Select Committee on Constitution Minutes of Evidence

Examination of Witnesses (Questions 1020 - 1039)



Lord MacGregor of Pulham Market

  1020. I would like to follow up one of the lines of reasoning of Lord Jauncey in relation to other regulators and the prices, the licences and so on. You indicated that you have the capacity now to accept appeals from them if it were thought desirable to do so. Would that mean expanding your technical resources or do you feel you are already equipped to handle that extra workload?
  (Sir Christopher Bellamy) It might conceivably require some possible expansion. For example, one might want to reinforce specialist knowledge of the members in some particular area, but the basic principle upon which the Tribunal works is that the parties bring before the Tribunal the main elements in the debate and the Tribunal then adjudicates on what the parties bring before it. If there are technical matters that need to be gone into further, we have various ways of doing that. We spent Monday tramping across the fields of Hampshire looking at mobile telephone masts and local telephone exchanges to decide whether a radio base station back haul circuit using a particular technology did or did not fall within a particular provision of a particular Directive. We have quite a lot of technical problems. First of all, you get quite a lot from the parties or the parties' experts. If we need to, we have power to appoint our own experts who would then discuss the matters with the parties and with us and that would be an additional element that we could take into account in reaching our decisions. It is feasible to go down the road you mentioned if one wanted to do so.

  1021. As to appointing your own experts for a particular case, you could go outside and then you make your judgment on the basis of what they say and what the representations are, could you not?
  (Sir Christopher Bellamy) And what everybody else says, yes.

  1022. You will probably be aware that we have had some representations about the lack of an adequate appeals process for some of the regulators, so it is very interesting to hear what you have to say about that. Would you extend that to the FSA as well if it was thought desirable?
  (Sir Christopher Bellamy) I have to say, my Lord, that I am not qualified to comment on the FSA.

  1023. Have you the technical resources or the systems necessary to deal with appeals from the FSA if that were thought desirable?
  (Sir Christopher Bellamy) I would have thought the answer to that is yes, we have them or could put them in place. How that would fit with the Financial Services and Markets Tribunal I am not sure, but there is a Tribunal in that area. The exact jurisdiction I am a bit hazy about.

  1024. When you have to decide on the merits of the case, obviously to some extent that is judgmental, different people can take different views from the technical representations that they receive. On what criteria do you judge the merits of regulators to make what are sometimes technical decisions?
  (Sir Christopher Bellamy) In our Competition Act jurisprudence there is a general obligation on us to follow the principles of Community law. There is quite a developed body now of competition law principles which we seek to apply, although I have to say that at this stage it is still fairly rudimentary. To some extent we are developing it as we go along. I think you essentially bring to bear the same kind of analytical skills that any judge trying a technical issue brings to bear. He seeks to weigh the parties' arguments, he listens to the cross-examination, if there is cross-examination, he asks his own questions and at the end of the day you come to a view. It is difficult to be more precise than that. One tries to be consistent as one goes along from case to case.

  1025. You mentioned some of the ways in which you try to cut down the amount of time that is taken in appeal and obviously one of the dangers of having too many appeals processes is that it can be a form of filibustering by the parties. If your role was extended, would you be in favour of trying to ensure that you have fast track appeals where it is desirable?
  (Sir Christopher Bellamy) Again I think the answer is yes. My own view is that any appeals process in this kind of area has to be managed, you have to keep it within certain bounds otherwise it can just be used as a delaying tactic or a filibuster or a nuisance. We would contend that in many ways our procedure already is a fast track procedure in that we do aim to complete appeals within six months from the day it was lodged. We do that by keeping the parties to a tight timetable set in advance, by having regular case conferences to hone the case down and by striking out points at an early stage if they are not arguable points. We would strike out frivolous appeals in a summary way if that became a problem.

