Clause 129 - Time-limits for market investigations and reports

Enterprise Bill – in a Public Bill Committee am 10:30 am ar 7 Mai 2002.

Danfonwch hysbysiad imi am ddadleuon fel hyn

The amendment seeks to reduce the period set out in clause 129. Opposition Members accept the value of certainty to which the Under-Secretary referred a

few moments ago; there should be some certainty about timetables. Equally, there are other concerns, although again, I am covering ground trodden upon only a few moments ago by my hon. Friend the Member for Huntingdon, when he referred to the damaging effect on business of uncertainty. The burdens on business extend beyond the professional fees and senior management time expended in examining market investigations.

I accept the need for such investigations, and all will have a downside. However, one problem is that they will end innovation, especially in relation to product development. It is easy to see how key players within a market that is being investigated would see little sense in developing products. In the medium term, that would reduce choice and, possibly, value for consumers, depending upon the nature of the market in mind.

Once again, we have received advice from the CBI; that should wake everyone up. We await the presentation of similar advice from the Transport and General Workers Union to enable us to include any amendments that it suggests. However, the CBI has made reference to the fact that the Competition Commission has shown that it is able to handle complex monopoly issues within nine months.

I appreciate that we are not treating like entirely with like, but if such complex monopoly issues can be determined within one year, it would be sensible to halve the timetable for the deadline that the Under-Secretary has in mind from two years to one year.

I seek guidance as to why the two-year timetable has been put in place, and whether there is any evidence that going well into a second year is likely to be necessary, given the sorts of cases that might arise as a result of this clause.

Photo of Jonathan Djanogly Jonathan Djanogly Ceidwadwyr, Huntingdon 10:45, 7 Mai 2002

I support the amendment. Two years is too long; 12 months would be more appropriate, as that is the cycle of one trading year. My hon. Friend the Member for Cities of London and Westminster (Mr. Field) has mentioned the risk to companies during the more lengthy period, so I will not go over that again.

Subsection (3) allows the Secretary of State to reduce the period from two years, but that is looking at the matter the wrong way round. It would be better to start off with a shorter period—for example, twelve months—and to allow the Competition Commission to apply for extensions on a case by case basis. That would be fairer, and would allow the realities of each individual situation to be addressed in an appropriate manner as time goes on.

Photo of Alistair Carmichael Alistair Carmichael Shadow Spokesperson (Energy and Climate Change), Liberal Democrat Spokesperson (Energy and Climate Change)

Further to what the hon. Member for Cities of London and Westminster said, I have received a briefing from a very distinguished trade union—a closed shop, in fact—known as the Law Society, which indicates that it also supports the amendment.

It appears that our colleagues in the Law Society are also prepared to go to the barricades on this matter. As the hon. Gentleman said, the Law Society's point is that the majority of complex monopoly investigations can be handled within nine months. In my experience, if such investigations are allowed to take two years, it is likely that, henceforth, they will take two years.

Subsection (4) limits any orders, so that they can vary the period only to two years. With regard to that, there is not a consequential amendment, so I presume that somebody clever at the Law Society has thought that they can keep the possibility of an extended period. As the hon. Member for Huntingdon said, allowing extensions on a case by case basis makes more sense than the blanket provision.

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

I do not for a moment expect that the majority of market investigations will take the Competition Commission two years to deal with. This provision is a long stop; it is not an assumption of an average time, or the likely time or even the time that exceptional cases might take.

By way of comparison, Opposition members talked about monopoly inquiries. Over the past four years, these have taken the Commission 13 months, on average, from the date of reference to the publication of report. Therefore, twelve months would reduce that period. Of course, that is not an exact precedent, and I accept the points made by Opposition members because there will be differences between market investigations and monopoly inquiries, but I can see no reason why the average market investigation should take twice as long as the average monopoly inquiry.

I share the concern of Opposition Members that market investigations should not take any longer than they have to, especially as it is clear that they place burdens on the businesses that are under investigation. The statutory maximum is a long stop, rather than a norm. For each inquiry, the Competition Commission will set a detailed administrative timetable as soon as possible after the reference is made. If an inquiry does not warrant a two-year investigation—I do not expect that most of them will—that will be reflected in the administrative timetable, which will be published early on. However, the fact that many investigations can and will be conducted in less than two years does not justify the amendment—notwithstanding the support for it from that well-known militant trade union, the Law Society—because it would impose on the Competition Commission a statutory maximum that is shorter than the average length of current monopoly inquiries. In other cases, the amendment would destroy the Competition Commission's ability to conduct a market investigation effectively.

We want a predictable framework so that people know what length of time inquiries are likely to take. We cannot tell at the moment, but we know that, like monopoly inquiries, the inquiries will often involve

enormous quantities of data, complex legal, regulatory and economic issues, and many parties. We believe that it would be dangerous to set the initial statutory maximum at less than two years, although I emphasise that we hope that most investigations will be concluded in a considerably shorter period.

