Enterprise Bill

Public Bill Committee, 23 April 2002.

Standing Committee B

Enterprise Bill

Derek Conway (Conservative, Old Bexley and Sidcup)

Before I call the hon. Member for Eastbourne (Mr. Waterson) to resume the debate, I remind the Committee, so that hon. Members may check their diaries, that the programme resolution enables us to sit until 9.55 pm today. I presume that there will be a refreshment break at a convenient point this evening, depending on who is in the Chair.Clause 179 Cartel offence

Clause 179 - Cartel offence

Nigel Waterson (Conservative, Eastbourne)

It is a great pleasure to be here again. We will do our best to tailor our remarks to meet the guillotine, but the prospects of finishing our discussions on this part of the Bill by then are remote.

I shall remind the Committee of what amendment No. 88 would do. It is an imposition on anyone in business to introduce new legislation on cartel offence only a couple of years after 1 March 2000, when the Competition Act 1998 came into force. The amendment would give business a settling down period, allowing that legislation to bed down, and an opportunity to see what will happen in the European modernisation programme of this part of the law. That is a sensible precaution, as the Government are rushing too soon into further legislation. I am interested in what the Under-Secretary has to say.

Melanie Johnson (Labour, Welwyn Hatfield)

The amendment would defer the coming into force of the cartel offence until three years after the proposals for the modernisation of European Commission law are finalised and brought into force. We do not know when those proposals will be completed and brought into force, and in the meantime there is no reason to delay the introduction of the cartel criminal offence against the individual.

The criminal offence is separate from, but compatible with, the EC civil regime. The United Kingdom criminal offence targets individuals, while the EC civil regime covers broader competition breaches committed by undertakings. The proposals for the modernisation of the EC regime are not yet finalised. As the negotiations continue progress, we will focus on avoiding any possible conflict with the new offence. In its response to last year's White Paper, the Commission said that modernisation did not preclude criminalisation. There is no inconsistency between EC law, modernisation and the proposed

criminal offence. The offence is being introduced to tackle serious criminal activity, and there is no reason to delay it by awaiting the outcome of the continuing modernisation negotiations. I therefore ask the hon. Gentleman to withdraw the amendment. If he does not, I regret that I shall ask the Committee to oppose it.

Nigel Waterson (Conservative, Eastbourne)

We shall have a much broader debate on the ambit of clause 179 in a moment, so I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Derek Conway (Conservative, Old Bexley and Sidcup)

For the assistance of the Committee, the Under-Secretary does not have to move the clause, as it is part of a Bill that has been given a Second Reading. Hon. Members may speak at random, and the Minister may conclude, or speak first if that is her wish.

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

Nigel Waterson (Conservative, Eastbourne)

It might assist the Committee if, at least on this occasion, I speak first, as I want to raise several issues on the criminalisation of cartels, especially those issues raised by bodies such as the Confederation of British Industry. It would also help to have the Under-Secretary comment on my remarks.

The clause deserves a detailed debate. A key issue in the Bill is whether it is helpful or necessary to imprison individuals as part of cracking down on cartels. It is perhaps an interesting coincidence that we meet to debate it on the day that the newspapers are full of reports of the sentencing to a year in prison of Mr. Alfred Taubman. He, you will remember, Mr. Conway, as I am sure you frequent that institution, was involved in a price-fixing scheme with Christie's on behalf of Sotheby's, which he acquired some years ago.

I am sure that part of the justification for the Government's wish to bring criminal sanctions, including imprisonment for up to five years, into the cartels regime, is a comparison with the American system, where such sanctions have been in place for some time—hence Mr. Taubman's fate. I suspect that there will be an attempt to draw a parallel between our debate and that case, in which Mr. Taubman, sadly, is about to go to some rather upmarket ''Club Fed''. According to The Times he has the choice of a variety of places. One in Louisiana

''has weight rooms, computer terminals, bingo nights and sunbathing area.''

All in all it does not sound like a particularly arduous regime for Mr. Taubman and other white collar-criminals.

A comparison will be drawn between Mr. Taubman's fate and that of Sir Anthony Tennant, who was also involved in the matter at Christie's. As Sir Anthony is not an American citizen and because, possibly wisely, he has not set foot in America since the investigation began, he is immune from both extradition and prosecution in the US. He would be well advised not to take any holidays there for the foreseeable future. Extradition is an issue that we come to a bit later. I understand that the sentencing judge,

having heard a lengthy plea in mitigation on behalf of Mr. Taubman—not least that he was a substantial donor to charities—rather waspishly remarked that the fact that he had given to the poor did not mean that he could steal from the rich. That is an interesting reversal of the Robin Hood principle.

The Government wish to bring that regime into our system so that a 78-year-old diabetic with a number of other medical conditions would go to prison for a year. I am not quite sure what purpose that would serve. I suppose that the argument is that it would be a deterrent to others. Again, we say that that is another example of the Government's rather superficial affection for the American system. Based on the Sherman Antitrust Act 1890, that attitude is ingrained in the US system. In other respects, as we have pointed out consistently, the United States have a much lighter regulatory touch than we have here.

For the avoidance of doubt, should any mischievous Government Back Benchers want to make an issue of it, our position on cartels is clear. Cartels are a bad thing. They cost consumers money and they also cost good businesses and good business men money. They may affect their market share and even put them out of business. No one is in favour of cartels. The only issue is what is the most effective way to tackle them.

The Library briefing is very helpful on some of the background to cartels. As the clause makes clear, the Government want

''to apply criminal sanctions to individuals . . . where that individual dishonestly''—

that word ''dishonestly'' is important—

''engages in what are described as 'hard-core' cartels.''

The Organisation for Economic Co-operation and Development defines a hard-core cartel as

''an anti-competitive agreement, anti-competitive concerted practice or anti-competitive arrangement by competitors to fix prices, make rigged bids (collusive tenders), establish output restrictions or quotas, or share or divide markets by allocating customers, suppliers, territories, or lines of commerce.''

The US competition authorities estimate that cartels, on average, lead to a 10 per cent. increase in the price of goods or services affected. Estimates of the total vary. It is a bit like trying to estimate the effect of crime on the economy: there is what criminologists call the dark figure, which is almost impossible to estimate. Varying estimates of the effect of cartels run to 20 per cent. of the total volume of commerce.

Of course, it is abundantly clear that this country is no less likely to suffer from cartels than America or anywhere else. Only in the past year or two, the Office of Fair Trading has launched investigations into eight possible cartels in markets such as, interestingly, services to local authorities, services to domestic consumers, milk, construction materials and fabricated metal.

In the short debate on amendment No. 88, I mentioned that there was a misunderstanding about whether the measure would bring us into line with other European jurisdictions. Certainly in the US, as I

said, there have been criminal penalties in that regard since 1890. During the 1990s, the US Department of Justice successfully prosecuted an average of 35 people a year for such crimes. That is quite a record, because each investigation must have been massive in terms of resources and cost. The US authorities have also acted against cartels with worldwide effects. In the recent vitamins cartel case, they imposed fines of $500 million and $225 million respectively against a Swiss and a German firm. Incidentally, I think that that problem was brought to light by a whistleblower working for one of the Swiss companies. As I shall say in more detail in a moment, I believe that one side effect of the Government proposals will be that whistleblowers are deterred rather than encouraged.

I said that the concept of dishonesty was relevant. It is a perfectly common concept in English criminal law and should present no particular difficulties. I think that it first surfaced in a major way in the Theft Act 1968 and then in other more recent legislation. According to the explanatory notes—as you know, Mr. Conway, I like to mention the explanatory notes so that those who laboriously prepared them know that someone has read at least some of them—the offence applies only to agreements across the same level of the supply chain: horizontal agreements. I think that the Minister is nodding, which is a good sign. The concept of vertical agreements is not dealt with directly in this legislation, but it might be helpful if she told us at some point about the Government's attitude to them. I understand that there are proposals to amend or scrap regulations on vertical agreements.

Sir Anthony Hammond and Roy Penrose prepared an interesting report on these issues, which set out some of the effects of criminalisation. Since the previous legislation came into effect—the chapter 1 prohibition in March 2000—the OFT has imposed only one fine. Two bus companies in my original home town of Leeds were found to have colluded in a market-sharing agreement on bus routes in the Leeds area, and substantial fines were handed out. Both companies had compliance programmes that were designed to ensure that staff were aware of the law, and they provided internal forms for staff to record contact with competitors. However, no staff member reported the relevant meetings that took place in a hotel in Wakefield. I think that I am right in saying that that was the first fine imposed under the 1998 Act.

The law firm Allen & Overy made some interesting points during consultation about the criminal cartel offence. It pointed out that that did not depend on a prior civil infringement of competition law by the individual or undertaking. The firm was concerned that juries in criminal courts could have to decide what might be complex questions of civil competition law as part of the cartel offence.

Given that cartels are a serious matter and need tackling, what issues arise? First, is it an inherently excessive reaction to introduce criminal penalties? Does the evidence of exploitation justify such penalties? Does foreign experience suggest that they are necessary or successful? As I said in the previous debate, few EC countries have criminal penalties and, even where there are such penalties, prosecutions are

rare. Finally, will disqualification be imposed more frequently than at present under the Companies Act 1989? It is surprising how rare disqualification is.

I have read the briefings and considered the matter from our perspective; there are eight broad concerns about criminalisation, which I shall take in order, to help the Minister to reach a conclusion. First, criminalisation will raise the standard of proof in cartel cases. At present, the OFT applies a standard of proof of balance of probabilities plus, which is slightly higher than the normal standard required in civil litigation. To achieve a criminal conviction, the OFT would have to satisfy beyond reasonable doubt. There is anxiety that that would hamper rather than assist the OFT's investigations and perhaps make action less rather than more likely.

The second concern is that conducting a criminal case against directors at the same time as an administrative investigation may cause problems. A simpler parallel is that of a road accident. There may be a claim for civil compensation as a result, but that must take a back seat—if I may use such a phrase—until a criminal case has been dealt with. I should like the Under-Secretary to say how such a case would work in practice.

Thirdly, the OFT and the European Commission have the power to grant an exemption from the prohibition on cartels, although they do so only rarely. How will that power complicate the prosecution of a cartel? Could the possibility of criminal sanctions depend on the whim of whether an exemption on a prohibition is granted at the time? Could it be given retrospectively or at some time during the conduct of the criminal case?

Fourthly, the interplay between a prosecution and an investigation by the authorities will be even more complex when the investigation is conducted not by the OFT but by the European Commission. How will that work in practice?

The fifth issue, which is related to the fourth concern, is that co-operation between the competition authorities may be compromised. There are already reports that the Commission will be unwilling to supply information about a cartel which could be used for a prosecution in this country. For example, on 21 February, the Financial Times reported:

''Plans to jail British businessmen found guilty of organising cartels are set to hamper vital co-operation between the European Commission and the UK Office of Fair Trading. However, competition investigators in Brussels only enjoy civil powers and say they cannot share evidence with the OFT if it is used to support criminal proceedings''.

The article continued:

''But officials admit that a serious difficulty will come when deciding in advance what penalties may result from an investigation. British investigators are also likely to be wary of passing cases to Brussels if they feel there is sufficient evidence to inflict tougher penalties under UK jurisdiction.''

Clearly, there is anxiety about the matter. At the outset there is a potential effect on co-operation between national and European authorities and a likely drying up of lines of communication and the passing of information backwards and forwards.

My sixth concern is that industry is bound to incur further compliance costs. It is not clear at present how many companies have invested in audit and compliance programmes ensuring that they do not infringe the provisions of the 1998 Act. As the Leeds bus case shows, programmes can be put in place, but still not work. Now there is to be a further bout of requirements on companies to produce yet further procedures. No doubt the prospect of going to jail will concentrate directors' minds even more.

