Clause 126 - Questions to be decided on market investigation references

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

Danfonwch hysbysiad imi am ddadleuon fel hyn

Amendment proposed [1 May]: No. 306, in page 92, line 44, after `services', insert—

`(iii) improvements to production or distribution; or

(iv) promoting technical or economic progress'.—[Mr. Djanogly.]

Question again proposed, That the amendment be made.

Photo of Derek Conway Derek Conway Ceidwadwyr, Old Bexley and Sidcup 10:30, 7 Mai 2002

We were debating the amendment when we adjourned on Thursday. Mr. Lansley was just about to sit down when I suspended the Committee, so unless any other member of the Committee wishes to speak, I shall call on the Under-Secretary to reply to the debate.

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

As you have just said, Mr. Conway, at the end of our previous sitting, the hon. Member for South Cambridgeshire (Mr. Lansley) suggested that the amendment should be adopted because it would bring the wording of subsection (8) into line with article 81(3) of the EC treaty. I shall explain why the clause has not followed the drafting of the article.

It is common ground in the Committee that while, by and large, firms are more efficient and customers are better served when the markets are more rather than less competitive, circumstances arise in some markets in which an aspect of the market structure or conduct that has an adverse effect on competition nevertheless gives rise to economic benefits that offset prevention, restriction or distortion of competition.

The question raised by the amendment is whether the alternative drafting approach under article 81(3) would be a more effective or appropriate way of making allowances for such "countervailing benefits" in the context of market investigation than subsection (8), as presently drafted. The White Paper stated that the article 81(3) criteria reproduced in the amendment were broader than the set of customer benefits that we have adopted both in the clause and for merger investigations and, in one sense, that is true. The two sets of criteria are fundamentally the same.

I can reassure Conservative Members about any benefits that accrue from improvements in

production or distribution, or in technical or economic progress, are passed on to customers in a United Kingdom market, not just in the market concerned. Those benefits can be in the form of lower prices, higher quality or greater choice of goods or services, or greater innovation in relation to such goods or services that already fall within the subsection (8) definition of customer benefits, provided that they fall within the criteria under subsection (8)(b) that the benefit has accrued or may be expected to accrue within a reasonable time and that it is unlikely to accrue without any aspect of market structure or conduct concerned.

Conversely, if benefits in improvements, production or distribution arise from aspects of market structure or conduct and have an adverse effect on competition that do not fulfil the criteria set out in subsection (8)(b) or which are not passed on to customers, we would not fulfil the requirements of article 81(3) either. Article 81(3) requires, for example, that customers must enjoy a fair share of the benefits of improvements in production or distribution if an exemption from an article 81 prohibition is to be granted. Thus, although article 81(3) and clause 126(8) are drafted differently, their aims are essentially the same. Given that we are not out of keeping with the spirit of article 81(3), we see no advantage in following it to the letter because the market investigations under article 81 do not have the same focus. Article 81 is concerned with agreements and arrangements consciously entered into by competitors; market investigations are concerned mainly either with structural competition problems or with parallel, but non-collusive, conduct by competing firms.

Moreover, unlike chapter 1 of the Competition Act 1998, the market investigations regime is not based on European Union law and there is no more reason for us to adopt the concepts from article 81(3) than there would be for us to use the European Commission merger regulation dominance test under part 3 of the Bill rather than the substantial lessening of competition test which, as members of the Committee know, we have already chosen. I hope that I have answered the question of the hon. Member for South Cambridgeshire about why we have so drafted subsection (8) and not done so in the terms of article 81(3) and that, as a result, the amendment will be withdrawn.

Photo of Jonathan Djanogly Jonathan Djanogly Ceidwadwyr, Huntingdon

We have argued why the provision should be aligned with the Competition Act 1998 and article 81. I thank the Under-Secretary for explaining why the provision is not out of keeping with article 81. However, she acknowledged that there are differences.

As my hon. Friend the Member for South Cambridgeshire said last week, on consultation, the majority of businesses said that they thought that an article 1-type approach would be most appropriate. However, I appreciate the fair point that the Under-Secretary made about the fact that we are dealing with structural issues, which is not the article 81

approach. I am concerned that there has been some confusion about the difference in the approaches taken to the competition issue and the consumer law provisions of the Bill. It would have been nice to have had the time to discuss those issues when we considered the consumer law provisions; however, we did not.

I am concerned that we are considering current, rather than future, consumers, as would be more appropriate in a competition debate. There is a risk that if we ignore the proposed amendments, a short-term approach will be taken, rather than the more strategic approach that we argued would be more relevant to the competition provisions. However, I have listened to what the Under-Secretary said, and beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 126 ordered to stand part of the Bill.