Enterprise Act 2002 (Protection of Legitimate Interests) (Amendment) Order 2014

Lord Stevenson of Balmacara Excerpts

Wednesday 26th March 2014 Grand Committee

[The Parliamentary Under-Secretary of State, Department for Business, Innovation and Skills (Viscount Younger of Leckie) (Con)]

My Lords, in moving the Motion on the Enterprise Act 2002 (Protection of Legitimate Interests) (Amendment) Order 2014, I shall also speak on the Enterprise and Regulatory Reform Act 2013 (Competition) (Consequential, Transitional and Saving Provisions) Order 2014. I am afraid that these are rather dry subjects for debate, as your Lordships may have ascertained from my introduction. They are highly technical pieces of legislation, characterised by various consequential and transitional provisions. However, debate them we must and my challenge is to make this an interesting and rewarding experience for us all.

That gives me the chance to place these orders in the context of our much wider and far more interesting reforms to competition law, because the real significance of these orders is to serve as the two final pieces in the legal jigsaw that creates the Competition and Markets Authority, or CMA, within a reformed competition regime from 1 April.

Noble Lords will recall—how could any of us forget?—the Enterprise and Regulatory Reform Act, which I had the pleasure of taking through this House last year. I hope that the Committee will permit me to refer to it as the 2013 Act for the purposes of this order. In its competition elements, the 2013 Act laid the foundations for the establishment of the CMA and a major reform of the UK’s competition regime. The CMA will be responsible for promoting effective competition in markets across the UK economy and for delivering major benefits for consumers. It will have strengthened responsibilities and powers, taking on the work of the Competition Commission and a number of the responsibilities of the Office of Fair Trading. This afternoon’s brief debate gives me the opportunity to provide noble Lords with an update of what has been achieved since the 2013 Act received Royal Assent.

The CMA was launched in shadow form in October last year. The Government have appointed a well respected board for the new organisation. We have also published our strategic steer for the CMA, setting out the key benefits that it should bring for consumers, and a performance framework that explains how we will measure its impact. We are on course for the full launch of the CMA next week, on 1 April.

Both the orders that we are debating today are, as their titles suggest, largely concerned with consequential and technical amendments to other legislation. These amendments are required to give full effect to the range of administrative and legal changes to the competition regime that Parliament enacted in the 2013 Act, so it is important to stress that there is nothing novel or unexpected in what we are asking your Lordships’ approval for today.

To be clear, the changes that these orders make were both foreseen and intended by the 2013 Act. By way of a very brief recap, Part 3 of the 2013 Act abolishes both the Office of Fair Trading and the Competition Commission and creates the new CMA to assume their competition functions from 1 April. Part 4 of the 2013 Act makes various changes to those competition functions. It amends the provisions on mergers in Part 3, on market studies and market investigations in Part 4, and the definition of the cartel offence in Part 6 of the Enterprise Act 2002. It also amends the anti-trust provisions in Part 1 of the Competition Act 1998. I hope that noble Lords are all still with me, because this is where it gets slightly more complicated.

First, the Enterprise and Regulatory Reform Act 2013 (Competition) (Consequential, Transitional and Saving Provisions) Order, as its name suggests, makes consequential amendments to a wide range of primary legislation. Many of these amendments are simply replacing references to the OFT and the Competition Commission with references to the CMA. Others ensure that changes in the 2013 Act to the regime for market investigations apply across the regulated sectors, such as gas, water and rail. Where the sector regulators share powers to refer markets for investigation with the national authorities, they ensure that the streamlining and modernisation in the 2013 Act apply as appropriate to the regulators.

I should add that the order also amends the Enterprise Act 2002 to reflect the CMA’s role in the enforcement of consumer legislation. The CMA will have primary expertise on unfair contract terms. This will enable it to take enforcement action where there are structural market failures. The CMA will also have access to other enforcement powers to ensure that consumer choice is not restricted. That being said, the great majority of consumer law enforcement will continue to be done by trading standards services, with the National Trading Standards Board responsible for co-ordination and prioritisation under the chairmanship of the noble Lord, Lord Harris. As competition is a reserved matter, the order also makes similar amendments to Scottish, Welsh and Northern Irish legislation. Article 3 and Schedule 2 make transitional and saving provision in connection with the transfer of functions from the OFT and the commission to the CMA.

All of that is pretty straightforward when compared with what I am about to cover—namely, the Enterprise Act 2002 (Protection of Legitimate Interests) (Amendment) Order. This amends a previous order of the same name from 2003. Again, many of its changes reflect the abolition of the OFT and the Competition Commission and the transfer of their competition functions to the CMA. The order relates to one of the three situations under the Enterprise Act 2002 in which the Secretary of State may intervene in a merger case that raises potential public interest concerns. Specifically, it sets out when the Secretary of State may issue a European intervention notice—or EIN, for short—to repatriate elements of merger cases that otherwise fall under EU jurisdiction. This may arise in merger cases where competition jurisdiction falls exclusively to the EU but where the case raises potential public interest concerns in the UK.

