Clause 356 - OFCOM's functions under Part 4 of the Enterprise Act 2002

Communications Bill – in a Public Bill Committee am 9:30 am ar 4 Chwefror 2003.

Danfonwch hysbysiad imi am ddadleuon fel hyn

Photo of Andrew Lansley Andrew Lansley Ceidwadwyr, South Cambridgeshire 9:30, 4 Chwefror 2003

I beg to move amendment No. 675, in

clause 356, page 307, line 20, after '(b)', insert

'in any other provision of that Act,'.

Photo of Peter Atkinson Peter Atkinson Ceidwadwyr, Hexham

With this it will be convenient to discuss amendment No. 676, in

clause 357, page 308, line 40, after '(b)', insert

'in any other provision of that Act,'.

Photo of Andrew Lansley Andrew Lansley Ceidwadwyr, South Cambridgeshire

As the Minister briefly informed us, clause 356 is about the extension of concurrent powers to Ofcom under the Enterprise Act. At the moment, concurrency does not apply to the ITC, but it does apply to Oftel. In the clause, we are broadening the concurrency that Ofcom enjoys compared with Oftel.

There are two groups of amendments to the clause, and the second is the more substantive. In the manner of my hon. Friend the Member for Lichfield, I shall therefore narrow my locus for a moment and talk about a specific drafting point. I freely confess that I may simply not understand why the language is as it is, and I should be grateful if the Minister would enlighten me.

The provision in clause 356(3) is mirrored in part 2 of schedule 9 on page 248 of the Enterprise Act in relation to the Director General of Telecommunications, although the language is different from that in clause 356. Why is it different? Amendment No. 675 relates to the Enterprise Act 2002 and amendment No. 676 relates to the Competition Act 1998. Paragraph 2(6) in part 2 of schedule 10 of the Competition Act contains language that I assume is intended to be mirrored in clause 357(3). The two amendments deal with the same issue but in relation to two different statutes.

Why is the wording different? I may be wrong, but let me say what I think. The approach seems to be that if, in relation to part 4 of the Enterprise Act, one

requires references to the OFT to be construed as including references to Ofcom, it may be assumed unnecessary to make any similar assumption about any other part of the Act. Almost by definition, one need not specify where the context requires that outside part 4 because, outside part 4, references to the OFT will not be construed as references to Ofcom and will be construed as references to Ofcom or to a sector regulator only where the original Act—the Enterprise Act or Competition Act—requires them to be so construed.

Now let me say why that is not sufficient. Of course, part 4 of the Enterprise Act or, in respect of clause 357, part 1 of the Competition Act are not the only provisions describing powers in the hands of the OFT and the sector regulators, which need to be used concurrently. There are other powers. For example, section 203 of the Enterprise Act relates to powers of entry. As far as I am aware, it is intended that, under the Enterprise Act, powers of entry should be used concurrently by sector regulators and the OFT. If powers are held concurrently, they are not in part 4 but in part 7. In so far as they relate to part 4, it might be held that, by implication, references to the OFT should be construed also as references to Ofcom, but not necessarily so. It seems to me that we should be prepared for the read-across to go outside the relevant part of the legislation.

That brings us back to the language of the Enterprise Act, which is different. It says,

''references . . . shall be construed as including references to Ofcom except—

in sections 166 and 171;''—

we need not detain ourselves with what that means—

''and

(b) where the context otherwise requires.''

But in the absence of the amendment,

''where the context otherwise requires''

would relate only to part 4. However, it should relate also to other parts of the Bill. The same is true, for instance, in relation to section 204 of the Enterprise Act on the disqualification of directors, which is a concurrent power. I paid slightly less attention to that part of the Enterprise Act when I was a member of the Committee that considered that legislation than I did to this part of the Communications Bill. Perhaps I missed it.

It seems that investigation powers under sections 62 and 64 of the Competition Act can be used concurrently, and that should be done in a similar fashion to that in which we relate concurrency to Ofcom. My question is, in a nutshell, whether the drafting of the Enterprise Act and the Competition Act is wrong—perhaps that is a bit harsh on the draftsmen; I should have said unnecessary. Is it unnecessarily wide, and is the drafting used in the Bill right—narrow, but necessarily or correctly narrow—or have we inadvertently in clauses 356 and 357 narrowed our focus—or narrowed our locus, as my hon. Friend the Member for Lichfield might say—onto part 4 of the Enterprise Act and part 1 of the

Competition Act, leaving out other parts of those Acts that ought to have been included?

