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Lord Hunt of Wirral: The Minister has told us what would happen if a Minister was not satisfied with a decision of the OFT not to make a reference. What happens when the Minister is not satisfied with a decision of the OFT to make a reference?

Lord Sainsbury of Turville: The point I should make clear is that the Minister has the right to make a reference, not to stop a reference. He would have the power, where he is not satisfied with a situation, to make a reference. That is very different from saying that he has a power to stop a reference, which would be wide of what we are discussing here.

I turn now to the second condition which must be fulfilled for a ministerial reference to be made. In addition to the Minister being satisfied that the reference criteria are met, he or she must be dissatisfied with the decision of the OFT not to make a reference. Alternatively, a Minister may make a reference where, having brought information about a possible reference to the attention of the OFT, he or she is not satisfied that the OFT is going to reach a decision on that possible reference within a reasonable period of time. This provision, contained in subsection (2)(b), exists simply to prevent the exercise of the ministerial power of reference being frustrated by administrative delay and to ensure that a reasonable degree of priority is given to the investigation of possible references brought to the attention of the OFT by Ministers.

The clause provides sensible back-stop arrangements for dealing with what we expect will be very rare cases. I think that we can be quite confident that such cases will be rare, because the ministerial power of reference in the Bill is drawn more narrowly than the corresponding provisions in the Fair Trading

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Act 1973 monopolies regime. Yet even under that Act, which allows Ministers complete freedom to make references where it appears to them that a monopoly situation exists and which prevents the Director-General of Fair Trading from being able to make references in certain sectors, so that in those sectors references can be made only by Ministers, there have been two ministerial references over the past 50 cases.

Finally, in making these arrangements, we have been mindful of the need to guard against any possible abuse of the ministerial power of reference. Like the OFT, Ministers must consult with those on whom they consider that a reference would be likely to have a substantial impact, explaining their reasons before making a reference decision. Once a reference decision has been made Ministers will, like the OFT, have to publish their reasons for it. Ministerial reference decisions, like those of the OFT, will be subject to challenge before the competition appeal tribunal. If they are inadequately justified, they are liable to be quashed. Thus there is clear control over Ministers making references which cannot adequately be justified.

Lord Hunt of Wirral: Much of what the Minister has told us is reassuring, but he has not yet had an opportunity to respond to the point I made about parliamentary accountability. As the Minister is envisaging only rare cases for what he has described as a reserve power, then presumably the Minister would do both Houses of Parliament the courtesy of making a Statement explaining them, thus ensuring that he or she is held accountable for having exercised this reserve power in the very limited circumstances described by the noble Lord.

Lord Sainsbury of Turville: I have described what we believe is the appropriate way for the Minister to be held accountable; namely, that he will have to publish his reasons for making a reference. Those reasons can then be challenged in the competition appeal tribunal, so a review is available. It is clear that the Minister would be held accountable for his decisions. We believe that that is the appropriate way to proceed.

Lord Hunt of Wirral: I made particular reference to parliamentary accountability. On reflection, perhaps the Minister will consider before we return to the matter on Report, that in the very limited circumstances he has described, it should not be only the competition appeal tribunal that is allowed to hold the Minister to account. Parliament should be able to do so as well. In any event, it will be a matter for Parliament.

I should like to take time to reflect carefully on the points made by the Minister. I thank him for his response.

Clause 127 agreed to.

Clause 128 agreed to.

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Clause 129 [Questions to be decided on market investigation references]:

Lord Hunt of Wirral moved Amendment No. 157:


    Page 94, line 30, after "market" insert "significantly"

The noble Lord said: If this amendment were accepted, Clause 29(1) would read:


    "The Commission shall, on a market investigation reference, decide whether any feature, or combination of features, of each relevant market significantly prevents, restricts or distorts competition".

Without this qualification, the commissioner would have to decide, no matter how minimal the effect on competition—which would be an unreasonably wide test. I hope that the Minister might consider accepting the amendment. I beg to move.

Lord Sainsbury of Turville: I shall deal first with Amendments Nos. 157 and 159, and then with Amendment No. 162.

Like Amendments Nos. 158 and 160, these amendments seek to introduce materiality into the Competition Commission's assessment of adverse effects on competition and detrimental effects on customers.

As I have said, there is no material difference in our minds between "significant" effects and "appreciable" effects. It should therefore come as no surprise to the Committee that I see no more merit in these amendments than in Amendments Nos. 158 and 160.

There are two main reasons why I believe it would not be wise to accept the amendments. The first has to do with the finding of adverse effects in itself; the second relates to the nature of the Competition Commission's duty to take remedial action, which, as we shall see, is very far from being unqualified. I shall deal first with the amendments in so far as they relate to adverse effects, and then consider the amendments proposed to subsection (5), on detrimental effects.

The clause does not impose any materiality threshold on the adverse effects on which the Competition Commission is required to report, and this is surely right. The Competition Commission will have carried out an extremely thorough investigation of the relevant markets, and its report should be as complete a picture of competition in those markets as it can provide. The publication of such information has a value in itself, independent of its relationship to the remedies process. But when it comes to deciding on remedies, we certainly do expect the Competition Commission to take account of the seriousness of the problems it is addressing. That is why the requirement of subsection (6) is to decide what remedies are "reasonable and practicable" to address each adverse effect on competition.

So if an individual adverse effect is not very significant—perhaps because the Competition Commission does not think it likely that it will ever have much of a detrimental effect on customers; or because it actually brings relevant customer benefits; or because the Competition Commission believes that, even in the absence of remedies, it will only be very short-lived—then it is unlikely to be reasonable and

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practicable to remedy it, unless the remedy concerned imposes only minimal burdens on the businesses concerned.

There is no reason not to remedy a small adverse effect on competition if the remedy concerned imposes only minimal burdens. On the other hand, a number of different adverse effects, although they are not individually very significant, may nevertheless, if taken together, constitute a serious prevention, restriction or distortion of competition, so that it would be reasonable and practicable to introduce a more intrusive remedy to address them all at once than it would have been reasonable and practicable to introduce or address them individually if they had occurred in isolation from the rest.

Moreover, where a remedy interferes with existing property rights—as will often be the case, for example, where parties' existing contractual rights are affected by a remedy—human rights law imposes the additional requirement on the Competition Commission that that remedy must be no more than is necessary and proportionate to address the competition problem identified.

Turning now to Amendment No. 162 and to detrimental effects on customers in the form of higher prices, lower quality, and less innovation or choice arising from an adverse effect on competition, much the same argument applies. It is right that the Competition Commission should document whatever detrimental effects on customers it finds, since that is an important part of the appreciation of the adverse effects. It is right in principle that it should try to remedy them in so far as they result from the adverse effects.

Again, we would prefer to leave it to the Competition Commission's assessment of what remedies are reasonable and practicable to determine whether particular detrimental effects are worth remedying. I hope that on the basis of that explanation the noble Lord will withdraw his amendment.

Lord Hunt of Wirral: I am grateful to the Minister for responding not only to Amendment No. 157 but also to Amendments Nos. 159 and 162 with which it is grouped. I would like time to reflect on the points he raised. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendments Nos. 158 to 160 not moved.]


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