Previous Section Back to Table of Contents Lords Hansard Home Page


Lord Hunt of Wirral: I am very grateful to the Minister for his response. I believe that he has very adequately answered the point I raised. He has also understood that we were trying to find some way of restricting what otherwise has to rely on the common

18 Jul 2002 : Column 1534

sense of the chairman. There is a general understanding that when Parliament gives powers to an individual one should not have to rely on his common sense, but one has to lay down his boundaries. There are no boundaries here. But I should like to reflect on what the Minister said. In those circumstances, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

11.45 p.m.

Clause 182 agreed to.

Schedule 12 [Competition Commission: certain procedural rules]:

Lord Kingsland moved Amendment No. 179:


    Page 248, line 38, leave out "may" and insert "shall"

The noble Lord said: Amendment No. 179 is a probing amendment. As the Minister is aware, the text to which the amendment relates is in Schedule 12 which incorporates Schedule 7A. Paragraph 2 states:


    "Rules may make provision—

(a) for particular stages of a merger investigation, a market investigation or a special investigation to be dealt with in accordance with a timetable and for the revision of that timetable".

What I seek to probe—and I shall take mergers as an illustration—is the relationship between that paragraph and Clauses 23 and 24 of the Bill. Clause 23 is headed "Time-limits and prior notice" and Clause 24 is headed "Extension of time-limits". Those two clauses set out in some detail the timetable for an investigation and include a certain number of specific constraints.

Is the intention that paragraph 2 of Schedule 7A should vary Clauses 23 and 24? In other words is the tail capable of wagging the dog, or does paragraph 2 operate within all the constraints contained in Clauses 23 and 24? I beg to move.

Lord Sainsbury of Turville: In addressing the amendment it may be helpful if I explain the purpose of Schedule 12 and how it fits into the rest of the Bill. It is closely related to Clause 182, which places a new requirement on the chairman of the Competition Commission to produce rules of procedure for the commission's reporting group.

As the term suggests—and this is a point I wish to stress—the rules of procedure will be binding on reporting groups. This is a significant step forward on the current procedural arrangements set out in Schedule 7 to the Competition Act 1998. There the chairman merely has a power to publish guidance for reporting groups to which they have regard.

Schedule 12 provides a non-exhaustive list of matters that the chairman might want to include in the rules. Its purpose is twofold. First, it gives an indication of the kind of ground that the rules might be expected to cover. Secondly, it puts beyond doubt that certain types of procedure are clearly within the scope of the chairman's power to set rules. It is intended, however, to be illustrative and not prescriptive.

18 Jul 2002 : Column 1535

Schedule 12 and the related clause reflect our view that, as the final decision-taker in the new regime, the commission should have responsibility for determining its own detailed procedures within the overarching framework set by the legislation. Certain key aspects of procedure, we agree, should be set out in the legislation. That is why the Bill sets out a maximum statutory timetable for inquiries, and statutory obligations to consult, to draw up rules of procedure and to provide full reasons for decisions.

Within these core legislative parameters, we think it is preferable that the Competition Commission should have the flexibility to determine its own procedures. This places responsibility where it should properly lie. It has the added advantage of ensuring that there is flexibility for procedures to evolve in the light of experience, and administrative law trends without the need for further primary legislation.

The sort of detailed procedural matters that would be prescribed by the amendment are matters that can and should be left for the chairman to determine. However, I can assure the Committee that those issues are covered in the draft rules of procedure, which have been placed on the commission's website and in the Library of the House. For example, draft rule 5.2 states:


    "After the group has been appointed, it shall, as soon as practicable, make arrangements for an administrative timetable to be drawn up which shall make provision for the major stages of the reference".

I hope that that is reassuring. I think that we all agreed that reporting groups should draw up detailed timetables for inquiries and have rules about the documents that need to be made available by and to parties to an inquiry. Those matters do not need to be prescribed. In the light of those arguments, I urge the noble Lord to withdraw the amendment.

Lord Kingsland: Once again, I am most grateful to the Minister for his reply. My concern was that the timetable rules might breach some of the stipulations set out in Clauses 23 and 24. I shall of course read carefully what the Minister said, but I think that he said that it was important for the internal discipline and conduct of inquiries by the commission that it set timetables—I am sure that that is right—and that their timetables would be set within the framework of Clauses 23 and 24. In other words, they will not require more demanding schedules than those in the Bill.

If that is not true, the tail will indeed be wagging the dog, because internal, discretionary decisions of the Competition Commission will be varying stipulations placed in an Act of Parliament.

Lord Sainsbury of Turville: If it is helpful, Clauses 23 and 24 concern the time limits for the OFT's reference of mergers. Schedule 12 concerns the timetable for Competition Commission inquiries. So the two are unrelated.

Lord Kingsland: That is helpful. So nothing either in Clauses 23 and 24 or elsewhere in the Bill in any way

18 Jul 2002 : Column 1536

constrains the Competition Commission's timetable. Is its internal timing entirely discretionary? I am most grateful to the Minister. In those circumstances, I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Schedule 12 agreed to.

