Enterprise and Regulatory Reform Bill

Lord Marland Excerpts

Tuesday 18th December 2012 Grand Committee

[Viscount Eccles]

I would like to detain the Committee briefly on a point of clarification that arose out of last week’s proceedings. Grand Committee Hansard for last week states:

“The creation of the CMA has also been welcomed by business groups and practitioners, including the CBI, the Federation of Small Businesses, the Institute of Directors, the Forum of Private Business and the City of London Law Society”.—[Official Report, 12/12/12; col. GC 335.]

The Committee will remember that we were debating the creation of the CMA under Clause 20. In col. 338, my noble friend Lord Razzall said that,

“all the major business organisations and the Law Society are in favour of this recommendation”.—[Official Report, 12/12/12; col. GC 338.]

That did not tally with my memory of the Government's response to the consultation on this matter.

Paragraph 317 of the consultation, which was admittedly published some time ago, states:

“A number of respondents expressed stronger concerns about the creation of the CMA and did not support it. Notably, the City of London Law Society and the Joint Working Party of the Bars and Law Societies of the UK on Competition Law (‘Joint Working Party’), echoed by many individual law firms in their responses, considered the proposed CMA to involve some real disadvantages that outweigh the potential efficiency benefits”.

So the government document published in March said in terms that neither the City of London Law Society nor the Law Society, which are two completely different organisations, supported the creation of the CMA.

Now I recognise that they may have changed their minds. When three Front Benches agree something it seems to become inevitable and in true British style they decided to make the best of it. But at that time it is quite clear that they did not agree.

I have gone over the ground with the Law Society. I confess that my impression is that it has not changed its mind. It repeats that,

“the merger is not expected to achieve any material cost savings; and, although there is potential for a single CMA to deliver efficiencies of the kind mentioned in the Consultation Paper, the [Joint Working Party] is very doubtful about the scale of such benefits. More importantly, the [Joint Working Party] sees a real risk that the benefits of the merger will in practice be more than outweighed by the loss of the benefits of independent decision-making by separate organisations”.

The Law Society ends by saying:

“The scale of these risks is such that the [Joint Working Party] is not persuaded of the case for a single CMA”.

As the whole burden of my own argument was that we were running into trouble with the legal profession if we created the CMA on a single-institution basis, it was quite important to clarify where these two important organisations now stand.

[The Parliamentary Under-Secretary of State, Department for Business, Innovation and Skills (Lord Marland)]

My Lords, as my noble friend said, we did not actually mention the Law Society, but he has responded with a statement from the Law Society. We mentioned the City of London Law Society, which, as he said, is a totally separate body. I quote from a statement made by Mr Robert Bell, the chairman, on 21 June 2012. The CMA,

“will help competition policy be more cohesive, and it will help streamline the regulatory process, which, in turn, will provide efficiencies and boost business confidence in the rigour of the competition system in this country”.

He also said:

“There are benefits to be gained. On the merger of the CC and the OFT, we do not really have a very strong position, but we are pleased to see in the Bill that the checks and balances between first-stage and second-stage merger investigations and market investigations have been retained. There is potential to streamline the regulatory process and make it faster”.

I am very content with that statement. It is unequivocal, and it is just one example, which was used by my noble friend on a previous day in Committee, of a number of institutions that supported it. I hope that that clarifies the position.

[Viscount Eccles]

I thank my noble friend for that clarification.

Moved by

[Lord Marland]

24C: Schedule 5, page 115, line 19, at end insert “, and
(b) for “Commission” substitute “CMA”.

[Lord Marland]

Thank you, Deputy Chairman. This is a government amendment. First, I would like to put on record my thanks to the officials. Not only have we had a confetti of amendments to deal with on this Bill but, late last night, they were all changed into different groupings. That has meant a huge amount of work for them but they have done it with good cheer. It has been difficult not only for them but for the rest of us. However, we shall press on as hard as we can. We have only 23 amendments to get through today so let us hope that we can do it. I am sure that people want to go home tonight for Christmas.

These government amendments are minor amendments. They are quite technical, which rules me out of the equation pretty early on, but they are consistent with what is intended. I hope that they will find favour with the Opposition and other Peers. I beg to move.

[Lord Stevenson of Balmacara]

My Lords, we have very few comments to make on the substantive point in the amendments before us. We accept the drafting; it is very appropriate. On Amendment 25A, which is included in the group but was not specifically spoken to by the noble Lord, I simply note that this matter will come up later on in discussions. Although I have no comments to make at this stage, that does not mean that we will not wish to raise one or two points later. I agree that the rest of the amendments are technical.

I apologise for the slightly odd grouping of Amendment 26AD. It is not in my name but I shall speak to it—which will confuse matters even further.

[Lord Marland]

Is the noble Baroness, Lady Hayter, already on her Christmas holiday?

[Lord Stevenson of Balmacara]

She certainly is not. She is working hard on other matters elsewhere, to which I will need to repair. That is why I asked if we could group the amendments rather oddly, although I think they work in the scheme of things. I shall speak to them briefly at this point.

The point of concurrency, which is raised in these substantive amendments, raises an issue in relation to the way that the new architecture which has been proposed will operate. Clearly we take a view, which I think is common around your Lordships’ House, that functioning competition and certainty are the two single most important conditions that markets require to sustain investment and drive innovation. Those conditions are best aided by clear, robust and agile competition regimes. That condition is most required in fast-moving sectors, such as telecommunications, where the market is in a state of constant, relentless evolution.

The recent experience of competition oversight of one section of the telecommunications market—the pay TV market—highlights two critical failings that the Bill must address: the slow-moving pace of investigations and the confusion that might be caused by differing outcomes between sectoral and competition authorities. Although it is right that the CMA should be the ultimate protector of the basic principles of competition law, surely it cannot do so effectively in isolation from market developments and, in particular, from advice that may be available within the sectoral regulators.

In my remarks I want to refer to recent investigations of the pay TV market in considering questions of pace and lack of collaboration. I recognise that some of my remarks will delve deep into regulatory matters and it may be appropriate for the Minister, even although he has taken an extended Christmas break, to respond to me in writing if he wishes to go into some of the points that I am going to make.

On slow pace, UK consumers have enjoyed more than a decade and a half of investigation into competition in the content/pay TV market by Ofcom, the Competition Commission, the Office of Fair Trading and the European Commission. Inevitably, much effort has been duplicated. Nevertheless issues in the market have been identified and yet no lasting remedies have been proposed to tackle a consumer harm that the Competition Commission had initially estimated cost consumers £50 million to £60 million per year in inflated prices for premium content.

Inconsistency, or lack of collaboration, is the other point I want to make. In August 2012, just a week apart, both the Competition Commission and the Competition Appeal Tribunal reached completely inconsistent and contradictory conclusions on two aspects of the state of the pay TV market. On 2 August 2012, the Competition Commission concluded that Sky has market power and that competition in the pay TV retail market is “ineffective”. On 8 August 2012, the Competition Appeals Tribunal issued a completely different view to both the Competition Commission and previous Ofcom statements, concluding that there were no substantive competitive concerns regarding Sky’s supply of premium sports channels.

Surely what we need is for the different layers of a regulatory regime to work together in the best interests of the consumer. This amendment seeks to ensure that the CMA acts in co-operation with sectoral regulators when exercising its competition powers to share information; undertake joint working, investigation and, if needed, remedies; and to keep the performance of each sectoral regulator against its competition powers under periodic review.

The CMA should provide the central core of expertise in these cases. It should have primary responsibility for conducting the full competition investigation and ultimately should take the decision on all aspects in competition cases. A reformed and strengthened competition authority acting within the parameters of competition law is best placed to objectively apply competition principles consistently across all sectors.

However, it cannot effectively judge the competitive conditions of a given market in isolation from the sectoral experts. So we believe that the sectoral regulator is best placed to make the initial assessment as to whether competition concerns may potentially arise in a given scenario. In recent history—certainly where the pay TV market is concerned—that stage of the process has taken far too long.

