Clause 71 - Order-making power where undertakings under section 69 not fulfilled etc.

Enterprise Bill – in a Public Bill Committee am 10:45 am ar 1 Mai 2002.

Danfonwch hysbysiad imi am ddadleuon fel hyn

Photo of Nigel Waterson Nigel Waterson Ceidwadwyr, Eastbourne 10:45, 1 Mai 2002

I beg to move amendment No. 276, in page 51, line 37, after `7', insert

`and essential to avoid the creation or strengthening of a dominant position'.

Having said all that, the effect of the provision is that one could have divestment ordered—it is a pretty extreme measure—in respect of an acquisition that had never been subject to a full review by the Competition Commission. That seems somewhat harsh to us. A better approach would be to limit the power under subsection (4). The amendment details how we chose to put that when we tabled a whole raft of amendments. There may be other ways of putting it that would improve the amendment; I am not necessarily wedded to the wording. However, we hope that the Government have considered the issue, or will consider it further. It seems at the very least odd, and potentially unfair, that something as serious as divestment could in theory—one would hope that it would not arise in practice—be visited on a company without the matter being reviewed thoroughly and fully.

Photo of Mr Tony McWalter Mr Tony McWalter Labour/Co-operative, Hemel Hempstead

This feels a bit like old ground. Why did the hon.

Gentleman not consider an amendment related to the substantial lessening of competition test, which I thought Conservative Members had accepted?

Photo of Nigel Waterson Nigel Waterson Ceidwadwyr, Eastbourne

The hon. Gentleman is making a bid to be a substitute Chairman of the Committee. I am happy to take interventions on the meat of the Bill, but I am not prepared to take interventions from Government Back Benchers on how we choose to conduct matters. The amendment was tabled to this clause and has been selected, so I cannot help the hon. Gentleman any further. I made the point on the previous amendment that we do not want again to get into a debate about the dominant position—that has not gone away; we still think that it is a good idea—but if the Government think that they have a monopoly on good ideas, that is a matter for them, as long as they have a majority.

Photo of Jonathan Djanogly Jonathan Djanogly Ceidwadwyr, Huntingdon

Presumably, the dominance test was put in as a test, but the point would be no less well made if another type of test were used, particularly the lessening of competition.

Photo of Nigel Waterson Nigel Waterson Ceidwadwyr, Eastbourne

My hon. Friend has put it better than I did. That was exactly the point that I was fumbling towards making. Let me assure the hon. Member for Hemel Hempstead (Mr. McWalter) that the dominance issue is there for historic reasons—perhaps he is here for historic reasons—but has nothing to do with the central issue raised by the amendment. The penalties that can be imposed on someone are pretty harsh even when there has not been a full review of the situation. That is the point, and I am interested to hear what the Minister has to say.

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

Given that this morning is the first time that I have addressed the Committee, I shall leave aside the contentious subject of history or old ground and start with the amendment's intention.

As I understand it, the amendment would limit the OFT's power to make an order in cases where it has become apparent that the parties concerned are not complying with an undertaking in lieu or have provided materially false or misleading information to the OFT before the undertaking was accepted. From the terms of the amendment and the remarks of the hon. Member for Eastbourne (Mr. Waterson), I understand that the particular purpose is to prevent the OFT replacing a behavioural undertaking in lieu with a divestment order.

Any order made under the clause may be different from the undertakings that it replaces. That is the same degree of flexibility that is available to the Secretary of State under the Fair Trading Act 1973. The hon. Gentleman's comments reflected the fact that it is necessary to allow the OFT to impose a different remedy if that is warranted, for example, by a different analysis that emerges after false or misleading information comes to light. However, on the substantive point of seriousness or harshness, as the hon. Gentleman described it, I remind the Committee that the OFT will be required to act in a

reasonable manner in replacing an undertaking with an order. Therefore, any new remedy will have to be justified in the circumstances of the case. If the OFT did not act reasonably, the parties would, of course, have recourse to an appeal to the competition appeal tribunal.

I further remind hon. Members that enforcement actions are very rarely necessary in respect of undertakings given by parties at any stage.

Photo of Andrew Lansley Andrew Lansley Ceidwadwyr, South Cambridgeshire

I should like to clarify what reasonableness will mean in that context. The OFT, when making such an order, should have the flexibility to try to establish through it what was originally intended by way of undertakings or would otherwise be justified in trying to avoid a substantial lessening of competition. Will the Minister confirm, however, that there should be no element of punitive action in any order made?

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

My understanding is that the provision is specifically to address cases in which misleading or false information has been provided. Therefore, the remedy appropriate in the circumstances will reflect the particular causes of the initial orders that have been established.

I reinforce the point that instances in which the OFT has had to operate over such matters have proved very rare. If the parties do not follow the guidance provided by the OFT in the first action, the OFT's likely response will be to encourage the companies to comply with the terms of the original undertakings. That cannot be punitive in the terms in which the hon. Gentleman asked his question, but aims to address the problem that the undertakings were originally directed towards addressing.

I hope that that has offered sufficient comfort to the Committee and that, in the light of the undertakings that I have given, the hon. Member for Eastbourne will be able to withdraw the amendment.

Photo of Nigel Waterson Nigel Waterson Ceidwadwyr, Eastbourne

I am grateful to the Minister. As he has rightly pointed out, we are talking, on any view, about rare instances, and there is a back-up of reasonableness and the prospect of an appeal to the tribunal, which is fine. The issue was worth raising, but I shall not press the amendment to a vote. I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 71 ordered to stand part of the Bill.

Clause 72 ordered to stand part of the Bill.