The seventh concern is the human rights issue although, because I do not have the benefit of advice from the Matrix chambers, I cannot go into great detail about that. What about self-incrimination? The implications of that aspect of human rights legislation have yet to feed their way into mainstream British criminal law. How will such legislation affect the criminalisation of cartels?

The eighth concern is about leniency policy. Both the European Commission and the OFT operate a leniency policy that is designed to encourage people to blow the whistle. I cannot imagine many instances in which serious and particularly international cartels between major companies would come to light without someone within those companies—or perhaps a disgruntled ex-employee—blowing the whistle. Inevitably, such matters will be kept securely within the company.

Under the Government's proposals, whistleblowers might be exposed to criminal penalties. That is not the case in the USA; I understand that, unlike Mr. Taubman, who is looking for the right ''Club Fed'' to check himself into, and Sir Anthony Tennant, who apparently cannot go to the USA on holiday, Christopher Davidge, who worked at Christie's, won immunity from prosecution by providing federal investigators with information that formed the bulk of the charges. The Times states that Mr. Davidge

''is reported to spend his time travelling around the world'',

no doubt keeping well away from Mr. Taubman and Sir Anthony Tennant. Is that not the truth of cartels? Cartels will almost never come to light unless someone like Mr. Davidge is prepared to blow the whistle—yet the legislation would have the effect of discouraging that.

Melanie Johnson (Labour, Welwyn Hatfield)

Will the hon. Gentleman explain why he believes that the legislation would have the effect of discouraging whistleblowing? He is merely alleging that, without evidence.

Nigel Waterson (Conservative, Eastbourne)

Obviously, no one—least of all the Under-Secretary—knows how the system will work in practice, but, in principle, if someone knows that he could be the subject of criminal prosecution for his part in an offence, he might well not blow the whistle. That is the straightforward point that I was making. It is possible, as happened in the US case, that immunity will be negotiated, just as some key players in the Enron saga have negotiated or are likely to negotiate immunity, but there is no guarantee of that. The European Commission has a clear rule that the first person to come out is automatically exempted, and that includes the company. Do the Government and the OFT intend to have a similarly clear policy?

Miss Johnson: I shall outline the details of our policy when I respond because I cannot make a speech in an intervention on the hon. Gentleman. Our provision is parallel to that in the US and provides the same sort of leniency arrangements.

Nigel Waterson (Conservative, Eastbourne)

I look forward to hearing the details of those complex matters. The concerns need to be aired, and what else is a Committee stage for if not to allow the Under-Secretary to allay such concerns?

To return to the issue of the European Commission, the CBI states that

''the Commission is planning to share enforcement of the rules with the national competition authorities . . . and the courts of each Member State''.

That involves the laudable aim of ensuring consistent application of the law by, among other measures, setting up a network for passing information backwards and forwards. I have already described how the Bill will affect that. As the CBI states:

''Decentralisation can only work if all Member States 'sing from the same hymn sheet'. Unfortunately, even before the Commission's reforms are in place, one large Member State''—

the UK—

''has—in full knowledge of Modernisation and despite paying lip service to the need for consistent application of the rules—gone off on a tangent by doing its own thing . . . for the UK to adopt a criminal regime may significantly reduce the willingness of NCAs in other Member States to pass information within the network to the UK, for fear that their citizens may be prosecuted.''

I have developed the argument before, so I shall be brief in my citation. Although

''Austria and Ireland have anti-trust regimes which are part-criminal . . . criminal sanctions have hardly ever been used in either jurisdiction . . . Anti-trust violations in Germany are treated by the BKA as civil, not criminal, offences.''

The CBI also touches on the whistleblowing issue, on which we shall hear more from the Under-Secretary later. The European Commission operates a ''first in, no fine'' rule similar to the US system. The first person in the office to blow the whistle can be guaranteed no fine. The CBI continues:

''However, given that the Commission will not be able to guarantee immunity from prosecution in the UK, for the UK to adopt a criminal system could seriously reduce the likelihood that individuals involved in cartels affecting the UK would want to come forward for leniency.''

The CBI is exercised about a related issue:

''the Commission will . . . rightly continue to handle the larger cases—be they 'hard-core cartels' ''

or whatever, but

''given that the EU's regime is civil not criminal, companies which are found by the Commission to have infringed Article 81 will be subject to a civil administrative fine. On the other hand, individuals in the UK involved in breaching Article 81 could find themselves subject to criminal proceedings and imprisonment. We believe this to be inherently unfair.''

The CBI also quotes an article in the Financial Times last August, which was written by the former deputy head of the European Commission's cartel unit, who stated:

''The perverse result in Britain would be that double-glazing salesmen fixing prices in the local pub could go to jail, while the biggest pan-European cartels would at most risk administrative fines on companies. Clearly, justice would fall into disrepute quickly if the smallest cases were the ones receiving the stiffest penalties''.

Running the risk of sending small offenders to prison or fining them heavily, and of subjecting large offenders to civil rather than criminal sanctions makes a nonsense of the deterrence argument.

The CBI's final concern is that the criminalisation of cartels would

''undermine the relationship between the OFT and business by making companies far less willing in future to provide sensitive business information on a voluntary basis''.

Companies might be nervous about whether their arrangements in a particular market were in breach of the legislation and might like to meet the authorities to establish their view on the matter. That would be possible and should be encouraged in a purely civil regime as a means of cutting out possible abuses and sharing information between the authorities and legitimate business men. Why would anyone want to take the risk, however, if criminal sanctions were brought into English law?

I make no apology for spending some time to develop those issues, which are a major concern to us and to legitimate business in the UK, not to mention our friends in Europe who are worried about how the provision will work in practice. The danger is that this country's system will move in a different direction from the European regime. There is no need to rush into it and no need to impose criminal sanctions.

Tony McWalter (Labour/Co-operative, Hemel Hempstead)

Cartel formation clearly can be theft, and those who are guilty of it on a large scale are guilty of substantial theft. Therefore, I approve of the general intention behind clause 179. However, I am concerned about some of its details. The hon. Member for Eastbourne mentioned the Leeds bus case. That case applies to two bus operators in my constituency—Sovereign and Arriva—who had through-ticketing and timetabling arrangements. Even though one of the companies in the Leeds case subsequently had its fine withdrawn, Sovereign and Arriva dissolved their co-operative partnership following the Leeds judgment.

I am a Co-operative and Labour MP. I am interested in businesses co-operating for the benefit of the public, rather than colluding to defraud and rob them. I am not sure that the clause makes that important distinction. If Sovereign and Arriva each has six buses but needs 10 to serve the needs of Hemel Hempstead at the rush hour on a particular route, it is reasonable for them to get together to provide a regular service. That is better than a situation in which Arriva discovers that Sovereign's bus is due at 9 am and gets a bus there at two minutes to 9 so that it can poach the customers, and Sovereign responds with a reprisal activity. We know that that has happened in other cases of bus competition. In other words, we have had berserk competition that has acted against the interests of consumers, rather than co-operative competition that could enhance the quality of service for consumers.

Mark Field (Conservative, Cities of London and Westminster)

There should be common agreement with the hon. Gentleman's remarks. However, we

should go far beyond co-operation among bus companies, which has had a high political profile.

I am interested in what the hon. Gentleman has to say about co-operation between a dominant player in a particular market—perhaps a narrow regional one—and two or three new players to divide the market informally by, say, timetable or geography. That would fall foul of the intention behind the clause. Does he believe that that arrangement could greatly benefit the consumer and should be recognised?

Tony McWalter (Labour/Co-operative, Hemel Hempstead)

I thank the hon. Gentleman for his observations. There is clearly a role for companies to co-operate as well as compete. That applies beyond the bus market, although that market is the object of my concerns. If a co-operative arrangement is recognised, the substantial burden of proof lies in whether it would be permitted because, ultimately, it is in the interest of the consumer. A dishonest arrangement would be one that leads to an overpriced product or a restricted supply of a product, and so acts against the consumer interest. The clause must make the consumer interest more explicit.

Ken Purchase (Labour/Co-operative, Wolverhampton North East)

On the narrow issue of buses, the point is surely that it is the job of the regulator to ensure that the service operates at the right price for bus passengers, rather than to say that the clause is flawed because it cannot deal with regulation in a way that would benefit them. Is not the clause perfectly adequate to deal with cartels in the general sense as a criminal offence, which my hon. Friend would support? Focusing on public transport issues may be diverting us from the clause's general importance to the competitive market.

Tony McWalter (Labour/Co-operative, Hemel Hempstead)

I thank my hon. Friend for his observations. As a fellow co-operator, I know that he shares my concerns and the general drift of my remarks. I do not want to focus exclusively on buses but, as the hon. Member for Cities of London and Westminster (Mr. Field) acknowledged, I am using this particular case to examine the wider context for business. If my points apply to one specific sector and not another, they may still be relevant in a general sense to other areas.

In the circumstances I described, where 10 buses are needed and both operators agree to provide five to meet the demand, an agreement exists between them, however arrived at, that results in bus company A, which would otherwise have provided six buses, providing only five. In that sense, a limitation of the supply of a product or service by company A exists in the United Kingdom. At first glance, at least, it appears that the bus operators had better be careful about how they conduct themselves.

Subsection (1) provides much of the clause's impetus:

''An individual is guilty of an offence''

not if he agrees with one or more other persons to carry out the actions listed in subsection (2), but if he ''dishonestly'' agrees to do them. Much weight attaches to the word ''dishonestly'', so what counts as a dishonest agreement should be spelt out in the Bill more effectively. The Bill already emphasises the sort of agreements that might give pause for thought, but

as some agreements could have been entered into honestly and for the benefit of the consumer, I am worried that the clause underspecifies precisely what market rigging involves.

Ken Purchase (Labour/Co-operative, Wolverhampton North East)

I am sorry to be unhelpful to my hon. Friend. I hear his argument about companies supplying five buses each in the interest of the general consumer, but what if I supplied six and my hon. Friend supplied four on a relatively profitable route and we came to another agreement on a different route? Would not that be anti-competitive? The issue may not be at the heart of this highly important clause, so could not public transport be dealt with effectively by regulation in the interest of the passenger? That is preferable to allowing, or even thinking of allowing, a diminution of the provision. My hon. Friend's argument about bus companies co-operating might be best dealt with through regulation.

Tony McWalter (Labour/Co-operative, Hemel Hempstead)

I was going to mention the position where a more effective bus service has been withdrawn in favour of a less effective one. I have written to the Under-Secretary of State for Transport, Local Government and the Regions, my hon. Friend the Member for Northampton, North (Ms Keeble) on this matter, about which I feel passionately, but I found her response less than reassuring.

I conclude that what counts as a dishonest, as opposed to an honest, co-operative or consumer-oriented agreement should be specified more fully in the Bill. I generally support the criminalisation of theft such as cartel fixing. I hope that my hon. Friend the Under-Secretary will reflect constructively and act on my remarks so that I can be more confident that the Bill will support co-operative arrangements that benefit consumers.

Mark Field (Conservative, Cities of London and Westminster)

I want to make a few general remarks about cartels, which we largely agree are, in principle, a bad thing. However, the devil is likely to be in the detail, and in this and subsequent clauses we shall try to tease out of the Government precisely how the Bill will work in practice.

The hon. Member for Hemel Hempstead (Mr. McWalter) made some narrow comments on the bus issue, although I appreciate that they related to matters far beyond it. We want an integrated transport policy and, as the hon. Member for Wolverhampton, South-West, said—

Ken Purchase (Labour/Co-operative, Wolverhampton North East)

North-East.