In addition, there should be a renewed emphasis placed on sectoral regulators to reach a speedy judgment on whether referral to the CMA for full market investigation is indeed warranted. But the role of any sectoral regulator should not stop at speedy referral. Rather, it is vital that it also provides a supportive and advisory role to the CMA, imparting knowledge and experience in the sector which the CMA would take into account as appropriate, and where appropriate taking a central role in considering any remedies that might be required.

[Lord Marland]

I apologise; I should have dealt with this amendment in the same grouping. Clause 45, as was rightly said, will bolster concurrency by giving the CMA stronger powers to co-ordinate Competition Act enforcement work and giving regulators explicit duties to consider using the Competition Act. Amendment 26AD is intended to add to these arrangements to make sector regulators make an early decision on whether to refer a matter to the CMA for an in-depth investigation. It would also allow the regulators to take exclusive responsibility themselves for remedying a problem in a market.

I do not believe that this amendment is necessary. First, it is the Government’s intention that new timeframes for market processes will apply to sector regulators. This will be effected by subordinate legislation later in the year under this Bill. Therefore we recognise the need for a timeframe—but we will get to that, as I said, with subordinate legislation.

Secondly, there are existing provisions in the relevant sector legislation which prevent duplicate market investigations by the relevant regulators and the CMA. Furthermore, the CMA in looking at a market should be able to consider whether action by a regulator is impeding competition. Amendment 26AD therefore is not appropriate and I would ask the noble Lord to withdraw it.

Amendment 24C agreed.

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Moved by

[Lord Marland]

24D: Schedule 5, page 115, line 22, leave out sub-paragraph (5)

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[Lord Whitty]

My Lords, we return to the issue that I raised in the Minister’s absence during our last session, on what exactly is happening to the functions and duties of the OFT which are not being subsumed within the CMA. I apologise to the noble Viscount, Lord Younger, that I had not seen his letter of 12 December when we debated it last time. Included with that letter was a draft order under the Public Bodies Act; reading that and its Explanatory Notes, I have to put Ministers on notice that when that comes before the House I shall object to a large range of its areas. It includes not only the abolition of various bits of consumer regulation and protection but the movement of functions from the OFT, and therefore the CMA, to the trading standards operation on the one hand and to Citizens Advice on the other.

That movement, which we debated briefly last time, includes the move of responsibilities to organisations that are not mentioned in statute, although some of them are mentioned in the draft order. This relates to the slightly shadowy national trading standards body and another body, which I think is called SIPEP. I forget what that stands for exactly, but it is another body that will absorb what were previously statutory duties of the OFT. We have debated that move but this amendment would provide for the ability of a future Secretary of State to reverse that devolution at any point.

While I have great admiration for Citizens Advice and for the trading standards organisation—indeed, I am a vice-president thereof—there is some doubt as to whether they will be able to cope. For example, will trading standards cope with a whole range of scam-busting or code-forming operations which were previously done or overseen by the OFT? Concerning Citizens Advice, while there are some functions of Consumer Focus and some of the OFT with which it will be able to cope in its present structure, on others there is some doubt whether Citizens Advice will have sufficient resources and expertise to conduct them. However, I strongly support the transfer of Consumer Direct from the OFT to Citizens Advice.

I wish Citizens Advice well with its new responsibilities but there has to be a reserve power somewhere here to reverse that decision. As far as I can see in this Bill, and as far as I read the order, there is no power to reverse those decisions. My amendment would provide for that power. It is one that I hope would not need to be used, because we will have to settle down with the consequences of earlier decisions. However, if it is needed it ought to be in the Bill and I therefore beg to move this amendment.

[Lord Marland]

My Lords, I recognise the amendment and I have just handed the noble Lord, Lord Whitty, a letter that was written to him. I am sorry that he has not been able to see it or that it did not arrive on time, but I hope that it deals with a number of issues raised earlier in the debate which run concurrently. As he will see, that is a copy; there is one out there for him.

A number of these elements have already been debated; they have had a good airing. In addition, to remind and inform, the Government understand that the consumer regime landscape needs reviewing. We have committed to do that in 2018, so we have a long-stop position if the system is not operating. We believe that reversing the generic powers of the Secretary of State would be wrong, because it would create fundamental uncertainty for consumers. It is important in all this that the consumer understands the direction of travel and where it is coming from. As I said, we will be reviewing the landscape in 2018, which gives us a long-stop position if we all agree that the system is not working, but we believe that it will. On that basis, I hope that the noble Lord will withdraw his amendment.

[Lord Whitty]

My Lords, I certainly hope that when everything settles down, it will all work, but it is interesting that on other matters which the Government are changing, they are providing accounts reviews, reversals, sunset clauses, or whatever. It seems odd that they do not do so in this case. I hope that the Government will keep that under review. It may eventually need to be covered in the order or some parallel order if it is not in the primary legislation but, for today, I beg leave to withdraw the amendment.

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[Lord Marland]

My Lords, I am much taken with the words of the noble Lord, Lord Whitty, which were underlined by the noble Lord, Lord Borrie. The three categories that the noble Lord, Lord Whitty, mentions—efficiency, global leadership and the long-term interest of consumers, which was amplified by the noble Lord, Lord Borrie—are fundamental to everything that we are trying to do. I am glad that they have been so accurately and succinctly encapsulated by the noble Lords opposite.

We have to remember that the CMA is an expert in competition and in these issues. We must also remember, although I am the wrong person to preach this, that competition law is based on the principle of improving consumer welfare. I firmly believe that the CMA—through its, some would say, very narrow area of activity, which is focusing on competition—will put at the front of its list improving consumer welfare, efficiency and things like that. There will be two phases, as we know. First it will go to the OFT and then to the CMA, so it will have been looked at twice. We will debate later, if we may, the super-complaints system and how that operates—an issue to which the noble Lord, Lord Whitty, made reference.

I turn to Amendment 24M. The CMA will be able to use its powers of assessment for any merger, and that is exactly what it should be doing; it will look at it from top to bottom. It is provided with these information-gathering powers, which will apply end to end for the whole process of a merger. Again, we have that base covered. I reiterate that I am glad that the noble Lord and I are singing from the same hymn sheet in our belief that efficiency, global leadership and the value of the long-term interests of the consumer are fundamental. I invite the noble Lord to withdraw his amendment.

[Lord Whitty]

My Lords, I did not understand the beginning of the Minister’s helpful reply because it seemed to refer to the OFT and then the CMA. I shall come to the issue of the complexity of the internal two-stage process at a later amendment—

[Lord Marland]

Sorry, I should clarify that the CMA has both phases. Currently it has the OFT and the CMA as we phase in that policy.

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[Lord Whitty]

My Lords, the body politic has suffered over the past few years from two major crises—a dreadful economic crisis as a result of problems in the financial sector and a major political crisis, which is about to be debated down the hall, on the media side. The amendment suggests that there have to be special considerations in the operation of the new CMA in relation to both these areas. This is a probing amendment to see whether the Government agree that one needs to look at those two sectors in a rather different way—particularly, in this regard, the financial sector.

This issue is complicated by the fact that the Financial Services Bill does not yet have Her Majesty’s signature on it, as well as by the fact that the FCA, as it will be, will not have exactly the same kind of concurrent powers as some of the other sector regulators. There will be some powers in the Bank of England and in the proposed PRA, as well as in the FCA. Well, good luck with all that; the Government seem to be replacing a much reviled tripartite system of regulation of the financial sector with a quintipartite one, and we will see how that works out. One of the factors in that, though, must be the CMA.

The complexity in the financial sector, with ever-increasing interrelations between the different parts of that sector both locally and nationally—plus we are waiting for a banking Bill shortly, and other provisions are coming out of the banking commission—means that there is turmoil in what we believe ought to be the structure of the financial sector. Do we believe in Glass-Steagall or in, as the EU Commission requires lawyers to do, selling off some outlets in order to provide more choice? How does this fit with a general duty on the CMA to look at the structure of, among other things, the financial system? Following the financial crisis—admittedly things could have changed a little since then—we had about 40% of retail banking and about 30% of the mortgage provisions in one place. That seems to be a market situation that deserves investigation. Indeed, I recall telling the previous Government that at the time. However, it is something that has not been completely and definitively tackled and it will fall in part, at least, in the CMA’s lap.