Photo of Stephen Timms Stephen Timms Minister of State (e-Commerce & Competitiveness) 9:45, 4 Chwefror 2003

I think that I can give the hon. Gentleman the reassurance that he seeks. The provisions of subsection (3) are confined to part 4 of the Enterprise Act 2002. In other words, the wording of the subsection can be used to extend concurrent powers to Ofcom only insofar as those powers are referred to in part 4 of the Enterprise Act. Even without the amendment, subsection (3) cannot be used to extend powers from part 7 of the Enterprise Act. That raises a rather different question, however, about the powers in part 7 of the Enterprise Act mentioned by the hon. Gentleman that ought to be applied to Ofcom.

In the context of this debate, the point is that subsection (3) does not convey those powers to Ofcom. However, there are investigation powers in part 4 and in section 174, and other powers appear in part 3—for example, requirements about the attendance of witnesses are applied by section 176. On reflection, the hon. Gentleman should accept that adding the words proposed in the amendment would not change the meaning, because that meaning can be used only to give Ofcom powers that are in part 4 of the Enterprise Act—or, in the case of clause 357, in part 1 of the Competition Act. The other powers to which he referred, which may well be needed, are applied elsewhere in the Bill.

Photo of Andrew Lansley Andrew Lansley Ceidwadwyr, South Cambridgeshire

First, I want to be sure that Ofcom requires no power as a concurrent regulator in relation to those two Acts that is reflected in other parts of the legislation but that is not applied by virtue of part 4 of the Enterprise Act and part 1 of the Competition Act.

Secondly, is the drafting of the Enterprise Act, in so far as it is the same as the Competition Act for those purposes, wider than is needed? Therefore, the drafting is different for the Communications Bill. I want to be absolutely sure that the Minister is clear that the drafting is different and does not need to be the same as it was for the other pieces of legislation, including the Enterprise Act, which was drafted only last year.

Photo of Stephen Timms Stephen Timms Minister of State (e-Commerce & Competitiveness)

I am not entirely clear about the hon. Gentleman's second question. I would need to look at the precise drafting of the Enterprise Act, but I am confident that it is correct. I am equally confident that the job that must be done is done by the wording in the Bill.

Turning to the hon. Gentleman's first question, the answer is yes. We need Ofcom to be able to have certain powers, and those powers are contained elsewhere in the Bill. Clause 356(3) is restricted to the powers in part 4 of the Enterprise Act. Any other powers that are needed are set out elsewhere.

Photo of Andrew Lansley Andrew Lansley Ceidwadwyr, South Cambridgeshire

I am grateful to the Minister, and I take his point. I did not understand that when he first made his point about powers elsewhere that he was referring to clauses 174 and 176 in this Bill, not the Enterprise Act. On that basis, and especially because the Minister said that the Government would be sure about the disparity in drafting, I am content to leave the matter to further consideration.

I am not attempting to make a point about drafting, Mr. Atkinson. Drafting is intensely difficult. Even the drafting of legislation such as the Enterprise Act is capable of improvement—everything is capable of improvement. It may be that the Bill works better as a formulation than the Enterprise Act did last year. Unless the Minister wishes to intervene, I shall be happy to seek leave to withdraw the amendment.

Photo of Stephen Timms Stephen Timms Minister of State (e-Commerce & Competitiveness)

I need to clarify that my references were to sections 174 and 176 of the Enterprise Act, and not to the Communications Bill.

Photo of Andrew Lansley Andrew Lansley Ceidwadwyr, South Cambridgeshire

Clearly, Mr. Atkinson, my research for amendments Nos. 675 and 676 took me only so far. Although, in iteration in Committee, one can read, think and look at the same time, I, too, shall look at sections 174 and 176 to see whether they do the job. However, I am content that it is perfectly obvious that a train of thought has been followed that has been designed to ensure that everything is grouped back in by application under part 4 of the Enterprise Act, and that the required powers are there. I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Photo of Andrew Lansley Andrew Lansley Ceidwadwyr, South Cambridgeshire

I beg to move amendment No.678, in

clause 356, page 307, line 29, at end insert

'and they shall together agree who shall exercise functions in relation to that matter.'.