Obviously, as hon. Members suggest, in the light of new experience, it might be appropriate for the Secretary of State to exercise her power under subsection (3) to reduce the statutory maximum. We want a quality process that fits. We are dealing with a horses for courses situation, and the time frame needs to be right for each investigation. In the final analysis, fairness is more important than speed. We believe that our proposal strikes a proper balance between thoroughness and urgency. I hope that I have persuaded the hon. Member for Cities of London and Westminster to withdraw the amendment.

Photo of Mark Field Mark Field Ceidwadwyr, Cities of London and Westminster

I confess that I remain uncomfortable with the limit. The Under-Secretary provides some comfort and says that, all too often, the investigation will not take two years. However, there is a danger in any bureaucracy of an instinctive mentality. Once an investigation starts, those involved will know that they have two years, notwithstanding the provisional timetable to which the Under-Secretary refers. The mentality may be that they have 24 months, and, therefore, things will drag on for a prolonged period.

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

The hon. Gentleman does not seem to be taking on board my point about early timetabling of the conduct of the inquiry, which will provide the timeframe within which the entire investigation will take place.

Photo of Mark Field Mark Field Ceidwadwyr, Cities of London and Westminster

I appreciate that, but the early timetabling will take place within the confines of the two-year maximum, however much we try to introduce a discipline in timetabling.

Is any guidance provided with respect to the nine-month timetable for monopolies inquiries? If most such monopoly investigations take seven or eight months—in other words, nine months provides a strict discipline—that suggests having a lesser timetable, rather than merely relying on the fact that the two years is a long stop and that the investigation may take less time.

Photo of Jonathan Djanogly Jonathan Djanogly Ceidwadwyr, Huntingdon

What if the commission asks for a variation, and the original timetable goes out of the window? The company involved would be in a much worse position.

Photo of Mark Field Mark Field Ceidwadwyr, Cities of London and Westminster

Yes, there would be a concern, notwithstanding the initial timetabling plan, that a variation would throw out the timetable. However, the Under-Secretary encouraged us earlier when she said that in no circumstances, notwithstanding a variation, would the entire investigation take more than two years, on the basis that the clock would not be put back to zero.

We are uncomfortable with the proposal. We have all made our comments fairly plain, and I hope that the Under-Secretary will give the matter some thought. I appreciate that provision has been made for her to consider reducing the timetable once the Bill is up and running and in view of investigations that have taken place.

I hope that plenty of attention will be brought to bear on the matter. It is important not simply in terms of the awkwardness involved for a company that is subject to a market investigation. The provision runs counter to the intention behind the Bill and may lead to less innovation and, therefore, less customer value.

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

I am listening carefully to Opposition Members. However, for the many reasons that I have given, they are failing to alarm me. In addition, in respect of monopolies investigations—about which there was a further question—there is no outer limit under the current regime. The Office of Fair Trading, or the Minister making a reference, sets the Commission a deadline for producing its report, which is typically between nine and 15 months. However, nine months is quite unusual and has been given on only a couple of occasions. It is parallel to the provision that will exist for a timetable to be published setting out the new arrangements. Overall, the fact that there has been no outer limit has not led to the inquiries being conducted over a long time.

Photo of Ken Purchase Ken Purchase Labour/Co-operative, Wolverhampton North East

Does my hon. Friend accept that companies could be of great help to themselves if they approached the Office of Fair Trading inquiry in an open and transparent way, rather than introducing the complicated obfuscation that frequently accompanies OFT inquiries and prolongs the work unnecessarily? As the hon. Member for Cities of London and Westminster suggested, that sometimes prevents product development. Does my hon. Friend accept that companies may help themselves in those matters?

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

I certainly agree that companies can, and should, help themselves. Unfortunately, as everybody would accept, there are occasionally complex situations that require complex information. That is the reason, as I said earlier, why the 12-month long stop is untenable. I want to re-emphasise the fact that a nine-month period is very unusual, 15 months is not common and 12 months does not seem to be sensible. We are committed to ensuring that investigations are completed in a good deal less than 24 months and we have the power to vary that if we need to. We are talking about a quality process and that is why we want to get the balance right. We do not want to curtail investigations that involve complex data and analysis of incoming information. We do not want to carry out a botched-up job by imposing a 12-month period. I hope that Opposition members will understand that—although we are coming from a similar position in terms of what we want to achieve and

the period in which we would envisage that normally being achieved—the decrease in the time limit would not be sensible.

Photo of Mark Field Mark Field Ceidwadwyr, Cities of London and Westminster

This has been a worthwhile debate. I am assured by the Under-Secretary that attention will be paid to the time limit if it were believed to have deleterious effects on business. I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 129 ordered to stand part of the Bill.