I do not expect the Government to accept the wording of this amendment, but it indicates that we will need to have some threshold provisions that probably need to be different. It may be in the area of the structure of the financial markets. We need to know which markets, how we define them and who does it—the CMA, the FCA or both?

Although I do not expect the Minister to accept the amendment, I do expect the Government to recognise that whatever happens, the CMA will have to give particular priority to the financial sector and will almost certainly need to have different criteria in relation to that sector than elsewhere, if only for global and political reasons. I beg to move.

[Lord Marland]

I am sorry that telling the previous Government fell on deaf ears. I fear that it might do the same as regards this Government, as the noble Lord has already recognised. We all recognise what the noble Lord is saying. Incredible hardship has been caused to our great country and we must make sure that it does not happen again. I believe that the OFT and CMA will inherit these powers. There is a governor in place with two criteria. One is that if the target’s turnover is greater than £70 million, the merger can be investigated and/or if the combined share of supply or acquisition of particular goods and services of the companies is 25% or more, that is known as the share supply threshold, which can also be investigated.

There are some pretty low thresholds in place which would capture the excellent examples given by the noble Lord, particularly in the mortgage market. These have to be applied rigorously. I hope that, as we debate the Bill, more will come out on the important issues that he raises. On that basis, I hope that he will withdraw his amendment.

[Lord Whitty]

I thank the Minister for that. We may well return to the issue, but for now I beg leave to withdraw the amendment.

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[Lord Marland]

I thought that that was a brilliant speech by the noble Lord, Lord Whitty—

[Lord Borrie]

If the Minister would care to allow some other speakers—

[Lord Marland]

I am sorry.

[Lord Borrie]

My noble friend Lord Whitty has made a most useful point. There is no doubt at all that this Bill, and this part of the Bill, is a convenient vehicle. Governments often look for convenient vehicles to do things that they have already decided to deal with. In this case that may not be so, but I suggest that if it seems convenient to the noble Lord, Lord Whitty, I have no doubt that it will seem convenient to some members of the Government.

I think that what we on this side of the Committee this afternoon are saying is that we are not worried about particular words in an amendment, and we are not expecting the Minister to accept these particular amendments. However, we are expecting the Minister to take this back to his people with higher pay rates than he has, and indeed to the Ministry of Justice and all the other departments that are probably interested in this subject, because plurality of the media is vitally important. It is a public interest concept beyond competition. It is subsidiary to competition, in a sense. We want competition because we want plurality. We want plurality because we want diversity of opinions throughout the industry. The Bill is a convenient opportunity to deal with an aspect of Leveson which, I am sure, is not the most controversial at all—but it happens to be with us, and it happens to be on the Government’s agenda. There also happens to be a Report stage and a Third Reading at which he can take this further.

[Lord Brooke of Sutton Mandeville]

My Lords, knowing the nature of this Government and the fact that not everyone in it is paid, I wonder whether before my noble friend the Minister gets up, he could tell us whether he has a pay grade at all. If he does not then, quite clearly, he has an all-inclusive alibi against anything which is said to him from the opposite side.

[Lord Marland]

As I was about to say before I so rudely interrupted the speech of the noble Lord, Lord Borrie, for which I apologise, I thought that the noble Lord, Lord Whitty, made a brilliant speech. If he wants to go into the Chamber I will do a deal with him: he can dump the rest of his amendments and he is very welcome to go.

[The Deputy Chairman of Committees]

My Lords, there is a Division in the Chamber. The Committee will be adjourned for 10 minutes.

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[Lord Marland]

I will rewind the clock, my Lords. This has been a brilliant debate and I do urge the noble Lord, Lord Whitty, to consider my offer of going next door and withdrawing the amendments. The offer is still open. The noble Lord, Lord Brooke, mentioned pay grades. I know exactly whose pay grade this is in. Certainly it is not in mine, because I am in the unpaid grade—voluntarily, I hasten to add, although most people would think that it was by necessity rather than by volunteering. This is in the pay grade of the Prime Minister. He will look at all this. There is a lot of aerial warfare going on at the moment—discussion which appropriately should be fully aired and debated. We have, obviously, notified DCMS of the noble Lord’s considerations of this recommendation, and it is considering them. It will consider them in the round in view of the overall Leveson position, and then that will rise like cream to the top to the Prime Minister for him to decide. As the noble Lord rightly says, we will doubtless revisit this. Indeed, more importantly, we should revisit it. On that basis, I hope that the noble Lord will withdraw his amendment.

[Lord Whitty]

My Lords, I am grateful to the noble Lord for his remarks. When the cream eventually reaches the Prime Minister I hope at least a footnote on this debate is enclosed.

This is a bigger and in some senses, a wider issue, but it is also an issue that is very relevant to this Bill. It is one that we need to get a decision on relatively early. There has been some move to all-party discussions on the other side of Leveson. If there is legislation to be proposed, in whatever form, it will have to include this. I would hope that we can come through this very difficult crisis with the news media with a cross-party agreement on how we should proceed. I hope that what little we can do here will help that. In the mean time, I beg leave to withdraw the amendment.

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[Viscount Eccles]

My Lords, I want to probe the Government’s attitude towards penalties in this part of the Bill. My amendment would take out an order-making power which is there by virtue of an amendment to Section 94 of the 2002 Act. There is already, of course, a power to settle turnover and to levy damages. That power comes from Section 28(2) of the 2002 Act. Indeed a statutory instrument was laid in 2003—the Enterprise Act 2002 (Merger Fees and Determination of Turnover) Order 2003.

Why do we need a new power and why do we need the new power to run in parallel with the old power? The Government state in their submission to the Delegated Powers and Regulatory Reform Committee:

“This new penalty will run in parallel with the existing civil enforcement mechanism for failure to comply with interim measures under section 94 such that a person could potentially be liable to damages under Section 94 and a financial penalty under clause 25.”

Some explanation is needed of the Government’s approach to penalties in this part of the Bill. In following a policy of simplifying and deregulating things, and creating more certainty for business, it could be argued that this overlap between two penalty regimes is going in the opposite direction. In thinking about that, I would be interested to know from my noble friend, what has been the experience under Section 28(2) and the statutory instrument which flowed from it. Are we absolutely sure that we need both? I beg to move.

[Lord Marland]

My Lords, I am grateful to my noble friend for raising this complex issue. In terms of the methodology, I undertake to look at it in some detail. This will come along in secondary legislation, once we have had a chance to look at it, because it is not a straightforward matter. We are applying rules in terms of financial turnover and in terms of percentage of the market. We then need to know how to enforce the penalties. Clause 25 provides the CMA with the power to impose a fine of up to 5% of the worldwide turnover. That is the effect of the clause that we have created. It is complex and my noble friend has drawn our attention to it. We will look at it in secondary legislation rather than having something in the Bill. I hope that that will encourage my noble friend to withdraw his amendment.

[Viscount Eccles]

I am grateful to my noble friend for that reply. It probably needs to be looked at because it seems to me that here we have some sort of tightening of the screw. If you believe in tightening the screws—frankly, I do not—and you believe in civil sanctions and administrative fining, which I find a difficult subject, one has to justify why one is hardening up the regime. I do not have up-to-date information so I do not know whether any damages have been levied under the existing statutory instrument. If there have not been any, which seems quite likely, it is even more important that this hardening of the position be justified. I beg leave to withdraw the amendment.

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[Viscount Eccles]

My Lords, I am very grateful to the noble Lord, Lord Whitty, because his contribution means I do not really have to say much about Clause 26 stand part. The real effect of knocking out Clause 26 would be to knock out Schedule 8, so perhaps we can elide the two.

This is a very tricky area and I am sure that it should be thought about again. There is already a time-limit regime—lots of it from 1998 and 2002—and there is a clear general duty of expedition, which is referred to in Clause 26:

“duty of expedition in relation to references”.

