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Lord McIntosh of Haringey: My Lords, Amendment No. 2 would add to the list of decisions by the OFT that could be appealed to the Competition Appeal Tribunal under the 1998 Competition Act. The amendment refers again to new Section 46(2) but it should refer—as it should have done on the previous occasion—to new Section 46(3).

New Section 46(3) lists a number of decisions of the OFT that can be subject to a full appeal to the tribunal and further decisions may be added by regulations under new Section 46(3). Strictly speaking, it is not necessary, therefore, to add these further rights of appeal on the face of the Bill.

The right of appeal at paragraph (m) in the amendment is already available under new Section 46(3) and it is not necessary to grant it again. I apologise that my noble friend Lord Sainsbury inadvertently misled the House when he stated last week that we had already agreed to add this further right of appeal to new Section 46(3) and to new Section 47. He meant to say only that such a right of appeal on interim measures was to be granted to third parties under new Section 47. It is already available to parties under investigation.

I turn to the remainder of the proposals. I wonder whether the repercussions of adding these further rights of appeal have been thought through. The proposal at paragraph (l) of the amendment would provide a right of appeal against an OFT decision not to investigate a complaint under Chapter 1 or Chapter 2 for a party to an agreement. I am not clear why a party to an agreement would wish for such a right of appeal. Surely an OFT decision of this kind would favour the party to the agreement.

I wonder whether it was intended to add a third party right of appeal which could be dealt with under Section 47. The noble Lord indicates that that is not so. That removes that doubt in my mind. Complaints are the main way in which the OFT uncovers anti-competitive behaviour and give rise to some 1,300 cases a year. Many are initiated as a result of multiple complaints which can number in the thousands. Of those 1,300 cases, only 5 per cent provide reasonable grounds for suspecting an infringement of the Competition Act prohibitions which would lead to OFT's more formal powers of investigation being used. It would be highly wasteful of the resources of both the OFT and the Competition Appeal Tribunal if we were to provide a right of appeal to every complainant, especially in view of the fact that many complaints either do not give rise to competition concerns or do not contain enough evidence to warrant further investigation. However, it is the 95 per cent who would be appealing.

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I hope that that serves to demonstrate that the OFT does not initiate use of its formal powers unless it has carefully considered the information before it and believes that there may be a case to be answered which warrants further investigation. The first step is almost always to ask for further information under Section 26 and the OFT is always conscious of the balance between placing a burden on business and the legitimate needs of competition law enforcement. In some cases, a request under Section 26 can bring the anti-competitive conduct to an end and the OFT will not need to take any further administrative action.

In other cases, the use of further investigative powers will be necessary. Cases in which the OFT deploys its powers to enter premises almost always run through to a final infringement decision. Where an investigation is undertaken under a warrant, the judge issuing the warrant must be satisfied that stringent criteria are met before issuing the warrant. The OFT's investigative powers, which were extensively debated before they were granted during the passage of the Competition Act, are not used indiscriminately or without good reason. The OFT uses them carefully where it believes that there may be an infringement of the Competition Act. The system also has the appropriate checks and balances and there is a further check available to parties under investigation before a formal infringement decision is issued. OFT is required to notify the relevant parties of its intended decision and there is then ample opportunity for those parties to make oral or written representations, which the OFT will take into account in reaching its final decision.

I am still convinced that the remaining proposals in the amendment—that is, those in sub-paragraphs (i) to (l)—should not be taken forward. I cannot see that adding further rights of appeal to intermediate steps in the OFT's investigative procedures on cases where the OFT believes that the test of reasonable suspicion has been reached would produce an efficient and effective system that balanced the interests of all parties. Those are not substantive decisions of the OFT and we would be creating further barriers to the effective enforcement of competition law.

Amendment No. 43 would provide persons who had submitted material to the Office of Fair Trading, alleging an infringement of the Chapter I and Chapter II prohibitions of the Competition Act 1998, to seek a direction from the Competition Appeal Tribunal that the OFT's investigation of the alleged infringement is determined without any unnecessary further delay, where the court is satisfied that there has been undue delay on the part of the OFT.

I have already explained that the majority of complaints received by the OFT are not progressed either because they do not give rise to competition concerns or because they do not contain sufficient information. The amendment does not distinguish between those complaints and other complaints that give rise to concerns and which lead to further investigation. The amendment would require the Competition Appeal Tribunal to determine whether there had been undue delay on the part of the OFT in

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investigating those allegations. In my view, the CAT is not the appropriate body. At the earliest opportunity, we intend to bring into force paragraph 7 of Schedule 5 and paragraph 7 of Schedule 6 to the Competition Act, which would provide for an applicant aggrieved by the failure of the OFT to determine a notification under the Competition Act to apply to the courts seeking a direction requiring OFT to determine the application without unnecessary further delay. Those provisions were not to be commenced until the 1998 Act had bedded down. In view of that model in the Competition Act, it would not be appropriate to give a power to the CAT when a similar power has been granted to the courts. The amendment is to that extent defective.