The changes in the order to this EIN process replicate those already made in the 2013 Act to the other two public interest regimes. These are the public interest intervention notice, or PIN, regime, which enables the Secretary of State to intervene in merger cases where the CMA has jurisdiction, and the special public interest intervention notice, or SPIN, regime—noble Lords should perhaps insert their own punchlines here—which enables the Secretary of State to intervene in a merger case on particular public interest grounds where the threshold for CMA jurisdiction is not met. Changes have been made to the powers available to deal with pre-emptive action. Powers to accept undertakings have been repealed and powers to make orders have been strengthened.

Allow me to leave your Lordships with a closing thought. It is true that these orders are unremarkable in themselves but, by approving them today, we are reflecting Parliament’s will to establish the Competition and Markets Authority and the new competition landscape that it will oversee from 1 April. I am confident that these reforms will enhance the competition regime and deliver greater benefits for consumers. I therefore commend these orders to the Committee.

[Lord Stevenson of Balmacara (Lab)]

My Lords, I thought for a moment that we had doubled our numbers and increased the interest in the dry but very important issues raised by the noble Viscount, but I was wrong. He rather threw me at the end by saying that he was expecting us to approve the orders today. Perhaps he could very quickly give me an answer on that, as I do not think that that is what we are doing today; I think that we are considering them. The approval comes later and, of course, one cannot bind what I and my colleagues might wish to do when the orders are put to the House for consideration, so we may have to go through all this again. The noble Viscount should not get too carried away at this stage with his rhetoric, which I did enjoy.

The noble Viscount mentioned the pleasures that he had had on the ERR Bill and I was, again, slightly confused by that, as there were occasions where the Minister was distinctly uncomfortable about some of that Bill and may remain so deep in his heart, given the way it was taken over into other areas under his direct responsibility. Some of the points that were brought in remain, in our view, poorly drafted and badly exercised in terms of consultation and process and not up to the standards that we would expect in this House. However, we are where we are. It was always a pleasure to debate the issues with the Minister and I pay tribute to him not only for being a model of what is required at the Dispatch Box but also for being able to generate a vast number of letters that inflect, add to and complete the questions that are sometimes asked but are not able to be answered in the process. For that I thank him very much. To have that on an almost regular basis makes my days in the office much more exciting.

The noble Viscount challenged us by saying that he would make these speeches exciting; I am afraid that I cannot do that myself. I have a number of questions but, as he said, these are not novel or unexpected statutory instruments. We knew that they were coming down the line, but what is novel and unexpected is that they are so close to the start of the CMA to which they refer, which comes into force in a matter of days rather than weeks, as would normally be the case. I suspect—although I have no evidence of this—that the fact that so many colleagues from the department are here suggests that there has been a bit of a problem in getting some of the details of this correct and that it has come close to the wire. Maybe I am wrong on that but, as the noble Lord went through it, it was clear that the orders are very detailed indeed and that there must have been some difficulty in getting them right.

The points that I want to make are very limited. One question on the Enterprise and Regulatory Reform Act 2013 (Competition) (Consequential, Transitional and Saving Provisions) Order 2014 is whether the Minister can explain a bit more for the benefit of the Committee the discussions that took place with the devolved Administrations. Although this is a reserved matter and therefore not a matter of competence in those areas, the impact that it will have and the suggestion that the Government were legislating at a time that might impact on the devolution and independence discussions going on in Scotland raise the question of what exactly would happen. I understand that there were no Sewel requirements but I would like to have a sense of that, if others have some thoughts on it.

--- Later in debate ---

[Viscount Younger of Leckie]

My Lords, first, I apologise to the noble Lord and the Committee in relation to the consideration of the order. For clarity, the Motion before the Grand Committee today is that the Grand Committee do consider the instrument. The instrument is then subject to a separate Motion to approve on the Floor of the House, usually without further debate, after Oral Questions, as is the norm. I realise that I will have to move the Motion on the next order formally at the end.

I thank the noble Lord, Lord Stevenson, for his comments in this brief debate, albeit between just two noble Lords. I, too, have greatly appreciated the discussions and debates that we have had in my office, in the Chamber and outside, as well as—if I may put it this way—his general congenial interactions. I hope that that will continue. As for the letters that I write, I rather hope that that may not continue, for the noble Lord’s sake, but my aim will be to inform and communicate to him as necessary.