It is clear in the current legislation that everyone is supposed to do things in as timely manner as possible. The question then arises of why the Secretary of State thinks that his or her intervention is helpful in this matter, which was very much the line along which the noble Lord, Lord Whitty, was going. I cannot see that it is helpful, nor that it is consistent with the coalition’s policy towards these matters. I thought that we believed in decentralisation, deregulation and trusting the professionals. It seems quite strange to introduce this regime, and of course it has to be hedged about with all sorts of escape clauses. If something gets as far as Brussels, all time limits are off the table; it says so in the schedule. The 40 days can be extended by 20 days, you can stop the clock in certain circumstances and—again I agree with the noble Lord, Lord Whitty—the lawyers will have great fun, as they always do, with this kind of overcomplicated and apparently statutorily enforceable system because they find ways around it. I am very much in support of the noble Lord’s amendment—if it is not to be accepted as it is, I very much support the way in which he put it across.

[Lord Marland]

We have had two excellent points of view, but the reality is as follows. Britain is seventh worst out of eight regimes in the world in terms of speed, in a review carried out by KPMG. That is a terrible place to be. We are seeking here to give some real clout to the process. Yes, the OFT exists on a 40-day rule but it is not statutory, and as a result 15 out of 76 cases have exceeded that time limit. We want to enforce that limit because it is absolutely no good being seventh out of eight in the world. We are enforcing the 40 days and we have put a period of undertaking in lieu of 50 days, as opposed to nil, and a period of implementation of 12 weeks, as opposed to nil. That is a very big step forward.

Often you are damned if you do and damned if you don’t, but one thing is for certain: we have to get our speed and efficiency up in getting these deals sorted, because that sends a clear message to industries that are merging. As we know, businesses want one thing, and that is clear messages. I therefore feel that this is the right approach for this Government. I do not totally disagree with the noble Lord, Lord Whitty, as on many occasions—I have rarely disagreed with him—we could perhaps have taken a more aggressive stance. This is a very good start, though; we will of course keep these things under review, but this is progress. On that basis, I hope that the noble Lord will withdraw his amendment and, when we come to it, that my noble friend Lord Eccles will do the same.

[Lord Whitty]

My Lords, I thank the noble Viscount for his support on this issue; I shall definitely support him on the next one. He is probably silent because there is not a lot more to be said. But yes, speed is of the essence and expedition ought to be a clear and central responsibility of the board of the CMA. Frankly, having all this to check and double check is the enemy of expedition, not its friend. Although I totally agree with the Government’s objective here, I do not think this will achieve it. Perhaps they will look at it again at some point. I beg leave to withdraw.

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[Lord Mitchell]

My Lords, I have listened with great interest to the words of the noble Lord, Lord Hunt of Wirral, and the noble Viscount, Lord Eccles. We, too, are always looking for reasonable ways to ensure that SMEs—or SEs, small companies, in this respect—are not subject to too much regulation.

Perhaps I am confused on this, but currently in the 2002 Act there are two criteria as to whether competition authorities should take an interest in a merger. The first, which we have spoken about today, is whether the turnover of the business is in excess of £70 million. This is a considerably higher level than what is being proposed today, so it is unlikely that any company with a turnover of £5 million being taken over would be investigated.

The second criterion, though, the one that we are paying most attention to today, stipulates that where two merging businesses have an effective market share of over 25%, that becomes a relevant merger situation for the competition bodies to consider. That 25% is an important threshold as to whether some form of monopoly is taking place and therefore, as the noble Viscount said, the value to the consumer is affected prejudicially.

At present, it appears that the only effect of Amendment 25 is to exclude the possibility of the CMA looking into a merger if the turnover of the business being taken over was above the £5 million threshold, even if the combined market share were to be more than 25%. Those are scenarios in which we might not wish to tie the CMA’s hands in this fashion. A tech company, for example, could have a low turnover but a high market share, particularly in a locality, and as a result the CMA might want to take a look at a merger between it and a dominant company in that market, or there could be some form of geographical dominance.

I find myself sympathetic with the thinking behind this because, as far as I am concerned, the more competition the better at all times, and I am also sympathetic with keeping red tape away from small businesses. However, it appears that when it comes to mergers, such protections are already offered, and this amendment could damage something even more important to SMEs—a strong competition environment. We definitely want to think about what has been said today; some important points have been raised. We will wait for the next round at Report.

[Lord Marland]

My Lords, the amendment is interesting; on the one hand, the noble Lord, Lord Berkeley, has made a compelling point, as indeed, on the other hand, did my noble friend Lord Hunt. Both points, although they differ, are things that we all want to safeguard against. The other point that was not made is that the amendment would not safeguard against the big company buying the small company, which we also want to safeguard against. I think that we are all talking the same language and, on that basis, if my noble friend Lord Hunt of Wirral, will allow us, I think we ought to take this issue away, roll our sleeves up a little more with some hot towels—or cold, if he prefers; some days I prefer cold, I must say—and look at it a bit further. If he is happy on that basis, I ask him to withdraw his amendment.

[Lord Hunt of Wirral]

My Lords, I am not just happy but enthusiastic in my response. There are not many Ministers who respond so positively and with such an open mind. I quickly say, “Done!”. I recognise that the noble Lord, Lord Berkeley, has an important point about protecting the consumer, and I recognise that I still have to persuade the noble Lord, Lord Mitchell. However, I am grateful to my noble friend Lord Eccles for his support. Yes, let us go away. As we all talking the same language, we do not need an interpreter; we just need action, not words. I beg leave to withdraw the amendment.

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Moved by

[Lord Marland]

25A: Schedule 8, page 195, line 32, at end insert—
“( ) omit paragraph (b),”

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[Lord Whitty]

My Lords, the amendment deals with cross-market issues and, I hope helpfully, suggests some flexibility. Other amendments simply insert a clearer reference to the consumer interest. I greatly welcome the reference in this part of the Bill to cross-market cases. Often, consumer or supplier abuse found in one sector is also rife in others. Traditionally, monopolies commission, OFT or Competition Commission references and investigations have tended to be siloed in vertical divisions. There are some horizontal abuses, in particular in relation to what I would call trading practices rather than necessarily market dominance. I suspect that with the growth of digital selling, we will have more consumer detriment arising from techniques which apply across a whole range of sectors.

Amendment 25B is a probing amendment to try to find out how this will work. I am not clear whether the cross-market reference has to designate both the practice and the sector in which it is suspected that it applies, or whether it just has to designate the practice. That is unclear in the Bill. If it requires reference to the sector as well, then Amendment 25B says, if you have found it in one sector, or two or three sectors, and you are starting an investigation or a reference, you need to provide for that to be extended to others. One frequent market or unfair trading abuse is the misuse of prepayment. That is a traditional one. That can apply in different respects to everything from paying for a ticket to a pop concert to buying a sofa or booking a holiday—there were tragic issues with the Christmas club and Farepak a few years ago—or paying for gym membership. If the service does not transpire or the goods never arrive, it does not really matter which sector the business is in, the practice needs tying down.

I hope that that is what is covered by the cross-market reference. I need confirmation, however, that you do not have to stipulate sector by sector where the suspicion arises. An investigation could start out knowing that there are problems in one sector but not until well into the process identifying them in another.

The other amendments in the group simply re-emphasise the need explicitly to look at competition from the point of view of the long-term detriment of consumers. Schedule 9 again does not once mention consumers. Amendments 25C to 25E would simply write into the key paragraphs of that schedule,

“to the detriment of consumers”,

to make it clear. I beg to move.

[Lord Marland]

My Lords, no one knows more about consumer protection than the noble Lord, Lord Whitty. He had a distinguished time as chairman of Consumer Focus, for which we are very grateful. It is also interesting to learn what he does during the day: he went to a pop concert, bought a sofa and had a holiday—the man never fails to surprise me. He is of course right about the consumer, and far be it from me to disagree.

I would like to point out that his amendments, being probing amendments, have asked the right questions, and I can answer them. One of those questions was whether this applies to both practice and sector or one or the other. It applies to both, and I hope that that gives him assurance. The existing provisions in Section 135 of the Enterprise Act will enable the CMA to vary the scope of a cross-market investigation. That was news to me and I think it is to him as well. I assure him that enforcing effective competition for the benefit of consumers is already embedded within the market regime, and I hope that that gives him the comfort that he was looking for. I hope that on that basis he feels able to withdraw his amendment.

