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Lord Bassam of Brighton: My Lords, I thank both noble Baronesses for their praise for the regulations. I hope that by saying a few further words I may have sufficient time to read the note that has been presented to me on some of the questions that were raised.
The noble Baroness, Lady Hanham, asked about delay. I understand that we have been consulting on the regulations with various rating professional bodies. As the noble Baroness said, these are complex matters—it is the 1000th regulation—and that consultation took somewhat longer than expected. However, most of the substance of the changes was embodied in negative regulations many months ago. We have now put those aspects together, one of which is fairly recent following the Local Government Finance Act 2003. In a sense, we have used the opportunity created by the delay usefully to bring in that aspect via this regulation.
I hope that there will be a degree of consolidation. I cannot be certain on that point, but it seems to be highly desirable. We are all grateful and glad that my noble friend Lord Woolmer and the noble Lords, Lord Moynihan and Lord Phillips of Sudbury, were so active and persuasive on mandatory rate relief. It would be remiss of me if I did not thank also my noble
friend Lord Pendry, who reminded us of the Northern Ireland example. He showed us that if it could be done there, it could be done here too.On Question, Motion agreed to.
Preparatory Commission for the Comprehensive Nuclear-Test-Ban Treaty Organization (Immunities and Privileges) Order 2004
8.2 p.m.
Baroness Symons of Vernham Dean rose to move, That the draft order laid before the House on 19 April be approved [15th Report from the Joint Committee].
The noble Baroness said: My Lords, the order was laid before the House on 19 April 2004, together with an explanatory memorandum, which is now required for all affirmative statutory instruments. The purpose of the order is to enable the Government to implement their obligations in the appendix to the agreement signed in 1999 between the United Kingdom and the preparatory commission for the comprehensive test ban treaty organisation (CTBTO) on the conduct of activities, including post-certification activities relating to international monitoring facilities for the comprehensive test ban treaty. The UK ratified that treaty in 1998. The CTBT provides for the establishment of the CTBTO. The appendix confers legal capacity on the preparatory commission. It confers privileges and immunities on the preparatory commission, its representatives, representatives of its members, its officials and its experts. Those privileges and immunities are comparable to those accorded to similar international organisations.
The agreement facilitates the activities of the provisional technical secretariat of the preparatory commission of the CTBTO in conducting in the UK and other member states the following: an inventory of existing monitoring facilities; a site survey; the upgrading or establishment of monitoring facilities; and the certification of facilities to international monitoring systems standards. It does so with the goal of facilitating the continued testing, provisional operation as necessary and maintenance of the international monitoring system in pursuit of an effective comprehensive test ban treaty. That work has to be carried out to ensure that the effective monitoring arrangements can really be put into place.
I am satisfied that the order is compatible with the European Convention on Human Rights. I commend it to the House. I beg to move.
Lord Astor of Hever: My Lords, I thank the Minister for explaining the order. We shall not oppose it. It is right and proper that officials of the provisional technical secretariat of the preparatory commission of the CTBTO have the status, the diplomatic immunity and the appropriate privileges for which Appendix 1 to the agreement provides. I have a couple of questions for the Minister.
I understand that the PTS started its work in Vienna in 1997. Are Her Majesty's Government satisfied that it is working effectively and positively? Does the agreement extend to the overseas territories?
Baroness Symons of Vernham Dean: My Lords, I thank the noble Lord—
Lord Redesdale: My Lords, I also plan to be brief, but perhaps not as brief as the Minister thought. We on these Benches also support the order, but I have three questions for the Minister.
