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Lord Eatwell: I speak to Amendment No. 300B, which is also in the group. I remind the Committee of the declaration of interest that I made a few moments ago.
The amendment addresses the Government's position on minority shareholdings that act as a trigger for consideration of control. My amendment would correct what I thought was an unfortunate slip in the drafting, but, given the experience that I had with the amendment that I moved a few moments ago, it may not have been a mistake after all. The amendment would correct an error in the drafting as to the use and effect of the trigger. Most importantly, the clause, as drafted, lies entirely outwith UK regulatory practice. It is, for example, inconsistent with practice under the Financial Services and Markets Act 2000.
Clause 350 amends Schedule 2 to the Broadcasting Act 1990 to enable Ofcom to treat a person as having control of a company if he or she has a minority shareholding of only 20 per cent. Ofcom would not have to provide any evidence that the person had such control. The burden of proof is placed on the minority shareholder to prove that he or she does not have control of the company. Not only is that offensive to our standards of natural justice and contrary to British regulatory practice; it is also economically inefficient. It discourages investment in the industry and could clog up Ofcom with requests for prior clearance of investment decisions.
My amendment would remove those distortions from the process by requiring Ofcom to advance some reasonable grounds for believing that the possession of
Clause 350 provides the regulator with a power that is open to abuse. The amendment would correct the position as regards the issue of control.
Lord Razzall: I shall add one comment to those that have been made, but I shall not detain the Committee long.
Several pertinent questions have been asked of the noble Baroness. I look forward to her answer. I shall add one more: is she happy that the definition of controleither amended in the various ways proposed or unamendeddeals with something that is a concern in other jurisdictions, of which I would pick out Australia as being typical, where it has been the practice for control of media companies to be disguised by the use of offshore trusts? Is she satisfied that, under the provisions in the Bill as it stands or amended as proposed by the noble Baroness and the noble Lord, such questions will be dealt with by the definition of control?
Lord Crickhowell: I shall not speak for long but this is an important matter. It was not a subject for consultation by the Government. It came as a surprise to most of those involved and reverses the onus of proof. I entirely agree with the point made by the noble Lord, Lord Eatwell. It is likely to have a potentially damaging impact on investment, particularly at a crucial moment when companies are developing from a small base. Coming from a government who have always said they wish to encourage investment, this seems perverse. I agree with the points made by my noble friend Lady Buscombe.
As to which amendment I would pick, I admit to not having very strong views. I like the amendment of the noble Lord, Lord Eatwell, for its simplicity and because it switches the onus of proof. That has some virtues. This is a clear case where the Government can come forward with a workable solution. Throughout the day the Minister has been unresponsive. She has found a reason to deny almost every suggestion that has been made. She is piling up an enormous raft of trouble for Report stage. I suggest that this is an occasion when she should understand that it would be perfectly possible for the Government to come forward with a more acceptable solution. If they do, they will remove that subject from lengthy debate at Report.
Baroness Blackstone: The 1990 Act, as amended by Clause 350, supplies a definition of where a person has control over a body even though they do not hold more than a 50 per cent interest. The intention is to allow the regulators to consider cases where a person has substantial control over a body without that being
I shall start with Amendments Nos. 300A, 300B and the first part of new Clause 229A. An amendment to Schedule 2 to the 1990 Act made by Clause 350(2) means there would be a presumption of control in relation to any person with a holding of 20 per cent or more of shares and voting rights. I am aware that there are many objections to this presumption of guilt. Having considered the argumentsthe noble Lord, Lord Crickhowell, always poses his question at the right pointI am prepared to consider this further with a view to bringing forward amendments at Report stage to remove this presumption. They will place those with an interest in a media company in a similar position to those with a holding in any other enterprise. I therefore hope that Amendments Nos. 300A, 300B and the first part of 299A will not be pressed. I hope this meets the point raised by my noble friends Lord Eatwell and Lord Gordon of Strathblane.
Turning to Amendment No. 300, spoken to by the noble Baroness, Lady Buscombe, it is important to recognise that the Enterprise Act and the Broadcasting Act are different acts with different purposes. The relevant provisions of the Enterprise Act are concerned with merger control, while the Broadcasting Act provisions are concerned with safeguarding plurality. There is no necessary reason why their definitions of control should be expressed in the same way. That is the answer to the question asked by the noble Baroness.
I am quite sure that the words in the Enterprise Act were carefully chosen and that they achieved the required result in that context. That does not mean that they should be adopted in the different context of media plurality. The provisions in the Broadcasting Act have worked effectively since 1996. Those who operate them and on whom they operate, know how to interpret them. The purpose of Clause 350 is not to make any substantial change in those provisions, but simply to clarify them. Therefore, I can see no reason to abandon an established form of words in one context for a different form of words from a different context. Both formulations do the job for which they were intended: if something is not broken, you do not fix it.
I return to the rest of the proposed new clause in Amendment No. 299A. As the Committee will be aware, Clause 350 already requires Ofcom to publish and, from time to time, revise guidance on the matters that will be taken into account when considering questions of control. Subsection (3) onwards of the new clause would also require Ofcom to consult on the guidance in draft and give a timetable in that respect.
I recognise that Ofcom is required in some cases to consult on draft guidance. However, that is not always the case. It depends upon the importance of the issue.Further, Clause 3 requires Ofcom to adopt "best regulatory practice". Therefore, even where the Bill
The proposed clause would also make the guidance much more prescriptive by making it include the factors that Ofcom consider,
As for the specific question raised by the noble Lord, Lord Razzall, I should have thought that matters like offshore trusts would be taken into account. However, I shall check the position and write to the noble Lord to confirm that information.
In the light of my response, I hope that the noble Baroness will feel able to withdraw her amendment.
Baroness Buscombe: I shall be brief. I thank the Minister for her reply, with which I am somewhat disappointed. As my noble friend Lord Crickhowell said, we are discussing important issues. That is especially so as they were not properly aired in another place. I shall consider with care the Minister's response to all these amendments. Unlike my noble friend, I like all the amendments in the group. I am certainly supportive of the noble Lords, Lord Eatwell and Lord Gordon of Strathblane. Their amendments simply approach the matter from a different angle in an effort to face this most important subject. We are concerned about any proposal in the Bill that would in any way deter investment. That point is tremendously important.
As I said, I shall read and carefully consider the Minister's response in the Official Report. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Clause 350 [Meaning of "control"]:
[Amendment No. 300 not moved.]
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