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Lord Sainsbury of Turville moved Amendment No. 136:
- Page 126, line 26, at end insert "(after the acceptance of the undertaking or (as the case may be) the making of the order)"
On Question, amendment agreed to.
Clause 169 [Investigation powers of OFT]:
Lord Sainsbury of Turville moved Amendments Nos. 137 and 138:
- Page 126, line 37, leave out "(6)" and insert "(5)"
- Page 126, line 41, leave out "(6)" and insert "(5)"
On Question, amendments agreed to.
Clause 171 [Investigation powers of the Commission]:
Lord Sainsbury of Turville moved Amendments Nos. 139 and 140:
- Page 128, line 15, leave out "subsection (2)" and insert "subsections (2) and (3)"
- Page 128, line 29, at end insert—
On Question, amendments agreed to.
Clause 174 [Review of decisions under Part 4]:
Lord Sainsbury of Turville moved Amendment No. 141:
On Question, amendment agreed to.
[Amendment No. 142 not moved.]
Clause 176 [Orders under Part 4]:
Lord Sainsbury of Turville moved Amendments Nos. 143 and 144:
On Question, amendments agreed to.
Clause 178 [Interpretation: Part 4]:
Lord Sainsbury of Turville moved Amendments Nos. 145 to 148:
On Question, amendments agreed to.
Schedule 11 [The Competition Commission]:
Lord Sainsbury of Turville moved Amendments Nos. 149 and 150:
On Question, amendments agreed to.
Clause 182 [Commission rules of procedure]:
Lord Sainsbury of Turville moved Amendment No. 151:
On Question, amendment agreed to.
Schedule 12 [Competition Commission: certain procedural rules]:
Lord Sainsbury of Turville moved Amendment No. 152:
On Question, amendment agreed to.
Lord Hunt of Wirral moved Amendment No. 153:
The noble Lord said: My Lords, we turn now to the cartel offence. In this amendment, we seek to insert a definition of the phrase "dishonestly agrees".
Perhaps I may make it clear once again that these Benches do not oppose the principle of criminalisation. Although I have made the comment that it is moving to some extent in the opposite direction to the rest of the European Union, it is nevertheless right that those who engage in hardcore cartels should be punished severely. Criminalisation will indeed boost deterrence. That is a very important aspect of this debate.
So, if we do have the cartel offence, it must be made absolutely clear to all those who become aware of this legislation exactly what sort of activity could lead a business person to gaol. We therefore believe that some amendments are required to clarify the scope and effect of the proposed offence.
The concept "dishonestly agrees" will be difficult to explain in court in the context of competition law. It is important, therefore, to include the concept of intent. That is the purpose of Amendment No 153, which would insert a definition of "dishonestly agrees", which means:
Amendment No. 154 seeks to delete the words in Clause 183(2):
If the agreement should have any of those consequences unintentionally, the parties would presumably not be acting dishonestly. So we seek to improve the definition of a cartel offence in the way I have described. I beg to move.
Lord Razzall: My Lords, I support this amendment. The issue was discussed at significant length in Committee, and it is a simple one. Those from the Conservative Benches and ours who support the amendment do so not because we are against the principle of criminality for cartelisation. We believe that legislation to criminalise cartel activity in this country is long overdue.
No doubt the Minister, when he replies to the amendment, will indicate, as he did in Committee, that two approaches to tests for cartelisation were considered in the consultation document. No doubt he will say, as he did in Committee, that the definition of dishonesty in the Ghosh case ought to prevail because it is long tried and tested in case law. That is true. However, the concept of the offence of dishonesty, which could lead to significant criminal offences, touches upon areas of activity that hitherto have not normally been subject to criminal penalties in this country. We support the Conservative Benches' view that it is much better to have the definition of dishonesty with the requisite intent described on the face of the Bill than to rely on a case that did not originally apply to this type of activity, and which, had it done so, may not have been applied as the Government intend.
Lord McIntosh of Haringey: My Lords, I am grateful to both noble Lords for their support for the criminalisation of hardcore cartels. The noble Lord, Lord Razzall, is trying to anticipate what I will say, and he is doing so with reasonable accuracy. Amendment No. 153 alters the new offence by defining a dishonesty on the face of the Bill rather than relying on the Ghosh case in case law. The definition in Amendment No.153 would require the prosecution to prove that the defendant had made an agreement knowing both that it fell into one of the categories of hardcore cartel and that it breached Section 2 of the Competition Act 1998 and did not meet the criteria for exemption in Section 9 of that Act.
The second part of the definition is a real problem. A requirement of knowledge of a breach of the Competition Act would render the offence virtually unprosecutable. It would be extremely difficult, if not impossible, for the Crown to prove beyond reasonable doubt that the defendant who had concluded a cartel agreement did so knowing that he was breaching particular sections of the Competition Act 1998. That would undermine our ability to create a real deterrent. I note the points that the noble Lord, Lord Hunt, made about the need to boost deterrence.
We do not have the same problem with the first part of the amendment. However, it is not necessary, as the Bill already provides that for the offence to be committed, the agreements must be ones which,
We share the concern that these new offences should be tightly drawn. The offence as it stands targets "dishonest" agreements precisely in order to avoid catching bona fide activity which would be exempted under existing competition law; for example, Article 81 of the EC treaty or the equivalent provisions in the Competition Act 1998.