Setting aside any deficiencies in drafting—one cannot have deficiencies in drafting at Third Reading in the second Chamber—I am firmly of the view that that amendment is not desirable. As my noble friend Lord Sainsbury said, in order to ensure that the most serious and harmful cases are dealt with effectively, the OFT needs to have the discretion to deploy its resources where they are most needed. If it is unable to judge the degree of priority that should be placed on individual complaints independent of external pressures, its ability to prioritise its caseload would be marred and investigation of serious breaches of the Act would be hampered.

As my noble friend said, many elements of an investigation are outside the control of the OFT, for example, where the OFT is dependent on further information from third parties. That can affect the time that it takes the OFT to gather the material necessary to further an investigation but it would not be assisted by that amendment. In other words, I cannot support the amendments.

4.45 p.m.

Lord Kingsland: My Lords, I am most grateful to the Minister for giving such a full explanation of his reasons for not supporting the amendments; that is much appreciated on these Benches.

I could reply in detail to the noble Lord's comments; these points have been well rehearsed by now in your Lordships' House. The fundamental deficiency with those points is rather like the fundamental deficiency of the noble Lord's approach to Amendment No. 1, on referring competition cases to the specialised tribunal. In the Competition Act 1998 and in the Bill, the Government have created a specialised body to deal with the judicial issues that arise out of anti-competitive practices. I remain puzzled about why the Government, having created that institution, persist in not allowing it to deal with all of the judicial issues that arise out of competition investigations and competition disputes. That appears to be wholly irrational.

I should very much like to test the opinion of the House on this amendment but we have already voted on Amendment No. 1. If we voted on every amendment about which I feel strongly, we should be here all night. I therefore hope that, after mature

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consideration, the Government will amend the Bill along the lines suggested in the amendment. Meanwhile, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 19 [Findings of infringements]:

Lord McIntosh of Haringey moved Amendment No. 3:


    Page 11, line 3, leave out "In any" and insert "This section applies to"

The noble Lord said: My Lords, in moving this amendment, I shall speak also to Amendments Nos. 4 to 7, 9 to 17, 21 to 24, 31, 45, 54 to 58 and 74.

These government amendments are technical and improving amendments which were identified following a final read through the Bill. We wrote to those who took part in these debates on what the amendments involve. They do not raise any issues of great substance but we believe that they are well worth making. They would improve the quality and internal consistency of the Bill as well as provide some additional future flexibility to deal with highly technical areas of the Bill. I shall focus my remarks on the more noteworthy of the amendments.

Clause 19 adds new Section 58A to the Competition Act 1998 to provide that infringement findings—for example, an OFT decision that the Chapter I prohibition has been breached—will be binding on the courts when the courts are considering damages claims. Amendment No. 7 clarifies that the new section does not apply in relation to infringement decisions that were made before the commencement of the section.

Amendment No. 17 to Clause 106 ensures the continued viability of the system by which the OFT offers confidential advice to parties considering a merger. Clause 106(1) currently requires the OFT to publish reasons for its decisions to refer or not to refer a merger. Clause 32(2)(b) states that the OFT may decide not to make a reference if the merger arrangements are not sufficiently advanced to justify it. The OFT would rely on that provision to avoid referring a merger in contemplation about which the parties had approached it for confidential advice. However, as the Bill stands, that would be a decision that the OFT is required to publish, which would undermine the confidentiality of the system. The amendment will ensure that the OFT will not be required to publish any decision not to refer where the grounds are those in Clause 32(2)(b).

Amendments Nos. 21 and 22 are minor amendments to Clause 120. They are designed to ensure that the Secretary of State has a similar power for determining turnover for the purpose of merger fee payments as is available for the jurisdictional turnover test in Clause 27. Amendment No. 9 deletes Clause 33 and replaces it with a power for the Secretary of State to make provision for the effective operation of Clauses 26 and 28. Clauses 26 and 28 enable the OFT to treat a sequence of transactions stretching over a prior period of up to two years—for example, the piecemeal acquisition of shares—as occurring

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simultaneously on the date on which the latest of them is recorded for the purpose of a reference. However, where the latest of the transactions is anticipated and there is therefore no firm date for the last transaction, a notional date is required from which to work back the permitted two years. Clause 33 supplies that notional date by saying that Clauses 26 and 28 will apply as if the anticipated transaction had occurred immediately before the date of the reference. However, we now believe that treating all the transactions as though they had taken place on that date sits uncomfortably with Clause 32 and related provisions, which are formulated on the basis that the merger is anticipated.

This is a highly technical area where we believe that a power to make regulations and adjustments to accommodate the rare hybrid cases that are a mixture of completed and anticipated transactions is preferable to setting out the detail on the face of the Bill. Amendment No. 24 makes the exercise of that new power subject to the affirmative parliamentary procedure.

Amendment No. 58 is concerned with the special regime for water mergers. It is consequential to the mass of amendments made on Report to the general merger regime. Where a merger case is handled initially in Brussels but falls subsequently to the domestic regime, it will ensure that the domestic authorities are not time-barred from considering those cases. This latest amendment ensures that the power provided in Schedule 6 to adapt by regulations the general mergers regime for the purposes of the water regime is wide enough to allow for the extension of the four-month timetable in the circumstances where ECMR proceedings have delayed the domestic consideration of a water merger. I beg to move.

On Question, amendment agreed to.


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