Mark Field (Conservative, Cities of London and Westminster)

That shows how at sea we Tories are. We go 180º from one direction to another. The hon. Member for Wolverhampton, North-East (Mr. Purchase) spoke about getting a regulator to determine matters. I would be uncomfortable with that, as it would not be in the interests of business. It would make far more sense if there were co-operation between bus and train companies and the local authorities that set up cycle tracks, for example.

I appreciate that the core issue in respect of cartels is dishonesty. Co-operation is not dishonest, but there may be concerns about large profits being made in a particular region if there are relatively few players in the field and interlinked shareholdings between

transport companies. What might be seen as dishonest may merely be sensible co-operation between companies in the interests of a designated and small consumer group.

In business terms, I am on the side of the angels. I want businesses to be able to co-operate in a sensible way without the implication that they are engaging in illicit cartel activity.

Andy Burnham (Labour/Co-operative, Leigh)

Does the hon. Gentleman agree that we are concentrating on the bus market because it shows the flaw in the policy of his party, which deregulated it? Buses are an essential public service, and the market, left to its own devices, is unable to come up with a system that will benefit consumers.

Mark Field (Conservative, Cities of London and Westminster)

The hon. Gentleman will not expect me to agree with that utterance. However, I accept that bus deregulation was a massive issue in the mid–1980s. At that time, I was an undergraduate in Oxford, where the streets, especially the Cornmarket and the High street, were packed with buses from four or five competitive companies, which drove prices down in the short term. I went up to London on several occasions and paid only £3 for a return journey. However, in a short time, some of those companies went out of business or decided not to run buses on similar routes, and there was an inexorable rise in the fares. That would concern us. In certain matters, I accept that the market does not necessarily have all the answers.

I want to make a few general comments without getting bogged down by the bus issue; if I were in a Standing Committee debating transport, I could wax lyrical about buses, trains and so on. We can understand the background to cartels by looking at what happened in the United States at the end of the 19th and the beginning of the 20th century. There was a deep-seated view about trusts, as they were known; hence the expression ''anti-trust''. Legislation came into force during the presidency of Theodore Roosevelt, who clamped down upon the perceived protectionist power of very big business. The undesirability of monopolistic or neo-monopolistic power is deeply entrenched in the corporate world of the United States.

An equally intrusive model in Europe in recent years has focused on a different test, that of ''dominant position''. As my hon. Friend the Member for Eastbourne pointed out, in recent months there has been an unprecedented run of decisions from the European Commission, which has imposed record fines on companies involved in price-fixing arrangements. As my hon. Friend rightly commented, one of the interesting developments has been the co-operation between the whistleblowers—companies or individuals—and the European Commission, which has led to large civil sanctions not being imposed on the first and even second of the groups that have decided to co-operate with the authorities.

Hoffmann-La Roche has been fined £530 million. In Germany, as I am sure the Minister will know, there has been widespread concern about commission-fixing, and five German banks have been fined. Several manufacturers of carbonless paper throughout Europe and brewers in Belgium and Luxembourg have been found guilty of price-fixing and market-domination agreements. One feature of that development has been the way in which lawyers for companies that discover that their employees have been involved in a cartel arrangement have managed to get discounts on their fines.

Even in this country the OFT has the power under the Competition Act 1998 to impose fines of up to 10 per cent. of a company's total UK turnover in a three-year period. That makes for a large potential upside for those co-operating early with the authorities in more complex hard-core cartel arrangements. That domestic system of fines has existed only a short time. The concern of many of the business organisations, which contact us more regularly than they might contact Labour Back Benchers, is that that Act has not yet bedded down and so it is too soon to see whether it is right to proceed with what could be quite draconian measures.

The seventh of my hon. Friend's eight tests related to human rights. Given that some three fifths of our trade is with the European Union, the larger scale and more blatant cartel arrangements will inevitably have an interstate element. Many of our more talented business executives, particularly in sensitive areas such as pharmaceuticals, may decide that it is more dangerous to be based here in the UK and opt for an easier life in Frankfurt, Paris or wherever. There could be a brain-drain if we had a system that was manifestly different. I am concerned that European law may apply to the exclusion of national legislation. In view of the reluctance of many European countries to extradite their nationals on a whole range of issues that I suspect would apply under this provision, it is difficult to see how the new cartel busting could operate on the larger and more complex price-fixing arrangements that have a strong interstate element.

In discussions about the issue of cartels and the thinking that underlies part 6—this also applies to the Government's high-profile press releases on much of what is in the Bill—it has become fashionable to argue that modern competition law requires politicians to be taken out of the process as much as possible. That is slightly illusory, however. Perhaps the Under-Secretary will speak at some length later about the strategy behind the Bill.

In a sense, the hon. Member for Wolverhampton, North-East let the cat out of the bag in the earlier discussion about regulation. To a large extent, it boils down to a choice between those who think that market failure can be left to the market—again, I take on board the intervention of the hon. Member for Leigh (Andy Burnham)—and those who believe in bureaucratic intervention. Ultimately, that is a political choice, and it is a little disingenuous of the Government to suggest that they will be stepping out of the process on cartels. If anything, with the Government not directly involved but hovering

slightly above that process and much of the mergers legislation or regulation, their involvement could act as even more of a control on many of the companies that might be subject to an OFT-type inquiry.

Ken Purchase (Labour/Co-operative, Wolverhampton North East)

The hon. Gentleman said that I had let some cat out of the bag. In fact, I only reaffirmed that, in a competitive society, it is necessary to have rules. To have a rule such as the one that we are considering, but nothing to back it up—such as in this case the creation of a criminal offence—would be to say, ''We don't really approve of cartels, but you might as well get on with them.'' Perhaps the hon. Gentleman does not share my view, but we cannot proceed on that basis. The example that was given of American anti-trust law shows that the system that I have described simply has not been strong enough.

Mark Field (Conservative, Cities of London and Westminster)

In all fairness, I do not have enough knowledge about the American situation to go into great detail about whether it would be right or wrong. Clearly, a particular time and its culture brought into play much of that anti-trust legislation.

There is no question of our saying that we want carte blanche for companies to establish price-fixing arrangements and complex cartels and to rip off the customer. We shall come to some of the more nitty-gritty consumer issues later, but it would be wrong to caricature our position in that way. However, it is important to ensure that whatever legislation is enacted operates correctly.

At a fundamental level, it seems somewhat odd to be considering a new tranche of legislation a very short time after the Competition Act 1998 came into force. In addition, we may be a step ahead of the game in the European Union at the very time when, to make the single market work effectively and given the interdependence of the larger-scale cartels that are likely to come into being, we should be looking for an integrated policy. A different policy could cause large-scale difficulties and, frankly, would be unenforceable. Nothing would be worse than a number of high-profile cases going to court and beginning to collapse because of the complexity of human rights legislation or otherwise.

I am interested to hear how the Under-Secretary feels that the issue could be taken further forward at a strategic level. I know that I have spoken for some time and other hon. Members wish to speak, so I shall await her comments with interest.

Alistair Carmichael (Liberal Democrat, Orkney and Shetland)

I have no objection to the creation of a cartel offence in the broadest principle. As the hon. Member for Hemel Hempstead said, the formation of cartels is merely a new species of dishonesty and I have little difficulty with criminal sanctions against them. However, I have several reservations about the clause and I share many of the concerns expressed by the hon. Members for Cities of London and Westminster, for Hemel Hempstead and for Eastbourne. Like the hon. Member for Eastbourne, I have had the benefit of the CBI briefing, but I will not follow him in quoting lengthy passages verbatim into the record.

I thank the Under-Secretary for her prompt and full answer to the point that I raised last week on criminal

attempts. I do not wish to make great play of that, but as we are discussing the clause, it is timely to raise the point. In her letter, which is available to members of the Committee, she explains fully the circumstances in which attempts at the offence might be charged or indicted but does not make a case that the existing words remain necessary. That does not in any way contradict my original point. Indeed, a conversation that I had at the weekend with Anne Keenan, the deputy director of the Law Society of Scotland, reinforced that; her initial reaction was the same as mine. My concern is that unnecessary words might trip up someone later and lead to inelegant legislation.

Another concern that arises from the Under-Secretary's letter is the impact of the Bill on the law of Scotland and the extent to which that law has been taken into consideration. In her letter of 22 April, the Under-Secretary refers to the Criminal Attempts Act 1981 which, as she may know, does not extend north of the border, where the area of criminal attempts is regulated by common law. Until recently, there were significant differences in the law on attempts—particularly in relation to a fairly obscure part of the law on impossible attempts. The differences may not be significant, but I would be greatly reassured if I felt that they had been considered. The fact that the letter makes no reference to the different situation in Scotland concerns me, particularly in the light of proposals elsewhere in the Bill on the obtaining of warrants, which are simply wrong. What input have the Scotland Office and the office of the Advocate General had in preparing the legislation? Has the Under-Secretary consulted the staff of the policy unit at the Crown Office in Edinburgh who are normally the conduit for the prosecution service in making representations on such legislation?

My principal concern about the substance of the clause relates to the interaction between criminal and civil proceedings, especially in a case where a public body has gathered the same information that is then used in civil or criminal proceedings. It is at least desirable that primary consideration be given to criminal proceedings, and that civil proceedings are resorted to only if criminal proceedings are deemed inappropriate, or have been attempted and were unsuccessful. The hon. Member for Eastbourne made a comparison with road traffic accidents, which clearly illustrated the point.

I am also concerned that we are talking about the criminalisation of activities, something that the 1998 Act substantially dealt with in the civil context. The CBI shares my concern that we have not allowed the civil proceedings envisaged under the 1998 Act to bed down properly. Severe penalties are now available and proceedings have been brought in only a limited range of cases. It would be better to introduce the legislation once we have full and extensive experience of how the 1998 Act has worked. We would not be leaving the position unregulated, as we have the civil provisions. The remedies under the civil proceedings are extensive, and would be severe.

I do not understand the rush to legislate on criminalising the offence, nor the difference in

principle between soft-core and hard-core cartels, although the hon. Member for Hemel Hempstead gave us a good example. It struck me that it is possible under the clause to act in accordance with the instruction of a regulator, such as the one to which the hon. Member for Wolverhampton, North-East referred, and still be guilty of an offence. That part of the Bill would be much improved if a clause on defence were inserted. I commend that to the Under-Secretary for her later consideration.

The interaction with EU competition law is a potentially massive pitfall for the Bill. As a general rule, I would adhere to the principle of subsidiarity in relation to that law. If we apply subsidiarity, the appropriate level is a UK level in some circumstances, but an EU one in others. As the hon. Member for Cities of London and Westminster pointed out, there are often substantial interstate aspects to such cases. However, there is insufficient specification in the Bill to make that clear. The hon. Member for Hemel Hempstead highlighted the contradiction that the largest and most involved cartel operating throughout the EU could be dealt with on an EU level and given a civil penalty, whereas a minor soft-core cartel operating in the UK and prosecuted in the UK could be subject to criminal sanctions and imprisoned. I cannot square the logic of that position, which could bring the criminalised cartel into disrepute.

My final concern is the protection of whistleblowers. Because of the interaction of EU and UK law, it will be difficult to protect whistleblowers who are protected on one level but open to prosecution on another. What protections does the Minister envisage in respect of whistleblowers? The concerns about this clause are so substantial that we have a long way to go before we can confidently say that it achieves the objective and will be workable.

Jonathan Djanogly (Conservative, Huntingdon)

My hon. Friends the Members for Eastbourne and for Cities of London and Westminster and the hon. Members for Orkney and Shetland and for Hemel Hempstead have already made a comprehensive case and shown not only that the clause will not work but that it might be counter-productive to the intention of stopping cartel activity. I shall not repeat earlier arguments, but I would like to add a few further points and elaborations.

