I beg to move amendment No. 618, in

clause 304, page 262, line 28, leave out from 'appropriate' to end of line 29 and insert

'to promote the interests of consumers in markets relevant to the provision of licensed services or of connected services, where appropriate by promoting competition.'.

With this it will be convenient to discuss the following:

Amendment No. 619, in

clause 304, page 262, line 30, leave out subsection (2).

Amendment No. 645, in

clause 305, page 263, line 13, leave out subsection (2) and insert—

'(2) OFCOM shall not exercise any of their Broadcasting Act powers in relation to any matter to the extent that such matter is capable of being dealt with under the Competition Act 1998 (c.41).'.

Amendment No. 649, in

clause 305, page 263, line 17, leave out subsection (3).

Amendment No. 624, in

clause 305, page 263, line 34 after first 'a', insert 'Broadcasting Act'.

Amendment No. 625, in

clause 305, page 263, line 35 leave out from 'if' to end of line 41 and insert

'and to the extent that, that power is exercised by OFCOM in furtherance of the duty under section 3(1)(a) of this Act.'.

Amendment No. 650, in

clause 305, page 263, line 41, at end insert—

'(7A) For the purposes of this section, a Broadcasting Act power exercised by OFCOM will be deemed to be exercised for a competition purpose to the extent that such power is exercised pursuant to the fulfilment of OFCOM's duties under one or both of the duties in section 3(1)(a) or 3(1)(c).'.

Amendment No. 629, in

clause 306, page 264, leave out lines 24 to 30 and insert

'if, and to the extent that, the provision is made in furtherance of the duty under section 3(1)(a)'.

It was with a certain degree of depression that I discovered that my hon. Friend the Member for South Cambridgeshire had been successful in his application for a debate on the film industry that would coincide precisely with the debate on clause 304. It is a complicated clause concerned with Ofcom's exercise of competition-related powers. If ever my hon. Friend happens to find himself on ''Mastermind'', I suspect that his specialist subject may be the workings of competition law, in which he is extremely well versed. I, on the other hand, have had to take a crash course because of his absence and I hope that the Committee will forgive me if I rely rather more on my notes than I have in previous debates.

I shall begin with a few words of introduction on the clause and the amendments, the purpose of which is to draw attention to some serious concerns about the fact that the Bill does not provide adequate safeguards in relation to the economic regulation of broadcasting. We hope that the Minister will clarify the Government's thinking on that aspect of the Bill, and that, if he is unable to support the amendments, he will at least consider whether it is possible to introduce additional or alternative amendments that will address our concerns.

The clause provides Ofcom with sector-specific competition powers relating to the broadcasting sector. Those powers will allow Ofcom to include a general fair trading condition in Broadcasting Act licences. It will also be able to exercise concurrent competition powers under the Competition Act 1998. We think that the sector-specific power is superfluous because, unlike its predecessors, the Independent Television Commission and the Radio Authority, Ofcom is given concurrent competition powers. There is potential for misuse, in that Ofcom might

attempt to use the sector-specific power instead of its concurrent competition powers, and thus manipulate markets in which no significant market power exists. The provision is unprecedented: to date, no other regulator has sought simultaneously to exercise both sectoral and general competition powers.

Clause 305 requires Ofcom to consider whether it would be more appropriate to act under its concurrent competition powers before exercising its powers under the Broadcasting Act 1996 when it is exercising the Broadcasting Act powers for a ''competition purpose''. That term is defined in clause 305(7), which reflects the wording of the general fair trading condition in clause 304. However, the Bill does not require or even encourage Ofcom to use its concurrent competition powers in preference to its sector-specific powers, despite the Government's stated position that concurrent competition powers should take precedence. That leads to considerable uncertainty about which approach Ofcom will take to competition issues in broadcasting.