Photo of Peter Atkinson Peter Atkinson Ceidwadwyr, Hexham

With this it will be convenient to discuss amendment No.679, in

clause 356, page 308, line 21, at end add—

'(13) The Secretary of State may make regulations for the purpose of coordinating the performance of functions under Part 4 of the Enterprise Act 2002 which are exercisable concurrently by the Office of Fair Trading and OFCOM by virtue of this section.'.

Photo of Andrew Lansley Andrew Lansley Ceidwadwyr, South Cambridgeshire

This might be a little simpler, amazingly. The amendments probably cut to the purpose of the clause in more accessible ways for those who read our debates.

Concurrency regulations under the Competition Act were made in 2000, and I do not think that subsequent regulations have been made. Disappointingly, much as we value the presence of the Minister from the Department of Trade and Industry, it was the Minister for Tourism, Film and Broadcasting, who, as the Parliamentary Under-Secretary of State for Consumer and Corporate Affairs, signed the regulations. I was looking forward to teasing him about his recollection of his own regulations: I suspect that he would know them pretty well.

The concurrency regulations are important from the point of view of industry's understanding of the matter, and of reassuring it that it will not suffer double jeopardy. When the Joint Committee began its work, the risk of double jeopardy was one of the concerns that were raised about the nature of Ofcom with regard to the Communications Bill. Double jeopardy can occur only if the concurrent powers are used in ways that are duplicatory, and if they are improperly co-ordinated between the two regulators. It was the view of the Joint Committee—and my personal view—that the concerns that were raised

could not be substantiated by evidence: examples from other sectors give no reason to suppose that it is impossible for concurrency to be pursued in a way that does not give rise to double jeopardy. Indeed, it should enable competition powers to be used more effectively. As the Minister rightly said, in so far as sector powers are being used as well, it offers a route by which ex ante powers and sector specific powers can progressively be dispensed with in favour of competition based powers, which—in the longer term—industry will find are more congenial to the maintenance of a market structure. Therefore, I have no difficulty with the intentions of clause 356.

There is a difference between clause 356, which deals with the Enterprise Act, and clause 357, which addresses the Communications Act. When we come to look at concurrency in relation to the Competition Act, we will find that there is already a power in that Act for the making of regulations: regulations have been made, and we can see the process by which concurrency works. With regard to the Enterprise Act, there is no comparable power that requires or permits the making of regulations for how concurrency works.

It might be the case that, by implication, concurrency works in relation to the Enterprise Act in similar ways to how it works under the Competition Act. Indeed, when one looks through clause 356, that seems to be what is going on. The manner in which concurrency should be exercised between the OFT and Ofcom is specified in clause 356, even though it is not specified in the Enterprise Act: for example, there is a requirement to consult in subsection (5). The requirement in subsection (6) that if one of those bodies were to act the other should not, specifically excludes the double jeopardy point.

The strongest principle in the regulations, and the one on which Ministers should rely when they introduce legislation on concurrency, is that the best placed regulator acts. That is enshrined in the guidance on concurrency that accompanies the Competition Act. Paragraph 3.8 states:

''The general principle will be that a case will be dealt with by whichever of the Director General of Fair Trading or the relevant regulator is better, or best, placed to do so.''

However, there is a problem with how that might work, because the first regulator to act is not necessarily the best placed one. The guidance issued under the Competition Act contemplates that one regulator might initiate proceedings but conclude after consultation that the other regulator is best placed to act and there is power to transfer a case from one regulator to another, but nothing in clause 356 contemplates the possibility of such a transfer.

Paragraph 3.10 of the guidance issued under the Competition Act states:

''Once the matter has been determined under Regulations 5 or 6, Regulation 7 also prohibits any other authority from exercising prescribed functions in relation to that case''—

so regulation 7 in the statutory instrument is a parallel to subsection (6)—

''unless it is formally transferred to that authority under the procedures laid down in Regulation 8.''

Although the principle that if one regulator starts, the other should not exercise functions is established in the regulations under the 1998 Act, those regulations allow for the subsequent transfer of cases. Unless I misunderstand the legislation, the provisions exclude the possibility of a transfer of a case between two regulators.

Is there an omission? That is the point that I was coming to on the amendments. Amendment No. 679 would permit the Secretary of State to

''make regulations for the purpose of coordinating the performance of functions''.

The transfer of functions is merely one example of the way in which regulations could be made for that purpose.