[Lord Whitty]

My Lords, I thank the Minister for that, particularly the reference back to the Competition Act, which I had not picked up. It is quite clear that we have that flexibility in a cross-market reference to a particular practice.

On the schedule itself, I accept that the Government’s intention is that it is the consumer detriment or benefit that needs to be assessed. It would be nice if the parliamentary draughtsman could occasionally remind us of that; I am afraid that he has failed to do so in this schedule. If there is anything that the Government can do quietly at later stages without upsetting too many people, but pleasing me, I would be extremely grateful. In the mean time, I beg leave to withdraw the amendment.

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[Lord Marland]

My Lords, I will break with tradition and, much to my officials’ relief, read from a prepared script on this one, because it is way above my unpaid grade.

Public interest cases are particularly important to the UK, so it is right that the Secretary of State receives the best possible expert advice on these cases. This clause gives the Secretary of State the option to ask the CMA to look at public interest issues in the round with competition issues. I hope that that clarifies one of the points the noble Lord, Lord Whitty, made. This will enable the CMA to provide comprehensive recommendations on both issues. The Competition Commission can already do this in merger cases.

This clause does not give the Secretary of State additional powers to intervene in market investigations—he already has the power to intervene on certain public interest grounds, and these are not changing. Currently the Secretary of State can only intervene where there are issues of national security.

It will not be the CMA’s decision on where the balance is between competition issues and public interest issues. This will remain, as it should, a decision for Ministers who are accountable to Parliament. The CMA will be the UK’s primary competition authority and will therefore overwhelmingly be focused on competition enforcement.

The CMA, like the Competition Commission, will have expert staff and panel members with a wide range of experience. If the CMA does not have enough in-depth expertise on the specific public interest matter in question, the clause allows for a public interest expert, or experts, to be appointed, who would work alongside CMA teams.

To my way of thinking that gives a very clear understanding of the position on a quite complicated issue. I think the noble Lord, Lord Whitty, has initiated a very good debate. On that basis I commend this clause to the Committee.

[Viscount Eccles]

The trouble is that it does not tell us why it is there. It tells us something about what could happen under it, but not why it is there. I would enjoy a freedom of information application to find out where this started and what it really means.

[Lord Marland]

I am not sure I can respond to that.

[Lord Whitty]

I thank the Minister. The noble Viscount, Lord Eccles, as ever, is opening my eyes to wider objectives of government legislation. The objective of obfuscating everything is, I suspect, part of legislation more frequently than we would care to admit or like. I felt today it worked slightly to clarify the Government’s position. I am very grateful to the Minister for that. I shall study his words carefully, as they say. My initial take is that I might, on balance, disagree with it, but I will need to look at that and may return to it. It was a useful question to ask and we will see how this works out in practice and whether we need to return to it on Report. I beg leave to withdraw the Amendment.

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[Lord Berkeley]

My Lords, this is a very quick, probing amendment. It gives the CMA powers to seek information in support of a market study. That is useful. I imagine this is where one occasionally reads about dawn raids on companies that allegedly may have transgressed—it makes interesting reading. However, when one talks about the sector regulators, it is not clear to me whether they would also have the same powers of investigation in Clause 30 as the CMA would have.

I have been talking to one or two of them and will bring some of the issues up in a later amendment. It would be useful to know the position on this. I think they would find it useful to have such powers in the initial stages of their investigations. It certainly is not clear to me whether they do have these powers and I look forward to the Minister’s comments.

[Lord Marland]

My Lords, we are trying to streamline the processes, as the noble Lord, Lord Berkeley, would acknowledge. We are trying to speed them up, as we have already debated. That is central to the Bill. As a result the CMA needs access to the relevant information, which it has. There have been a number of cases where the OFT has had difficulty getting to the information that it requires from the market-study stage, so this is being done to make sure that it does. The clause extends the powers to request the information and ask parties to give evidence so that consistent powers will cover the whole piece. They are subject to statutory limits. The most important thing is that business has clarity of vision and knows the direction of travel, and that is why speed, time limits and penalties send a clear message to business.

The noble Lord, Lord Berkeley, asked quite rightly if sector regulators have Clause 30 powers. We need to look at this more carefully. We have not come to a firm landing on it, but we could perhaps have dialogue on this together before Report. If we can bottom that out we will, but if we cannot we will make a commitment to look at it in secondary legislation. I commend this clause.

[Lord Berkeley]

I am grateful to the Minister for his comments. As we discussed in a previous amendment, one of the objectives of the Bill is to streamline things and reduce the costs of activities connected to investigations. I am sure that he is aware that the better sector regulators—I will talk about them later—are probably able to undertake this work cheaply and quickly, and with sectoral special knowledge that you would not expect the CMA to have. I welcome his interest in looking at this, and perhaps we will be in touch before the next stage. On that basis, I am happy to see the clause stand part.

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[Viscount Eccles]

I quite agree about deterrents: a nuclear bomb is a deterrent. You have to provide a deterrent. Everyone will say, “Well we expected that, so now we’ll only go to 70 and not 90”. I am sorry, but I do not agree with the philosophy behind such a system. The minimum number of sanctions and penalties that you can achieve is the best, and the greatest degree of things working properly by consent is the best way to go.

[Lord Marland]

I have to disagree with my noble friend Lord Eccles because I believe that you should have deterrents. I think that the general public would want us to impose deterrents for those who do not comply with statutory rules, so I am afraid that he and I do not converge on that.

The noble Lord, Lord Whitty, is right to talk about deterrents. First, I point out that this is not just £30,000, it is £30,000 or 10% of turnover, so that deals with some of those companies that did not fall into the net that he was talking about. For very large companies, the Competition Commission can fine a daily rate of £15,000 per day with no limits, which is a serious deterrent.

The other point that I emphasise is that the Competition Commission has never had to impose a fine for non-compliance with a request, which shows that the system is working and has worked. I hope that on that basis the noble Lord will withdraw the amendment.

[Lord Berkeley]

Before the noble Lord sits down, I was interested in his comments about the £30,000, the £15,000, or whatever it is plus the 10%, plus a daily rate of £15,000 or something.

[Lord Marland]

Can I just clarify that? I did not say plus. It is £30,000 or 10% of turnover, and the Competition Commission can charge a daily rate of £15,000.

[Lord Berkeley]

I am grateful to the Minister. I am wondering why the daily rate should not be a percentage as well. One is talking about a big range between small companies and multinationals. Frankly, £15,000 a day for a big company is really nothing.

[Lord Marland]

I have made a mistake. It is not “or 10% of turnover”; it is a fixed rate of £30,000—not 10% of turnover—and £15,000 per day. The noble Lord, Lord Berkeley, asked where the deterrents are. The deterrents are the £15,000 per day, which has no limit on it unless the Competition Commission determines that it should have. So it lies within its power, if the noble Lord understands me.

[Lord Berkeley]

I am grateful to the Minister for that clarification. I still think that £15,000 a day for a big company is chicken feed; they will not notice it, even if it goes on for several years. I am no expert at levelling fines but I have been investigating the potential level of fine, admittedly on the Government, but it concerns the Thames Water tunnel outside here. The figure being bandied around there is £1 billion if we are lucky. That is a project that is worth £4 billion, and maybe there is a company with a turnover of £4 billion involved in this competition issue. The figure seems to be slightly low and out of proportion. I do not know whether it is a deterrent. Perhaps the Minister could reflect on whether a percentage for a daily rate would not be an additional deterrent.

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[Lord Whitty]

My Lords, this is very straightforward. It is a matter of clarity. Clause 31 refers at several points to “relevant authority” and I assume that that means the CMA or possibly, in some cases, trading standards through to local authorities. The amendments in this group refer to the CMA or a local authority. Is that right? If not, there is some confusion. Or is it just the CMA itself? The Minister might wish to consider this improvement. I beg to move.

[Lord Marland]

My Lords, I can get to the nub of this very quickly. The relevant bodies in this case are only the Secretary of State and the CMA. That is why we would not want to accept the amendment. It would not be appropriate to widen that, particularly embracing non-competition bodies in the organisation. I hope that that is the clarification that the noble Lord, Lord Whitty, was looking for and I hope that he withdraws his amendment.