Given that Ofcom will have concurrent competition powers, it is unclear why it requires competition powers under the Broadcasting Act, as well as an obligation under clause 3 to have regard to

''the desirability of promoting competition in relevant markets''

when that is considered to be relevant. If the Government included clause 304 because they believe that there are circumstances in which it would not be appropriate for Ofcom to use its concurrent competition powers when dealing with broadcasting matters, they have yet to explain what those circumstances are. It is extremely difficult to foresee a situation in which it would be legitimate for Ofcom to use its competition powers under the Broadcasting Act, but in which its concurrent competition powers were not available to it.

It would be inappropriate if clause 304 had been included merely because of the power that is available to the ITC and the Radio Authority. Although both are currently subject to a statutory duty to ensure fair and effective competition, they do not enjoy the concurrent competition powers that Ofcom will be given. Because of that, to discharge the duty to ensure fair and effective competition, the ITC and the Radio Authority need to be able to impose an obligation on the companies that they regulate via their licences. However, Ofcom will be able to apply and enforce the statutory competition regime and will not need to fall back on a general fair trading licence condition, as the ITC and the Radio Authority have done in the past.

We should recognise that to date no regulator in the communications sector has sought to rely simultaneously on a general fair trading condition and concurrent competition powers. When Oftel first introduced a fair trading condition into Telecommunications Act 1984 licences in the mid-1990s, it included in that condition a sunset provision that ensured that it ceased to apply when prohibition-based competition legislation came into force. That sunset provision was triggered on 1 March 2000 when the Competition Act 1998 came into force: from that date, the general fair trading condition in licences

under the Telecommunications Act 1984 ceased to apply. Oftel took the further step of confirming, in a statement on 1 July 2002, that its approach when faced by behaviour that could contravene both the Competition Act and the sectoral regime would be to use its Competition Act powers and not to rely on the sectoral regime.

In the light of that, allowing Ofcom to rely simultaneously on competition powers in the Broadcasting Acts 1990 and 1996 and its concurrent competition powers is unprecedented, disproportionate and contrary to the principles of good regulation. It also creates inequities between the ways in which electronic communications networks and services on the one hand, and the broadcasting sector on the other, are treated. Amendments Nos. 645 and 549 require Ofcom to use its concurrent competition powers in priority over its sector specific powers. Ofcom should not have the discretion to choose which route to take when it makes decisions, which is what the Bill as it stands provides.

The Bill is silent on the general question of the economic regulation of broadcasters. Part 3 gives Ofcom overall power to regulate the broadcasting sector via broadcasting licences. Under clause 206(2)(b), Ofcom's function in relation to broadcasting is

''to regulate . . . in accordance with this Act, the 1990 Act and the 1996 Act . . . television licensable content services that are provided by persons under the jurisdiction of the United Kingdom for the purposes of the Television without Frontiers Directive''.

Those licences are to be issued pursuant to the Broadcasting Acts 1990 and 1996, which give Ofcom the power to impose licence conditions on licensees and issue directions pursuant to the fulfilment of Ofcom's duties.

Although part 3 describes the regulation of content in the television broadcasting sector in detail, it is silent on how Ofcom should undertake the economic regulation of broadcasting, other than under the extremely wide functions given to Ofcom to regulate and licence the broadcasting sector. Ofcom could seek to include whatever conditions it considers appropriate in broadcasting licences. It has considerable scope to regulate broadcasters in ways that are unrelated or only peripherally related to content regulation, which could be outside the scope of Ofcom's concurrent powers and its sectoral competition powers. For example, Ofcom could seek to impose conditions on broadcasting licensees in the nature of economic regulation that is not for a competition purpose, but is pursuant to one of Ofcom's other duties.

For example, clause 3(1)(a) imposes on Ofcom a duty to

''further the interests of consumers''.

In performing that duty, Ofcom must have regard to the interests of consumers

''in respect of choice, price, quality of service and value for money.''

Under clause 3(1)(a) and clause 3(4), Ofcom may seek to determine that packages of television channels should be comprised of particular channels or a particular number of channels all sold at a particular

price in ''the interests of consumers''. Directions that Ofcom sought to impose on broadcasting licensees pursuant to the fulfilment of that duty would be in the nature of economic regulation, but would arguably not be pursuant to any of Ofcom's competition powers.