Clause 183 [Cartel offence]:

Lord Hunt of Wirral moved Amendment No. 179A:


    Page 134, line 10, leave out "dishonestly" and insert "knowingly or recklessly"

The noble Lord said: We now come to Part 6, which contains some important provisions. In moving the amendment, I seek to ensure that there can be some objective assessment of an individual's intention to enter into an undertaking under the clause.

The word "dishonestly" should be omitted and substituted by the phrase "knowingly or recklessly". As the Minister will be aware, the definition of the criminal offence is absolutely central to the proposed criminalisation of cartels and must therefore be entirely clear in its terms. At present, the requirement is one of dishonesty, which certainly signals that the offence is serious—and rightly so. Would the application of a dishonesty test be effective in practice? Many of the legal brains that have considered Clause 183 find it unclear how proof of dishonest intent would be established to the requisite standard. That is why I have been advised that a more appropriate definition of the mental element of the offence might use the phrase,


    "knowingly or recklessly enters into an agreement"

of a specified kind.

We will shortly hear from the noble Lord, Lord Sharman, about another amendment in the group. His amendment is another attempt to clarify the way in which the cartel offence is defined. The Minister may also wish to consider the other amendments in the group—Amendments Nos. 181, 182 and 183. I invite him to consider the various suggestions and await his response with great interest. I beg to move.

Lord Sharman: As the noble Lord, Lord Hunt of Wirral, said, my amendment, Amendment No. 180, is in this group. I can do little better than echo the noble Lord's concerns about the definition of "dishonestly".

It is right that those who engage in hardcore cartel activity should be punished severely. Criminalisation would help to deter. However, some amendment to clarify the scope and effect of the proposed offence is needed. In particular, it is essential to include the concept of intent in the definition. The concept of dishonestly agreeing will be difficult to explain to the court in the context of competition law. The offence should be linked to infringements of the Competition Act 1998 to make it clear that normal business activities will not be caught.

It is essential that we get it right, if the criminalisation of such activities can be effected. I support the amendment.

Lord Hunt of Wirral: That was an interesting analysis. It may be helpful to the Minister if I give some further details on Amendment No. 181.

18 Jul 2002 : Column 1537

The purpose of the amendment is similar to that of the others. It would link the offence to a substantive infringement of competition law, as set out in the 1998 Act. The amendment proposes to insert the following formula:


    "An individual is only guilty of an offence under subsection (1) if he dishonestly"—

or "knowingly", "recklessly" or whatever word is determined—


    "agrees with one or more persons to make, implement or cause to be made or implemented agreements which fall within section 2 of the 1998 Act and do not meet the criteria in section 9".

That would tie the offence for individuals to the substantive infringement of competition law in the 1998 Act.

If the Minister were minded to accept the amendment, he would avoid the problem with the present wording of the Bill, which means that an individual could be convicted where the agreement qualifies for exemption under Section 9 of the Competition Act 1998. Under subsection (2) the offence would appear to cover exclusive distribution agreements. For example, A would agree only to supply B as its distributor in the UK and would not sell directly to end-users. B would agree not to distribute competing products. Such cases are fairly common, as the Minister will know, and are generally regarded as being efficient and pro-competitive. In fact, the European Commission has issued a block exemption approving such arrangements.

So I believe that it would not be sufficient to rely on the discretion of the prosecution not to bring proceedings in such a case. That would depend in turn on whether the prosecutor thought there was any dishonesty, or behaviour that was knowing or reckless—whichever the test should be. The offence carries a substantial period of imprisonment. Certainly we would contend that the liberty of the individual should not be at risk save where Parliament clearly intends that that particular conduct should be criminal.

In its present form the clause leaves a large element in the hands of the enforcement agency and thus goes against the concept of maximum certainty in the definition of an offence. That, after all, is a concept which underpins human rights principles. Objectivity would be retained as a test of dishonesty, as laid down in the case of Ghosh, by requiring the jury to investigate not only the state of mind of the defendant, but also to interpret it in the light of what the reasonable man would envisage to be dishonest. Moreover, unlike the clause as drafted, if the amendment were to be adopted, it would prevent prosecutions from being brought in cases where the economic impact was insignificant. That is because in order to fall within Section 2, the anti-competitive agreement would have to have an "appreciable effect on competition".

I understand that the Government argued in another place that linking the offence to the substantive competition infringement would result in economic arguments being adduced which juries would find extremely difficult to determine. I believe

18 Jul 2002 : Column 1538

that economic arguments will often be adduced by an individual in his defence in order to demonstrate that he was not acting dishonestly. Similar conduct has been approved by the OFT or the European Commission in other cases.

That is the reasoning behind Amendment No. 181. Perhaps at this stage it might be best to pause and allow the Minister to respond.

Midnight

Lord McIntosh of Haringey: Here we start on Part 6 of the Bill concerning cartels. I should like to say first that I welcome the recognition on the part of both Front Benches that it is right that, given the qualification of "under certain circumstances", we should create a criminal offence of creating a cartel. Now, as the noble Lord, Lord Hunt, has said, we have to get it right.

I turn first to Amendments Nos. 180 and 181 which seek to provide a definition of dishonesty. I shall then go back to respond to Amendment No. 179A which would reject the word "dishonestly" and replace it with "knowingly or recklessly". I wish to defend the concept of dishonesty.


Next Section Back to Table of Contents Lords Hansard Home Page