First, what influence do the Government plan to exert on America to think about joining the treaty organisation, although it seems unlikely that it will do so at the moment? Secondly, the Government have recently provided £2 million to equip the Atomic Weapons Establishment at Aldermaston with the means to design and build a new generation of tactical nuclear weapons. Under the terms of the treaty, how will the new tactical weapons, or "bunker-busters", that I believe the establishment is looking at be tested? They obviously cannot be tested in the real world. Are they to be tested just under simulation, or are they to be tested as part of the Americans' programme if the Americans do not sign up to the treaty and start testing again? Thirdly, is the policy set out by the Secretary of State for Defence in March 2002, that first strike with nuclear weapons is to be considered as a British option, still to be adhered to? This seems to be rather a strange attitude to take. On the one hand, we are talking about signing up to a Comprehensive Nuclear Test Ban Treaty; on the other hand, we are talking about using the nuclear arsenal which, under the obligations we have at the moment, we should be considering dismantling rather than using. We are looking at that nuclear arsenal as a means of intimidation as regards the rest of the world.
Baroness Symons of Vernham Dean: My Lords, that welcome intervention from the noble Lord, Lord Redesdale, has allowed time for the Box to send me all sorts of interesting answers to your Lordships' questions. I thank both noble Lords for the support that they have given. The noble Lord, Lord Astor, is quite right in saying that we should confer the legal capacity on the preparatory commission for the comprehensive nuclear test ban treaty. We should ensure that it is in the same position as similar other international bodies.
The noble Lord, Lord Astor, asked me how the preparatory commission has been working. It has been working well. It is, of course, the Civil Service element of the CTBT and assists the preparatory commission in making the preparations come into force. As we all know, its duties include the supervising and co-ordinating of the operation of the international monitoring system. Once the treaty has entered into force, the Comprehensive Nuclear Test Ban Treaty Organisation will take over from the preparatory commission, as I am sure the noble Lord has noted.
The noble Lord also asked about the position of the overseas territories. The agreement does not apply to the overseas territories; a separate appendix or
appendices will be concluded, setting out that the agreement applies to them. That will be done by having an exchange of notes with the appendix or appendices annexed. There will be a further stage to go through with regard to the overseas territories.The noble Lord, Lord Redesdale, asked about the United States. I so often have to stand at this Dispatch Box and persuade the opposition parties—particularly, if I may say so, the Liberal Democrats—that there really are differences between the United Kingdom and the United States on a whole range of policy issues. It is really no secret that the UK and the US have different views over the value of this treaty. The United States is well aware of our views; we agree on the importance of supporting the international monitoring system, for which the United States continues to provide funding. The United States reduced its funding to the CTBTO in 2002, but the reduction was small compared to its overall financial contribution. I have spent quite some time trying to persuade our friends in the United States that our view on these and similar matters is the right view to take. I am not deterred by my lack of success and shall continue to try so to do.
The noble Lord, Lord Redesdale, asked me a rather technical question about the way in which the testing would be carried out and contrasted the system in this country with that of the United States. My understanding is that the system that will be used will be that of the United Kingdom. Unless I find that I have committed a faux pas in giving that assurance to your Lordships, we shall leave it at that. If I have made a mistake, I shall write to the noble Lords, Lord Redesdale and Lord Astor, to correct it.
Lastly, the noble Lord, Lord Redesdale, asked me about the whole question of first strike. The fact is that the United Kingdom is not going to give up the option. We all know that it would be used in extraordinarily extreme circumstances. The noble Lord is experienced enough to know that it is highly unlikely that a Minister at the House of Lords Dispatch Box at 12 minutes past eight on a Wednesday evening would turn over what the Secretary of State for Defence had said. I am bound to tell the noble Lord that I have no change in policy to announce on that particular issue.
On Question, Motion agreed to.
Competition Act 1998 (Determination of Turnover for Penalties) (Amendment) Order 2004
8.12 p.m.
Lord Triesman rose to move, That the draft order laid before the House on 31 March be approved [15th Report from the Joint Committee].
The noble Lord said: My Lords, this legislation represents the first major change in this area for 42 years—since February 1962. It is appropriate that after such a period of time a major overhaul should take place.