Similarly, Ofcom may seek to rely on its duty under clause 3(1)(c):

''to secure the availability throughout the United Kingdom of a wide range of television and radio services which (taken as a whole) are both of high quality and calculated to appeal to a variety of tastes and interests''.

Ofcom may seek to use that duty to impose on broadcasters licence conditions or directions regarding channel packaging and pricing, or other types of significant economic regulation that are unrelated, or only indirectly related, to the core matters of content regulation that part 3 of the Bill deals with.

I understand that in discussions with industry representatives, officials have advised that Ofcom would not use its licensing powers to undertake economic regulation of the broadcasting sector. The fact that the Bill leaves cable distributors of television services unregulated in these activities shows that they are not intended to be caught—otherwise, significant disparities between the regulation of competitors engaged in the same activities would arise.

Ofcom would have no jurisdiction over how cable operators package and price television channels, as the operators do not require part 3 licences to retail third-party channels. Their television activities are thus unregulated by the Bill. However, However, Ofcom could assume jurisdiction over the retail packages of satellite retailers that hold broadcasting licences. Ofcom could seek to regulate the prices of distributors of channels on satellite that happen to hold broadcasting licences, while satellite distributors that retail only the channels of third parties would remain outside the regulatory net as they would not need a part 3 television licensable content service licence for those activities; they could therefore price and package as they pleased.

In any event, the intention that Ofcom will not use its licensing powers to undertake economic regulation of that type is not reflected in the Bill, and there are no safeguards against Ofcom using its licensing powers in that way. Such concerns are not unfounded. Under the ITC regime, the regulator relied on its duties to ensure both the availability of a wide range of services and fair and effective competition in order to issue directions regarding the package of channels—the so-called minimum carriage requirement—and the EPG code.

Furthermore, the exercise by Ofcom of its powers in relation to the economic regulation of broadcasting under part 3 of the Bill—where matters do not fall to be dealt with under its concurrent competition powers—is not subject to sufficient procedural safeguards. The introduction of and any changes to codes, licence terms or general directions to the broadcasting sector are not governed by a set of tests and procedures for their introduction and modification that is similar to the set of tests and procedures in clauses 43 and 44, which apply to

electronic communications networks and services. Similarly, the bill does not provide full rights of appeal to the Competition Appeal Tribunal against Ofcom decisions in such matters.

At the moment, the Bill provides full rights of appeal in three circumstances, subject to a number of exceptions—

Order. I do not want to put the hon. Gentleman into any more difficulty, but appeals are covered in the next group of amendments.

In actual fact, Mr. Ofcom, amendment No. 650—[Laughter.]

It must be the heavy regulatory touch.

As my hon. Friend suggests, Mr. Atkinson, it may be the heavy regulatory touch that caused me to call you Mr. Ofcom. I do apologise.

I was addressing amendment No. 650, which has been included in the group of amendments for this clause and which deals with procedural safeguards, including rights of appeal. The matter is dealt with in both clauses 304 and 305, and I assure you, Mr. Atkinson, that if I am allowed to consider these matters in the current debate on clause 304, I am less likely to speak at such length when I outline the case in favour of the amendments to clause 305.

The Committee might consider that a fair deal.

Let us hope that this sets a precedent for relations between regulators and those whom they seek to regulate.

The Bill currently provides full rights of appeal in three circumstances: in relation to decisions that are taken under part 2, decisions that are taken under the concurrent competition powers, and decisions that are taken when Ofcom is exercising its powers under the Broadcasting Act 1990

''for a competition purpose.''

I have already mentioned that Ofcom could try to take decisions and impose licence conditions and directions that amount to economic regulation in connection with a number of its primary duties that it has not designated as being

''for a competition purpose'',

for which the only recourse under the provisions of the Bill as it stands is to go to judicial review. Thus, broadcasters will be denied rights that are available to, for example, telecommunications operators. It is bizarre and inconsistent that in a Bill that is based on convergence, Ofcom's ability to act in relation to electronic communications networks and services is subject to due safeguards and accountability, but that ability is not safeguarded in relation to broadcasting.