[Lord Whitty]

In which case, my Lords, surely it would be sensible to say the Secretary of State or the CMA—then we would all be clear. I beg leave to withdraw the amendment.

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[Lord Whitty]

My Lords, these amendments are straightforward. Part of the rationale for the merger has been to speed everything up. The time limits here seem generous in relation to Schedule 12 on market studies—admittedly, that is only part of the Bill—and I thought I would take the opportunity to try to speed them up a bit. I am relying on the Minister to tell me why not. I beg to move.

[Lord Marland]

I cannot tell the noble Lord why not; I asked the very same question of my officials. It is a perfectly reasonable comment for him to make. If we can work together to see where the dynamics exist, we might be able to see if it is practical to improve this a little. I do not think that we will be able to do anything too dramatic, but the noble Lord makes a good point. We have said all along that this is all about speed of process. As I have agreed with his overall point, I hope that the noble Lord will agree for the moment to withdraw his amendment so that we can discuss this later.

[Lord Berkeley]

Before the noble Lord sits down, I have a question in relation to these time periods. I have had a little experience of trying to do something like this in the railway sector. My recollection is that a long time is taken between when the notice is issued saying that the authority will conduct such a study and when it has sufficient information to allow the clock to start running. Reading the Bill and my noble friend’s amendments, I am not sure whether these numbers—from six months to four months—apply to the time between the notice being issued or where the clock starts ticking and the authority believes that it has sufficient information. Maybe my noble friend has more information on this, but it is a point worth looking at when we come back to it.

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[Lord Marland]

That was a veritable tour de force from the noble Lord, Lord Borrie, as one would expect. Just to deal with the issue of whistleblowers, I want noble Lords to understand that nothing in this clause would affect the rules relating to whistleblowers at all; that is key. I shall read out the speaking note on this—my goodness, I might get used to this—because it is a complicated issue; the noble Lord, Lord Whitty, himself wanted to clarify this in his own mind, so between us we might be able to muddle through and clarify both our minds.

The amendment is to Clause 33, which gives the CMA an important new power to require certain individuals to answer questions during an anti-trust investigation. The new power is similar to the current power to require a person to answer questions, which exists under Section 193(1) of the Enterprise Act 2002 in the context of criminal cartel offence investigations. The Bill will correct the anomaly that a person can be required to answer questions in criminal cartel investigations but not anti-trust investigations, including into cartels.

Such a power should be subject to safeguards, however. We have proposed provisions akin to those made in relation to cartels by Section 197 of the Enterprise Act, to provide that statements made by an individual in response to a requirement imposed under the new section can be used in evidence against the individual or the relevant undertaking only in limited circumstances. Those are the safeguards that the amendment would remove, and I therefore hope that, on reflection, the noble Lord will see that in effect extending the power to ask questions to the anti-trust area, we also need to transpose the associated protections for individuals and undertakings.

I hope that that is as clear as daylight to the noble Lord. In the light of that, I hope that he will withdraw his amendment.

[Lord Whitty]

My Lords, it is six o’clock on 18 December, so there is not much daylight, but I am grateful to the noble Lord for some reassurance on that. I am not sure where we are restating the existing provisions. I am grateful for the intervention of my noble friend Lord Borrie, because he points out that, on the one hand, investigations depend on people telling the truth and that, in other countries, there are rather stronger protections than we have.

If the Minister is right that my amendment would make the protection worse, I will clearly withdraw it. I will have a look at how the interplay between the various existing provisions protects that position. Whether they are responsible themselves and therefore a degree of what the Americans would call plea-bargaining is appropriate or whether they are simply imparting knowledge which they have acquired in one way or another, we need to protect such people. Any hint that the Bill would change that is important.

Clearly, I am not doing it in the right way. I will read what the noble Lord said and see whether I need to take the matter any further, but I am very grateful for his response. I beg leave to withdraw the amendment.

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[Lord Whitty]

My Lords, I am in danger of re-establishing my alliance with the noble Viscount. There are aspects of this clause that could do with clarification. It had not struck me until he spoke that the wording,

“is or was … employed by”,

might refer to when they were an employee, a subcontractor or a director 20 years ago, and that would still be covered by this clause. Clearly the noble Viscount’s previous career flashed past him. Mine did so a little earlier this afternoon when watching the interplay between the Minister and his team; I recall that many decades ago my Civil Service career was clearly doomed when I passed the Secretary of State an illegible note during the course of one bit of legislation. There must be equivalent things that people have seen, and have had in their hands; they may not have realised their importance at the time but they still have vague knowledge of them. The criminal sanctions that are implied by the interplay of the various pieces of past legislation here could raise anxieties that the Government do not really intend. The noble Viscount is essentially right that perhaps once again the draftsman could have another look at this. Clearly the noble Viscount and I will quietly let any amendments on this front through at later stages.

[Lord Marland]

Perhaps I could explain to the noble Lord, Lord Whitty, and to my noble friend Lord Eccles that all that the clause does is to allow the CMA to conduct a more effective and timely anti-trust investigation. We are imposing civil fines, to be quicker and more effective, which will have some bite to them. The reason for this is that not one criminal prosecution for non-compliance has been pursued. That shows either that the CMA does not want to pursue it because it is too complicated, or that it is in the margin.

We are retaining criminal sanctions for obstructing an officer exercising powers to enter premises, destroying or falsifying documents, or giving false or misleading information—they will remain. The imposition of civil fines rather than criminal sanctions to speed up the action on anti-trust is also in line with the European law that features that. On that basis, I hope that my noble friend might withdraw his amendment.

[Viscount Eccles]

I thank my noble friend. Can he deal, if not now then later, with this point about an individual having had a connection with an undertaking? As a provision in Section 26A, which is one of the new clauses covered by this enforcement power, it seems pretty wide-ranging. I am pleased to be told that the criminal sanctions are staying for certain parts of the 1998 Act regime. On that, the presentation of the Delegated Powers and Regulatory Reform Committee was rather ambiguous, but we have cleared that up.

In the argument that says that if people know that there are all sorts of horrendous and complicated penalties, with extensive legal costs attached to them—even if you go down the route of new Section 40A, costs will still be attached—we are basically, steadily saying that nobody can be trusted. We are losing touch with the idea that people do things by consent and because they trust each other. That is very regrettable. Meanwhile I beg to withdraw.

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[Lord Whitty]

My Lords, I think that my noble friend Lord Berkeley is right to seek verification on this. A later government amendment will propose what he fears. At that stage, I shall certainly propose that we need a much more conciliatory regime between the Secretary of State, the CMA and the sector regulators, otherwise we shall get into serious trouble. It is important that we get clarity on the issue.

[Lord Marland]

The noble Lord, Lord Berkeley, gets to the point. I am grateful for his brevity. I am reliably informed that the rules under Section 51 will apply to the sector regulators. The same principles will apply but the rules may differ a little in detail. Of course, as he would say, the devil is in the detail but I am sure that within the detail there is quite a wide canvas. I hope that clarifies the situation for the noble Lord.

[Lord Berkeley]

I am grateful to the Minister but I wonder whether, within his broad canvas, or whatever, he has any views about whether any secondary legislation will be introduced on the issue which may or may not be helpful. I noticed that within this group there is the Question that Clause 40 stand part and Amendment 26BF, in the name of my noble friend Lord Whitty. I would be pleased to hear what he says about that because I have some comments on it too.

[Lord Whitty]

My Lords, I was going to leave that because my Amendment 26BF is an attempt to tidy up the provisions on review, along with another amendment that I cannot find immediately. There are separate provisions on the mergers, the markets and the anti-trust provisions, as to when we review them. I am in favour of the Government’s policy that we review legislation every so often but I think that it should be done simply and that we should look at the whole of the legislation. Essentially, that is what Amendment 26BF to Clause 48 is about. I was not going to move it today because I think that it requires the interplay of other parts of the Bill but I think a review of the totality of the Bill, all at the same time, would be helpful and should be built into the Bill in some way at a later stage.

