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Lord Phillips of Sudbury: My Lords, I am most grateful to the Minister for his extremely careful and detailed response. I hope that he will forgive me if I do not respond instantly to all that he has said. I, along with other people, will consider it very carefully. If necessary, we shall return and, if necessary, we may come to the Minister to talk about certain matters. However, in the meantime, I am happy to withdraw the amendment.

Amendment, by leave, withdrawn.

Lord Sainsbury of Turville moved Amendments Nos. 96 and 97:

Page 95, line 31, leave out ", in the course of business,"

Page 95, line 34, leave out ", in the course of business,"

On Question, amendments agreed to.

Clause 127 [Ministerial power to make references]:

Lord Kingsland moved Amendment No. 97A:

Leave out Clause 127

The noble Lord said: My Lords, this amendment seeks to remove the ability of the Minister to make references to the commission. This matter was debated in Committee.

The noble Lord, Lord Sainsbury, stated that the prime aim of the Bill is to take Ministers out of the final decision-making process in competition cases. We

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accept that, with the exception of public interest criteria, that has been done for market investigations and mergers.

Clause 127, of course, only gives the appropriate Minister the power to refer to the Competition Commission. We nevertheless believe that there is a serious risk of politically motivated references, requiring companies and bodies to incur considerable expenditure. All references should be left to the expert competition body. I beg to move.

10.15 p.m.

Lord Sainsbury of Turville: My Lords, it has been clear for some time that there is a difference of views on Clause 127, which we see as providing a sensible backstop provision—a reserve power to be used in exceptional circumstances. Others have portrayed the clause as contradicting a policy pursued in the Bill of taking Ministers out of decision making in competition cases.

Ministerial references are permitted under the Fair Trading Act 1973 and monopolies regime but have only been made rarely. We do not expect that they would be a more regular feature of the operation of the new regime. Primary responsibility for considering possible references and deciding what references to make lies with the OFT and those sectoral regulators with the relevant concurrent powers.

We expect that only very rarely will Ministers have reasonable grounds to be dissatisfied with a decision of the OFT not to make an investigative reference or with the speed or apparent failure of the OFT in reaching a decision one way or the other on a possible reference. It would be imprudent, however, to assume that such circumstances will never arise or, given the complexity of the economic issues that can arise in potential market investigation cases, that both the OFT and a Minister who disagrees with an OFT decision may not have valid points of view. In such a borderline case, it is appropriate that the Competition Commission should look at the matter thoroughly, rather than risk potentially significant competition problems going uninvestigated.

In no sense is the role that we are proposing for Ministers determinative. They are merely being given the right to ask a question. The valid exercise of that right depends on Ministers having a reasonable and reasoned economic assessment of competition in the market or markets concerned. Ultimately, all reference decisions will stand or fall not on their political merits or demerits but on the economic justification. If Ministers make an unreasonable market investigation reference, they will—like the OFT—be open to the possibility of challenge before the CAT. Their decision and the reasoning behind it will have to be capable of withstanding that level of scrutiny if a ministerial reference is to be validly made. Any ministerial reference decision would no doubt receive some degree of publicity. As Ministers will be accountable to Parliament in respect of such decisions, they would be expected to defend them in Parliament.

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On that basis, the power is justified and does not contradict the policy pursued in the Bill of taking Ministers out of decision making in competition cases. I ask the noble Lord to withdraw the amendment.

Lord Kingsland: My Lords, I am partially reassured by the noble Lord the Minister. He indicated that the circumstances would be rare, indeed, in which the power to intervene would be exercised. I wonder whether the Minister can go further and speculate on the kind of circumstances in which he would expect this rarely exercised power to be used.

Lord Sainsbury of Turville: My Lords, I cannot really add anything. There may be situations where there is disagreement by the Secretary of State, who ultimately may feel that there is a competition issue that needs seriously to be examined. The key issue is that the clause offers the possibility only of making a reference—it is not determinative. There are no circumstances in which Ministers would not take great care in making references. Because they might be thought to be political, Ministers would be carefully scrutinised. Unless the references can withstand the review which takes place by the Competition Commission, they will fall and in that case will not be valid. The fact that it is not determinative—it is the power only to make a reference—should give everyone security that this power will be rarely used: only where the Secretary of State feels strongly that a competition situation has not been properly considered.

Lord Kingsland: My Lords, I am grateful for that further explanation by the Minister, which has helped me to understand the circumstances in which the noble Lord foresees the power being exercised. I shall reflect on his comments. Meanwhile I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 128 [Contents of references]:

Lord Sainsbury of Turville moved Amendments Nos. 98 and 99:

Page 97, line 16, after "persons" insert "by or"

Page 97, line 16, after "or" insert "by or"

On Question, amendments agreed to.

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

Lord Hunt of Wirral moved Amendment No. 100:

Page 97, line 21, after "market" insert "significantly"

The noble Lord said: My Lords, we now turn to the determination of references and to the questions to be decided on market investigation references. Here we return to the word "significant". I suppose I could go away satisfied with the words of the noble Lord, Lord Borrie, that one should read in the word "significant" because that describes the attitude of mind of the previous regime in that it would not seek to decide a matter unless it was a significant measure which restricted, distorted or prevented competition.

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However, it would be a great reassurance to the world of business and commerce if the word "significantly" could appear in Clause 129(1) as is suggested by Amendment No. 100, after the word "market", so that it 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".

I believe that without that qualifier on the face of the Bill the commission would have to decide the issue no matter how minimal the effect on competition, which would be an unreasonably wide test.

Subsection (2) contains the definition of the phrase "adverse effect on competition", which is used throughout Part 4. Here, again, Amendment No. 101 seeks to insert the word "significantly" after the word "market", to read:

"For the purposes of this Part, in relation to a market investigation reference, there is an adverse effect on competition if any feature, or combination of features, of a relevant market significantly prevents, restricts or distorts competition".

Subsection (5) reads:

"For the purposes of this Part, in relation to a market investigation reference, there is a detrimental effect on customers".

Amendment No. 103 would insert the word "significant", to read:

"there is a significant detrimental effect on customers".

The subsection then continues to explain the circumstances in which that would be found.

I believe that that change is also needed to prevent insignificant effects driving action which would be costly and burdensome for business. I hope that the Minister will accept the amendment. I beg to move.

Lord Hodgson of Astley Abbotts: My Lords, I support my noble friend. Noble Lords will probably have received the CBI's briefing on this point—certainly the Minister's officials will have—about how this meshes with the European Court of Justice's decisions and the implications drawn from a number of cases that the CBI describes as John Deere, New Holland-Ford and the 1999 Italian banks case, where it was decided that where restrictive agreements have an insignificant effect on competition they fall outside the prohibitions.

The CBI draws attention to the publication last year of the

"Commission Notice on agreements of minor importance which do not appreciably restrict competition under Article 81(1) . . .".

The CBI makes the powerful case that a de minimis test is an important principle of competition law, helps to free businesses from regulatory burden and gives them some security that small-scale activities will not be subject to investigation. I therefore support my noble friend and I hope that the Minister, seeing that it will mesh closely with the decision of the European Court of Justice, will see fit to accept the amendments.

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