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Lord McIntosh of Haringey: My Lords, the amendment is more subtle than the ones put forward in Committee and on Report. It is particularly subtle in that although it is evidently concerned with the legal profession it does not actually say so. I admire that in a way.

There are two levels to the amendment. At a simple level, the amendment proposes that references to the prevention, restriction or distortion of competition are to be interpreted in the same way as the same references in the Competition Act. Our only objection to that at a simple level is that it is superfluous. The formulation "prevent, restrict or distort" has no

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special meaning here which it does not have in the Competition Act, the monopoly provisions of the Fair Trading Act or in Article 81(1) of the treaty.

The OFT, in its draft guidance on market investigation references, notes that,

    "EC case law and the past practice of the CC both indicate that the phrase should be interpreted broadly to encompass any reduction or dampening of actual or potential competition".

In our view, references to the prevention, restriction or distortion of competition already are to be given the same meaning as references to those concepts in the Competition Act because in both contexts the words concerned are used in the ordinary and natural meanings.

I could stop there, but to do justice to the amendment I have to refer to the question of legal professional rules because that is what the supporting speeches were about. Broadly speaking, the rules governing the provision of legal services in the United Kingdom are of two kinds: those made by statute and those made by the Bar Council and the Law Society. Rules made by statute are not the concern of this amendment. They do not fall within the Competition Act prohibitions or their EC equivalents and it is not within the power of the Competition Commission to change them in any way. Any action to modify such rules would be taken by the Government and Parliament.

Legal professional rules made by a body such as the Bar Council are likely in many cases to be considered to be decisions of undertakings within the meaning of Article 81(1) of the EC treaty. I understand that the Bar Council has agreed that that is the case. If the rules restrict competition to an appreciable extent and have an effect on trade between member states of the European Union, they may be prohibited under Article 81. There are a number of ways in which they may escape being prohibited, but the important thing to note is that it will be impossible for the Competition Commission, following a market investigation, to use its powers under Clause 160 to prohibit any rule which falls within the ambit of Article 81 but is not prohibited by it. This is because of the provisions of the draft new regulation for the application of Articles 81 and 82, which will implement the so-called "modernisation" of European Community competition law. We expect this to come into force before any investigations under Part 4 have been concluded.

The new regulation is expected to provide that national competition authorities must always apply Articles 81 and 82 where they are applicable and may only apply national competition law in such cases if the result of the national law proceedings is compatible with the result under Community law. So a professional rule which falls under Article 81(1) but would not, for whatever reason, have been prohibited under Article 81, will not be capable of being prohibited as a result of a market investigation. On the other hand, if a professional rule is prohibited under Article 81, no provision of national competition law can save it.

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The only situation in which the Competition Commission will be empowered to take remedial enforcement action in respect of a professional rule is where that rule is not made by statute and is not a decision of an association of undertakings within the meaning of Article 81(1). Given the case law of what constitutes an association of undertakings, it may be that no legal professional rules at all fall into this category. However, in case there should be any such rules, I shall review the possible outcomes of the Competition Commission's analysis of them under Part 4.

In the normal way, assuming no public interest intervention, there are essentially four possible outcomes. The first is that the Competition Commission may find that the rule in question does not prevent, restrict or distort competition at all. The second is that the commission may find that a rule has both adverse and beneficial effects for competition. Having identified the adverse effect on competition, the commission would be bound to consider what could be done to remedy it. If the pro-competitive effects of the rule outweigh its restrictive effect, and if the rule could not be modified in such a way as to preserve its pro-competitive consequences while removing its restrictive effect on competition, then it would not be reasonable to seek to change it. On the other hand, if it were possible to modify a rule in that way, then it would be reasonable.

A third possible outcome is that the Competition Commission is certain that a rule has, overall, an adverse effect but decides not to take action to remedy that adverse effect because the rule concerned also has positive consequences, not in terms of competition but because it gives rise to relevant customer benefits—a point made by both the noble Lord, Lord Phillips, and my noble friend Lord Brennan—within the meaning of Part 4. These benefits would consist of services being provided, whether generally or to particular groups of customers, at a lower price—a point that was not made—to a higher professional standard, more innovatively or in a way which gives customers greater choice. Given the circumstances of the legal profession, and the kind of rules that might be under investigation, the concept of "customer benefits" may be found to be a more permissive one than the Article 81(3) exemption criteria were found to be in the Wouters case. That case related to rules of the Dutch Bar. I do not think that we can read across directly to the rules of the Bar Council.

Finally, the Competition Commission may simply decide that the rule restricts competition, that it has no redeeming features in terms of distinct pro-competitive effects, and that it either gives rise to no relevant customer benefits or that those that it does produce are not such as to outweigh the adverse effect that it has on competition. It will then be for the commission to consider what steps it is reasonable and practicable to take to remedy, mitigate or prevent the adverse effect on competition and any detrimental effects on customers.

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Of the four possible outcomes, three are likely to leave the hypothetical professional rule intact, while only one is likely to threaten it. If the supporters of this amendment are correct in their assessment of the value of legal professional rules—it is a wider subject than I want to enter into now—this last outcome is all but inconceivable. In any event, we do not think that the likelihood of any of the above outcomes would be affected one way or the other by making this amendment.

I must apologise for the length of my response, but when dealing with lawyers we have to go into a certain amount of detail.

To summarise, the words,

    "prevents, restricts and distorts competition",

have no special meaning here or in the Competition Act. The legal professional rules made by statute fall outside competition law altogether. The fate of rules which constitute decisions of associations of undertakings will be decided not by the Competition Commission but in accordance with Article 81. Any rules which do not fall into either of these two categories will be subject to remedies by the Competition Commission following a market investigation only if the Competition Commission determines that they do not in fact bring the benefits which their supporters claim for them. All of this would still be the case were the amendment to be accepted, and it would add nothing to the Bill. I ask the noble Lord to withdraw it.

6 p.m.

Lord Phillips of Sudbury: My Lords, first, I should express considerable gratitude to the Minister for his detailed response. It will cause a little reading late into the night and, heaven knows, might even induce a little sleep. It was an important speech. Clarity, so far as one can have it in this sphere, is very important.

The crucial point, as the Minister twice made clear, is that if this amendment were on the face of the Bill it would not change the Bill's effect. He refuses to accept the amendment solely because it is unnecessary; it is superfluous. That was precisely the position taken on Report by the noble Lord, Lord Sainsbury of Turville. I apologise for referring earlier to the Committee stage; we discussed this matter on Report. That, at least, has been made abundantly clear by the exchanges that we have had in this House and that will be valuable and important.

The Minister made reference to Wouters, saying that the case related to the Dutch Bar and that there is no read across. In a literal sense, no, there is not; but the ratio of the decision is directly relevant to the interpretation of this Bill and of the Competition Act. It was to make clear that and similar points that we wanted this provision on the face of the Bill. It would have helped in its future interpretation. However, in the circumstances, I do not think that there is any question of dividing the House. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

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Clause 133 [Questions to be decided on market investigation references]:

[Amendments Nos. 27 and 28 not moved.]

Clause 178 [Review of decisions under Part 4]:

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