Amendment No. 678 would add to subsection (5). Whereas the OFT and Ofcom have to consult each other before exercising functions, the purpose of the amendment is to make sure that neither regulator engages—I hope that this will never happen—in a pre-emptive strike on the other. They would be required to agree. One could not merely consult the other and then act. If they did not agree, under subsection (8) they would be required to go to the Secretary of State for a determination as to how the matter should be dealt with. It seems to me that those two bodies should not only consult, but agree. That is implied by the structure of the clause.

Amendment No. 678 is consistent with the intention of subsection (5) and closes off what might otherwise be a risk of something that I hope would not occur. On amendment No. 679, in so far as there might be issues dealt with in the regulations under the Competition Act that appear not to be properly dealt with under either the Enterprise Act or the clause, regulations could be made, for example, on the transfer of functions.

Photo of Stephen Timms Stephen Timms Minister of State (e-Commerce & Competitiveness) 10:00, 4 Chwefror 2003

I agree that the exercise by the OFT and Ofcom of their concurrent powers under part 4 of the Enterprise Act needs to operate smoothly, fairly and effectively. That has been the case with the OFT and sectoral regulators under the Competition Act, but the amendments would introduce some unnecessary additional provisions into the arrangement, and I therefore hope that hon. Members agree that they are not appropriate.

Amendment No. 678 would require the OFT and Ofcom not merely to consult each other before deciding which of them should take a case under the 2002 Act, but to agree which of them should take that case, as the hon. Member for South Cambridgeshire has explained. That is indeed the position under the concurrency regulations that my hon. Friend the Minister for Tourism, Film and Broadcasting issued in relation to the Competition Act. It is certainly right that we need to prevent double jeopardy and duplication of action by the concurrent regulators. However, I hope that the hon. Gentleman would agree that substantively the same practical effect is achieved under the Bill in subsection (6), which provides that

''Neither the Office of Fair Trading nor OFCOM shall exercise . . . functions which are exercisable concurrently . . . if functions

which are so exercisable have been exercised in relation to that matter by the other.''

Photo of Andrew Lansley Andrew Lansley Ceidwadwyr, South Cambridgeshire

If the problem were double jeopardy, that would be fine. However, as I have explained, the problem is that in those circumstances, which I freely acknowledge have not to my knowledge arisen, whereby one regulator—say, Ofcom if it had a less enlightened board—decided to engage in a market investigation but was not best placed to act, there would be nothing in the provisions to stop Ofcom pursuing that route after consultation with the OFT and simply using subsection (6) to be the first to act, thereby closing off the possibility of action by the OFT.

Photo of Stephen Timms Stephen Timms Minister of State (e-Commerce & Competitiveness)

To conclude the point that I was making about the difference between the arrangements under the Competition Act and the Enterprise Act, the formulation is somewhat different in each, but the effect is the same.

The hon. Gentleman is, I think, raising a point about the possibility of transfers. He was arguing earlier that in some circumstances it should be possible to bring about a transfer between the two. Transfers can be handled by administrative arrangements between the regulators, as happens in relation to the Enterprise Act. These things work by way of a co-ordination arrangement, through the concurrency working party, a group of officials from the OFT and the sectoral regulators set up when the Competition Act was introduced. That has worked well.

Photo of Andrew Lansley Andrew Lansley Ceidwadwyr, South Cambridgeshire

But that is precisely where the difference between the Competition Act, the Enterprise Act and the current proposal is relevant. Under the Competition Act, regulation 8 allows for transfers. Subsection (6), however, implies that once either Ofcom or the OFT had begun to act, transfers would not be possible. In fact, they are expressly excluded in primary legislation. That is not how the Competition Act works. There is nothing in it to preclude or allow transfers. The matter is dealt with in secondary legislation. Under the Bill, primary legislation will block transfers.

Photo of Stephen Timms Stephen Timms Minister of State (e-Commerce & Competitiveness)

No, because administrative arrangements between the regulators will still be possible, as is the case under the Enterprise Act.

Amendment No. 679 would replicate for the Enterprise Act the powers in the Competition Act for the Secretary of State to make concurrency regulations. We have not made provision for that in the Bill, because, first, the clause as it stands deals with the possibility of double jeopardy, as I have said. Secondly, whereas the regulations made under the Competition Act contain various detailed provisions about the way in which these matters will be handled—for example, with regard to telling those concerned which of the concurrent bodies is dealing with their case—we do not consider that necessary for the Enterprise Act.