I hope that it will be helpful if I open this debate on this important issue by setting out the context in which the Government have decided to introduce these statutory instruments. Their purpose is to amend certain aspects of United Kingdom law governing competition rules and how they are enforced. Primarily, they introduce certain changes to the Competition Act 1998. Those changes are being made mainly because equivalent changes have now been made in the corresponding European Community law. In November 2002, the European Council of Ministers approved the text of a new EC regulation that substantially overhauls the framework of European competition law. The regulation it replaces established the Commission's powers, procedures and penalties for enforcing the EC Treaty Articles 81 and 82 on competition. This new regulation comes into force on 1 May 2004 and will be directly applicable in all EU member states from that date.
These statutory instruments introduce certain changes that are required as a result of the new EC regulation. In addition, they introduce a number of legislative changes not expressly required by the new regulation but which the Government none the less believe are necessary or desirable to ensure that the United Kingdom's competition regime is properly harmonised with the Community competition regime and up to date.
The changes being made to the relevant Community and domestic legislation are accompanied by relevant changes being made in respect of the associated regulatory regime. The Commission is issuing new procedural regulations and notices on the interpretation of community law. In the United Kingdom, the Department for Constitutional Affairs is introducing a number of related changes to court rules and the Office of Fair Trading is modifying its guidance on competition rules and how the regulatory regime works.
By way of background, I will briefly outline the purpose of Articles 81 and 82 in the context of this evening's debate. Article 81 is concerned with anti-competitive agreements, decisions and arrangements. Article 81(l) generally prohibits all agreements between undertakings, decisions by associations of undertakings and concerted practices which may affect trade between member states and which have as their object or effect the prevention, restriction or distortion of competition within the single market. However, an agreement between undertakings of the kind that I have just described, which falls within Article 81(l), is not necessarily automatically void. Article 81(3) provides that the prohibitions in Article 81(1) may be declared inapplicable where such agreements, decisions or practices have a countervailing benefit. Article 82 is concerned with the behaviour of "dominant" undertakings: monopolies and other businesses with market power. It prohibits any abuse of its dominant position by such an undertaking.
The modernisation of EC competition law is intended to improve substantially the enforcement of these prohibitions and, with it, the operation of the single market, while reducing regulatory burdens for most businesses. It comes into force on 1 May 2004 in order to coincide with the enlargement of the EU.
The new EC regulation has four main effects. First, it abolishes the current system of notifications under which businesses have been required to notify the Commission of agreements that would be prohibited under Article 81(1) in order to confirm that they qualify for individual exemptions provided for under Article 81(3). This has led to the Commission devoting considerable enforcement resources to examining largely innocuous agreements; inevitably that reduces effectiveness, resources and focus on rooting out the worst kinds of competition law infringements. Moreover, undertakings have faced significant delays in obtaining clearance for their agreements and the Commission has resorted to dealing with many notifications by offering comfort letters, which have no binding legal quality.
The new EC regulation replaces the notifications system with what is known as a legal exception regime, which will enable businesses to self-assess their own agreements for compatibility with the terms of Article 81. In practice, many businesses have been doing this for some considerable time, evaluating their proposed commercial transactions in the light of Article 81 on the basis of existing case law and practice before deciding whether to notify.
Secondly, the new EC regulation sets minimum standards of competition enforcement, thereby providing for a consistent approach to the competition scrutiny of commercial agreements across Europe. It achieves this in a number of ways. First, national competition authorities and national courts in member states will in future be able to apply the treaty articles on competition in their entirety. In addition, national competition authorities will have to apply Articles 81 and 82 in parallel with domestic competition legislation in respect of agreements or conduct that might have an effect on inter-state trade. Decisions under national competition law in relation to anti-competitive agreements must not reach a different outcome from the decision which would be reached under European competition law.
Thirdly, the new EC regulation requires that member states co-operate closely in enforcing competition law. It provides for exchange of information and for investigations on each other's behalf. To facilitate this process, a European competition network is being established.