[Lord Marland]

Perhaps I may first reply to the noble Lord, Lord Whitty. We will review this in five years’ time, as I think he recognises. That deals with his point. The precise detail will be discussed with sector regulators themselves and, once we have done that, we will obviously publish what has been achieved. On that basis, I hope that that satisfies the noble Lord.

Amendment 26A withdrawn.

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[Lord Whitty]

My Lords, this is really a drafting amendment. Section 35 of the 1998 Act refers to “serious, irreparable damage”. I agree that that is too high a threshold and I assume that is behind the government amendment, but what is wrong with the present definition is surely the reference to “irreparable” which, by definition, is prospective, difficult to define, a bit subjective and therefore should go. To dilute “serious” to “significant”—I think it is a dilution—seems to reduce the threshold too far and is equally subjective. I consider that the word “serious” is probably better unless the Minister has a very good reason for sticking with the word “significant”. I beg to move.

[Lord Marland]

As the noble Lord says, it is a matter of conjecture and we will obviously look at it. I am not sure that I would be prepared to concede that change. I think that both definitions hit the target and I know that the noble Lord, Lord Whitty, is trying to find the right word. We will look at it again to see whether it is the right word. At the moment I am perfectly happy with our drafting but, as the noble Lord knows from our past together, we are always open to discussing these things. I am glad that the noble Lord withdrew Amendment 26AA because there is an existing MoU between the OFT and the CMA, which answers that question.

[Lord Whitty]

I am grateful to the Minister for that and I beg to withdraw the amendment.

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[Lord Marland]

I take from this that the noble Lord, Lord Whitty, agrees with his own Front Bench in the other place that the removal of the dishonesty issue makes it easier to prosecute and therefore is a much better system. Clearly there has been a lot of consensus in the other place. I am not sure, because I was not involved in the debate in the other place, that we have put in a clause that bears any relevance to the provision that he is trying to impose. I have just confirmed that with my officials, who would concur.

At the end of the day, it is important that we should prosecute people who have formed cartels dishonestly—by marginal dishonesty. We all agree to that. It is reasonable that we provide notice for arrangements, for those who are likely to be affected, such as companies and their customers. It is very clear that where people breach these things we must use the strong arm of the law to create the necessary deterrents that involve market rigging, share rigging and all the usual things that are unpleasant and corrupt in many ways.

I think there is more debate to be had around this particular issue—there is more bottoming out to be had. As always, we are very grateful for the thinking that has gone into the amendments of the noble Lord, Lord Whitty. As he has said, we have had representations from various bodies. It is incumbent on us to listen to that. I think our direction of travel is right. There may be some tightening up of the wording needed to reflect the comments that the noble Lord has made as a result of those people who have contacted him. Obviously, as with all things, we make that undertaking. I hope that satisfies the objectivity of his excellent amendment and that he will withdraw it.

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Moved by

[Lord Marland]

26B: After Clause 45, insert the following new Clause—
“Power to remove concurrent competition functions of sectoral regulators
(1) The Secretary of State may by order made by statutory instrument amend any enactment so as to remove from a sectoral regulator either or both of the following—
(a) all the functions of the regulator under Part 1 of the 1998 Act that are exercisable concurrently by the regulator and the Competition and Markets Authority (“the CMA”) or that would be so exercisable but for provision made by virtue of section 54(5)(e) of that Act;(b) all the functions of the regulator under Part 4 of the 2002 Act that are exercisable concurrently by the regulator and the CMA.(2) An order under subsection (1) may make such other amendments of any enactment as the Secretary of State considers appropriate in consequence of the removal of the functions.
(3) Each of the following is a sectoral regulator—
(a) the Office of Communications;(b) the Gas and Electricity Markets Authority;(c) the Water Services Regulation Authority;(d) the Office of Rail Regulation;(e) the Northern Ireland Authority for Utility Regulation;(f) the Civil Aviation Authority.(4) Before making an order under subsection (1), the Secretary of State must consult—
(a) the regulator whose functions would be removed by the order,(b) any bodies who appear to the Secretary of State to represent the interests of persons in respect of whom those functions are exercisable (“regulated providers”),(c) any bodies who appear to the Secretary of State to represent the interests of persons who use the services supplied by regulated providers,(d) the CMA,(e) where the regulator is the Office of Rail Regulation, the Scottish Ministers,(f) where the regulator is the Northern Ireland Authority for Utility Regulation, the Department of Enterprise, Trade and Investment in Northern Ireland and the Department for Regional Development in Northern Ireland,(g) where the regulator is the Water Services Regulation Authority, the Welsh Ministers, and(h) in any case, such other persons as the Secretary of State considers appropriate.(5) An order under this section may include transitional, transitory or saving provision.
(6) A statutory instrument containing an order under this section is not to be made unless a draft of the instrument has been laid before, and approved by a resolution of, each House of Parliament.
(7) In this section—
“amend” includes repeal or revoke;
“enactment” includes—
(a) an enactment contained in subordinate legislation (within the meaning of the Interpretation Act 1978), (b) an enactment contained in, or in an instrument made under, an Act of the Scottish Parliament,(c) an enactment contained in, or in an instrument made under, a Measure or Act of the National Assembly for Wales, and(d) an enactment contained in, or in an instrument made under, Northern Ireland legislation.(8) The references to the CMA in subsections (1) and (4) are to be read, in relation to any time before the commencement of section 20(3), as references to the Office of Fair Trading.”

[Lord Marland]

My Lords, Clause 45 gives the Competition and Markets Authority stronger powers to co-ordinate Competition Act enforcement work and gives sector regulators explicit duties to consider using the Competition Act. This will strengthen the regime for the concurrent competition powers.

The Government want to send a further signal about the need for the strong and effective use of competition powers across the regulated sectors. The Government therefore propose, under Amendment 26B, that if the new concurrency arrangements do not work and a regulator fails to produce better outcomes, the Secretary of State will have a power to ensure that the OFT and then the CMA take sole responsibility for applying concurrent competition powers in that regulated sector.

This will be a reserve power and the Government see its existence as being entirely consistent with our aim throughout to see improvements in the concurrency regime. The use of the power would be subject to a full consultation with those likely to be affected by the proposal to exercise the power, including businesses and customers, and an impact assessment process as well as the affirmative resolution procedure.

Nothing in the current provisions in the Bill or the new clause is intended to affect the Government’s commitment that Monitor will have concurrent powers so that competition rules can be applied by a sector-specific regulator with healthcare expertise. We have therefore revised the new clause in Amendment 26B, following the debate in Committee last week, to make sure that this is absolutely clear. Monitor’s concurrent powers will therefore not be subject to this clause. I acknowledge the amendment put down by, I think, the noble Lord, Lord Whitty and the noble Baroness, Lady Hayter of Kentish Town, which made a very good point. I hope that that finds favour.

I turn to the amendments to the new clause proposed by the noble Lord, Lord Whitty, and the noble Baroness, Lady Hayter. The Financial Conduct Authority will not have concurrent competition powers so it would not be right to make it subject to this power. Instead, we have provided tailored powers of competition scrutiny of the FCA by the competition authorities in the Financial Services Bill.

The Secretary of State would have to publicly consult and gain Parliament’s approval before an order could be made. He would also no doubt want to take into account the CMA’s concurrency report. In our view, Amendments 26BA, 26BB and 26BC are therefore unnecessary.

Amendment 26BD would provide for arrangements for the co-ordination of concurrency, which in many respects—for example, on information-sharing—will mirror the arrangements for co-ordination that will be made under Clause 45. It would also duplicate the main features of Amendment 26B in giving the Secretary of State the power to make an order removing the concurrent powers of a sector regulator. Given this, we believe that this amendment is also unnecessary.

I beg to move Amendment 26B and I hope that, in the light of what I have said, the noble Lords will not press their other amendments.

Amendment 26BA (to Amendment 26B)

Moved by

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[Lord Marland]

The noble Lord, Lord Whitty, indicated that he was minded not to support our amendment and what I am about to say is therefore largely academic because I will not support his amendment. However, let me explain, because there is not an awful lot between me and the noble Lord, Lord Berkeley.

