on that subject in Committee and I look forward to that. He made the only really radical speech in the whole debate, if he does not mind my saying so.
I have dealt with the issue of the competition test. There was considerable discussion on the criminal offence and the issue of dishonesty. The noble Lord, Lord Razzall, welcomed it. The noble Baroness, Lady
Miller, was concerned that it should not be thought of as being the same thing as theft and she objected to the use of theft. I am not sure that I agree with her. The dishonesty element will ensure that only people who are entering into agreements which they know to be wrong may be charged with a criminal offence and dishonesty will be tested against standards already established in case law. Juries will ask themselves whether what was done was dishonest by the standards of reasonable people and whether the defendant understood that that was the case.It has not been defined in existing legislation but the relevant legislation is of course the Theft Act 1968. I think there is a reasonable balance between the civil offences and the criminal offences just as I believe there is the same reasonable balance in the Financial Services and Markets Act. The working together of the OFT and the Serious Fraud Office means that the OFT will be collecting evidence to different standards for civil and criminal cases. For criminal cases it will need to follow the Police and Criminal Evidence Act criteria and procedures because it will have to hand that over to the Serious Fraud Office. Incidentally, I would say to the noble Lord, Lord Phillips, and the noble Lord, Lord Hodgson, that the SFO conviction rates, which admittedly were lower in earlier years, have risen to 87 per cent in 1997-2002. My judgment is that my noble friend Lord Borrie was right in approving the decision to have those matters dealt with by the Serious Fraud Office.
Finally on the issues involving competition, there was concern about disclosure and information. I heard what my noble friend Lord Brennan said about overprotecting the corporate system. I was interested in the fact that implicitly the noble Lord, Lord Phillips, made similar points. If that issue is raised in amendments, I shall consider them with interest.
I turn to consumer issues. I am glad to say that to some extent I have already pre-empted myself by discussing the accountability of the OFT. It will be accountable to the Secretary of State, Parliament and the public. The chairman could be summoned by Select Committees. It will have to follow the general principles of good governance for all bodies corporate. It will have to publish an annual plan and an annual report, which will inevitably cover some of the elements of a regulatory impact assessment. It may or may not decide to publish minutes. The appointments will be in accordance with Nolan principles. I must resist the idea that comes up from time to time that there should be prior approval of appointments by a Commons committee. If that is to be done, we should do so knowing what we are doing rather than introduce the practice piecemeal. However, I have said that before and I guess that it becomes less convincing each time that I say it. The noble Viscount, Lord Astor, was concerned that the OFT should act in accordance with the principles of good governance. We believe that it will do so.
I have answered the issues raised by my noble friend Lord Borrie and, to some extent, by the noble Viscount, Lord Astor, about the role of the board. The noble Baroness, Lady Miller, asked for the assurance
that the OFT would still have to give proper consideration to complaints from members of the public, not just super-complaints. The OFT will have to consider any complaint that it receives that raises issues that are relevant to its functions. The special procedure for super-complaints does not affect that. She also asked for further information about what sort of bodies could be designated enforcers in relation to Part 8 for consumer protection purposes. The private bodies will be designated by the Secretary of State in a statutory instrument. They must have as one of their aims the protection of the collective interests of consumers and they must fulfil criteria that are set out by the Secretary of State, which will be designed to ensure that they act impartially, independently and with integrity and that they have the ability to take action under Part 8. The criteria will be based on the criteria for designation that are set out in the stop now orders, on which we will consult fully. If those bodies behave in a way that does not meet the criteria, we could take away the designation.I did not hear many complaints about the super-complaints procedure, although there were concerns about the time of response. My noble friend Lord Brennan welcomed the 90-day period. I believe that the noble Viscount, Lord Astor, thought that it would be difficult to keep to 90 days in view of the bad experiences that he related.
On the stop now orders, the main issue is the general duty to trade fairly. The consensus, I gather, is that we should not go towards a general duty to trade fairly. The European Commission is looking into those issues. Of course we believe that businesses should trade fairly but we are targeting our new laws on the areas of real concern, which are those that should be concentrated on at the moment.