The amendments and new clauses tabled by my hon. Friend the Member for South Cambridgeshire go a long way towards rectifying those deficiencies. They would remove the unnecessary and redundant fair

trading condition in licences, tying conditions relating to competition matters to clause 3(1)(a), which states Ofcom's duty to promote consumer interests in markets that are relevant to the provision of licensed services or of connected services, where that is appropriate, by promoting competition. That would ensure that if Ofcom relied on that duty in exercising its powers under the 1990 Act, there would be a full right of appeal. Other procedural safeguards that are currently lacking would also be put in place: for example, consultation prior to the introduction of codes, licence terms or general conditions, and consultation prior to subsequent changes in its codes and licences.

The third amendment in the group, No. 650, goes further than my hon. Friend's amendments. It would ensure that a power exercised by Ofcom pursuant to clause 3(1)(a) and 3(1)(c) would be subject to proper procedural safeguards, including full rights of appeal. It therefore closes a hole in the Bill through which Ofcom might seek to rely on its clause 3(1)(c) duty and take decisions and impose licence conditions and directions. Such a course of action would amount to economic regulation, for which proper safeguards might not be provided and for which the only recourse would be judicial review. There is evidence from the current regulatory regime that the risk of a regulator using such a duty is not theoretical. The ITC has acted under both of its primary duties under the Broadcasting Act 1990—to ensure that there is fair and effective competition and to ensure that a wide range of services are available—to undertake matters of significant economic regulation.

I recognise that the Government do not intend to provide for a full independent appeals process on the merits of any decision, licence condition or direction made by Ofcom. I fully accept that the Competition Appeals Tribunal is not well placed to make judgments relating to, for example, taste and decency issues. However, our amendments are not intended to be open ended and they do not allow for such appeals in respect of Ofcom's duties in respect of standards in all television and radio services. The judicial review process will continue to provide the appropriate mechanisms and standards for appeals on matters relating to offensive and harmful material in television and radio services, unfair treatment in programmes, and infringements of privacy.

If there are other areas in which the Government think that full independent rights of appeal or proper procedural safeguards should apply, they should identify them, allow a proper debate to take place, and table the appropriate amendments to narrow the scope accordingly. That is standard better regulation practice, as supported by the Government, which requires transparency, accountability, proportionality, consistency and the targeting of cases in which action is needed. The Government are not meeting the standards of better regulation in respect of the power under discussion, because it is not targeted on cases in which action is needed.

This is not the first time that we have raised the issue of safeguards and appeals. In the debate on clause 187, I mentioned that its effect would be to

introduce full rights of appeal for decisions, directions, approvals and consents made under part 2. We agreed that it would put in place strong and necessary safeguards and I contrasted that with the provisions in part 3. In his response, the Minister for E-Commerce and Competitiveness said that

''Regulation of content is excluded from the scope of the directives and there is no EC requirement for an appeal on the merits involved. Matters of content regulation are strongly connected to public policy and we believe that it is wrong for courts to have the task of reviewing the merits of relevant public policy as part of an appeal process. The judicial review process provides the appropriate mechanisms and standards for an appeal. When powers in the Broadcasting Acts 1990 and 1996 are used to promote competition rather than regulate content, it is appropriate and consistent with the drafting for there to be a formal appeal to the tribunal. That is the distinction that the Bill makes.''—[Official Report, Standing Committee E, 9 January 2003; c. 403–04.]

However, it should be clear from what the Minister said and my comments on what he said that the issue is not as simple as that.