Lastly, it strengthens and clarifies the Commission's powers of investigation, widens the range of available remedies and provides tougher sanctions for procedural infringements.
Those changes should enable the Commission to focus on rooting out the most damaging types of competition law infringement such as secret cartels.
As I said earlier, the changes we are making to the Competition Act fall into two categories: those necessary to give effect to the new EC regulation for which we are using powers in Section 2 of the European Communities Act 1972; and those that we are choosing to make in order to realign the domestic competition regime with the new EC competition regime. For this purpose we are using powers in Section 209 of the Enterprise Act.
First, the Government are required to designate UK national competition authorities for the purposes of the new EC regulation. These national competition authorities will be the Office of Fair Trading and the sectoral regulators to the extent that they have concurrent powers under the Competition Act. When I refer to the OFT, it should be taken as read that I mean the sectoral regulators as well.
Secondly, we are required to lay down the procedures to be followed by the OFT when investigating and enforcing Articles 81 and 82 and specify what penalties are applicable. Thirdly, we must provide for appeals against decisions of the OFT under Articles 81 and 82.
There is also a requirement to make provision for the OFT to have the power to assist with Commission investigations in cases involving inspections of undertakings located in the United Kingdom; and discretion to assist with investigations by competition authorities of other member states in cases involving inspections of undertakings in the United Kingdom. While the former position is largely unchanged, the latter is new.
The Competition Act 1998 was drafted so as to mirror as far as possible the system applied in European competition law. The Government continue to believe that it is desirable for the United Kingdom system to continue to mirror EC competition law, ensuring business is not faced with having to comply with two completely separate systems. Accordingly, we need to change the Act to avoid any misalignment between the United Kingdom system and the revised European system.
I will now outline a couple of examples of the changes we are making to the Competition Act 1998 in the interests of such realignment. The first concerns the legal exception regime. The new EC regulation does not require the United Kingdom to abolish the domestic notification system which provides for individual exemptions from the prohibitions in the Competition Act. But to retain a UK notification system when the Commission is abolishing its own notification system inevitably risks increasing the number of notifications received by the OFT. For instance, there is a risk that undertakings may seek to notify to the OFT under the domestic regime as they know that the OFT generally applies a consistent approach to corresponding questions arising under both the Competition Act 1998 and under Articles 81 and 82.
There is also a risk that the OFT might find itself dealing with notifications from across the EU from undertakings seeking a degree of comfort through a
decision under the Chapter I or II prohibitions, particularly in cases where there is some effect on United Kingdom trade. To ease any concerns that business may have as a result of the switch to a legal exception regime, the OFT will be introducing an extra-statutory system of written opinions in cases which raise genuine uncertainty because they present novel or unresolved questions of law under either the Competition Act or Articles 81 or 82.The second example is to do with the harmonisation of maximum penalties for infringements of Chapters I and II and Articles 81 and 82. At present, the Commission may fine undertakings up to 10 per cent of their total worldwide turnover in the preceding business year for infringement of the prohibitions in Articles 81 and 82. That limit on maximum penalties imposed by the Commission will not change under the new EC regulations. A number of member states have already given their national competition authorities power to apply Articles 81 and 82, and have adopted maximum penalties equivalent to those of the Commission.
Under domestic law, the OFT can impose on undertakings financial penalties of up to 10 per cent of turnover for breaches of the Chapter I and II prohibitions. Turnover during the period of the infringement up to a maximum period of three years can be considered when determining the penalty. The OFT may impose a penalty on an undertaking only if it is satisfied that an infringement has been committed intentionally or negligently by the undertaking. The maximum penalties provided for in UK national law are therefore different from those currently applicable by the Commission and by some other member states for breaches of Articles 81 and 82.
