Clause 145 - Specified considerations: Part 4

Enterprise Bill – in a Public Bill Committee am 11:45 am ar 7 Mai 2002.

Danfonwch hysbysiad imi am ddadleuon fel hyn

Variety is the spice of life. I shall not divert the Committee long on the amendment, which is narrow but significant and raises interesting and important issues.

The amendment would make sport a second public interest issue that the Secretary of State could specify in serving an intervention notice into a market investigation by the Competition Commission. Even I would not accept that sport is in the same bracket as national security when it comes to the public interest, but it plays a vital role in Britain's social fabric, which is why it needs safeguarding. Why is it necessary? Main sports were invented in this country not originally for profit-making enterprises, but as voluntary and amateur activities for leisure and recreation. In recent years, the influx of vast sums of revenue from broadcasting has brought sports into the purview of the competition authorities.

Sport is unique among markets in that the businesses that make up the market—the professional clubs—rely on their competitors to survive. More importantly, they need their competitors to remain healthy and strong. That is what creates a vibrant and buoyant sports league with an uncertainty of outcome and that, in turn, is what is of interest to the public. It is fair to say that sports leagues are perhaps the most blatant form of public cartels in this country. Furthermore, they prevent, restrict and distort competition.

Sports leagues need to maintain competitive balance and, to do that, they need to operate internal rules and practices, such as transfer fees and the collective selling of marketing and

broadcasting rights. In recent years, the FIFA transfer system has come into conflict with employment legislation and the collective selling of sports rights continues to conflict with competition legislation not only in this country, but in Europe.

Collective selling has two distinct functions. First, it allows for resources to be shared out equally among the members of the league, thereby preventing the emergence of dominant clubs. Secondly, it provides for resources to be top-sliced and reinvested in the grass roots of sports or in wider public interests, such as the rebuilding of stadiums following the Hillsborough disaster. The rules have never before troubled the competition authorities, but most relevant to the amendment is the OFT's claim, brought under the restrictive trade practices legislation three years ago, against the Football Association premier league and its selling of collective broadcasting rights. That was one of the OFT's most high-profile failures to date.

Under that legislation, there were seven gateways through which a restrictive agreement could pass and be allowed to stand. One was if it brought significant and substantial benefits to the public, and it was on those grounds that the premier league argued its case. The judge in the restrictive practices court accepted the arguments advanced by the premier league and, as a result, the money that has been generated from that deal is now partly being pumped into grassroots football in this country. If the OFT had won the case, the consequences for all organised sport would have been disastrous. All other collectively negotiated television deals would have collapsed as there would have been no legal basis for them to continue. It would have put all the power in the hands of the broadcasters and the very big clubs, at the expense of the smaller and weaker clubs.

The premier league's argument was successful because of the wide definitions of the public interest that were allowed under the restrictive practices legislation. While I accept that those wide definitions needed to be narrowed—I welcome the Bill in that it narrows the tests—if the same case were brought today by the OFT against the premier league, I am confident that it would be upheld and that the collective deals would be struck down. That would pave the way for the individual selling of rights by clubs.

In specifying sports, I am not opening the Bill to wider abuse, nor do I want to give the sporting bodies in this country carte blanche to carry on without regard to the public interest. The amendment would give the Secretary of State the ability to question whether the proceeds of any collective deals were being used for purposes for the wider public good. Such an approach would be entirely consistent with United States anti-trust legislation. In the early 1960, a US court ruled that the collective sale of television rights by sporting leagues violated US anti-trust law. Congress acted quickly to grant an exemption to such sales under the Sports Broadcasting Act 1961. Today,

that exemption from anti-trust law exists for American football, baseball, basketball and hockey.

In conclusion, I pose a question; is the threat that I have raised real? It is common knowledge in sporting circles that the European Commission is about to launch a formal investigation into the latest premier league broadcasting contract, and that the Commission favours the selling of rights by individual sports clubs, rather than collective deals. However, I believe that once the genie is out of the bottle, and individual selling becomes the norm, the fabric and structures of sport will unravel.