We expect the CMA to work closely with the regulator. That is best, and we totally agree that government would be wrong to intervene in that process, as the noble Lord rightly said. That is something in which I strongly believe. Most organisations are better when government does not interfere in them. They are full of competent people, as the noble Lord, Lord Bradshaw, said, who have served us well over a period of time. We are a very well regulated society, certainly compared with most other countries.

However, there needs to be a clear signal that if this does not work or there is abuse of the system, the Government have the opportunity to invade in this area, and that is exactly how it should be. In that way you are protecting the consumer—the customer—against bad practice, not interpreting the rules properly and so on. If the Secretary of State were to intervene, he would almost certainly have to put that before Parliament to seek its approval. We are all on the same side as regards the spirit of the amendment. “We are all in this together” is the phrase that we like to use most.

I would be disappointed if the noble Lord, Lord Whitty, could not agree to our amendment and invited me to withdraw it. However, we are all singing from the same hymn sheet, and I totally respect the views of noble Lords who have spoken because this issue is important. It is absolutely fundamental that the system works without government intervening aggressively in it.

[Lord Berkeley]

Can the noble Lord expand a little on the reasons for when this would happen? He quoted bad practice and lack of interpretation of the rules, but it is not moving far away from the reasons for sacking, for example, the chairman of the board of the rail regulator if they have not behaved properly. If things have got that bad, one would expect them to resign anyway if this kind of thing came about. On that basis, I should have thought that there are already enough powers to change what the regulator is doing if it is really so ineffective. Given the proposed MoUs, the system would probably work much better. I am still not persuaded that there is a good enough reason for going through all this. Perhaps I have got it wrong.

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[Lord Marland]

All that is important is that the consumer or customer, by which we mean the general public, recognises that if there is malpractice—a rare event—misinterpretation or something like that, someone ultimately has to be able to intervene in that process to ensure that it is put on the right track. One would hope that people would do the honourable thing and resign. However, sadly, we are not entirely in that world any more; it passed us by a few years ago, to my great regret. One could not therefore ultimately rely on that happening and you need a deterrent for it. The noble Lord, Lord Berkeley, knows this better than I do. He knows regulators backwards and has been involved closely with them. I have huge respect for his knowledge in that area.

All this seeks to do is complement the existing reforms that we are putting in the Bill. As I have said, it is a good government amendment and the amendments enunciated by the noble Lord, Lord Whitty, are of interest and not unnecessarily unreasonable, but they could be clarified.

[Lord Bradshaw]

Perhaps the noble Lord would answer my question about how long it will take to bring the machinery into effect. If, for example, the Government are dissatisfied with the way an industry is being regulated, they presumably will make that clear. But if they have to resort subsequently to producing a statutory instrument, how long will it take for that to have an effect?

[Lord Marland]

The Secretary of State would intervene only if an agreement had not been reached with the various parties on the direction of travel. As we all know, that is a big “if”. He then has to do an impact assessment and would have to consult for three months. I apologise, it would be for 12 weeks. Whether it is 12 weeks or three months is a very important differentiation because sometimes we work on working weeks and on others we do not. Therefore, let us say 12 weeks.

I do not think that any of this is unreasonable. If we have failed to determine through the channels of discussions why something is being done wrong, or are getting nowhere with it and feel that the public are better protected by the action that we are going to take, we have to have a way to be able to do it. That is all that we are seeking to do.

[Lord Whitty]

My Lords, I am grateful to the noble Lords, Lord Bradshaw and Lord Berkeley, and the Minister. That sounded fairly conciliatory from the Minister. I am not entirely sure that I should seize on “not unreasonable” or “not unnecessary” as indicating approval of my approach. Nevertheless, I think that it was generally positive.

However, probably neither of our amendments is ideal. I hope the main theme that the Minister is taking away from all this discussion is, if you want a reserved power, it has to be very clearly a reserved power in extremis. In order not to get there, you need some provisions of co-operation between the various regulators. All these regulators operate different types of market and you cannot have the CMA being asked to second-guess them every five minutes.

I am not quite as sanguine as the noble Lords, Lord Bradshaw and Lord Berkeley, are about some of the other regulators. It may all be fine in the railways, although I am not sure that I would agree with that as a consumer and passenger. Certainly, I have had my rows with Ofgem. I am not very happy about Ofwat and some aspects of even Ofcom, which generally speaking is a better regulator. I also had recent experience of the Northern Ireland regulator that regulates the energy industry except for the main supply of energy in the Province, which is the oil industry and definitely needs regulation.

I am not saying that everything in the garden is rosy with these independent regulators as they stand—it definitely is not. They all need to raise their game. But raising the game by having a prospect of an intervention by the Secretary of State and giving all their powers to someone else seems to be overkill. We must have an upfront co-operation and only a very distant reserve power in any alternative clause that the Minister may propose at a later stage. It would be sensible for him to consider mine and other representations that have been made.

The noble Lord, Lord Berkeley, raised a number of concerns, which are very important for the Government to take on board. The threat of this would undermine confidence in the markets. Key investment markets, such as energy, water, aviation, railways, telecoms and so on are key areas where we need to sustain a degree of confidence in the near permanence of the regulatory system.

The relationship between the regulators and the industry is very important. I am not talking about cosy relationships but about known, established and reasonably long-term relationships. The issue of the EU, which my noble friend Lord Berkeley raised, is also important. We need to be careful when we are intervening and what, at the end of the day, would be quite a draconian power.

I hope the Minister will take this away. It is important that we review the performance of regulators. But we should not do that on a case-by-case basis or because of suddenly saying that they are not doing their job 100%. Other forms of review could be built into the regulation—indeed, the Government are doing that in other areas—rather than taking a power that looks at first glance to be a draconian intervention by the Secretary of State.

I am sure that the Government and their Civil Service can come up with a better form of words for dealing with this if they wish to. It may be something that we should leave until much later. But if they intend to do so, I am happy to give my co-operation to them with my experience with regulators, as will my noble friends and the noble Lord, Lord Bradshaw. However, this will not work and it could be quite detrimental.

I am grateful to everyone who has participated. I am sure that we will return to this in some form or other at the next stage. I beg leave to withdraw my amendment.

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Because these cases are so different from market investigations and references, they need a special unit within the CMA. It is arguable that they may need a special group of the board or panels of the CMA to deal with them, because they need different skills, but they certainly need a separate location of expertise. This amendment deals only with the staff element of setting up such a unit, which for conflict-of-interest purposes clearly should not be working simultaneously on a market reference for the same sector. It is a dimension of the CMA’s role that probably needs more recognition in the new regime and therefore in its eventual organisational structure. If this amendment were adopted, it would give the basis for doing that. I beg to move.

[Lord Marland]

My Lords, let me assure the noble Lord, Lord Whitty, that we totally recognise the need for specialist advice, which already exists in the Competition Commission. The CMA would take that expert body of experience and there is no intention of this being delegated to the staff. The CMA will have independent panellists, who will take on specialist areas, and we will ensure that those panellists take their decisions independently of their parties, of the regulators, of the Government and, indeed, of the CMA board if necessary. They will then deliver their advice to the CMA board, which will make the decision. I believe that this amendment is not necessary and I hope the noble Lord would agree that this deals with his concern. I therefore invite him to withdraw his amendment.

[Lord Whitty]

My Lords, I appreciate what the Minister says about the panels. I am not sure that I can identify where that is in the Bill, which was one reason for putting this down. In a sense, it is not about whether you leave it to the staff; it is about whether there is within the organisation the expertise—procedural and legal, as well as sector-specific—that is needed to take these appeals.

As this is the last amendment today, I thank the Minister for his patience, as I thank those of your Lordships who have persevered through the whole of this afternoon on this. I hope that we have at least given the Government some thoughts for improving the Bill. There will be a few issues to which we will return. I would welcome it if someone could write to me about where the panels bit is in the Bill and how the CMA is likely to deal with these appeals in future. For the moment, however, a happy Christmas to everybody and I beg leave to withdraw the amendment.

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Moved by

[Lord Marland]

26C: Schedule 15, page 231, line 38, leave out “Omit”