Lord Elton

  1026. As I understand it one of the changes made in 1998 was that the appeal body as it then was was empowered to look into due process and into the legality of what was done and the interpretation of the law, but then there was added the substance — I think that is the same term as the merits. What are the criteria that you apply in order to arrive at a decision on the merits? A decision on the merits I take it is where you take a different view from the authority as to what should happen in the general interest.
  (Sir Christopher Bellamy) In terms of the Competition Act, to take that specific statute as an example, one is asking oneself a specific question, that is has the regulator established that there is an abuse of a dominant position here or has he established that there is some infringing agreement. That is a question of fact, so you have to look at what the evidence is and the evidence may be in documents, in witness statements or in other circumstantial evidence or whatever. You have to base a judgment on the facts. You are not asking whether this was a judgment that a reasonable regulator could have arrived at, you are asking has he got it right on the facts. You then have to apply the law as you understand it to those facts and there is quite a body of case law in this particular area which one tries to apply or fill in. So you put the law and facts together and you decide whether you think the decision-maker has proved his decision in whole or perhaps in part, or whether there is some slightly different decision that is proved, not the one he originally took but one quite close to it that can be established. If the matter is duly established you then have to decide, if it is a penalty case, whether there should be a penalty and, if so, how much. When you get to that stage there are various criteria laid down in guidelines and so forth, but you are essentially doing the same operation that any court is doing when it is deciding what the penalty should be for a certain infringement. In that context the criteria one is applying are largely to be found in decided cases and you try to bring common sense and judicial judgment.

  1027. That is very helpful. What percentage of cases that are brought to you come to a conclusion different to that of the authority appealed against?
  (Sir Christopher Bellamy) It is early days yet and I think everybody so far has found the transition from the old rather administrative-based system to a more judicial-based system a transition that has involved a certain learning curve.

  1028. On whose part?
  (Sir Christopher Bellamy) On the part of the regulated authorities. I am not able to give you a very clear answer. We have upheld some decisions, others we have sent back. We have a power to remit the decision for the regulator to reconsider it and I think in two cases at least so far we have said, "Look, I am sorry, this is not quite good enough. It is in the public interest that this case proceeds, but we are going to send it back to you to have another go."

  1029. Do you suggest in what direction that should be?
  (Sir Christopher Bellamy) In those cases we have not so far suggested it though we have power to do so and in some cases we have said the regulator has not proved his allegation and we think the appeal therefore succeeds.

  1030. Although you premised your remarks by saying you are not a regulator, in effect you do have considerable influence on how the regulation is done.
  (Sir Christopher Bellamy) I think that is a fair comment, yes. I think in this kind of area the ground rules ultimately have to be decided by somebody and the various cases eventually funnel into the Tribunal and are subject to the control by the Court of Appeal. We are the body that develops the grounds on the basis of the decisions that a regulator takes and whether we uphold them or not.

  1031. Do you look on the framework of law within which you are operating as being something which you are comfortable with or is it something that could be improved?
  (Sir Christopher Bellamy) I personally feel relatively comfortable with the framework within which we are operating although I would like to see the rights of third parties, particularly under the 1998 Act, given consideration because my own view is that third parties and complainants are very often the grist to the mill of the system, they provide the energy and the initiative and in my view they are an important element. Under the regulatory system from which we are moving away there was in effect a kind of system of regulatory monopoly, that is to say the regulator had a monopoly as to whether he could take an initiative or not. If you could not get the regulator to do anything you were more or less stuck. As a third party, a small business or whatever, you do at least have the chance, if the regulator does not act or he acts in your view inadequately, to go to the Tribunal and say he has not done his job. I regard that possibility, speaking personally not officially, as a healthy development in the system.