This is a probing amendment. I have tabled it to find out where the Government's thinking has reached on the vexed and controversial issue of competition policy and sport. However, it is non-controversial, as it leaves the discretion entirely in the hands of the Secretary of State, although it also enshrines in British law an expectation that the application of competition law to sport will be carefully handled.

Photo of Mark Field Mark Field Ceidwadwyr, Cities of London and Westminster 12:00, 7 Mai 2002

Tempting though it is to lead this matter to a Division, and thereby to end a highly respected young political career, I am unsure whether we would support the idea that sport should be included in the list. Although I—like the hon. Member for Leigh (Andy Burnham)—am a keen sports fan, I do not think that sport should be seen as closely associated with national security unless the list is made much more exhaustive. However, I do not know whether the Under-Secretary has any thoughts on other areas that might be included.

Photo of Miss Melanie Johnson Miss Melanie Johnson Parliamentary Under-Secretary, Department of Trade and Industry

It is nice of the hon. Gentleman to give my hon. Friend the Member for Leigh a sporting chance, but I am sure that he does not need that.

It might be helpful to my hon. Friend if I set out the role of the Secretary of State in public interest issues. Markets will be referred only on competition grounds. They have not previously been referred only on competition grounds, as he is aware. There is no scope in the new regime for a market to be referred for any other reason. The purpose of the public interest provisions in relation to market investigations is to ensure that the Secretary of State can review the remedies that the Competition Commission might impose.

We believe that, in general, the Competition Commission should address the competition problems that it identifies in the course of a market investigation. Addressing competition problems will drive improvements in the market; it will benefit businesses and consumers. When considering remedies to any adverse effects on competition, the Competition Commission will be able to have regard to the relevant customer benefits, which include increased quality and choice—I reassure my hon. Friend about that.

Therefore, we do not believe that anything further is required to safeguard the particular interests of sport, and I do not think that it would be appropriate to specify that topic in the legislation as a public interest consideration—or to go down the path suggested by the hon. Member for Cities of London and Westminster, who is tempting me to add other things to the list. The Competition Commission can and already does take into account the special characteristics of sporting markets, but they are as much about the big-business broadcasting and entertainment markets as they are about sport. It would not be desirable to set a precedent by treating those sectors differently under competition policy. Other sectors would also make claims to be treated as special cases—as the hon. Gentleman's suggestion indicates—and that might go on for some time.

This legislation and the Competition Act 1998 replace the provisions on restrictive practices. In market investigations, there is no duty to refer. Where the reference is made, the Competition Commission can take account of customer benefits, including quality.

I hope that that reassures my hon. Friend, and that he will not press his amendment to a vote.

Photo of Andy Burnham Andy Burnham Llafur, Leigh

I thank the Under-Secretary for that reply. I am reassured by her explanation that the Secretary of State retains the discretion to intervene if important public interest issues are at stake. I agree with her that such cases are often brought against sports leagues primarily because the regulators are trying to influence and shape the broadcasting industry. However, sport is often the vehicle for that, and it is sport structures that may suffer when regulators try to achieve that goal.

The unravelling and breakdown of a broadcasting deal can have a disastrous impact on sport, as we have seen with the collapse of ITV Digital, which will undoubtedly have an effect on football league clubs. I have had some assurance from the Under-Secretary that if sport is ever the subject of investigation by the competition authorities, it will be given a sympathetic hearing. I therefore beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Question proposed, That the clause stand part of the Bill.

Photo of Nigel Waterson Nigel Waterson Ceidwadwyr, Eastbourne

I congratulate the hon. Member for Leigh on developing his arguments so carefully, as befits a former special advisor at the Department for Culture, Media and Sport. He has done us all a service because he has reminded us of the dangers lurking in subsection (3). However, we have already debated that subject, so I shall cut to the chase.

At the moment, when we consider the so-called public interest, we are concerned only with "national security" and we are reminded that we must fall back on the European definition of "public security", which is referred to in subsection (2).