The hon. Member for Eastbourne concisely explained the complex inter-relationships between UK and EU law, between the Bill and existing legislation and the many unresolved issues that arise from them. Many businesses and the CBI, which responded to the clause, have noted that while some countries have criminal liabilities for cartel actions, they are rarely enforced in practice; particularly in other European countries. In comparison with our European neighbours, this country has a history of active involvement, which might put UK companies at a competitive disadvantage. That is an important and valid point.

The hon. Member for Hemel Hempstead rightly argued that the concept of criminalisation and whether a cartel exists are often highly complicated issues. It can be clear cut, but more often than not, identifying a cartel—deciding at what point a series of actions constitutes a wrong—is complex. Different interests—of consumers, companies, creditors and other parties—are at stake, and in some circumstances they coincide. Often, however, they do not, which is a problem that we have to struggle with throughout the Bill. It is not a straightforward matter and if we make a mistake, the implications for business and for consumers could be disastrous. If companies start to go bust and fewer people are in the market, prices are unlikely to become more competitive. Quite the opposite; the impact of regulation could increase prices.

On the basic concept of criminalisation, my hon. Friend the Member for Eastbourne is right that we need more time to assess how the penalties in the 1998 Act work out in practice. Some hon. Members have implied that the penalties are not onerous enough. We do not yet know, but companies can be fined up to three times 10 per cent. of their UK turnover, and the highest penalty would destroy most companies. The present penalties can be extreme, with the threat of the loss of business and jobs; I would not say that they are not tough. As my hon. Friend the Member for Eastbourne said, so far there has been only one case under the existing penalties. That area of the law needs to be developed, and we should see how it works before jumping into the unknown, as the matter has serious implications for other aspects of the law, which have been mentioned in the debate.

It is valid to mention concerns about how the concept of criminalisation would work in practice in larger companies. Many multinational global companies have many layers of management throughout the world. It would be difficult to discover when and where the price fixing occurred and who was responsible for it, and extremely hard to get to the bottom of the complicated matter of liability and culpability.

My hon. Friend the Member for Eastbourne mentioned Sotheby's and Christie's, but that case is probably as simple as it would get as they are relatively small companies with few layers of management, where decision-taking is relatively easy. In larger companies, the concept of criminal liability would become increasingly complicated.

We are worried that the proposal is a manifesto for scapegoatism. If a large, multinational company with many layers of management were threatened with extinction, what would be easier; taking the civil route, with the possibility of extinction, or finding a poor manager or director of subsidiary number 53 at the bottom of the pile to take the rap? My fear is that companies will take the latter option, and that PR machines will go to work and do deals with Government Departments rather than there being a significant fine for the whole company. I should be interested in the Minister's views on those implications.

I am anxious, too, that criminalisation may discourage whistleblowers. The Under-Secretary asked my hon. Friend the Member for Eastbourne to explain why that should be so, as the proposed system worked well in the United States. However, there is a massive difference between this country and the United States, where the culture of criminalisation—

Melanie Johnson (Labour, Welwyn Hatfield)

The hon. Gentleman is misrepresenting what I said, and I shall repeat my remarks later. I asked the hon. Member for Eastbourne to substantiate his allegation that, in relation to leniency in the UK, there had been a failure to pick up the provisions that made those in the US work.

Jonathan Djanogly (Conservative, Huntingdon)

I thank the Under-Secretary for her clarification but it does not affect my point, which is that it is a cultural issue as much as anything else. The US has had these provisions for a long time. But, more importantly, it has a different legal culture which encourages deals being done with prosecuting agencies and permeates the whole criminal system from federal agencies right through to bog-standard criminal courts. Plea-bargaining is part of the culture of the USA; it is certainly not part of ours. Criminal barristers say that there is enormous confusion and inconsistency here. The policy of the Crown Prosecution Service is that deals are not done here.

Melanie Johnson (Labour, Welwyn Hatfield)

Among other things the hon. Gentleman is leaving out of the mix are the leniency arrangements in the case of the Leeds bus companies, which also led to a significant reduction of fines. A leniency regime was operated in that case, and it operates in other circumstances. The hon. Gentleman seems to be taking no account of that.

Jonathan Djanogly (Conservative, Huntingdon)

I certainly shall. Indeed, it also would be fair, from the Under-Secretary's point of view, to mention that there are proposals in clause 181(4) to put in place a plea-bargaining type of system in this country. We will come on to that.

Nigel Waterson (Conservative, Eastbourne)

Does my hon. Friend agree that the essential difference is that in America, where they have had similar legislation since the late 19th century, a substantial body of practice has grown up, so that lawyers advising potential defendants are well able to advise on the likelihood of plea-bargaining and how they are likely to be treated, particularly if they are whistleblowers? There is no such set of precedents in this country.

Jonathan Djanogly (Conservative, Huntingdon)

Exactly. I thank my hon. Friend for that comment. In America, someone acting for a defendant knows that he can approach the prosecution and talk about a deal. He may not come to a deal, but he knows that that is how the system works. In this country, criminal barristers worry as much about whether it would be suitable for them to approach the prosecution to talk about a deal as about whether there would be a deal. It is commonly felt in this country that if a barrister approaches the prosecution, it will automatically be thought that the plea should be switched to guilty. If we are moving to a system of whistleblowing, how can the Under-Secretary assure us, and the wider legal profession in general, that we

will also move to a totally different culture that will be similar to that in the USA?

Tony McWalter (Labour/Co-operative, Hemel Hempstead)

Is the hon. Gentleman arguing that the measure is complex and a bit of an import so we ought not to do it, or that it is complex and a bit of an import so we should revamp it to make it more effective?

Jonathan Djanogly (Conservative, Huntingdon)

Neither of the above. I am explaining why criminalisation is not right. I am attempting to show how there are many more issues involved in going down the route of criminalisation than simply saying, ''The Americans do it, so let us do what they do.'' It is not quite so straightforward, not only in terms of what is in the various bits of legislation, but in terms of the culture of the system.

Mark Field (Conservative, Cities of London and Westminster)

On the differences in American culture, I wonder if my hon. Friend has thought about not only the differences in their legal system and approach to whistleblowing but the fact that the economy as a whole is much more lightly regulated. Obviously, that has an impact on the nature and the type of cases that go through their anti-trust or monopolistic legislation.

Jonathan Djanogly (Conservative, Huntingdon)

My hon. Friend makes a fair point. Whistleblowing is encouraged in the American culture. If one approaches the prosecution with information, one is not made to feel that one will be prosecuted oneself, as would happen in this country.

Another important concern is that there is something of a presumption that criminal sanctions are necessarily a more effective way of remedying the problem of cartels than civil penalties because people would be more frightened of the implications of criminal penalties. I am not sure that that is the case. We are talking about cases involving cartel offences in which juries in criminal courts will have to decide beyond reasonable doubt what could be enormously complex areas of competition law.

The current movement is away from criminal towards civil penalties; for example, there have been a relatively tiny number of prosecutions under the insider dealing legislation. The main reasons cited for that are because the evidence is so hard to get and the burden of proof means that the Crown has lost most of those few prosecutions. Criminal prosecution in such cases simply does not work, not least because juries must discuss and consider what are often commercial rather than criminal issues in the traditional interpretation of criminality.

The general move is towards getting rid of criminal sanctions on insider trading and making it a civil offence with a lower burden of proof, with the objective of creating a faster court process and an increased ability to come to settlements. That applies in other areas of law. The Companies Act 1989 is under review; the Government propose to abolish section 151 of that Act, which deals with the legal financial assistance given by companies.

Mark Field (Conservative, Cities of London and Westminster)

Does my hon. Friend agree that, in regard to the high-profile trials that have taken place in related areas such as financial assistance and insider dealing—and which will take place on cartels if they are criminalised—one of the difficulties is in

persuading the juries in such cases that someone should go to prison if convicted? Juries regard such offences as serious commercial matters for which a fine is appropriate, and criminalising individuals results all too often in cases collapsing; cases that seemed strong when they went to court result in acquittal.

Jonathan Djanogly (Conservative, Huntingdon)

Without derogating the more humorous aspects of ''Club Fed'', as referred to by my hon. Friend the Member for Eastbourne, a jury should take a serious attitude towards conviction when an individual's liberty is at stake. One of the implications of criminalisation is that trials become longer. The Guinness or Maxwell trials are examples that, it was subsequently argued, should have been conducted on a civil basis to facilitate the process. I wish I had statistics on the number of failed insider dealing cases, as these would show how criminalisation often does not work in practice.

Mark Field (Conservative, Cities of London and Westminster)

On a related point, my hon. Friend the Member for Eastbourne mentioned an acid test earlier. With a two-twinned approach, it would make sense logically to start with the criminal route first, followed by the civil route. Uncertainty would surround the alleged cartel in the commercial sector for a period. Would it not be better to avoid the criminal trial and go straight to a fully-fledged civil investigation? The civil investigation could take place with great gusto, with a view to establishing whether the charges should be upheld, and criminal proceedings could take place subsequently.

Jonathan Djanogly (Conservative, Huntingdon)

I certainly agree with my hon. Friend about moving straight into the civil proceedings.

In many aspects of law, we are moving away from criminalisation, but the Bill is reversing that, for unsubstantiated reasons. I look forward to hearing what the Under-Secretary has to say in that regard. I provided examples, such as section 151 of the Companies Act 1989, which the Government are proposing to abolish as a criminal offence. Another example appears in the Bill. Clause 246 deals with the new civil bankruptcy restriction orders, which are aimed at protecting the public from dishonesty. Here, the Government are moving away from criminalisation. I quote from the White Paper:

''The high evidential requirements of the current criminal sanctions means that very few bankrupts have action taken against them. The civil BRO regime''—

the proposed new bankruptcy restriction orders regime—

''with its lower standard of proof will allow for greater protection of the public and business.''

That says it all. The Government are absolutely right. If that is conceptually right for bankruptcy restriction orders and that is the way in which other legislation is moving, why are we embracing criminalisation in this clause? I support my hon. Friends. These measures are not well thought out and are being introduced too early. They might even work in favour of cartels rather than against them.

Ken Purchase (Labour/Co-operative, Wolverhampton North East)

We have entered deep philosophical waters and we have seen a clear divide between one

side and the other. Far from letting the cat out of the bag, we have heard all the cats that we would ever want to hear. If we are going to drift from criminal to civil law, something must be said about that. Personally, I do not support that drift. Civil law has played an honourable part in the development of civilised relationships in this country, but it is erroneous to believe that civil law alone can regulate the activities of cartels, trusts and monopolies, and deal with anti-competitive practices. At some point, there must be consensus in society that such practices are wrong and that criminal proceedings must deal with them. My hon. Friend the Member for Hemel Hempstead was speaking almost of grand theft when he talked about what multinational corporations can do.

Theft is theft. The hon. Member for Huntingdon (Mr. Djanogly) said that the difference between the United States and Britain was largely cultural as to whether civil or criminal proceedings were brought or plea-bargaining was made. He may be right. I would go some way to support the idea that in the United States there is cultural acceptance of behaviour that, frankly, I find abominable. When Woody Guthrie was called to give evidence—or, more accurately, was pilloried—by the House Un-American Activities Committee, he was asked what he understood by ''a capitalist society''. One must remember that it was the 1940s. He replied that, in his experience, it was a society in which a banker could rob a farmer, but a farmer could not rob a banker. We will go down that route if we take note of, and act on, the sentiments expressed by the hon. Member for Huntingdon. He says that the differences are cultural, and that the activity that we are discussing should not be considered criminal. He also says that plea-bargaining is used in the United States. We do not do that here; thank goodness we do not, or not on the scale to which he referred in the United States.

