New Clause 5 - Use of fines by OFT

Enterprise Bill – in a Public Bill Committee am 9:45 am ar 16 Mai 2002.

Danfonwch hysbysiad imi am ddadleuon fel hyn

'(1) The OFT will consider whether any fines which it imposes under Chapter I or Chapter II of the 1998 Act might be applied for any purpose or purposes which would contribute towards remedying harm suffered by consumers generally as a result of the infringements of those provisions.

(2) The OFT may, in pursuance of subsection (1), make such direction as it considers appropriate.'.—[Mr. Waterson.]

Brought up, and read the First time.

Photo of Nigel Waterson Nigel Waterson Ceidwadwyr, Eastbourne

I beg to move, That the clause be read a Second time.

I hope that, for once, the purpose of the new clause is obvious from the wording. Under the current regime, fines may be imposed under chapter I and II of the Competition Act 1998. In a sense, the aim of the new clause dovetails with the provision of funding for consumers or consumer groups that we have just debated. Consumer bodies have asked what will happen to the fines and whether they might be applied to the benefit of consumers generally. I appreciate that that process is different from an education or information-spreading process. When taking the class action approach, however, it will sometimes be impossible to identify all the consumers affected.

The Under-Secretary gave an example a moment ago, albeit in a different context, of a problem with Rover car parts or car sales. That example ties in neatly: one could devote the funds to remedy

''harm suffered by consumers generally'', as the new clause says. That would be welcomed by consumers, consumer bodies and the OFT, and I hope that it receives the Under-Secretary's support.

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

I have considerable sympathy with the aims of the new clause, in so far as I am keen that there should be projects to help consumers who suffer as a result of anti-competitive practices. However, that will be possible under clause 262, which allows the Secretary of State to

''give financial assistance to any person for the purpose of assisting . . . activities which the Secretary of State considers are of benefit to consumers''.

That may include specific groups of consumers who have suffered harm as a result of a particular anti-competitive practice.

In fact, clause 262 has a wider application than the new clause. Although the priority will be to fund projects relating to the markets in which fines have been levied for anti-competitive behaviour, the clause will also ensure that consideration can be given to financial assistance for a wide range of projects and other work that would benefit consumers. It is not confined to consumers who have suffered from anti-competitive practices for which fines have been levied under the Competition Act. The clause will benefit consumers more widely and ensure that a more strategic view can be taken of the issues that need addressing and of the funding available.

For those reasons, clause 262 is better for consumers than the new clause would be. In view of that, I hope that the motion will be withdrawn.

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

I should like to say a few words in support of the new clause. I do not understand the Under-Secretary's reply, because the alternative that she offers relates to the powers of the Secretary of State. We are not concerned with whether the Secretary of State should be able to dish out money to consumer groups, which is fine in itself. However, the new clause would establish a flexible link between the abuse and some restitution for the people affected, without making that restitution mandatory. It would give the OFT the power to use the fine revenue for the consumer group, under certain circumstances, and is far more targeted than the Under-Secretary implied.

Photo of Nigel Waterson Nigel Waterson Ceidwadwyr, Eastbourne

I accept what the Under-Secretary says, but I remain wedded to having a separate power for the OFT to deal with the funds, which will otherwise simply disappear into the Treasury and be of no benefit to anyone. I would like to return to the point, but I shall be withdrawing the motion.

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

I should like to explain further our reasons for resisting the new clause, in response to the points made by the hon. Members for Twickenham (Dr. Cable) and for Eastbourne. Initially, we entertained a similar idea to theirs, but it did not seem a good idea for the OFT to be allocating fines money

to projects benefiting consumers, because there might be a conflict of interest. Allegations might be made that fines were taken for a specific purpose or that specific projects were favoured. That would make it difficult to maintain business confidence, so we thought that it would be inappropriate for the OFT to occupy the position suggested in the new clause.

As regards links to fines for anti-competitive behaviour, it is better to agree the level of funding in the context of the Department's budget. We can then plan and ensure that the money is well used to fund groups generally for the benefit of consumers. Fines are unpredictable, and we do not know which organisations will be subject to them and how much they will be fined until the fine is imposed. Linking consumer benefits to fines could, therefore, lead to a rather erratic cash flow.

For all those reasons, we felt that it was inappropriate to pursue the proposed mechanism.

Photo of Nigel Waterson Nigel Waterson Ceidwadwyr, Eastbourne 10:00, 16 Mai 2002

It is always interesting when the Under-Secretary gets down to the part of her brief that says ''if pressed''.

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

I have not got down to that part—none of the points are headed ''if pressed''.

Photo of Nigel Waterson Nigel Waterson Ceidwadwyr, Eastbourne

In that case, if the argument is so good, why did she not deploy it the first time around? Perhaps she simply shuffled her papers the wrong way. I must say, however, that her argument is still not very good.

One of our set books at school was Evelyn Waugh's wonderful ''Scoop'', which is set in what we would now call a third world country—I think it was called Ishmaelia—where the country's army and inland revenue are combined, and punitive columns are sent out to lay waste to villages and to collect tax in kind. It is a little far-fetched to suggest that under new clause 5 the OFT would operate a slash-and-burn policy and go round finding people so that it can generate cash flow. We are still wedded to our proposal, and although we shall not press the motion, we shall be back. I beg to ask leave to withdraw the motion.

Motion and clause, by leave, withdrawn.