In subsection (3), the Secretary of State retains the power to

"modify this section for the purpose of adding to, removing or amending any consideration which is for the time being specified in this section."

My thinking is entirely in line with that of the hon. Gentleman. If other factors are going to be added to the important concept of public interest, they should appear in the Bill. We think that it is wrong that the Secretary of State should arrogate to herself the power to add to the list in future, and we tabled an amendment on the subject to an earlier clause. Let us hear what the Under-Secretary might be keen to add to the list, as she is not keen to add sport, and let us hear why she thinks that her Secretary of State should have that power to add to the list instead of having to come back to primary legislation.

Photo of Mr Harry Barnes Mr Harry Barnes Llafur, North East Derbyshire

The hon. Member for Eastbourne is correct that some of what he has said has been debated before. However, the subject has not yet been clarified. No examples or definitions have been given of what could be referred to under subsection (3). The Opposition are worried that a camel will be pushed through the eye of a needle, and that the situation will be different to that indicated.

In response to amendment No. 376, which my hon. Friend the Member for Leigh tabled, it was suggested that there might be an opening for sport to be included in the clause, but will it be included? I hope that I have correctly understood the philosopher John Locke—my hon. Friend the Member for Hemel Hempstead (Mr. McWalter) will correct me otherwise—who when speaking about secondary and primary qualities of objects said that even if all those qualities were removed, there would still be something there to which colours and other things would adhere. That was the "something I know not what". We have such a something; we do not know how it should be described. Is it to be—as feared by Opposition Members, which would be hawked by myself—something that can be used on wider grounds, or is it an exception that the Committee cannot describe or even think about? We need some understanding between the two sides. I believe that the Government intend it to be a fallback option which might be required for unknown circumstances and which needs to be in the Bill. It will not be anything of the nature suggested by the Opposition or that others would place their hopes in.

I quoted earlier from a letter from the Secretary of State to the secretary general of the Trades Union Congress, which confirms that point. It states:

"The system will however contain a fallback option to consider other public interest matters before a case is referred".

That seems to satisfy the interests of the TUC, which is keen to have public interest provisions in the Bill. The letter continues:

"although in reality the Government does not envisage that new public interest gateways will be created except in extremely rare circumstances. Our policy is for the vast majority of cases to be considered without ministerial involvement.

I understand that mergers do have a wide impact beyond competition concerns, but the focus of our merger regime is to achieve long term economic efficiency."

The Under-Secretary should be aware that I am not alone in my thinking on the issue. There is genuine concern that issues such as employment, the distribution of industry and exports should be defined in the Bill. There is an opportunity under the clause to do that, and other avenues in the Bill will allow it. Perhaps we should have a comprehensive list of sets of amendments on Report that would ensure public interest—unless Opposition Members can cite examples of some interpretation or definition that they are worried about. People like myself can be content that there are other avenues and back doors that we can use. It would be nice if it were clarified in the legislation beyond peradventure that we have in mind public interest concerns.

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

I shall resist the temptation to engage in a discussion about Locke's contradictory concept of substance, but the focus on subsection (3) is useful. I agree with my hon. Friend the Member for North-East Derbyshire (Mr. Barnes), about the need for examples in this debate. In an earlier discussion, I mentioned an example of a national security issue—that of accepting products that could lead to gross degradation of the biosphere. It may be helpful for the Under-Secretary to focus her thoughts on that. In discussions about genetically modified crops and organisms, those who are of the doomsday school may be quite wrong. However, they may be right, and if they are, admitting materials that might lead to degradation of the biosphere could be regarded as quite strongly against the national interest. Those wishing to import such materials would, in a sense, be prima facie involved in breaching national security. Although we have debated this issue before, it is worth considering whether the framework of law outside the Bill can provide the type of assurances that we need about accepting something as a product.

Other considerations are taken into account by the framework of law outside the enterprise system and culture. That applies to degradation of the biosphere.