Jonathan Djanogly (Conservative, Huntingdon)

Am I to take it that the hon. Gentleman will not support the Government's provision that provides for a plea-bargaining process?

Ken Purchase (Labour/Co-operative, Wolverhampton North East)

The hon. Gentleman will see me vote in favour of the clause, which provides for criminal proceedings to be brought against cartels. I had the pleasure—not quite—of intervening on my hon. Friend the Member for Hemel Hempstead when he talked about bus companies. We must stand foursquare behind the clause, as we have to send out the appropriate messages. That is how we create a culture. We do not say that it does not matter if someone wants to take such a case to a civil court. We must state our belief that theft on such a scale is wrong and must be dealt with in the same way in which any other theft is dealt with. That is why criminal proceedings must be brought.

There is a plaque in Westminster Hall commemorating the famous Catholic, Sir Thomas More, who said that he would give the benefit of the doubt to the devil himself for his own safety. All the measures are in place to ensure that the man or woman accused of theft while engaged in the activity concerned has the benefit of the doubt and the

opportunity to defend themselves properly. The hon. Member for Huntingdon says almost nonchalantly that the burden of proof is lower in a civil court. It certainly is, because a civil offence is less serious. If an offence is criminal, the burden of proof must be beyond reasonable doubt.

Nothing is perfect, and we must stand foursquare behind the clause if we want a decent society. We recognise that capitalism must be regulated. I am not opposed to capitalism; it is a way forward to a more civilised society. We can see around the world that civilisation advances to higher and better forms where capitalism develops. I am saying merely that if we want a civilised society, we must regulate capitalism and ensure that unfairness is ironed out. Ultimately, people have to understand that if they do not play by the rules, society will not only frown on that, but will act to prevent it from happening.

Melanie Johnson (Labour, Welwyn Hatfield)

In responding to this lengthy and detailed debate, I can best help hon. Members if I talk about the provision initially and then deal with individual points. I fear that we shall troop backwards and forwards otherwise. If hon. Members allow me, I shall group my remarks by topic, and not by those hon. Members who have spoken.

It is important to be clear at the outset that, unlike the existing civil competition law, this offence targets individuals, not undertakings. That point is being lost in many contributions. We all agree that cartels do real harm to consumers, other businesses and the wider economy. The criminal offence is intended to discourage individuals who might be otherwise tempted to become involved in such activity. I shall return to deterrence later, because it is a key element of what I have to say.

The offence targets individuals who reach agreements that, if implemented by their undertakings in the way the individuals intended, would result in certain forms of serious anti-competitive activity. I shall describe those for the sake of clarity. An offence will have been committed whether or not the agreement reached between the individuals is implemented by the undertakings as the individuals intended. As I have said, the offence targets individuals who reach agreements. That would be undermined by a need to prove that implementation took place.

The first form of serious anti-competitive activity to which the intended agreement must relate is price-fixing. I think that the hon. Member for Orkney and Shetland (Mr. Carmichael) asked what exactly was meant by the phrase ''hard-core cartels'', and it relates to these areas. Price-fixing means agreements whereby undertakings that would otherwise be competitors at the same level in the market agree the selling price of certain of their products or services. Direct and indirect price-fixing are covered. Indirect price-fixing might include arrangements such as relative prices, discounts and rebates that achieve the same anti-competitive effect as a direct agreement to sell the products or services at a certain price.

The second form of serious anti-competitive activity is limitation of production or supply. Those

agreements restrict or stop completely the production or supply of certain goods or services. Typically, one undertaking would restrict the production or supply of one product or service, in return for another undertaking doing the same for another product or service.

The third form is market-sharing. That refers to agreements under which two or more undertakings agree which of them will supply products or services to a certain market or customers.

Mark Field (Conservative, Cities of London and Westminster)

In this exhaustive list of what amounts to hard-core cartels, will the Under-Secretary say what would amount to a non-hard-core cartel and therefore be outside the ambit of the Bill?

Melanie Johnson (Labour, Welwyn Hatfield)

I have not finished describing what constitutes hard-core cartels. In addition, the hon. Gentleman's point is addressed through the Competition Act 1998 and a range of measures under European Union and competition law. Those measures cover a wide range of offences that might loosely be described as soft-core cartels. I am talking about practices that need to be prohibited under competition policy, but which are not covered by the phrase ''hard-core cartel''; perhaps I should not use the word ''cartel'' in that context.

When the hon. Gentleman interrupted me, I was giving an example of market-sharing. A manufacturer might agree not to sell its products in the north of England in return for another not selling in the south. Two food manufacturers might agree which supermarket chains each would supply, or which products they would offer to a specific supermarket chain. All those situations allow the producers or the suppliers to increase the price by reducing competition. Obviously, there can be cartels of every size and scale of operation. Hon. Members have made assumptions about their being large or small, but a cartel can cover any scale of operation that fits with the criteria.

Mark Field (Conservative, Cities of London and Westminster)

This strikes me as a rather simplistic approach. Take, for example, agricultural produce, which is likely to rot quickly. Two companies might have an arrangement to ensure that, on certain days, one company delivered its goods to a particular supermarket and the other company delivered later on in the week. Clearly, from what the Under-Secretary said, that would be seen as a cartel and would come under the auspices of the Bill. Common sense suggests that consumers would not be put to any disadvantage in that regard and it may in their interests to ensure that choice remains relatively high.

Melanie Johnson (Labour, Welwyn Hatfield)

That does not go to the core of the clause. It is about the criminalisation of cartels. It is not about what constitutes cartels except in relation to their criminalisation. It is not about the areas that are currently covered by anti-competitive measures, such as the anti-competitive activities that the hon. Member for Eastbourne mentioned, such as vertical agreements, the crisis cartels that are authorised to save a failing industry or other arrangements for research and development. There is no reason why honest co-operative arrangements that do not fall foul of the measures should not continue to exist. Only

dishonest activities fall under the provision. I trust that the hon. Gentleman accepts that it is important that these measures are addressed. The offence will bite only on the most serious of those arrangements.

Nigel Waterson (Conservative, Eastbourne)

Will the Under-Secretary give way?

Melanie Johnson (Labour, Welwyn Hatfield)

I can see that I will make most points by answering interventions.

Nigel Waterson (Conservative, Eastbourne)

In my eternal quest to be helpful, I wanted to ask the Under-Secretary to confirm whether the exemption for vertical agreements will be ended. If so, when and how?

Melanie Johnson (Labour, Welwyn Hatfield)

I will come back to that later. I will finish on the fourth point because we are losing the thread of the debate. Bid-rigging means agreements between parties who are responding to a tender for goods or services, so that either one party does not bid, or one or more parties bids at a price agreed with the others. Typically, one party would withdraw from one tender or enter a high bid, in return for being given a clear run in another. The whole purpose of a competitive tender is undermined, to the detriment of the tendering organisation.

The clause has been drafted to cover not just the obvious cases—where, for example, two parties fix the price for a particular product—but other permutations. It covers agreements between more than two parties, as is common in cartels and agreements that include more than one of the four activities I have described. It covers the type of agreement whereby one party withdraws from the production of a certain product, in return for the other party withdrawing from the production of another product. It also provides for a variant of this example, whereby one or both parties agrees not to enter into production of a product that is currently produced by the other. The offence does not extend to forms of anti-competitive activity other than those I have described. For instance, it does not extend to vertical agreements. The offence is targeted at the most serious forms of anti-competitive activity, which do real damage and which deserve severe penalties.

I will return to the point about the links with the EC regime in a minute. The criminal offence is separate from and compatible with the EC civil regime. The UK criminal offence targets individuals; the EC civil regime covers broader competition breaches committed by undertakings. Some hon. Members suggested that we should await the outcome of the EC modernisation proposals before we introduce the criminal offence for cartels. However, we do not know when those proposals will be brought into force and there is no reason to delay the introduction of the offence in the meantime. I trust that that sets the scene.

On the specific matters raised in the debate, first, may I correct the impression given by the hon. Member for Eastbourne that there were eight ongoing cartel investigations? There are 10 such investigations in which the Director General of Fair Trading has reasonable grounds to suspect an

infringement of the Competition Act, one of which involves a so-called multiple cartel. Three of the 10 investigations came to the OFT'S attention as a consequence of leniency applications and some involve major companies.

It is insufficient simply to target companies. Therefore, it is necessary to target the individual. I will come to the relationship between the company and the individual in a moment. However, there is not enough of a deterrent effect as a result of the 1998 Act. Opposition Members may say that it has been in force for only a relatively short period, but it has been around for considerably longer—about three to four years. There has been a lot of time for people to respond to the fact that that legislation is on the statute book, and to know that what they are doing is unacceptable and illegitimate. The number of cartels and the investigations being carried out suggest that there is an ongoing problem that is not being addressed. Part of that problem is the relationship between the individual and the company—hence the move to criminalise cartel agreements and to prosecute the individual.

It is true that the only pure cartel offence so far has been the Arriva and First Group market-sharing cartel—in shorthand, the case of the Leeds bus company. However, substantial fines have been imposed recently on companies such as NAPP Pharmaceutical Group, whose fine was set after appeal at £2.2 million. NAPP had abused its dominant position by supplying sustained-release morphine to patients in the community at excessively high prices. The prosecution has resulted in an estimated saving to the national health service of £2 million a year.

Aberdeen Journals abused its dominant position by engaging in predatory pricing with a view to eliminating a competitor from the local newspaper market and was fined £1.3 million. That decision was recently set aside on procedural grounds by the Competition Commission appeal tribunal, but none the less the prosecution went forward. In addition, the OFT accepted informal interim assurances from Robert Wiseman Dairies and negotiated amendments from the Film Distributors Association. I am citing only recent cases in the United Kingdom, but if hon. Gentlemen tempt me, I could cite a set of case studies from the European Union and the United States, and lots of information about the prosecution of cartels.

Nigel Waterson (Conservative, Eastbourne)

I am trying to assist the Under-Secretary. Opposition Members are not suggesting that cartels do not exist or that they should not be rooted out and dealt with. The issue is whether there should be criminal sanctions on individuals. Does the hon. Lady believe that Mr. Taubman was deterred by the possibility of a criminal sentence?

Melanie Johnson (Labour, Welwyn Hatfield)

It would appear not. Who can tell what Mr. Taubman was doing? We only know the outcome of the court hearings and what the evidence presented revealed. Yesterday, he was given a sentence of a year and a day in prison and fined some £5 million.

We are going for criminalisation because of the need to deter individuals from entering into such agreements. What Mr. Taubman did or did not do is irrelevant. There will always be individuals who ignore the deterrent because they believe that they will not be caught. The hon. Gentleman was a lawyer in a previous life, so I am sure that he will not tell me that the law is ineffective because some individuals break it. As my hon. Friend the Member for Wolverhampton, North-East said, the law is there to highlight messages about certain behaviour that society wants to give individuals, in order to bring about a culture in which some things are acceptable but others are not. There will always be individuals who decide to go against that, but the legislation will be a deterrent to many individuals who would otherwise act differently.

Jonathan Djanogly (Conservative, Huntingdon)

Is the message more important than whether the provision works?

Melanie Johnson (Labour, Welwyn Hatfield)

No. I was making the point that the message is important, as it is part of the working of the provision. Of course, the message is useful if it causes few cartels to be created. It is as simple-minded to assume that there will be no cartels after they are criminalised as it is to think that no murders will be committed because murder is a statutory offence. That will never be so. However, there is an important relationship between an offence on the statute book and a deterrent. The current measures do not have that deterrent effect, as they do not deal with individuals, but allow them to hide behind companies. There are commercial trade-offs for companies between fines that they may receive for entering into such arrangements and any commercial gain that, as we all accept, they may receive from cartels.

