Clause 107 - Penalties

Enterprise Bill – in a Public Bill Committee am 12:45 pm ar 1 Mai 2002.

Danfonwch hysbysiad imi am ddadleuon fel hyn

Photo of Nigel Waterson Nigel Waterson Ceidwadwyr, Eastbourne 12:45, 1 Mai 2002

I beg to move amendment No. 290, in page 77, line 35, leave out `and' and insert `or'.

I do not want to have a stand part debate on the clause, but I shall speak generally about this straightforward amendment, which would make the penalties, especially those set out in subsection (7), alternatives rather than accumulative. It is based on a concern raised by the CBI that the penalties are pretty harsh. We accept that the powers of enforcement in investigation are necessary and that they should be backed up in appropriate circumstances, which we hope will be few and far between, with penalties. The CBI took the view that the penalties in clause 107 are heavy and draconian. The amendment would deal with that by making the penalties into alternatives. In theory, a fixed penalty amount not exceeding £30,000 could be imposed along with a daily rate of £15,000 or more. Taken together, that would be a substantial amount of money. The Minister accepts that we are talking about relatively few instances, but on what basis have Ministers concluded that the level of the penalties and their cumulative nature is appropriate? I assume that when they consulted on those matters organisations such as the CBI sounded something of warning bell.

Photo of Douglas Alexander Douglas Alexander Minister of State (e-Commerce & Competitiveness)

I will take some time to go through the detail of the points that the hon. Gentleman has raised. On the basis of the CBI briefing and his remark, I assume that the amendment is designed to prevent the Competition Commission from setting both a fixed-rate penalty and a daily-rate penalty for the same failure to provide information.

The Competition Commission must have effective information-gathering powers, which is a view held by all members of the Committee. In the new regime, it will be taking final and irreversible decisions against a tight statutory deadline of 24 weeks. It will be expected to take fully informed and high-quality decisions on which the shape of important sectors of the economy may depend. It is therefore right that it will have the power to impose both a fixed-rate penalty and a cumulative daily penalty for further

days of delay and that it can impose a combination of the two.

A fixed-rate penalty clearly has value as a deterrent, which is similar to the points that we were making on the previous clause. It will provide a strong incentive for parties to comply with a request for information. However, once it has been imposed, it has no further value as a lever for securing the required information. In those circumstances, the cumulating daily-rate penalty becomes the more potent power. It will increase the likelihood of parties complying with the information request, which must be the main purpose of the powers. After all, the point is to secure the relevant information, rather than punishing parties, which was the point made earlier by the hon. Member for South Cambridgeshire (Mr. Lansley). The point is not to punish, but to secure the relevant information for the relevant authorities. I suspect, too, that the fact that a daily-rate option is available will perhaps encourage the Competition Commission to impose lower fixed-rate fines.

The hon. Member for Eastbourne is concerned that being able to impose both types of penalty may lead to excessive penalties being imposed, but the effect may well be the opposite of what he fears. The ability to use the two powers may actually lower the overall amount of any penalty.

Photo of Jonathan Djanogly Jonathan Djanogly Ceidwadwyr, Huntingdon

If the fixed-rate penalty were imposed rather than fixed and daily-rate penalties, but the information was still not provided, could the Competition Commission go back to the court and ask for a daily rate to be imposed as well? Can a further penalty be added to what is, in effect, a conviction?

Photo of Douglas Alexander Douglas Alexander Minister of State (e-Commerce & Competitiveness)

No, as I hope I made clear in my earlier remarks, the specific provision to allow for both a fixed penalty and a daily rate to be imposed is designed to address a situation in which a fixed penalty has been imposed but no action has been taken on the disclosure of information by the companies affected. In those circumstances, it is appropriate to give authorities the power further to incentivise the passage of information, which is so important to their work. In that sense, the clause recognises a possibility by which both penalties would be imposed, but we are aiming for an outcome that would result in the overall sum of money handed over being potentially less.

I should like to reassure the Committee that the use by the Competition Commission of the powers will not be arbitrary. Clauses 105 to 112 set down a detailed procedural framework that we believe to be both fair and reasonable. Before a penalty can be imposed, for example, the Competition Commission must consider whether a person has a reasonable excuse for a failure to comply. There is a full right of appeal to the Competition Appeals Tribunal for aggrieved parties. Furthermore, the Competition Commission is required under clause 112 to consult on, publish and then have regard to a statement of

policy on the enforcement of information notices and the considerations that will be relevant in determining the type and amount of any penalty that is imposed, which is an important safeguard. That will provide the necessary certainty for business about how those penalties will be used in practice.

As I emphasised earlier, the powers are closely modelled on equivalent powers in articles 11, 14 and 15 of the European Community merger regulations. It is right that we pick the best aspects of the equivalent merger regimes elsewhere. Those powers have worked very effectively for the European Commission for more than a decade—since 1990—and they should therefore be incorporated into the domestic regime. Therefore, I ask the hon. Member for Eastbourne to withdraw the amendment.

Photo of Nigel Waterson Nigel Waterson Ceidwadwyr, Eastbourne

I repeat that we do not have a problem with the powers; it is the penalties that back them up. I am sure that business appreciates the certainty involved, but the certainty that one is going to be hammered is not necessarily the sort of certainty that it wants. The penalties are quite stringent. I have expressed our views and those of the CBI. I do not want to disturb the pre-lunch torpor of the Committee, so I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 107 ordered to stand part of the Bill.

Clauses 108 and 109 ordered to stand part of the Bill.