"Dishonesty", as we use it, creates a high hurdle for the prosecution. In any event, the Serious Fraud Office would not prosecute where the agreement would not be anti-competitive under existing civil competition law.
Amendment No. 153 also seeks to require the prosecution to prove that the agreement is made,
I turn to Amendment No. 154. The policy intention behind the words which would be removed is specific and important. The intention is that the offence should criminalise individuals who reach agreements to operate the various sorts of hard-core cartels, which are set out in paragraphs (a) to (f). If we were to leave it until they were implemented, we would find a prosecution knowing that it was going to take place and having to sit on its hands waiting for the detriment to occur.
Where individuals have entered into a dishonest agreement to operate a cartel, none of this reduces the seriousness of what they have done. An offence is committed whether or not the agreement reached between the individuals is implemented by the undertakings as the individuals intended. It is only right that they should be exposed to criminal sanctions, whether or not circumstances mean that the agreement is not implemented. I do not agree with the noble Lord, Lord Hunt, that that includes where they could not in practice be implemented.
I hope we all agree that a key purpose of the offence is to deter agreements being reached in the first place. The proposed amendment would undermine the deterrent effect.
"(3) Section 108(5)(b)(ii) shall, in its application by virtue of subsection (1) above, have effect as if—
(a) for the words "section 49 or 64, given" there were substituted "section 137, published or given under section 138(1) or (3)"; and
(b) for the words "(or given)", in both places where they appear, there were substituted "(or published or given)"."
Page 129, line 23, leave out subsections (3) and (4).
Page 130, line 43, after "repealed" insert "(and the previous enactment revived)"
Page 131, line 2, at end insert "and without prejudice to the making of a new order"
Page 132, line 1, leave out "Section" and insert "Sections 122(1)(b) and (4) to (6) and"
Page 132, line 1, leave out "it applies" and insert "they apply"
Page 132, line 5, after "notice" insert "under section 134(1)"
Page 133, line 13, at end insert—
"(5A) In subsection (4)(c) the reference to the acceptance of the undertaking concerned or the making of the order concerned shall, in a case where the enforcement action concerned involves the acceptance of a group of undertakings, the making of a group of orders or the acceptance and making of a group of undertakings and orders, be treated as a reference to the acceptance or making of the last undertaking or order in the group; but undertakings or orders which vary, supersede or revoke earlier undertakings or orders shall be disregarded for the purposes of subsections (3)(a)(iv) and (b)(viii) and (4)(c)."
Page 249, line 27, after "of"" insert—
"( ) in sub-paragraph (1), after paragraph (d) there is inserted—
"(e) one or more members appointed by the Secretary of State to serve on the Council.";"
Page 249, line 38, after "Commission"" insert—
"( ) in sub-paragraph (2), before paragraph (c) there is inserted—
"(bb) the member or members appointed under paragraph 2(1)(e);""
Page 135, line 24, leave out "section" and insert "paragraph"
Page 252, line 41, after "under" insert "section 59 of the Fair Trading Act 1973 (c. 41), section 32 of the Water Industry Act 1991 (c. 56) or"
Page 137, line 8, at end insert—
"( ) "Dishonestly agrees" means, for the purposes of subsection (1), making an agreement knowing that it has one or more of the consequences set out in subsections (2) to (6) in breach of the prohibition contained in section 2 of the 1998 Act (agreements etc. preventing, restricting or distorting competition) and not meeting the criteria in section 9 of that Act (the criteria for individual and block exemptions), with the dishonest intention of causing detriment to consumers or customers."
"for the purposes of subsection (1), making an agreement knowing that it has one or more of the consequences set out in subsections (2) to (6) in breach of the prohibition contained in section 2 of the 1998 Act . . . and not meeting the criteria in section 9 of that Act . . . with the dishonest intention of causing detriment to consumers or customers".
So, not only does the offence need to include the concept of intent; it should also be directly linked to infringements of the Competition Act, to make clear that normal business activities are not caught. I very much hope that the Minister will agree to include this definition in the clause.
"if operating as the parties to the agreement intend, would",
so that the subsection would state simply:
"The arrangements must be ones which"—
followed by paragraphs (a) to (f). Unless the words referred to in the amendment are deleted, it would appear that the offence could theoretically be committed, even where the relevant arrangements provided for in the agreement could not in practice lead to any of the circumstances set out in paragraphs (a) to (f).
11 p.m.
"if operating as the parties to the agreement intend",
would result in one of the cartel activities. The Bill requires the Crown to prove that the defendant acted with a dishonest state of mind, which is a critical part of the Ghosh definition. That implies both intent and knowledge of the consequences of the agreement.
"with the dishonest intention of causing detriment to consumers or customers".
The problem is that as soon as one brings "dishonest" into the definition it becomes circular. One would have to reintroduce the "Ghosh" test meaning of "dishonesty" in order to defend it. I do not know whether that is what is intended, but that is what it does. In any event, one does not need to refer to the detrimental effect on consumers or customers. The primary intention of the defendant is likely to be to earn supra-normal profits, not detriment to consumers. We are criminalising cartels because of their damaging effect, but bona fide business agreements which do no harm will not be "dishonest" agreements. As can be seen, I am unhappy with Amendment No. 153.
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