Jonathan Djanogly (Conservative, Huntingdon)

On that point, I assume that the Government considered the possibility of introducing such provisions on a civil rather than a criminal basis. Will the Under-Secretary explain why the Government decided to opt for criminal rather than civil proceedings?

Melanie Johnson (Labour, Welwyn Hatfield)

I will discuss one or two comparators in a moment. For serious offences, prison is obviously the sanction used for individuals. There are parallels with insider trading and similar offences.

My hon. Friend the Member for Hemel Hempstead mentioned co-operation agreements. They are currently the subject of correspondence and discussion and, given my ministerial responsibilities, it might not be appropriate for me to comment on them at great length. I am well aware that co-operation agreements may be entered into legitimately; they affect my constituency as well as my hon. Friend's. They would never breach the provision, as they are honest by nature. Dishonesty is an important part of the provision, as I have emphasised and members of the Committee have accepted. I agree with my hon. Friend that cartels are theft. We must not lose sight of that important point.

Several hon. Members made comparisons with other EU countries and other regimes. There are a few points to make. Four EU countries—France, Ireland, Germany, and Austria—currently make the

forming of cartels a criminal offence. In Ireland, the maximum prison sentence is five years. In France, only suspended sentences have been passed so far, the highest of which was for 13 months. The offence of fraudulent conspiracies in France carries a maximum prison sentence of four years. In Germany, the criminal offence is bid-rigging, which carries a maximum prison sentence of five years. The point is not about how many people we send to prison. We do not want to have any cause to send anyone to prison for anything. However, if people break the law and the law states that a prison sentence is necessary, that is what they will receive. We would rather that people did not end up operating cartels, but it is important if they do that we send a message, both to the individual and to society, that that is unacceptable and a serious offence.

On the interplay with the EC regime, under the exemptions from article 81 of the treaty, there is no Community law requirement for an exact correspondence between EU competition law and the criminal offence. However, as far as possible, we should seek to ensure that the two operate consistently in practice. That will be achieved on the one hand by prosecutorial discretion—for example, the OFT and the SFO will not prosecute where genuine possibility of compatibility with Community law on the agreement between undertakings exists—and, importantly, on the other by the need to prove dishonesty.

Tony McWalter (Labour/Co-operative, Hemel Hempstead)

Obviously, I agree with much of what my hon. Friend says but I am concerned to clarify what is meant by dishonesty. As the clause is drafted, one could argue that if someone commits one of the offences listed in subsection (2), he has behaved dishonestly; in other words, engaging in those actions is a sufficient condition for exhibiting dishonesty. In that argument, ''dishonest'' is not a substantive qualifier of ''agrees'' and goes on to be merely spelled out in subsection (2). The phrase is amphibolous. That interpretation is different from the one that implies that one could engage in those activities honestly; in that interpretation, ''dishonestly'' becomes a substantive qualifier. I am not sure whether my hon. Friend the Under-Secretary has given proper weight to my invitation to reflect on that matter.

Melanie Johnson (Labour, Welwyn Hatfield)

I assure my hon. Friend that I always give his remarks proper weight. I will reflect on his point but I do not want to be drawn into the discussion because it deals with a specific case.

On the reaction of the European Commission, Mario Monti said in September:

''Cartels are cancers on the open market economy''

and that they

''undermine the competitiveness of the industry involved, because they eliminate the press from competition to innovate and achieve cost efficiencies.''

The Commission has said about our legislation that

''The European commission is aware of the UK debate on the proposed changes to its competition law. UK national law is of course a matter for the UK, but the Commission also knows that part of the debate is on the interaction with Community law.

It is very important that the interface between Community and national law is carefully worked out. We are pleased that the UK has been working closely with the Commission to ensure that this is the case.''

The Commission therefore has no concerns on that front.

On the interplay with the regimes of other member states, the criminal offence applies to cartels that are implemented or intend to be implemented in the UK and therefore there is no conflict with civil proceedings in other member states. If more member states introduce or make use of criminal penalties, we will need to work with them on an appropriate allocation mechanism for assigning cases, but that is merely to implement the routine methods of working together that exist in parallel situations.

On the interplay of leniency with the EC regime, the OFT can grant leniency for the UK jurisdiction. Where the cartel activity affects interstate trade, the OFT already advises potential whistleblowers to approach overseas competition authorities, including the EC authorities in parallel, and will continue to do so. The OFT will continue to work closely with colleagues in DG COMP to ensure effectiveness of the competition regimes including leniency programmes at national and EU level.

On the relationship of the modernisation of the EC regime with the primacy of EC law and the implementation by member states, the proposals are not finalised, but as they proceed, we shall focus on avoiding any possible conflict with the new offence. The Commission has said that modernisation does not preclude criminalisation, so we have no reason to await the outcome of the modernisation process, which would only delay us from putting our own house in order in the UK.

As to the interplay of civil and criminal proceedings, the OFT's role in civil proceedings is in the investigation of a criminal offence designed to ensure a streamlined approach. That makes good sense. The OFT will, of course, need to collect evidence to different standards according to whether it is dealing with a criminal or civil case.

In criminal cases, the OFT will need to follow procedures in the Police and Criminal Evidence Act 1984, caution suspects before taking statements and so forth. Obviously, it will be different under the civil regime. The Serious Fraud Office will undertake prosecution of criminal cases.

Alistair Carmichael (Liberal Democrat, Orkney and Shetland)

What protections will the Under-Secretary put in place to ensure that cases are not lost in criminal prosecutions because evidence was obtained by using civil procedures in the 1998 Act, which are not admissible in criminal cases?

Melanie Johnson (Labour, Welwyn Hatfield)

I may return to that point later and perhaps write to the hon. Gentleman. My current understanding is that if evidence is acquired through civil arrangements, it cannot then be used for criminal purposes. That acts as a safeguard to some extent and

the right decisions must be taken about which route should be pursued.

Alistair Carmichael (Liberal Democrat, Orkney and Shetland)

It is a safeguard to an extent, but it is a potential pitfall for prosecutions. The Under-Secretary, as well as the hon. Member for Wolverhampton, North-East, has spoken about sending messages. The worst possible message to send, following the criminalisation of cartels, is that any prosecutions that are brought will subsequently be unsuccessful. It is inherently difficult when a single public body is in the business of evidence gathering and it also has to decide under what procedures that evidence was obtained and how it should be applied in the courts.

Melanie Johnson (Labour, Welwyn Hatfield)

That should be done carefully. I appreciate the hon. Gentleman's concerns, but the difficulty should not be exaggerated. We just need to ensure that everything is done carefully and the right procedures are carried out for the right cases. Careful discrimination is necessary about which route is to be pursued.

I move on now to the regulatory impact and compliance costs. The hon. Member for Eastbourne, surprisingly, mentioned significant extra compliance costs, but we do not accept that they will arise.

Mark Field (Conservative, Cities of London and Westminster)

That is a complacent approach. The compliance costs will not just be the direct costs to the OFT or to Government Departments, but will embrace internal training, for example. In the past, when large companies or near-monopoly-type organisations were subjected to similar merger or cartel investigations, internal training programmes were seen as a necessity and they took up countless hours of management time. Companies know that if they face another OFT investigation, the first question they will be asked is what internal network they have put in place. It should never be underestimated that the biggest single cost is often setting up the internal mechanisms, which cost so much in management time. Clause 179 is likely to result in more of the same for the companies that will be affected by it.

Melanie Johnson (Labour, Welwyn Hatfield)

The hon. Gentleman chooses to forget that companies currently need to ensure that their staff are fully trained on the impact of legal anti-competition measures, including the 1998 Act. Further issues relate not to the operation of the business, but to individuals' dishonest behaviour, and cannot be covered, but I doubt whether much additional time would need to be spent over and above the general training that companies already provide.

Another upside, which Opposition Members left out in their discussion of the issue, is that a better-operated market without destructive, anti-competitive behaviour is good for business and will benefit legitimate concerns. I promised that I would not say that we were creating a level playing field—although it is an indispensable expression—but that is what we are doing. It is important for legitimate business and the measure will help to ensure that that is the case.

The Secretary of State has signed a statement saying that the Enterprise Bill is compatible with the European convention on human rights. Civil and criminal proceedings will be kept separate; the criminal

evidence must be of a higher standard and with the appropriate safeguards. Clauses 188 and 189 provide protection against self-incrimination.

Alistair Carmichael (Liberal Democrat, Orkney and Shetland)

Will a Scottish arm of the Office of Fair Trading be established? When terms such as the Police and Criminal Evidence Act, which is not part of Scots law, are being thrown around, there is massive scope for confusion between the systems.

Melanie Johnson (Labour, Welwyn Hatfield)

I had not given much thought to that point, but, as always, I will think further about questions asked in Committee. I cannot give the hon. Gentleman any undertaking either way. Earlier in the debate, he asked about the degree of consultation on Scots law in relation to the clauses. We have consulted the Scotland Office and the Crown Office at every stage and they are content with the Bill. I do not think that there are further issues to be addressed.

I want to return to cartels and vertical agreements. In response to a question from the hon. Member for Eastbourne, the repeal of the exclusion of verticals in the Competition Act 1998, which is proposed in the White Paper, is still under consideration. The issue is on our agenda.

It is most important to have a transparent leniency programme, which is an essential element in successfully cracking and prosecuting cartels. The hon. Member for Eastbourne has recognised the role that leniency played in the Sotheby's and Christie's case that he mentioned earlier. Informants often provide vital evidence, which can be used in prosecution and punishment of a ringleader and others. Leniency is cost-effective; it provides for prosecution without a long and expensive investigation. The US experience shows a good combination of the stick of criminal sanctions and the carrot of leniency, which can be used together to defeat cartels.

The OFT no-action letters are subject to a set of conditions; for example, not being a ringleader, admitting guilt, co-operating fully and so forth. They certainly do not give carte blanche to those who are guilty to get away with it. If the conditions of the letter are broken—for example, if the holder of the letter turns out to have been a ringleader—it will be void and prosecution may follow. The OFT will issue detailed guidance about the terms for leniency, including pro forma, no-action letters.

Alistair Carmichael (Liberal Democrat, Orkney and Shetland)

Is the Under-Secretary aware that in Scotland, when the police issue a warning or give an indication that no proceedings will be taken, that is not subsequently binding on the procurator fiscal? Has consideration been given to that matter in respect of the OFT?

Melanie Johnson (Labour, Welwyn Hatfield)

As I said a moment ago, if the conditions of the letter are broken—for example, if the holder of the letter turns out to have been a ringleader—the letter will be void. It is certainly possible to revisit the matter in specific circumstances.

Alistair Carmichael (Liberal Democrat, Orkney and Shetland)

My point was that for the police as an investigating authority to say that no action will be taken does not bind the procurator fiscal; he is entitled to disregard that. If the Office of Fair Trading said

that no action was to be taken, would the procurator fiscal be entitled to disregard that?

Melanie Johnson (Labour, Welwyn Hatfield)

The Lord Advocate will prosecute the new offence in Scotland and will not be formally bound by the OFT no action letter. However, as I have mentioned, there are effective working relationships between the OFT, the Serious Fraud Office and the authorities in Scotland. That should avoid inconsistency in practice. Indeed, Customs and Excise uses a related leniency procedure, and the same theoretical problems apply, but they are dealt with in practice through the good working relationship between Customs and Excise and the Scottish authorities.

I think that I have covered most of the points that needed to be made on leniency. I have mentioned that there will be guidance on the OFT website and in leaflets. That will make it clear that leniency will be granted on the basis of an individual's need and only in so far as is necessary to gain evidence with which to investigate and prosecute cartels. Leniency will not go beyond that. An appropriate leniency programme is an important part of being able to make progress and take cases before the courts with evidence that will back up the likelihood of a conviction.

