Examination of Witnesses (Questions 1980
- 1999)
WEDNESDAY 6 FEBRUARY 2008
Professor Tony Prosser, Professor Tom Gibbons and
Professor Lorna Woods
Q1980 Baroness Scott of Needham Market:
I want to come back to the role of the Secretary of State. In
general terms, I think one can characterise your response by saying
that you think it is important to keep too much political interference
out of the process; the job of a government department is to set
a framework. Then, Professor Gibbons, you used the expression
about the Secretary of State playing the trump card. What I want
to do is to go through some of the bits of process and say at
what point should he be playing the trump card or his cards. If
we start with Ofcom, it has its statutory duty to promote the
interests of the citizens but it does not have the power to initiate
its own public interest investigations. First of all: do you think
it should have or is it right that they rely on the Secretary
of State to decide whether that should be taken forward?
Professor Prosser: My view is that it should
have this power. I think that again in the rest of competition
law and in other areas of regulation the shift has been much more
towards saying that independent regulators should have autonomy
to initiate investigations themselves. We see this with the OFT
for example. It seems to me that as long as you provide discretion
at the end for the Minister and the Minister has publicly to justify
how he uses that discretion, the early stage of deciding whether
to investigate seems to be something which could be left to the
independent regulator. That regulator will know the market better
than the Minister, one hopes, or the civil servants, because it
is the job of the regulator to keep the market under supervision.
It would seem to me that that would be very desirable.
Q1981 Baroness Scott of Needham Market:
Would you all feel the same way?
Professor Woods: I think it is odd that Ofcom
does not have that power at the moment to do that. I wonder how
we deal with a decision not to investigate then if we are leaving
review right to the end.
Professor Prosser: A decision by Ofcom not to
initiate and investigate would be subject to the usual procedures
for challenge by the Judicial Review Board.
Q1982 Baroness Scott of Needham Market:
Would you think in that case—that the Secretary of State
would have another trump card, which would be to say: you decided
not to investigate it but I think you should? Would it work that
way round too?
Professor Prosser: Like a call-in in the planning
system? Yes, I think that would be an interesting proposal which
I had not thought about before. It could be desirable.
Professor Gibbons: Of course it would always
be open to competitors and indeed members of the public to make
a complaint or ask for an investigation. I would see Ofcom's initiative
as being a backstop possibility if complaints were not coming
out of the market or elsewhere.
Q1983 Baroness Scott of Needham Market:
Would it be your view that really Ofcom would have to have that
power because the remit of the Competition Commission is too narrow?
Is that narrowness an element?
Professor Prosser: Yes.
Q1984 Baroness Scott of Needham Market:
If Ofcom raised a concern, then automatically referring it to
the Competition Commission, would that in your view be helpful
or not because they do not have the remit to deal with the broad
issues?
Professor Prosser: I think that would be helpful
also. At that second stage of deciding, having done a preliminary
investigation, whether or not it should go to the Competition
Commission again is something that Ofcom as a regulatory body
would be well placed to do. It seems to me that the public interest
issues would come in at the end in deciding whether or not to
accept Competition Commission proposals, but earlier at the stage
of investigation that is again precisely something which independent
regulatory bodies should be good at.
Q1985 Baroness Scott of Needham Market:
At that end stage, should the Secretary of State be bound to accept
the use of the regulatory authorities, in this case at the moment
the Competition Commission, or is it right that they have this
discretion that they can use as their trump card?
Professor Prosser: This is where I think we
may differ somewhat. My view is that there should be a remaining
discretion for the Minister, partly because of the formidable
political difficulties of removing that. It is just not on the
agenda in this context as opposed to ordinary competition law.
Secondly, however, it seems to me that, given the importance for
a democratic society of these issues, they could well raise considerations
that are a bit broader than we could expect an independent regulatory
body, particularly a competition commission type regulatory body,
to take on board. The important qualification to what I have said
is that of course the Minister's decision should be fully reasoned;
it will be subject to judicial review, so it is not a matter of
the Minister simply taking a decision which completely disregards
anything that has been said earlier. It seems to me the role of
the regulator is to inform, advise and propose and not take the
final decision.