  1032. What we are undertaking in this inquiry is not a general look at regulation as such that has been undertaken by bodies like the Better Regulation Task Force; our focus is accountability and essentially one of the questions is who regulates the regulators and in a way your answer to Lord Elton may have told us it may be you. The reason a body like yours exists is essentially to hold regulators accountable, you are fundamental to the mechanism of accountability. To what extent do you think the changes you have outlined have enhanced the accountability of regulators? I can see the benefit of the process you have outlined because you try to deal with these matters expeditiously and I can see from the point of view of those bringing those cases that is an enormous advantage in terms of time and presumably there is a cost implication as well. It is far less costly than one that drags on. I can see how you operate and it is enormously beneficial in that respect. I wonder whether the Acts that you have outlined and the implications there you would see as benefiting accountability in terms of the breadth of powers encompassed by the different Acts?
  (Sir Christopher Bellamy) It is not really very easy for me to express a view on how well we have done, that is something you would have to ask other people, but if one puts your question, if I may, my Lord, in an abstract way, it seems to me that there are three elements perhaps to bear in mind. First of all, the scrutiny of the appeals system or perhaps even just the existence of an appeals system should improve the quality of decision making and I have the subjective impression that that has happened. Secondly, the existence of a system and its operation should increase confidence in the system as a whole. Because we operate in public, because everybody can see what is happening and because our transcripts go straight onto the website—and as far as I can discover it is visited all round the world by people who are watching closely what we are doing—everybody knows what they are and I think that helps people to understand and have confidence in the system. Thirdly, it is a safeguard against regulatory capture, regulatory inertia or regulatory timidity which with the best will in the world may creep into any regulatory system from time to time. I am not suggesting that it has but it might.

  1033. People who want to bring a case not only know they can but that it will be dealt with fairly expeditiously and not drag on. On the third point, regulatory capture, would that be reinforced by the scope of allowing third parties to bring appeals?
  (Sir Christopher Bellamy) I would agree with you, my Lord Chairman, I think it is the third party element that is particularly important on that point.

  1034. So in a way that is enhancing the accountabilities of regulators because of the increased number of bodies that have powers to bring cases. If we look at it in that sense then the change that has taken place would appear to be beneficial from the point of view of accountability within the system.
  (Sir Christopher Bellamy) Yes.

Lord Jauncey of Tullichettle

  1035. I want to take you a stage further. I see that the decisions which are appealed to you under the 1998 Act are decisions where a prohibition has been infringed, whether it is a Chapter 1 or Chapter 2 decision. As you say you are looking at a question of mixed facts of law. In that decision the general criteria for public interest would not enter into it. You would look at the facts and see whether there had been an infringement as an infringement has been defined in the law and then make your decision. Is that right?
  (Sir Christopher Bellamy) That is right in general, my Lord, but in practice when you get to grapple with an issue like whether certain conduct is an abuse an area of "appreciation" comes into it and in making that appreciation matters that would fall under a public interest heading tend to be part of the arguments that are put to us. For example, we have had two cases so far, one of which is pending, that in   one way or another affect the pricing of pharmaceutical drugs. That is an area where there are various important interests at stake, the need to encourage research and development in drugs and the need to ensure that new drugs reach the market quickly and that people have an incentive to develop them. So up to a point a certain balance needs to be struck between those and pure competition issues. Those kinds of questions can come into it as well.

  1036. Any decision you make on whether or not something constitutes an abuse will presumably be supported by a judgment?
  (Sir Christopher Bellamy) Indeed.

  1037. And the judgment will be available and read by regulators?
  (Sir Christopher Bellamy) Yes.

  1038. So to that extent you do have an influence or certainly should have?
  (Sir Christopher Bellamy) Yes, we do have an influence and if they disagree with us they can appeal through the system.

Lord MacGregor of Pulham Market

  1039. Could I just ask you about the footnote in relation to paragraph 13 as it were in relation to privatised utilities. The sentence is, "As a form of challenge to regulatory action on the part of regulated undertakings and/or other affected bodies or citizens, this type of inquiry represents at best an oblique form of `appeal'." Could you just say a bit about what that means, and do I detect that there is a criticism of the present arrangements in that sentence?
  (Sir Christopher Bellamy) I would not wish to make any public criticism of the present arrangements. I think what is being said here is that the word appeal can be used rather loosely to cover rather different forms of process. I think I have explained what we mean by an appeal, which is the classic appeal mechanism. The traditional investigations by the Competition Commission where something is referred to them take the form of an administrative re-investigation of what the regulator has already decided. They are conducting another investigation to a large extent behind closed doors.

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