That is partly because the Enterprise Act already provides—for example at section 169—a process in which those with an interest in a part 4 investigation must be consulted before any reference is made to the

Competition Commission. Thus, interested parties will know before any substantive decisions are taken as to who is in charge of the case. Another reason is that—in contrast to the situation under the Competition Act, when concurrency was a relatively new concept and more sectoral regulators were involved—the Bill deals with concurrency as an established concept in one sector, and we have created Ofcom as the independent regulator for that sector. All that needs to be done is for Ofcom to work out the detail of the processes that it will adopt in the relevant context, in conjunction with the OFT.

In fact, the OFT is already in the process of preparing more detailed guidelines on the operation of the Enterprise Act, in co-operation with the other sector regulators with concurrent powers, including the bodies whose activities will be subsumed into Ofcom. There is thus already good co-ordination on the matters in question, and I look forward to its continuing. The powers in clause 356 are drafted to fit with the powers in the Enterprise Act and they mirror those for other regulated sectors. The hon. Gentleman is right to note that the approach is slightly different from that in the Competition Act, but I hope that I have persuaded him that sufficient procedural safeguards are built into the provisions as drafted.

Both the amendments are unnecessary, and I hope that the hon. Gentleman will feel able to withdraw them.

Photo of Andrew Lansley Andrew Lansley Ceidwadwyr, South Cambridgeshire

I am afraid that on this occasion the Minister has not persuaded me at all. Indeed, he tried at one point to have things both ways. He argued that there was no need for amendments like mine because the best placed regulator would act in the first instance, under the Enterprise Act, and because there is a duty to consult under section 169 of that Act, and so on—by extension, he argued that it would always be true that the first regulator to act would be the best place to act; he argued also that, in any case, administratively, the two regulators could transfer functions between them if, in any circumstance, one were to act but the other was best placed. He cannot have it both ways. I may be wrong, but it seems to me, on the face of it, that the second argument is certainly not true. I cannot see how administrative arrangements between the regulators—still less if those arrangements were not covered by secondary legislation—could override what appears to be a requirement under clause 356(6).

I am even slightly worried about whether, if Ofcom were to begin the process of consultation on a market investigation, it would be construed as exercising

''in relation to any matter functions which are exercisable concurrently''.

Once Ofcom starts the process—even the process of consulting about a market investigation—will it, by virtue of subsection (6), be required to continue, even if the scope of the market investigation would make it better for the Office of Fair Trading to act?

This is not a purely academic and theoretical argument. Many people in the industry feel that over time there will be merit in market investigations being conducted by the OFT, even when it might be possible

for Ofcom to conduct them, because of the benefit of having them carried out by a more independent body than Ofcom. As time goes on, in relation to some of the issues, Ofcom has become intimately connected to the market structure that has been created by virtue of licence conditions relating to broadcasting and significant market power conditions that have been set under telecommunications legislation.

I am not content that the structure of the Bill properly provides yet for the degree of flexibility that should be available under the Enterprise Act. The issue is not about double jeopardy. I am pretty sure that in more or less any circumstances the regulators will avoid that. It is about the achievement of the general principle that the best-placed regulator should be the one to act. It is also about establishing the flexibility that would enable that to happen. The important points are, first, that the two regulators should not only consult one another, but be required to agree, and, secondly, that they should have the ability to transfer cases if it becomes apparent, even after the commencement of functions, that a regulator—probably Ofcom—should transfer to the OFT.

I shall not press the amendment to a vote because I have made my point and I have no doubt that the Government's intentions are the same as mine. There is no difference over policy—only over drafting—and the last thing that I should claim would be the ability to draft legislation. My amendments might not be right. However, the Government need to think hard about the matter. If they agree with me, there may be room for more amendment to clause 356. I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

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

Photo of John Whittingdale John Whittingdale Shadow Secretary of State for Culture, Media and Sport

I want to raise a specific matter about the clause and then to make a more general observation about what the clause is intended to achieve.

The first matter amounts to a suggested change. I apologise to the Committee, because had I thought about it earlier I should have tabled it as an amendment. As I did not do so, perhaps I may at least draw it to the Minister's attention. Much of our debate on the clause has been about trying to reproduce the powers and the terms set out in the Enterprise Act, as well as the general application of competition law.

My particular concern is about the wording of the Bill, which is different from that in other legislation in cases where it would be sensible and consistent to use the same wording. I am looking particularly at subsection (7)(a), which imposes the duty on Ofcom, for the purpose of assisting the Competition Commission in carrying out an investigation, to give the commission

''any information which . . . relates to matters falling within the scope of the investigation,''

and, under subsection (7)(b),

''any other assistance which the Commission may require''.