The Government have consulted in detail on whether we should align the maximum penalties that may be imposed by the OFT for infringements of EC competition rules with those of the Commission or those provided for infringement of domestic competition law. There are a number of arguments in favour of alignment with the Commission's maximum penalties. It is possible that, in applying current national maximum penalties to breaches of Articles 81 or 82, the United Kingdom could find itself out of step with the fines that would be imposed by the Commission or other member states for the same anti-competitive behaviour.
For instance, an undertaking may be found by the OFT to have infringed EC competition rules that has a large European or global turnover but a comparatively small UK turnover. That might increase the potential for "forum shopping" where the maximum penalties available in each member state relevant to the infringement, influence where a complainant chooses to lodge their complaint. It might also make it more difficult for the OFT to be able to fine for effects in other member states in suitable cases where the relevant other member state consents. A lack of alignment of maximum penalties may also exacerbate the risk of dispute over whether the correct legal framework is being applied.
In the light of the fact that the Commission's maximum penalties are clearly effective, dissuasive and proportionate for infringements of the EC competition rules, the Government have consulted on whether they should be applied to infringements for domestic competition rules. The decision to harmonise maximum financial penalties for infringement of both EC and domestic competition rules with those of the Commission was made in the light of the responses to that consultation.
I would also like to address briefly a matter that has caused some interest; namely, the repeal of certain exemptions and exclusions from the Competition Act. In particular, I shall deal with the domestic exclusion from the Chapter I prohibition for most vertical agreements. Ministers stated in 1999, on the consultation on the draft exclusion order, that they intended to review the verticals exclusion when a new system had settled in place. That review has now been carried out and, having consulted extensively, the Government do not think the retention of that exclusion desirable for a number of reasons.
First, the original reasons for the exclusion's introduction no longer subsist. It was originally intended in part to alleviate the effects of the introduction of a notification system; there was a fear that, without it, the OFT might be swamped with notifications on commencement of the Competition Act. Clearly, that is no longer an issue. In addition, since it was introduced, the EC Block Exemption Regulation for Vertical Agreements has come into force. This block exemption has a parallel effect under the Competition Act and so provides a safe harbour for most vertical agreements from the Chapter I prohibition as well as Article 81.
Secondly, the verticals exclusion no longer accurately reflects current economic thinking on the treatment of vertical agreements between member states. Vertical agreements are now generally considered benign except where they are accompanied by market power or have network effects.
Finally, the vertical exclusions do not provide as much legal certainty for vertical agreements as has been perceived. The OFT can withdraw the benefit of an exclusion where it considers that an agreement would infringe Chapter I and that it would be unlikely to be granted individual exemption. So, the value of the vertical exclusions after modernisation will also be limited by the OFT's obligations to apply Article 81 to the same agreement where there is an effect on inter-state trade. The result in the eyes of the business community was that there would be a good deal of confusion to the competition law framework.
Here again, we have consulted widely and few concerns have been expressed. The one area where there has been unease—and that is why I have spelt the matter out at what I hope noble Lords will not feel is at unreasonable length—has been that of the newspaper and magazine distribution world, where publishers and wholesalers have been concerned at the potential
result in terms of the application of the Competition Act to their distribution agreements. We have considered all their concerns carefully.Our conclusion is that the exclusion has outlived its usefulness. We believe that the framework established by the EC block exemption and the provisions of Section 9 of the Competition Act, allowing countervailing benefits to be taken into account in considering the lawfulness of restrictions in vertical agreements, should be sufficient to enable any concerns to be met. However, to ensure that businesses have time to adjust and, if necessary, seek advice from OFT on the implications for any particular agreements where they have concern, we do not propose that the repeal should come into force for a year.
I should like to stress to the House that the changes made by these regulations have been the subject of a lengthy public consultation process. The new EC regulation itself was of course long in the gestation and was consulted upon extensively. In April 2003, we published a consultation document that clearly explained how we intended to give effect to the new EC regulation and discussed the subsequent changes needed to the UK competition regime. The treatment of exemptions and exclusions was the subject of a second consultation document published in June 2003. In addition to those written consultations officials have hosted a number of workshops and meetings on various aspects of the regulations, where lawyers and business representatives were able to air their views and discuss the issues.