Hon. Members will be aware of ways in which competition policy is used by the American Government, who sometimes provide ways of producing products that threaten competitors in a market—banana or sugar producers, for example. Other players in the market may be threatened, not simply with having to liquidate their businesses, but with paying for the competition culture with their lives or with the prospect of curtailing forever their chance of earning a livelihood.

There are all sorts of agreements—the Lomé convention, for example—about how we should operate with other countries and treat their work forces. However, it is incumbent on us to pay attention to the wider framework and ensure that we do not end up with a competition policy that is antithetical to our ideas about what constitutes fair competition in the world of commerce.

Photo of Miss Melanie Johnson Miss Melanie Johnson Parliamentary Under-Secretary, Department of Trade and Industry 12:15, 7 Mai 2002

I have been tempted by my hon. Friends and the Opposition into debating an issue about which there has already been considerable discussion, although I appreciate hon. Members' interest and concern. Subsections (3) and (4) provide a mechanism for amending the list of public interest considerations, but at the risk of upsetting hon. Members on both sides of the political divide—perish the thought—I emphasise that the Government have no current plans to use the power to broaden the scope of the Secretary of State's role in market cases.

My hon. Friend the Member for North-East Derbyshire, in his Lockean reference, most accurately represented this issue as a thing "we know not what". Like my hon. Friend the Member for Hemel Hempstead, I have a background in philosophy, but I shall not follow up the reference any further. However, the provision is certainly necessary. We have no plans to use the power to broaden the role of the Secretary of State. The reserve power to specify new public interest considerations is a necessary safeguard to ensure that the legislation can be adjusted. That is why it appears in the Bill as it does. I cannot give hon. Members on either side of the Committee any comfort about what the thing in question might be.

Photo of Nigel Waterson Nigel Waterson Ceidwadwyr, Eastbourne

The Under-Secretary talks about adjusting the legislation. My inference is that she means that that will have to be done quickly, to deal with an unexpected "we know not what" situation. Surely, national security is the only umbrella under which one can imagine something like that happening. The legislation can always be adjusted by introducing further primary legislation. What reason can there be, other than national security, to change the grounds of the Bill in a great hurry? Presumably that is the point of regulations.

Photo of Miss Melanie Johnson Miss Melanie Johnson Parliamentary Under-Secretary, Department of Trade and Industry

The hon. Gentleman is again trying to persuade me to be more specific. I cannot and will not do so. In my experience, it is not unusual for the Government to be told that a piece of legislation has an outcome, issue or problem, unforeseen and unforeseeable at the time of its introduction, that has arisen since. Because it relates to public interest, it is important for the Secretary of State to have such a power. We do not have a list or any single item to which the clause should apply, but it is important for the provision to be available.

Photo of Mr Harry Barnes Mr Harry Barnes Llafur, North East Derbyshire

My problem with the Locke example—my hon. Friend the Member for Hemel Hempstead pointed out that there might have been some defective reasoning—is that that "something I know not what" does not exist. The matter that is provided for in law will not refer to anything in future, so the provision might as well not be made. I would want it to be something that was a possibility—something that had substance.

Photo of Miss Melanie Johnson Miss Melanie Johnson Parliamentary Under-Secretary, Department of Trade and Industry

I appreciate that my hon. Friend seeks to put substance into the provision. However, by the nature of what is being considered, it is not something of substance. It might well be of great substance in the future; the fact that it is not foreseeable does not mean that it does not exist.

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

I cannot believe that. Post 11 September, we know that operating our markets in such a way as potentially to deny a livelihood and the prospect of life to people from some nation or other poses a threat to our national security. I do not know why my hon. Friend is being so evasive about confronting my examples of what could count as prima facie threats to national security. Hence, there is a prima facie case for considering those matters under subsection (3).

Photo of Miss Melanie Johnson Miss Melanie Johnson Parliamentary Under-Secretary, Department of Trade and Industry

I recognise that my hon. Friend raises issues that are important to the future of the planet, and that the Government should take them on board. However, let me reassure him that I am not trying to be evasive in not specifying something. I am trying to be clear with the Committee that the reason for not specifying something is because it is unforeseeable. We cannot put any further meat on the bones of the matter. I have explained why we think that it is important to public interest considerations that the legislation does not fail to meet some future need. That is why we are including the provision in the Bill.