It might be more sensible to insert the word ''reasonably'' in relation to both information and assistance, so it would read ''which reasonably relates'' and ''may reasonably require''. If we were to do that, it would put the measure on a par with the requirements on the OFT in part 4 of the Enterprise Act. In the corresponding provision of that Act, the OFT must act reasonably in relation to providing information to the Competition Commission once it has referred the matter to it for investigation, and it may give such assistance as the Commission may reasonably require. Such an amendment, had I had time to table it, would have phrased the Bill so that it mirrored the Enterprise Act. I apologise to the Minister that it is not an amendment, but I put it to him for consideration.

While he is reflecting on that, might I make a more general observation in relation to the clause. We are dealing with the functions carried out by Ofcom under the terms of the Enterprise Act. I was fortunate enough to debate that Act on Second Reading. In general, I support it. My hon. Friend the Member for South Cambridgeshire and I are graduates of the Tebbit school. When Lord Tebbit was Secretary of State for Trade and Industry, he laid down the principle that references to the competition authorities for intervention should be made only on competition grounds. Subsequent Secretaries of State have followed that rule, with varying degrees of rigour. Some notable exceptions occurred in the early life of this Government, when references were made that seemed to have little to do with competition. The clause concerns competition and the Enterprise Act essentially puts that in statute and removes ministerial interference.

In the next section we shall debate the specific exemption to that principle, which relates to newspaper mergers. However, before we do so, I should like to say something about the way in which the Enterprise Act is framed. I expressed a concern during debates on the Act that applies equally to this clause, which deals with Ofcom's carrying out its functions under the Enterprise Act in terms of the communications market.

I believe in the power of the market and competition, as do my hon. Friends. It has been argued that we do not need to have competition references; if there is abuse of market power, or a cartel is in operation, somebody will enter the market or somebody else will undercut, and in the long term there will be a market-based solution. However, I am persuaded that the market does not always act quickly or effectively enough. I commend to the Committee the work of Dr. Irwin Stelzer, who has written persuasively on the matter. He is a fine advocate of the free market and of competition policy. If he believes that it is necessary for Government to intervene to prevent abuse, who am I to question him? I have concerns about paragraph 723 of the explanatory notes to clause 356, which states:

''Part 4 of the Enterprise Act 2002 will replace the monopoly provisions of the Fair Trading Act 1973 with a new regime of 'marketing investigations'.''

It goes on to say that market investigations might be necessary

''where competition does not appear to be working well, but where there is no apparent breach of existing competition law.''

It then says:

''An example of the sort of circumstances in which a market investigation might take place would be a situation where a few large firms supplied almost the whole of the market and, without there being any agreement between them, they all tended to follow parallel courses of conduct, while new competitors faced significant barriers to entry''

I expressed some concerns at the time of the Enterprise Act because, essentially, it boils down to Ministers thinking that there may be something dodgy going on but not having evidence to back up their suspicions. That has led inevitably to the imposition of huge costs on the industries that have been subjected to investigations. I would like to give a couple of examples because they illustrate the dangers.

The first, although it is not directly the responsibility of Ofcom it is related, is the record industry. There have been stories of the rigging of markets and the pricing of compact disks in particular over many, many years. In 1993, a year-long investigation by the Monopolies and Mergers Commission

Photo of Peter Atkinson Peter Atkinson Ceidwadwyr, Hexham 10:15, 4 Chwefror 2003

Order. I would be grateful to the hon. Gentleman if he told me what his argument has to do with the very precise provisions of clause 356, which deal with the functions of Ofcom under part 4 of the Enterprise Act. I know that he is going on a wide preamble; nevertheless, I wish that he would return to the subject matter as soon as possible.

Photo of John Whittingdale John Whittingdale Shadow Secretary of State for Culture, Media and Sport

My argument is relevant because clause 356 deals with that part of the communications market in which Ofcom applies Enterprise Act powers. Therefore my concerns about how such powers can be used apply equally to Ofcom in looking at the communications market as they do to how the Office of Fair Trading can use its new powers under the Enterprise Act. It is perfectly relevant to consider examples in which Enterprise Act powers have been used because the dangers that arise from them are equally applicable to how Ofcom might interpret its powers under clause 356.

