Enterprise and Regulatory Reform Bill

Lord Borrie Excerpts

Wednesday 14th November 2012 Lords Chamber

[Lord Borrie]

My Lords, that was a short and sweet speech, which I am sure we all welcome.

[A noble Lord]

Do not complain.

[Lord Borrie]

I would not dream of complaining. I am afraid I shall take a little longer than the previous speaker. I want to concentrate entirely this afternoon on Part 4 which concerns competition and reform. I will not make the usual remarks about reform. From 2010—I think it was the Public Bodies Bill that drew my attention to it—the Government first seemed to propose the amalgamation of the Office of Fair Trading and the Competition Commission into one new Competition and Markets Authority. I had doubts then, and I have had doubts since, about the desirability of this change. Partly, I admit that it is, of course, a matter of nostalgia because I had been director general of fair trading for some 16 years and had come to value the independence and degree of separation of the Office of Fair Trading on the one hand and the Competition Commission on the other. For nearly 40 years, from the Fair Trading Act 1973 to today, it has been the job of the OFT to investigate whether there is a prima facie case for saying that some business practice, takeover bid or merger is anti-competitive and to the detriment of the consumer. If the OFT has found a prima facie case of that sort, it can send the matter to the Competition Commission for judgment. I use that word deliberately because I want to emphasise that the OFT phase of the proceedings that go on today and have done for so many years could properly adopt a more aggressive stance, rather like a prosecutor; whereas the Competition Commission must, of course, be much more balanced and is more quasi-judicial.

The Government admit in the papers leading up to the Bill that there has long been international commendation of the UK’s method of administration of competition law. Of course, I see the disadvantages of the existing separation of the OFT and the Competition Commission, including the need for any particular business or company to have to present their case twice: first to the one body, then to the other. There is a certain amount of duplication of effort. However—and this has not been mentioned today, even by the Minister—the Government intend that the new arrangements will maintain the separation of phase 1 and phase 2 decision-making in mergers and market cases. The various provisions in the Bill to ensure that phase 1 and phase 2 are conducted independently of one another make it difficult to see how the key objective of the creation of the new authority, which is to remove the duplication and inefficiencies caused by the division of responsibility between the OFT and the Competition Commission, can really be achieved. The answer might be that the same officials in the authority, the same staff—whether they are generalists, lawyers, economists, accountants or whatever—should examine the case at both phase 1 and phase 2 of the new arrangements. If that is so, it then becomes difficult to see how phase 2 can be the fresh, in-depth investigation which it is claimed it will be.

I certainly welcome the Government’s intention to retain as final decision-makers in the Competition and Markets Authority the panels of independent people who spend their normal work day as accountants, businessmen, lawyers and whatever. Their immediate and continuing relationship with the outside world is a great benefit to the Competition Commission at the moment and would be of great benefit to the new authority.

I am glad that in the other place the Government emphasised that the objective of promoting competition in the interests of the consumer is not just for the short-term interest but for the long-term interest of the consumer. I am glad that the Government have also emphasised in the other place the value to the consumer of the deterrent effect of the work of the competition authorities. Recent OFT figures show that for every cartel case which is pursued, 28 breaches of cartel law are deterred. The OFT has also said that for every abuse of monopoly pursued, 12 others have been deterred. This is important because, as and when the new authority comes to condemn a particular industry’s anti-competitive practice, we can appreciate that this can have a beneficial effect well beyond the particular businesses involved in a particular case.

It was a significant factor of the OFT structure from its creation in 1973 that it had both competition powers to combat anti-competitive practices in mergers and so on, but also had a general power in consumer protection. This seems appropriate. We can all recognise that you can have competition in a particular industry but not necessarily completely happy consumers. If you look at the second-hand car industry, there is plenty of competition, but is the consumer never harshly or unfairly dealt with? In this House, on more than one recent occasion, attention has been drawn by Members to the credit industry. Here, again, there is plenty of competition between people offering this and that kind of credit, but are consumers not still harshly and unfairly dealt with? The answer, I am afraid, is that they are.

The Government have said—I quote from the Minister in the other place—that the Competition and Markets Authority,

“will continue to operate the combined OFT and Competition Commission’s markets regime, to ensure that markets work well for consumers”,

and will,

“have power to enforce unfair contract terms legislation”.

The OFT has long had good, close relations with citizens advice bureaux and the trading standards departments of local authorities. I would like reassurance from the Government that Citizens Advice, now that it is to have the main role in terms of consumer advice and education, will have adequate resources to do that. As for trading standards departments, which are in the front line of enforcing consumer protection legislation, they are of value; I am glad that the Minister mentioned this in his opening speech. I am glad to hear about the creation of the new national trading standards board. It is a logical development of the primary authority scheme which was introduced by the 2008 Act, whereby a business that operates across several local authorities can form a partnership with one local authority whose advice and enforcement powers will prevail over those of other local authorities.

I have a little query at the back of my mind which I have not heard the Minister or others explain. What happens to the power and influence of elected members of local authorities? The new body, I understand, has officials from local authorities on it. What happens to the existing authority of the councillors who are members of the authorities?

Finally, I am pleased that dishonesty is no longer required to be proved before a covert cartel can be successfully prosecuted. During my time as director general of fair trading, anti-cartel legislation did not even include a criminal offence at all. The 2002 Act brought it in so that price-fixing, market-sharing and other agreements between apparently competing companies could now be attacked in the criminal courts. Unfortunately, the requirement to establish dishonesty was found to be too high a hurdle. I am glad to learn that the Government have every intention of resisting CBI blandishments on this matter.