With regard to criminal prosecutions in cases where the EC is taking civil action, the individuals in large global or EC cartels could still be targeted. We will pursue such cases. ''Company'' and ''individual'' are separate legal entities, and the OFT will collect separate evidence to criminal standards. Close working relationships between the OFT and the EC authorities will also continue on that score.

Mark Field (Conservative, Cities of London and Westminster)

I should be interested to hear the Under-Secretary's thoughts on what would happen in practice if a civil case in the European Union were taking place simultaneously with a criminal case in the United Kingdom. If a civil case were going on in the EU and there was a desire to extradite to the UK a domiciled national who was involved in an interstate cartel arrangement, how would the OFT or, indeed, the Government persuade the EU that they should be extradited to face criminal charges in the UK?

Melanie Johnson (Labour, Welwyn Hatfield)

That is a matter for each arrangement. We have working relationships with authorities in other countries that deal with related issues, so these arrangements will no doubt be in force with regard to this relationship, too. A criminal case will not be prejudiced by any prior EC civil proceedings. Defendants might argue that the EC civil case publicity had prejudiced their chance of a fair trial, but we do not believe that that would be persuasive. The cases would be heard in different jurisdictions and before different legal persons, so we do not believe that that would cause a serious problem.

A question was asked about the relationship between honest business people and the criminalisation of the cartel offence. Honest business people have nothing to fear. The new offence has been drawn to cover only clear-cut cases of hard-core cartel activity. Bona fide business agreements are not entered into dishonestly. On the point made by my hon.

Friend the Member for Hemel Hempstead, arrangements in subsection (2) about dishonest agreements are always qualified by the reference to dishonesty in subsection (1). I think that that answers my hon. Friend's point at least partly, but I shall continue to reflect on it.

Tony McWalter (Labour/Co-operative, Hemel Hempstead)

I shall write to my hon. Friend the Under-Secretary to try to disambiguate what I believe is an ambiguous clause.

Melanie Johnson (Labour, Welwyn Hatfield)

I look forward to receiving that letter.

Of course there will not be any scapegoating—I am not sure whether ''scapegoatism'' is a word—of companies. The OFT and the Serious Fraud Office will investigate and prosecute on the seriousness of the cartel. It will be based on the role of individuals and the question of evidence. They will have to go through the same process for assessing whether there is sufficient evidence to bring a prosecution as for many related issues.

It is important to have widespread support for our proposals. Michael Cutting, a partner at Linklaters & Alliance, wrote in the New Law Journal in July last year:

''Criminalisation of cartels . . . will cause companies and their managers to review their attitude to competition law compliance and risk . . . Criminalisation on even a narrow basis will send a clear message about the seriousness of competition law.''

These changes will have a deterrent effect and make people change the culture in which some of these otherwise dishonest activities take place. We have a number of substantial experts on our side. Irwin Stelzer, the director of regulatory studies at the Hudson Institute and an adviser on competition policy said that

''in the case of price-fixing conspiracies, big fines are a less effective deterrent than small jail sentences. In America, it is the threat of a stretch as a guest of the government that keeps many an executive out of a smoke-filled room . . . Britain has no such deterrent . . . It will be a long time before mere fines will destroy the culture of price-fixing.''

Professor Michael Porter recently confirmed that he thought that it was no good simply having fines for hard-core cartels; we needed the imprisonment option, too. Finally, I make the point that the US has not exactly suffered as a result of the measures that they have in place. As of today, those measures are used in highly appropriate circumstances.

I turn now to a few unrelated points. The hon. Member for Huntingdon spoke about the comparison with the civil bankruptcy restriction orders. It is a question of measure for measure. Hard-core cartels are wide-scale theft and should not be seen in the same light as bankruptcy. BROs might be for serious failure to keep proper financial records. They are there to protect the public and other businesses. The criminal penalties for the dishonest cartel offence is of quite a different order of seriousness, as we all accept. I was asked whether the UK would be able to pursue individuals where the EC authorities were taking civil action against the company in parallel. I think that I

have already answered that point. Yes, they will be able to, as they are separate legal entities and the OFT will need to collect evidence to the standard of criminal proof.

In conclusion, there is a clear lack of a deterrent effect in the 1998 Act, as shown by the degree of ongoing cartel investigations. Experts agree with us about the importance of the deterrent effect of criminal sanctions against the individuals, including prison sentences. As well as having a deterrent effect, criminal sanctions punish those who have committed a serious theft against consumers, individuals and other legitimate businesses.

Question put, That the clause stand part of the Bill:—

The Committee divided: Ayes 11, Noes 5.

Clause 181

Nigel Waterson (Conservative, Eastbourne)

I beg to move amendment No. 36, in page 132, line 11, leave out

'to imprisonment for a term not exceeding 5 years or'.

Derek Conway (Conservative, Old Bexley and Sidcup)

With this it will be convenient to take the following amendments: No. 90, in page 132, line 12, leave out 'five' and insert 'three'.

No. 37, in page 132, line 12, leave out 'or to both'.

No. 39, in page 132, line 12, leave out

'to imprisonment for a term not exceeding six months or'.

No. 40, in page 132, line 14, leave out 'or to both'.

Nigel Waterson (Conservative, Eastbourne)

I can deal with this amendment fairly briefly, as we have dealt fairly exhaustively with some of the relevant issues in the previous debate. These amendments add up to two different approaches. The first is to remove the possibility of imprisonment altogether as a sanction but leaving the prospect of a fine. That seems a reasonable compromise. I merely pray in aid the arguments that we used in the previous debate. As we voted against clause 179 it is clear that we are still not happy with the Government's approach. They have not made their case for criminal sanctions. We will return to that at much greater length on Report.

Amendment No. 90 has a slightly different effect. If the Government insist on having the threat of imprisonment, it should be reduced to three years, rather than five, which is the sentence available in the

US. A five-year sentence is extremely serious. Even the hapless Mr. Taubman got only a year and a day—I am sure that he does not regard that as particularly lenient—for what was a pretty egregious, to use a lawyer's word, price-fixing offence. Given the deterrent effect that the Under-Secretary claims for the measure, it seems to have had remarkably little effect on Mr. Taubman and his associates.

Jonathan Djanogly (Conservative, Huntingdon)

My first point concerns fines. I note that reference is made to a statutory maximum for a summary conviction. What is the amount? There is no reference to a maximum sentence for indictable offences. Why is that? Does it come into the Bill in another place or is there an automatic amount of which I am not aware? Finally, in what circumstances would a summary conviction, which presumably involves the case going through the magistrates court, be appropriate? I have visions of cartel offences being dealt with before drink-driving offences and after the parking ticket offence. It seems rather incongruous, given our previous discussion, that such a case could go to a magistrates court.

Alistair Carmichael (Liberal Democrat, Orkney and Shetland)

As I said at the start of my contribution to the clause 179 stand part debate, I am minded to support the Conservative amendments. I am not opposed to the criminalisation of cartels in principle, but I have substantial reservations about the Government's proposals and doubt that they are workable. I am worried about someone going to jail for the commission of anti-cartel activity and I see many problems with the practicalities. As to fines, I presume that they will be unlimited on indictment. I share the sentiments of the hon. Member for Huntingdon about summary prosecutions. If we are serious about sending the right messages, it is appropriate to say that prosecutions in respect of cartel offences should be on indictment only.

Melanie Johnson (Labour, Welwyn Hatfield)

It would be helpful to run through the amendments quickly, but in view of the remarks of the hon. Member for Orkney and Shetland, I should certainly go through them in more detail.

The Bill provides for the SFO and OFT to prosecute the new offence in England, Wales and Northern Ireland. It is the Government's expectation—and that of the OFT and the SFO—that the SFO will carry out all the prosecutions initially. In Scotland, the OFT will investigate. As the hon. Gentleman said, there is no Scottish OFT, but the Crown Office is training OFT officers, so his point is being met in that way.

Alistair Carmichael (Liberal Democrat, Orkney and Shetland)

The Under-Secretary may not know the answer to this immediately, but she may be able to find out; how many lawyers qualified in Scots law are employed by the OFT?

Melanie Johnson (Labour, Welwyn Hatfield)

The hon. Gentleman is right that I cannot answer that at the moment, but we can return to it.

The arrangements for prosecution will be properly resourced. The SFO already has experience of criminal

prosecutions, having prosecuted other white-collar crimes such as insider dealing for many years. It may, however, be appropriate at some future time for the OFT, whose initial role will be investigatory, to take on a prosecutorial role. That might arise if the number of cartel prosecutions created a conflict with other SFO priorities.

Nigel Waterson (Conservative, Eastbourne)

The Under-Secretary may be getting ahead of herself; she appears to be dealing with the next group of amendments.

Melanie Johnson (Labour, Welwyn Hatfield)

That is helpful. I shall return to some earlier points made by the hon. Member for Huntingdon about summary conviction. At the moment, magistrates courts can provide for summary convictions, and they cover prison sentences of up to six months or a fine up to the statutory maximum of £5,000. The hon. Gentleman may be right that it would be inappropriate to deal with many cartel offences in magistrates courts, but that is a matter for them. Magistrates are able to refer up to the High Court and are usually likely to do so. The system allows magistrates courts to refer certain more serious offences to higher jurisdictions, even though the process starts with the magistrates.

The amendments would seriously undermine the intended deterrent effect, which is a key objective of the new offence. The maximum prison term in the Bill has been set to create the appropriate level of deterrence for serious and damaging anti-competitive behaviour. The maximum five-year prison term in the Bill is appropriate for a serious financial crime and is in line with existing precedents. It is also in line with international precedents: Canada has a five-year term for hard-core cartels, as does Germany for bid-rigging cartels; Norway has a six-year maximum and France four years. As hon. Members have remarked, the US has a three-year maximum, as does Japan.

Providing solely fines as a sanction for cartels would in no way reflect the seriousness of the offence. The Government accept that fines may be appropriate in less serious cases with mitigating circumstances, but fines do not have the same deterrent effect as imprisonment. It is a question of the punishment fitting the crime, which is right and appropriate.

Dishonest companies might find ways of reimbursing employees who were fined or of indemnifying them against a potential fine. If fines were the only sanctions, dishonest companies would take a commercial decision to engage in a cartel. They would weigh the risk of being caught and the size of the fine against the likely gain to be derived from the cartel, which would be no deterrent at all. Honest companies tell the OFT that the threat of imprisonment will help to impress on their employees the need not to become involved in cartels. In addition—

It being One o'clock, The Chairman adjourned the Committee without Question put, pursuant to the Standing Order.

Adjourned till this day at half-past Four o'clock.

[Part I]

Enterprise Bill

Nigel Beard (Labour, Bexleyheath and Crayford)

With this it will be convenient to take the following amendments: No. 90, in page 132, line 12, leave out 'five' and insert 'three'.

No. 37, in page 132, line 12, leave out 'or to both'.

No. 39, in page 132, line 13, leave out

'to imprisonment for a term not exceeding six months or'.

No. 40, in page 132, line 14, leave out 'or to both'.

Nigel Waterson (Conservative, Eastbourne)

The Under-Secretary assures me that she concluded her remarks, but I seem to remember her quietly subsiding back to her seat. I apologise if I missed some concession in her last few sentences.

Melanie Johnson (Labour, Welwyn Hatfield)

I confirm that I made no concession in my last subsiding sentence to the hon. Gentleman.

Nigel Waterson (Conservative, Eastbourne)

Why break the habit of a lifetime?

There are still significant concerns about the provisions, several of which we discussed. My hon. Friend the Member for Huntingdon (Mr. Djanogly) mentioned that there could be an unlimited fine on an individual on indictment. The Under-Secretary did not touch on that in her response, but I assume that that is correct. Hon. Members are nodding. I do not know whether they agree with my summation, or whether she referred to the issue.