It is valuable to consider a few examples. The example of the record industry is a very good one because it was subject to a full investigation by the Monopolies and Mergers Commission, which cleared the industry of any wrongdoing.

Photo of Michael Fabricant Michael Fabricant Ceidwadwyr, Lichfield

Is my hon. Friend aware that the old Select Committee on National Heritage also conducted an inquiry and confirmed that there was a monopoly in the record industry?

Photo of Peter Atkinson Peter Atkinson Ceidwadwyr, Hexham

Order. Once again, we are debating examples. I have told the hon. Member for Maldon and East Chelmsford that his remarks were going wide of the clause and I hoped that he was bringing his them to a conclusion. I would be grateful if he did not engage in the debate suggested by the hon. Member for Lichfield.

Photo of John Whittingdale John Whittingdale Shadow Secretary of State for Culture, Media and Sport

I merely suggest to my hon. Friend the Member for Lichfield, with due respect to

the Committee, that if I had to say which was more likely to find the truth, the Monopolies and Mergers Commission or the Department of Culture, Media and Sport, I know which of them I would choose. The important point is that the record industry was subjected to a year-long investigation that found no evidence of wrongdoing. That investigation cost the industry about £20 million.

Nevertheless, in the past three years there have been five more investigations, none of which has overturned the conclusions of the first one. There is a danger that the general view will be that, although they found nothing this time, something is clearly going on because prices are very high and considerable profits are being made, so we should have another look at it. The same thing happened in the 1990s, when the former Secretary of State for Trade and Industry, the right hon. Member for Tyneside, North (Mr. Byers), stood up at a Labour party conference and started talking about rip-off Britain. That led to an investigation into supermarket pricing, which did not come up with any evidence.

Although I am all in favour of giving powers to a regulator to root out anti-competitive practice and to search for evidence of cartels, we should always remember that that is not a cost-free option. It places a significant burden on the industry, which is subject to investigation at a considerable cost. It is incumbent on the regulator to think very carefully before recommending a full investigation. Some have argued that, when an industry is subject to an investigation and incurs considerable costs in providing the regulator with material concerning its market position, if the subsequent inquiry finds that it has acted properly and that there is no evidence of anti-competitive practice, the industry might have some claim for costs. I raised that suggestion during debate on the Enterprise Bill and it did not find favour. However, we should bear it in mind.

Ofcom should examine areas where there have been allegations of abuse of market power, particularly the area of conditional access charges, because there is a dominant position. In some cases, such allegations turn out to be justified, in others they do not. Nevertheless, there should not be a rolling examination—as soon as one investigation into potential abuse has finished the next one starts. At this stage of the Bill—when we are considering how Ofcom is to carry out its functions under the Enterprise Act—we should flag up a warning. We cannot assume that having investigations into potential anti-competitive practices will always be of benefit to the consumer, especially if no evidence is found and a large price tag is attached. The consequence will be that the consumer will have to pick up the bill.

Photo of Stephen Timms Stephen Timms Minister of State (e-Commerce & Competitiveness)

The hon. Member for Maldon and East Chelmsford has raised two points. First, he wants to add the word ''reasonably'' in two places in clause 356. He will know from our discussions that Ofcom has always to act reasonably. We are resistant to the idea of putting in the Bill statements to the effect that Ofcom should behave reasonably. He argued that there is precedent for the use of the word, and I shall

consider the suggestion, but I am cautious about adding too many statements that do not seem to be required.

The hon. Gentleman also referred to the changes that the Government have made. He was right to point out that, under the Enterprise Act, Ministers are not involved in decisions on the references. That is an important strengthening of the competition framework for the British economy. He seems to be saying that he is in favour of that. In clause 356, we are simply carrying across provisions that have already been agreed for inclusion in the Enterprise Act and putting them in this legislation as well. The hon. Gentleman said that he had made similar points during the debate on the Enterprise Act and that they did not find favour. We now need to ensure that we carry across into the Bill the framework that Parliament has agreed. I take issue with the hon. Gentleman's assumption that people will launch investigations for which there is no evidence. That will not happen. Regulators would be reluctant to embark on a major exercise unless there were a significant reason for them to do so. It is important that, if there is evidence of a problem that falls short of a breach of competition law, it should be possible for action to be taken or an investigation to be carried out. These provisions permit that, as do similar provisions in the Enterprise Act that have been agreed by Parliament.

Question put and agreed to.

Clause 356 ordered to stand part of the Bill.

Clause 357 ordered to stand part of the Bill.