A short closing speech addressing the noble Lord’s questions—I hope that I shall be able to address them all—is also a welcome opportunity to provide noble Lords, just days before it becomes a reality, with an update on the establishment of the CMA and to expand on what I said in my opening remarks. This provision will enable the CMA to fulfil its mission, which is to make markets work well in the interests of consumers, businesses and the economy.

The interests of consumers are at the heart of the CMA’s mission. We have given it a target over three years of demonstrating direct financial benefits to consumers of at least 10 times its relevant costs to the taxpayer and we are requiring the CMA to report annually on how it is delivering those consumer benefits. It will have primary expertise on unfair contract terms legislation and will have additional consumer enforcement powers to tackle practices and market conditions that make it difficult for consumers to exercise choice in an otherwise competitive market. The OFT super-complaint mechanism will be transferred to the CMA, so designated consumer bodies can continue to expect fast-tracking of issues that significantly harm the interests of consumers.

The CMA will co-ordinate its efforts with trading standards on both enforcement and the sharing of research and intelligence. We believe that there is a strong case for reform. We have created the CMA to improve the effectiveness of competition enforcement, to streamline processes by improving the quality of decisions and by taking forward the right cases and to improve speed and predictability for business. This is not to denigrate the outgoing competition bodies. That is an important point that I want to make, given the debate that we had some time ago during consideration of the ERR Bill. They had excellent reputations both at home and abroad and the CMA intends to build on that and, indeed, the leadership.

The CMA will be a non-ministerial department with full operational independence. It will have a mission to make markets work well in the interests of consumers, businesses and the economy. It will be obliged to report annually on the delivery of consumer benefits and the wider benefits in terms of growth, business and consumer confidence, compliance and the deterrence of anti-competitive behaviour.

Finally, the CMA has five strategic goals: first, to deliver effective enforcement, making strong and effective use of its powers; secondly, to extend competition frontiers proactively to identify and address markets where competition is not working well; thirdly, to refocus consumer protection, working with consumer protection partners; fourthly, to achieve professional excellence with robust decisions and effective and proportionate remedies; and, fifthly, to develop integrated performance and demonstrate improved efficiency.

I should like to attempt to answer a number of questions. The noble Lord, Lord Stevenson, asked about the reason for the delay. There have been no problems at all in getting the details correct. The timing is more a result of a proper public consultation that has been required and the scheduling of the business of the House, so it is much more of a process issue.

[Lord Stevenson of Balmacara]

I cannot find the exact reference. The Minister referred to extensive consultation but I think that I read somewhere that neither of these documents required much consultation. If I have got that wrong, I should be grateful if the Minister could clarify it.

[Viscount Younger of Leckie]

That is a fair question. Although there has not been a formal consultation, there was a need to consult a wide range of bodies. I will double-check that and write to the noble Lord if that needs to be corrected or expanded on.

The noble Lord also raised the issue of whether there had been discussions with the devolved Administrations. I can reassure him that drafts of the order were shared with the devolved Administrations, who were able to consider the provisions to amend the legislation and make some comments. He also raised the issue of errors corrected by the protection of legitimate interests order. The corrections made by the order include Article 16(7), which corrects a typo. Article 18(2)(a) is a revocation consequential on the repeal of Section 69 of the Enterprise Act 2003; the same applies to Article 18(3). Article 18(16) deals with a missed consequential amendment when Section 118(1)(aa) was added to Section 118 of the Enterprise Act. I know that this is a serious matter. Perhaps the noble Lord is attempting to compete with me on the dryness of the issues, but I hasten to add that they are important.

The noble Lord also raised the issue of who leads in different areas. Trading standards are more devolved across different nations. Competition law and enforcement is a reserved matter, however, so I can confirm that the CMA, under the leadership of the noble Lord, Lord Currie, will look across the UK. To clarify a point that I made earlier about the consultation, there was in fact a public consultation on the protection of legitimate interests order—it was on that specific order.

[Lord Stevenson of Balmacara]

I am sorry; I have now found my reference. The point that I was trying to make was that, in relation to these instruments being so late relative to the formation of the CMA, which we welcome, the Minister used the reason that the Government had to do extensive consultation. I would not say that it was an excuse, as that is a terrible thing to say. However, that consultation closed in July 2013 and there was plenty of time to absorb anything that came out of it, particularly as this goes on to say that there were no substantive comments.

[Viscount Younger of Leckie]

As I said earlier, and say again, I will definitely now write to the noble Lord to clarify the process and the element of consultation in as much depth as I can.

To conclude, these orders represent the final stage in the parliamentary process, which began with the Enterprise and Regulatory Reform Bill, to create that new competition landscape. They give effect to policy objectives and provisions that Parliament enacted in that Bill. I therefore commend these orders to the Committee.