However, I would like to highlight to the House at this point that we recognise that it is unfortunate that the draft regulations were not ready sooner. This has been essentially the result of the tightness of the timetable for implementation which was driven by the need to have the new EC regulation in place in time for the accession of the new EC member states. There was also a need to get absolutely right the detailed harmonisation of the UK and EC regimes. I draw a little comfort—but I do not in any way resile from my point that it is unfortunate—from the fact that the statutory instruments will contain no surprises for business—in particular, the main change, the abolition of the legal exception regime, has been long trailed and very widely discussed. The one other change—repeal of the verticals exclusion—will not take immediate effect. The lack of adverse comments from business and stakeholders suggests that the steps we have taken to engage with them effectively have gone a long way towards ameliorating any problems caused by the timetable.
In conclusion, I believe that the measures contained in these statutory instruments giving effect to the new EC regulation and re-aligning the domestic and European competition regimes should help us towards our goal of having one of the best competition regimes in the world. The overall effect of these changes will be deregulatory in impact and they will enable both businesses and regulators to operate in a domestic competition regime that is as consistent as is practical with the EC competition regime. In my view, greater deregulation and improvements in the competition
environment are good news for this country. I hope that gaining greater domestic control over regulation will commend itself to those on all sides of the House.I am sorry that the regulations are so complex, but at least I have tried to deal with all three at once, which I hope—in the long term, at least—will have saved a little time. I commend the regulations and orders to the House.
Moved, That the draft order laid before the House on 31 March be approved [15th Report from the Joint Committee].—(Lord Triesman.)
8.30 p.m.
Lord Hodgson of Astley Abbotts: My Lords, I begin by thanking the Minister for, in 22 minutes, giving us a run through these very complex orders. As he pointed out, and as we appreciate, they will have a significant impact on British business. They are—to the uninitiated reader, at least—fairly technical and dense, and therefore his explanations were most helpful.
In general terms, we on these Benches support the proposals for three main reasons. First, in our view, effective competition increases innovation and improves efficiency and productivity within the single market, and it reduces prices to consumers. It is good to know that a Labour Government and the Labour Party are equally convinced of the virtues of the free market. Long may that continue.
Secondly, the proposal to align our domestic and EU competition legislation, as paragraph 3.25 of the regulatory impact assessment points out,
- "enhances coherence, creating greater clarity for business, their legal advisers and enforcers alike".
Thirdly, the package recognises the fact that levels of cross-border activity within the EU are continuing to rise and that, in due course—perhaps already—the present system of competition law will cease to function effectively. In that context, it is perhaps a shame that the Government have not devoted similar energy to ensuring the passage of an EU takeover directive, which represents the other great spur to the proper allocation of resources and appropriate economic activity. I accept that that is perhaps outwith the remit of tonight's debate, but any updates that the Minister can give us would be gratefully received.
I wish to make a number of detailed points about the individual regulations but, before doing so, I want to raise some general questions that apply to them all. First is the question of speed of response and/or decision by the competition authorities. The Minister, quite rightly in my view, laid stress on the importance of aligning domestic and EU competition law. One provision of the Enterprise Act 2002—as the Minister pointed out, the regulations are being introduced under Section 209 of that Act—was to lay down timetables specifying the maximum time within which
UK competition authorities had to make responses or decisions. I am not clear whether this particularly useful provision is matched in EU law.This is far from an academic issue. If I speak with some vehemence on the matter, it is because I was formerly a director of a Stock Exchange-listed company which was the subject of an unwelcome "dawn raid"—a process by which a predator company bought a 29 per cent stake through the stock market in the company of which I was a director. That was totally unwelcome. At that time, the purchasers anticipated no problem with the competition authorities but, to their surprise, further purchases were then prohibited, pending a competition review, which took months. Noble Lords can imagine the difficulty of maintaining morale within the company during that period when its future was so uncertain. Therefore, a few words from the Minister on timetabling and deadlines would be very welcome.