Photo of Vincent Cable Vincent Cable Shadow Spokesperson (Trade and Industry), Liberal Democrat Spokesperson (Trade and Industry)

It could get worse.

As the Under-Secretary's position rests on the narrow national security definition, will she clarify what she means by national security? The old ideas about national security being a matter of standing armies moving across frontiers have been replaced with a much more fluid view of what is involved. The

hon. Member for Hemel Hempstead was right about that.

In the United States, where the argument has been well developed in terms not just of competition policy but of trade policy, the idea of national economic security is adduced to justify a wide variety of Government interventions. There is a danger that if the Under-Secretary sticks to the concept of national security, everything from threats to the biosphere to unemployment will be bundled under it. If she intends to take a stand on this narrow definition, will she explain to us what national security means for the purposes of the legislation?

Photo of Miss Melanie Johnson Miss Melanie Johnson Parliamentary Under-Secretary, Department of Trade and Industry

In earlier debates, I did explain that. National security is defined under this clause as it is under clause 56, which governs mergers. It includes defence and other essential public security considerations. I am afraid that I cannot remember whether the hon. Gentleman was present during our earlier debates, but I assure him that a definition of the terms has been placed on the record for the benefit of the Committee.

Photo of Nigel Waterson Nigel Waterson Ceidwadwyr, Eastbourne

I do not want to prolong this debate—[Hon. Members: "Sit down then."]—but I will if provoked. I particularly do not want to do so because, as the Under-Secretary rightly reminded us, we had a long debate, with an equally unsatisfactory outcome, on clause 56. She talks about some future need, but is wholly unable, no matter how hard she is pressed from both ends of the political spectrum, to come up with anything that might conceivably amount to such a need.

I am sure that the Under-Secretary is being open and not evasive, contrary to what her so-called honourable friend the hon. Member for Hemel Hempstead said about her performance. However, the more doughtily she fights her position on the matter, the more suspicious we become. What on earth are we including the provisions for? On the basis of her arguments, every Bill that comes before the House ought to include an escape clause in case some great horror—or benefit, as the hon. Member for North-East Derbyshire might say—has not been envisaged. That is not the way legislation works. We deal with the here and the now.

The provision on national security is already very wide and could, in the wrong hands, have a gigantic scope. Why is that not enough? If something were to come up that none of us has ever conceived of, could it not be dealt with quickly by primary legislation? Presumably it would be of such enormity and moment to the whole country that even the Opposition parties would collude in its rapid passage through the House. If I read the Under-Secretary's remarks right, it would have to be of such significance that it would deserve that kind of approach.

We are deeply unhappy about the matter. We do not understand why the Under-Secretary is hanging on to the powers set out in subsection (3) with such ferocity when she has not got a clue what they might be needed for. What is this "need" about which she continually talks?

Photo of Miss Melanie Johnson Miss Melanie Johnson Parliamentary Under-Secretary, Department of Trade and Industry

I am grateful to the hon. Gentleman for his suggestion that the Opposition will always collude with the Government in finding time for primary legislation of an urgent nature, although I am not sure that the usual channels on the Labour Benches would agree with that conclusion. Indeed, it is often difficult to find slots for urgent primary legislation, so I have reservations about his assumption.

If we had a specific example in mind, we would include it in the Bill. It is because we do not have such an example, and because the matter is important and we might want to do something quickly and easily that we are including the provision—for those reasons and no other. Opposition Members can become more suspicious if they wish, but their suspicion is entirely misplaced. The measure is designed to deal solely with the unforeseeable, and I cannot be more specific about what the unforeseeable might contain.

Question put and agreed to.

Clause 145 ordered to stand part of the Bill.

Clauses 146 and 147 ordered to stand part of the Bill.