Professor Woods: I have concerns with plurality
issues being determined in the final instance by the Competition
Commission, merely because with its focus it has a very narrow
view. I suppose the public interest is different in different
contexts, and also the level of threat we are prepared to accept.
The standard position in European competition law and now the
Competition Act is that power in itself is not bad; it is the
abuse. So we are waiting for an abuse to happen almost in a competition
assessment. I am not sure I am so happy to wait for somebody to
abuse their power in a media context before we feel there is a
problem. I think there is a lower level of acceptable risk to
plurality in that context. For that reason I think I am not happy
to see plurality issues being the job of the Competition Commission.
I think in that context the Secretary of State can take in broader
issues. I do have concerns about, I suppose, independence and
what Professor Prosser has said about fully reasoned decisions
maybe carrying some weight. I am slightly uneasy.
Q1986 Baroness McIntosh of Hudnall:
Can we perhaps look at that by example because we have an example
in front of us now of a very recent decision that was taken by
the Secretary of State on advice from the Competition Commission;
Ofcom were also involved. There is a remedy that has been proposed
by the Secretary of State which may or may not please any of the
parties involved but it was taken by the Secretary of State. If
you take that example, is that for you a good example of how these
various regulatory pressures work? Is it textbook? Is it faulty
in some way? I know we have already discussed this but just in
terms of the procedure, the processes, how does it rate?
Professor Prosser: We are talking here about
ITV and BSkyB?
Q1987 Baroness McIntosh of Hudnall:
Yes. I should have said that.
Professor Prosser: It is a very unusual case.
Remember that the Secretary of State found that there were no
plurality issues involved, as did the Competition Commission,
given those protections that it believed existed. In a sense,
it was very similar to an ordinary merger case concerned with
a non-media institution. That seemed to me the sort of case where
there would be no problem in saying the Competition Commission
can take the final decision and decide on remedies because the
issue was one of maintaining competitive markets. Had there been
plurality issues involved and had this been accepted by the investigatory
bodies, then I think we would have moved into the territory which
we have just discussed where it seems to me that the Minister's
role would be important and where you would need to have a responsible
Minister taking the final decision on an informed and public basis.
Q1988 Baroness Scott of Needham Market:
Could I ask your colleagues because you are the ones who are slightly
more sceptical about the role of the Secretary of State? If we
had the situation that you have all agreed that you would like
where Ofcom could initiate investigations, it could become more
commonplace that they would find on their public interest test
that something was not all right and the competition authorities
would find on their economic framework that it was. If you do
not have role for the Secretary of State, who would arbitrate
between the two views?
Professor Gibbons: If we had that position,
I think it would have to be built into the legislation somehow
that one consideration dominated the other. Other things being
equal, I would tend to go toward the plurality test being dominant.
It is interesting that we have not really had the relationship
between the two properly tested, as Professor Prosser said. One
could almost imagine a convention beginning to develop that the
Minister would have to show really good reasons why he or she
would depart from the recommendation of a regulator. In some ways,
it is easier for that kind of expectation to start to develop
when you have had a negative decision such as we have had—there
was no plurality problem—because for all that, the reasoning
was very close. There were good reasons offered for why the Minister
decided to accept the recommendation that there was no plurality
problem and one could see that carrying through into future decisions.
I think we might in any event be getting to a situation where
the political manoeuvrability is going to be limited by developing
expectations that even these kinds of what ought to be political
decisions have to be fully rational.
Q1989 Baroness McIntosh of Hudnall:
I had something chasing through my mind while you were talking
there, which was about some evidence that Ofcom gave to us when
they were before us a few weeks ago. Ed Richards, speaking about
this issue, expressed some surprise to us that the plurality issue
did not seem to have been accepted as being relevant in relation
to the BSkyB thing. I think that surprise was probably not limited
to him; that there were a lot of people looking in on that issue
who probably took a similar view. Were you surprised that plurality
was not deemed to be an issue there?