Secondly is the issue of the speed with which this process is being concluded. I accept the Minister's expression that this is "unfortunate". I read very carefully the remarks by Mr Gerry Sutcliffe in the debate on the regulations in another place, where a lengthy discussion took place. But, notwithstanding the fact that the Government have ensured widespread consultation, which I accept is inevitably time-consuming, the reality is that these regulations flow from the EC competition regulations agreed on 16 December 2002. Surely it should have been possible to have produced these regulations in January or February of this year at the latest, not 72 hours before they are due to come into force.
In this context, is the Minister aware of the knock-on effect this delay has had on the OFT consultation period on best-regulation guidelines? As I understand it, the normal OFT consultation period is 12 weeks, but because of the late arrival of these orders, the OFT has reduced the period to six weeks. That is inherently unsatisfactory in an area as complex and far-reaching as this one. Perhaps the Minister can confirm or deny the accuracy of what I have been told.
Thirdly, can the Minister explain the comparative position in the rest of Europe, particularly among our major industrial competitors? It has been put to me that, once again, the UK stands on the 1 May start line, uniform pressed, shoes shined, with every "i" dotted and "t" crossed, and well resourced authorities enforcing a competition regime as tough as any in Europe. How many other EU countries will be standing on the start line with us, in a similar position, with every piece of EU law ready and in place for enforcement at one minute past midnight on Saturday morning next? All too often, the UK's keenness to implement is not matched elsewhere.
Finally, I would like to raise the position of professional privilege under these codes. Professional privilege has been an important part of the UK legal scene for many years, enabling the provision of independent legal advice on a confidential basis. It would be helpful if the Minister could explain the general position of professional privilege under these
rules. May I press him on a rather more specific aspect? Many of these competition regulations will be of particular significance to larger companies. Many larger companies will have in-house legal departments to address these issues. What is there position as regards professional privilege under these regulations?It has been suggested to me that under UK law, in-house legal advice can be provided on a privileged basis. This is not true under European law, where in-house legal advice is not covered by professional privilege. Can the Minister confirm or deny what I have been told and, if my information is correct, what are the Government going to do about it?
Let me go one stage further to try and explain how complicated the matter could become. Paragraph 1.4 of the regulatory impact assessment points out how one of the purposes of the regulations is to,
- "bring enforcement of EC law closer to the markets concerned by expanding the role of national courts and authorities".
Mr Sutcliffe elaborated on that in another place when he said on Monday:
- "The hon. Gentleman asked about the European competition network. It is being established to allow the Commission and the national competition authorities of the 25 member states to co-ordinate the application of EC competition law. A legal basis will be created to allow the Commission and the national competition authorities to exchange and use in evidence any matter of fact or of law, including confidential information, in order to apply EC competition law".—[Official Report, Commons First Standing Committee on Delegated Legislation, 26/4/04; col. 14–15.]
The EU competition authorities could request the UK competition authorities to investigate on their behalf. What, then, is the position of in-house legal advice—privileged, because it has been obtained by UK authorities, or not privileged, because it has been obtained under EU law?
This is an important issue. The Minister has not had the benefit of participating in the Committee stage of the Companies (Audit, Investigations and Community Enterprise) Bill, but we have been tramping through the foothills of this topic with his colleague, the noble Lord, Lord Sainsbury of Turville. I think the Government are under no illusions—indeed, I think they agree—that the maintenance of professional privilege is important. But no less importantly, the Government have laid great stress on the harmonisation aspect of these regulations. If my belief is correct, this clearly does not represent harmonisation.