The fact that proper procedural safeguards and rights of appeal are not contained in EC directives is not sufficient grounds for their exclusion from the Bill. It is a matter of the Government's professed principles of good regulation that they are expanded in part 3, in which an element of economic regulation is involved. Pure matters of content, such as those covered by Ofcom's duty in clause 3(1)(d), are unlikely to give rise to questions of economic regulation that merit a full right of appeal to the Competition Appeals Tribunal. However, we have shown that the Bill leaves Ofcom with the ability to undertake matters of significant economic regulation under part 3 that may be unrelated, or only indirectly related, to content regulation. That might be done on grounds other than its concurrent competition powers or its sectoral powers for a competition purpose. In such cases, there is no right to a full appeal process, even though similar decisions made under part 2—for example, in relation to pricing and packaging of telecommunications services—provide such a right.

I hope that, in responding to this lengthy submission, the Minister will use the opportunity to clarify the Government's thinking about those aspects of the Bill and will consider tabling additional or alternative amendments to address the concerns that I have outlined, even if he cannot bring himself to support our amendments. Will he at least give us some assurance on how Ofcom will use both the powers that it inherits under competition legislation, and those that it can exercise under the Broadcasting Acts?

I have to admit that I share with the hon. Member for South Cambridgeshire a kind of perverse enjoyment of matters relating to competition law and its implications for markets including broadcasting and telecommunications. The hon. Member for Maldon and East Chelmsford should not underrate his ability to give us the gospel according to BSkyB—he did a magnificent job. However, I do not agree with the amendments, and I shall explain why.

The effect of amendments Nos. 618 and 625 would be to give primacy to Ofcom's duty under clause 3(1)(a) to promote the interests of consumers where

appropriate by promoting competition. Amendment No. 650 seeks a similar outcome, but would also add Ofcom's duty under clause 3(1)(c)

''to secure the availability throughout the United Kingdom of a wide range of television and radio services which (taken as a whole) are both of high quality and calculated to appeal to a variety of tastes and interests.''

The amendments would widen the scope of the decisions that would be subject to the right of appeal on their merits to the Competition Appeals Tribunal. The effect would be unduly to limit Ofcom's statutory discretion in the application of its general duties under clause 3 and those functions that, rightly, should have a route of appeal to judicial review.

Clause 3 sets out an overall duty on Ofcom to further the interests of consumers in relevant markets, where appropriate by promoting competition. As a general duty, together with the other duties contained in clause 3, it applies to all of Ofcom's functions, including those set out in the clauses relating to its Broadcasting Act competition powers. The same is true of Ofcom's general duty to secure the availability of a wide range of television and radio services. Ofcom is required to resolve any conflict between its clause 3 duties in such manner as it thinks fit.

We have provided for those of Ofcom's decisions that are made for the purpose of ensuring fair and effective competition to be subject to a right of appeal on the merits to the CAT. Other decisions that Ofcom makes for policy reasons may have an economic effect, but that does not mean that they should be subject to a similar right of appeal. It is important that Ofcom, a specialist broadcasting regulator, should retain its discretion in that respect. We are satisfied that judicial review of those of Ofcom's decisions that do not relate to competition is entirely appropriate.

Amendment No. 645 would limit Ofcom's ability to determine the most appropriate route for intervening in a competition matter. The ''where appropriate'' test, in the current wording of clause 305(2), is in line with the concurrent powers of all other regulators in competition matters. That formulation acknowledges that regulators of a range of sectors, not only of communications, are best placed to determine whether to use general competition law or sector-specific competition powers. That is entirely the correct approach. Broadcasters can apply for judicial review if they consider that Ofcom has wrongly used its sector-specific powers when the Competition Act powers would have been the more appropriate route.

The hon. Member for Maldon and East Chelmsford raised the specific matter of ensuring parity and equity between platforms. He was right to say that cable packages do not require a licence under part 3, but nor does a packager of satellite channels. However, a cable packager that provided its own channels as well as or instead of simply distributing channels provided by others would need a licence for those channels. In that respect, therefore, cable and satellite are treated in the same way. It depends on the nature of the business and especially on whether the packager provides its own channels.

It is true, as the hon. Gentleman said, that no regulator has used both sets of powers simultaneously.