Professor Gibbons: I was initially; then, when
I looked at it more closely, I thought that the reasoning seemed
quite strong. However, I said earlier that I have one reservation;
that is, I think that the Competition Commission did not really
have a sense of the long term and the kinds of resources that
might be put into news organisation. Related to that is the issue
of the viewers' or the end users' experience—the sense of
trust. Because, no matter what might be said about this, I think
there will be an underlying suspicion that, if BSkyB were to have
that kind of interest in ITV, can we really trust ITV to be the
kind of organisation that it was? There may be no rational basis
for that, but I think that trust is quite an important element
of the relationship between the journalist and the readership
and audience. The Competition Commission took a rather formal
view of measuring that trust, I thought. With that reservation,
it was perhaps a little odd that it did not, on balance, find
there was more of a risk.
Q1990 Lord Maxton:
Do you think if they had not done that and the Virgin takeover
of ITV had gone ahead, Sky would have insisted on that being referred
to the Competition Commission?
Professor Gibbons: I do not know.
Q1991 Lord Maxton:
Surely that raises even greater issues of control, plurality and
all the rest of it? Would there not have been an equal case for
that to have gone to the Competition Commission and to Ofcom?
Do you think it would have happened? I know that you are guessing.
Professor Gibbons: I am guessing, but it should
work both ways.
Q1992 Lord Maxton:
That is what academics are for, is it not?
Professor Gibbons: Yes, indeed.
Q1993 Chairman:
There is perhaps a danger in our building a whole structure on
one case, is there not? This is not the only case that we have
had over the years, under different Governments as well. The dilemma
remains. We have received a lot of evidence on politicians wooing
proprietors, owners, and on the face of it there does seem to
be a dilemma—I would not put it more strongly—in having
the politicians who are wooing proprietors also deciding, in the
end, about what the final disposition will be of a proposal to
merge. Is that not the essential dilemma on the independence point
you are putting?
Professor Gibbons: Yes.
Q1994 Baroness Scott of Needham Market:
There is a final question on that which is that, having made the
decision, there is the question of remedy. At the moment, if there
is not a plurality issue then it is straightforward: it is a competition
issue. If there is a plurality issue, however, it is the secretary
of state. Is that a situation that you think is right, or is it
one of the reasons why you thought Ofcom should also have an ability
to launch an investigation?
Professor Prosser: On the remedies issue it
seems to me that there is no reason why you should not leave the
remedies decision to Ofcom. The minister's role in my view is
to take the final public interest decision of substance. The minister
will not have a particular role, it seems to me, where you have
the details of the remedies, because the body that is closer to
the market—the regulator—will be better able to decide
on remedies, particularly given that that is the body that should
be responsible for monitoring observance of the remedies as well.
I think that we could therefore leave that for the regulator.
Q1995 Chairman:
I do not know if things have changed but, certainly when I was
in the Cabinet, this did not come to Cabinet because it was a
decision for the secretary of state, sitting in a quasi-judicial
position. Is that still the position?
Professor Prosser: In general competition law,
no; it is for the competition authorities. That was one of the
changes made by the Competition Act and the Enterprise Act. In
this area, because of the public interest considerations, it is
still for the minister.
Q1996 Chairman:
In effect what it means is that one secretary of state actually
makes a decision, at the end of the day.
Professor Prosser: Yes.
Q1997 Chairman:
But you are saying, "That's fine. It can be subject to judicial
review".
Professor Prosser: That is one potential means
of accountability.
Q1998 Chairman:
It is not much of a safeguard, is it—judicial review? It
is simply a matter of opinion, in a way. I am not quite sure how
he could be challenged on judicial review successfully.
Professor Prosser: Judicial review has developed
extensively recently. Certainly I can imagine a court asking the
secretary of state to justify his reasons publicly as part of
that process. It seems to me here that, as we are dealing with
issues that are value-based, it will be very hard to say that
there is a simple rule that can provide the outcome. If we are
talking about values, it is for the minister. The important thing
is that the minister has to justify those values publicly, and
that is the sort of process that I would envisage.
Q1999 Chairman:
At the moment the position is ... ?
Professor Prosser: The position at the moment
is that judicial review would apply to a remedies decision, I
think. It has not been used because we have not had opportunities
to see it, given that we only have this one decision. The substance
of the ITV/BSkyB decision is likely to be appealed to the Competition
Appeal Tribunal, given the nature of the decision anyway. We will
therefore have scrutiny of the substance there.
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