So much for the broad issues. I turn now to some specific points. The Competition Act 1998 (Determination of Turnover for Penalties) (Amendment) order was covered by the Minister in some detail. In the debate in the other place, my colleague, Mr Henry Bellingham, raised the issue of the multinational with only a small part of its businesses in Europe. He said:
- "The Minister talked about turnover. Will he tell us what happens when a multinational trades predominantly in the Americas or the far east but also trades in Europe—will it be the
- worldwide or the European turnover that is relevant?".—[Official Report, Commons First Standing Committee on Delegated Legislation, 26/4/04; col. 12.]
- "The fifth step is an adjustment if the maximum penalty of 10 per cent applies to the world wide turnover".—[Official Report, Commons First Standing Committee on Delegated Legislation, 26/4/04; col. 15.]
I turn to the land agreements exclusion and revocation order. As the Minister said, the debate on the desirability of this seems to focus very much on the single issue of distribution of newspapers and magazines. The report by Professor Paul Dobson entitled, The Impact of Proposed National Distribution Developments on the UK Regional Press Industry argues that there will be a widespread loss of newspaper/magazine distribution services, particularly to country areas. It is clear from the paperwork that the Government do not accept Professor Dobson's arguments.
I have no idea who is right. Events must take their course. My question is what will happen if Professor Dobson does prove to be correct and the system for newspaper/magazine distribution collapses. Can the legal situation be reversed or are we on a one-way street? If it can be reversed, do the Government believe that the status quo ante bellum can be restored?
I turn to the third and final set of regulations, the other enactment amendment regulations, which appear to be concerned primarily with enforcement and about which worries have been expressed. First, the general power to investigate appears to be very imprecisely and broadly drawn. Nowhere do the words "company" or "industry" appear. That in turn gives rise to concerns about fishing expeditions.
The regulator sets out with only very generalised objectives in the hope that he will stumble across more specific information about some activity or other en route. What safeguards exist to prevent such an approach? Secondly, what restrictions exist on the onward transmission of information so gathered? Can it be passed by the regulator, for example, to the Inland Revenue or to the Health and Safety Executive, and what use could they make of information so gained?
Thirdly, I refer to the nature and scope of interviews taken under these regulations. Presumably, they do not fall within the provisions of the Police and Criminal Evidence Act and associated codes. So, what safeguards exist for the naive, inexperienced or unwary interviewee? I note that paragraph 16 on page 13 of the Explanatory Memorandum refers to protection against self-incrimination. Perhaps the Minister could explain a little further what safeguards there are and how they will operate.
Finally, could he explain the judicial hierarchy by which warrants are issued? For example, on page 25, paragraph 38 inserts a new section 62A (power to enter non-business premises under a warrant). That requires the assent of a judge of the High Court for the issue of
a warrant. By contrast, page 29 paragraph 44, Section 65H (power to enter domestic premises under a warrant), requires only the assent of a judge. It could be argued that entering domestic premises should be subject to higher safeguards than non-business premises. Perhaps the Minister could enlighten us.There is one small administrative issue which I would ask the Minister to take up with his officials. In all three of these statutory instruments there is a reference to the regulatory impact assessment, which has been prepared. Indeed, the statutory instrument numbers 1077 and 1078 provide Internet links to the DTI consultations page which claims to hold a copy of this RIA. I can tell the Minister that the link will take him to a vast page containing 30 or so RIAs in which the relevant link can be found only after sifting through 15 other consultations and their attachments. The third attachment of consultation number 16 is entitled Public Consultation on the Government's Proposals for Exclusions and Exemptions from the Competition Act 1998 in the light of regulation 1203EC. Hallelujah! Here is the RIA that we have been looking for, but I see no reason why this title is not included in the Explanatory Notes of the instruments and the absence of a direct link seems equally unhelpful. A technically complicated area such as this hardly needs the added confusion of imprecise and protracted referencing.
I end as I began, by saying that we on these Benches give a broad welcome to these provisions. However, they raise questions, issues and concerns on which enlightenment and clarification would be helpful. I look forward to hearing the Minister's reply.
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