There is always a choice of route. He mentioned the Oftel statement of 1 July 2002, which stated:

''In some cases it may be appropriate to use sectoral powers. However, in the majority of cases that could potentially be caught by the Competition Act, but which do not arise from interconnection disputes, the Director General now expects to investigate, and where appropriate take enforcement action, under the Competition Act rather than under the sectoral regime. The proportion of cases dealt with under the Competition Act will increase.''

The hon. Gentleman could have quoted that statement. Oftel is not saying that it will not use sectoral powers—on the contrary. It went on to state:

''Oftel may decide at any stage in an investigation that it is more appropriate to carry out the investigation under the sectoral regime rather than under the Competition Act.''

It is clear that the regulators should, from time to time, have access to the necessary powers. As I have already outlined, there is good reason for that.

Those who argue against clause 304 believe that the Competition Act is sufficient to protect against anti-competitive behaviour in broadcasting. That is a cause of fundamental disagreement. Under the prohibitions in the Competition Act—those prohibitions on which Ofcom would largely have to rely were its sector-specific powers to be removed—intervention would be allowed only if there was an abuse of a dominant position, or if agreements existed that appreciably prevented, restricted or distorted competition. We are concerned about cases in which markets should be opened up to greater competition but where the legal tests required by the Competition Act are not met. That is when the anorak expertise of the hon. Member for South Cambridgeshire becomes important. I shall attempt to explain why.

The sector-specific powers contained in the Bill can be used to supplement those contained in the Competition Act. The Competition Act cannot be applied until the regulator has reason to believe that an enterprise has harmed the market by acting anti-competitively, or that the market has been harmed by existing agreements. As such, there are situations in which the use of sector-specific powers may be more effective, especially where advance action or action in a short time frame is required to ensure effective competition.

The opponents of that policy want us to leave the broadcasting sector to be determined by the Competition Act, which, I am sure the hon. Member for Maldon and East Chelmsford will agree, has very little broadcasting case law behind it. The Act is still relatively new. Our policy is to carry over the safeguards that the ITC and the Radio Authority have had to guarantee that Ofcom has that same flexibility to ensure fair and effective competition as the other broadcasting regulators had pre-Ofcom.

We have made changes to ensure that Ofcom cannot use those powers in a way that unnecessarily burdens industry. The policy's opponents might have lost sight of the fact that the Bill will ensure that Ofcom must not use its sector-specific competition powers where it considers that the more appropriate

route would be under the Competition Act. That is important. Any decision that Ofcom makes for a competition purpose will have a route of appeal to the CAT. Moreover, Ofcom must periodically review any of the prohibitions that it issues under its sector-specific powers to ensure that unnecessary burdens on the industry are removed. Given those safeguards, I hope that the hon. Member for Maldon and East Chelmsford will seek leave to withdraw his amendments.

I am not sure that the Minister's assurances take us further forward. He says, for example, that the regime applied to cable and satellite operators is the same, because if a cable operator were to provide its own channel, it would be subject to those powers, whereas a satellite operator that did not provide channels would not. That theoretical argument is undoubtedly correct, but the practical effect is that, in the present market, cable operators have to be outside the arrangements and satellite operators do not. The Bill's provisions appear to be discriminatory.

Although the Bill states that Ofcom should use its Competition Act powers in preference to its Broadcasting Act powers, it is left to Ofcom to decide whether that is the more appropriate way to proceed. That an appeal to the tribunal is available in respect of competition purposes is something, but the Minister appears to concede that Ofcom may use its Broadcasting Act powers for purposes that do not relate to, for example, content regulation, taste and decency, or standards, which come under part 3, but that do relate to economic matters, even though they do not necessarily come under the competition requirements of clause 3(1).

I have a feeling that the Minister is confirming my fear that it is at least possible that Ofcom may interpret its general duties to impose conditions using its Broadcasting Act powers, which most people would see as economic regulation rather than content regulation. Even though the Minister has not reassured me, I shall not press for a Division, as I suspect that the subject will be debated again later in our proceedings. We are to debate some procedural safeguards that might help under amendments to clause 305 that stand in the name of my hon. Friend the Member for South Cambridgeshire. I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 304 ordered to stand part of the Bill.