The noble Baroness, Lady Wilcox, asked about Section 14 of the Trade Descriptions Act and the issue of mens rea; the noble Lord, Lord Hodgson, raised the same point. Misdescriptions by traders in relation to goods and services will usually constitute a misleading advertisement under the Control of Misleading Advertisements Regulations. Mens rea is not a consideration under those regulations and the provisions can already be enforced by stop now orders and will be covered by Part 8. I heard the doubts of the noble Lord, Lord Hunt, on that matter and was to some extent encouraged by his comments. I also heard what the noble Lord, Lord Hodgson, said about postal scams from abroad. That is covered by the same misleading advertisements regulations. The cases that he gave would be more a matter for the Financial Services Authority than for this legislation.
There has been a considerable degree of misunderstanding about the insolvency provisions. The impression has got about that somehow bankruptcy is becoming an easy option. Our policy is and remains that if bankrupts can pay, they should pay. On entering bankruptcy, a debtor's assets are liable for sale for the benefit of creditors, just as is the case at present. Bankruptcy has a wide-ranging impact on the lives of those who enter it. They risk losing their
homes and possessions and they face severe restrictions on their finances, such as availability of bank accounts and their ability to obtain future credit, including mortgages. If a bankrupt has earnings, he is likely to be subject to an income payment order or an income payment agreement. They will apply to all bankrupts, regardless of their culpability. They will not be affected by early discharge, and they will continue to run after discharge for the full three-year period.The noble Lord, Lord Boardman, raised the concern that the one-year period was not long enough. I hope that he will be reassured if I repeat the fact that income payments orders will extend beyond discharge and will run for three years. That, from the creditor's point if view, is the important point.
We are introducing a new and tougher regime of bankruptcy restriction orders for those bankrupts who represent a risk to the public or commercial community. That involves those who fail to account for losses and incur a debt where there was no reasonable expectation of being able to repay it, fraud and failing to co-operate with the Official Receiver. Those orders can apply for between two and 15 years. Any previous bankruptcies will be taken into account when considering bankruptcy restriction orders. The present regime allows for criminal action against bankrupts only where there is misconduct. We believe that that regime will allow the Insolvency Service more flexibility with regard to the way in which it deals with those who represent a risk to the public, which is what really matters. That applies in relation to what a number of noble Lords, notably the noble Lord, Lord Razzall, said about rogue bankrupts. The noble Lord, Lord Hodgson, who was concerned about this, was right to suggest that the loss to creditors is the important consideration. That is still the case under the regime that we are pursuing.
There was concern about the proposed timescales in the streamlined administration procedures. One of the key points that is coming out of consultation is that administration takes too long. It does not provide any certainty for creditors about when they might get paid. We need to address that issue in order to reassure the lending community. With the changes that will be introduced elsewhere in the Bill, administration will become more accessible and attractive, particularly to smaller firms. The costs of running a lengthy administration can be a barrier to entering the existing administration procedure. Let us have more debate on timescales in Committee.
I was interested by the comments of the noble Lords, Lord Razzall and Lord Hunt, who is expert in this area, on "business against company" rescue. We would not want the administrator to rescue companies that are empty shells at the expense of rescuing viable businesses, especially when that would mean that the creditors would suffer. We want to put company rescue at the heart of insolvency procedures because we want to save companies which have a decent chance of survival so that they are not driven to the wall unnecessarily. I do not make a distinction there between business and company. If they carry on it is
the business which does so by means of the company surviving. But I am sure that we can return again to this matter in Committee.The noble Baroness, Lady Miller, made a point about employees' claims. Under the Employment Rights Act the Government meet, and will continue to meet, the redundancy payments of employees where the employer has become insolvent. That does not mean that the employee cannot make additional claims. It is a statutory provision and the Bill enhances the position of employees. Where the Secretary of State and the employee both have a preferential claim in insolvency proceedings, it removes the Secretary of State's priority over that employee.
I believe that noble Lords could have been a little more welcoming about the abolition of Crown preference, which is a rather important matter which has bugged many of us over a number of years. I did not hear much of the welcome which I believe we were entitled to.
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