Melanie Johnson (Labour, Welwyn Hatfield)

The hon. Gentleman is right on both counts: I did not touch on the matter, and the fine is unlimited. I was talking to the hon. Member for Huntingdon about that before the Committee.

Nigel Waterson (Conservative, Eastbourne)

I was not privy to that side discussion. The unlimited fine is yet another concern, but we will not make much headway at this juncture. It may be a matter for Report, or for another place. I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Nigel Waterson (Conservative, Eastbourne)

I beg to move amendment No. 38, in page 132, line 17, leave out from 'Office' to end of line 18.

Nigel Beard (Labour, Bexleyheath and Crayford)

With this it will be convenient to take the following amendments: No. 140, in page 132, line 17, leave out 'or'.

No. 141, in page 132, line 18, leave out 'by or'.

Mr. Waterson: The amendments would all have the same effect, limiting ability to instigate the new criminal offence in clause 179 to the Serious Fraud Squad, and to remove the criminal investigatory powers from the Office of Fair Trading. That was not my idea originally, but the Government's. In their response to the consultation in December 2001, they said that they had decided that the SFO should be the lead prosecutor. We agree with that, and so does the joint committee of the Law Society and the Bar which was good enough to draft the amendments. The Bill does not seem to reflect the Government's statement, as it gives equal power to the OFT and the SFO. It also gives the OFT extensive criminal investigatory powers. Some of the legitimate concerns of business, industry and Opposition Members have already been graphically described.

The powers of the OFT to investigate company infringements under the Competition Act 1998 are different from the criminal powers under the Bill and from criminal law in general. The rights of defence differ, as do the procedures. It seems to the Opposition, the Law Society and the Bar that giving the OFT both sets of powers will lead to confusion, especially as, in reality, most criminal investigations are likely to stem from an initial investigation under the 1998 Act. Neither is it appropriate that the chairman of the OFT, who has no experience of criminal investigations or prosecutions, should authorise surveillance on application by one of his officials under the Regulation of Investigatory Powers Act 2000. That is why we tabled the amendments, which I commend to the Committee.

Jonathan Djanogly (Conservative, Huntingdon)

The concept of fairness and transparency is a paramount consideration in the administration of justice, and relates to the attitude that business and outsiders will have towards the OFT and how it conducts itself. It is undesirable for the OFT to be able initiate proceedings. It is a regressive step. It is some years since the police could decide to initiate prosecution. That was stopped because the system of having one agency carry out the investigation, consider the evidence and then decide to initiate a prosecution proved ineffective. Indeed, it is not used in most parts of the world. It led to unfair prosecutions and a lack of balance. It did not separate the judgment of the two issues concerned. It continually led to prosecutions being initiated on the basis of inadequate evidence. Yet here we are in 2002 proposing to go back to that system in some ways.

It is no secret that the SFO has had its problems in recent years. It has been discussed in the press and reviews have been ongoing. It has not had a successful conviction record and perhaps that is why the Government now propose that the powers of the OFT should be increased to match those of the SFO. I should be interested to hear the Under-Secretary's opinion on that. If that were the reason, it would be sad in many ways. To my mind, it would lead to less good justice and possibly to a series of human rights claims.

On a more mundane basis, such a move is also wrong because the OFT needs the confidence of

business if it is to operate effectively. In some ways, we will get so bogged down with the concept of criminalisation and what can be prosecuted that we will not be able to see the wood for the trees. In practice, most companies deal fairly readily with the OFT. They hand over documents freely and have meetings with the OFT, perhaps to describe the marketplace in which they operate for the purposes of a quite separate OFT investigation. They will talk to the OFT about pre-clearances on deals that they are considering.

These provisions could affect the whole nature of that relationship. It would be a disaster for the OFT to be seen as a wing of or an alternative to the SFO. Companies might not want to talk to the OFT as they have in the past, or to advise it on markets and so on, unless forced to do so by measures such as these. We have explained why criminalisation is wrong generally, but it is specifically inappropriate in relation to the clause.

Mark Field (Conservative, Cities of London and Westminster)

I speak only briefly in support of the proposal made by my hon. Friends the Members for Eastbourne (Mr. Waterson) and for Huntingdon. By being given these additional powers, particularly being in tandem with the SFO, there is a risk that the OFT could become a judge and jury. My hon. Friend the Member for Huntingdon rightly pointed out that the ideal role of the OFT would be as an advisory body for companies that might worry that their links and co-operation with other bodies might fall foul of some of this cartel legislation. A company's long-standing practical and commercial relationship with the OFT could be undermined if it found itself subject to an investigation initiated by the OFT. If the powers were in the hands of one body—the SFO—yet the OFT had equivalent powers, it might be seen as somehow trumping the SFO's powers. The measure might then be viewed as particularly serious or of a particular type, which could be dangerous. Does the Under-Secretary know of instances in which the OFT, in preference to the SFO, might initiate such an investigation?

Melanie Johnson (Labour, Welwyn Hatfield)

I remarked this morning that the expectation of the Government, the SFO and the OFT is that the SFO will carry out all prosecutions initially. The SFO has the resources and experience of criminal prosecutions of a similar type. For many years, it prosecuted white-collar crime such as insider dealing.

The hon. Member for Huntingdon asked about the SFO prosecution record. SFO conviction rates, measured against the number of defendants, have risen from an average of 63 per cent. in the first five years of its operation, from 1988 to 1993, to an average of 87 per cent. in the past five years, from 1997 to 2002. That is a good record, giving rise to no concerns on my part of the sort that he expressed. With the figures now in front of him, he may feel reassured.

It may be appropriate at some time for the OFT, whose initial role will be as investigator, to take on a prosecutory role. That might happen if the number of

cartel prosecutions created a conflict with other SFO priorities, although we do not expect a large number of prosecutions. The OFT would have to develop the necessary capability and resources to take on the role of prosecution.

No one will be judge and jury in all this. The OFT will investigate offences and pass suitable cases to the SFO, which will take the lead role in prosecution. The two bodies have already worked extensively on the practical arrangements and a memorandum of understanding is in preparation. There is no question of undermining the OFT's role—it is co-operative working to draw on the strength and expertise of both authorities.

If we were not proposing this division of roles, I could envisage members of the Committee asking why we were duplicating existing roles and functions. We have made the right choice: if we had made a different choice, we would face a different line of criticism. Our choice here is cost-effective and draws on the strength of each organisation.

Alistair Carmichael (Liberal Democrat, Orkney and Shetland)

Will the Under-Secretary explain the Department's thinking on subsection (2)(b)? As presently worded, it states:

''by or with the consent of the OFT.''

Do the Government intend that the OFT should always be required to give consent? If so, the presence of the word ''or'' at the end of paragraph (a) defeats the object. If not, why would the SFO director require the consent of the OFT, given that his power is absolute under paragraph (a)? I simply do not understand the words

''or with the consent of''.

Melanie Johnson (Labour, Welwyn Hatfield)

Perhaps I can come back to that point in a moment. In Scotland, the Lord Advocate is responsible for prosecutions—I realise that the hon. Gentleman is well aware of that—and he will consider a report from the OFT carefully before taking any decision.

It was a matter of interest this morning how many Scottish qualified lawyers are employed at the OFT. We do not have the figures and it will take some time to get them, but the hon. Gentleman will agree that the real issue is that the OFT has access to Scottish legal advice—and it certainly does. It has access to the advice of the officers and solicitors of the Advocate-General. A long tradition exists of making such advice available to all UK Government bodies at an early stage. Good communication channels with the Crown Office are also open. The Crown Office can provide the OFT with immediate practitioner advice on Scottish legal matters at any stage of an investigation.

The OFT is also a named prosecutor to allow for the possibility that it may be appropriate for it to take on a prosecution role in future. The prior consent provision is necessary to enable the OFT to prevent any prosecution, by a third party, of individuals who have been granted leniency. The reason for the phrase

''with the consent of the OFT''

is to allow private prosecutions and to close down other options.

I have explained that we envisage a prosecution being brought by the SFO, except in Scotland. Third-party prosecutions may normally be brought for any offence where the legislation does not exclude them. The amendment would restrict the bringing of prosecutions for the cartel offence to the SFO, but I do not believe that there are grounds for doing so. To ensure the proper working of the leniency regime, it is important that a private prosecution can be brought only with the OFT's consent. I have now said quite a lot about the leniency provisions, so I shall not say anything further at this stage.

Alistair Carmichael (Liberal Democrat, Orkney and Shetland)

I may be missing something blindingly obvious. The Under-Secretary keeps going on about private prosecutions, but I do not see how there could be private prosecutions for these offences, because they may be instituted only under the two options in the provision.

Melanie Johnson (Labour, Welwyn Hatfield)

I will come back to that in a moment, if I may. I should like first to deal with the point about scrutiny by surveillance commissioners. The Regulation of Investigatory Powers Act 2000 requires that there be prior approval by a surveillance commissioner. Someone alleged that the decision would be by the OFT, but that would not normally be the case. It would happen only in an urgent case, which I think would be very rare in a cartel investigation. In those circumstances, however, there is a provision in the 2000 Act for the authorising officer—in this case, the OFT chairman, I guess—to issue a notice that grants authorisation and explains the urgency that justifies going ahead. Then the surveillance commissioners, who exist under that Act, would be there to scrutinise immediately after the fact in any event.

Prior scrutiny is the norm under the provisions. As I have said, I expect matters of urgency to be very rare. Complaints and appeals can be directed to the investigatory powers tribunal set up under the 2000 Act. There are plenty of safeguards. In some circumstances, however, it will be necessary to resort to the measure that I have described.

I shall now deal with the meaning of the phrase

''by or with the consent of the OFT''.

First, it allows private prosecutions, and secondly, it enables the OFT to close down prosecutions. The point is to permit private prosecutions. I hope that, having heard what I have had to say, Opposition Members will be happy for the amendment to be withdrawn. If not, I urge hon. Members to resist it.

Nigel Waterson (Conservative, Eastbourne)

I am content for the moment. I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

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

Jonathan Djanogly (Conservative, Huntingdon)

Before we move on, it is appropriate to say a little more about the clause, if only because we have not discussed subsection (3), for lack of an amendment. Clearly, many issues have been raised about the penalty and prosecution procedures, and I for one am not particularly comfortable with the

clause. This comes down to the fact that, by attempting to stand tough, we risk hurting the procedures of the courts, undermining human rights and not doing things to the standard that we expect in this country.

The offence in subsection (3) extends to agreements that are implemented, or intended to be implemented, in the United Kingdom. The exception is for agreements made outside the UK that are not implemented in the UK. If I understand that correctly, two UK companies could plot in Paris to implement an agreement in Germany without being criminals. However, they would be criminals if they missed their train and did their plotting in London instead. I would be grateful for the Under-Secretary's clarification.

I understand from the Under-Secretary's comments that the EU Commission has seen the Bill and is happy with it. I would like to know whether it considered the provisions, which would not work in a European-friendly way. What message does it send to foreign companies that our guys can operate cartels abroad, but that anyone operating a cartel here will go to prison? Cartel operations can be blatant, but they can often be complicated, as we discussed. They can also be immensely hard to prove, because what the OFT considers to be a cartel operation may not be seen as such by the companies concerned. If companies discuss international volumes of supply or international prices at a sector conference, at what point does that conversation become price fixing? Under the provisions, a foreign company is eventually likely to decide that it does not like the way things work and will not invest in this country.

Alistair Carmichael (Liberal Democrat, Orkney and Shetland)

Those remarks prompt me to make a brief observation about subsection (3).

The Under-Secretary was at pains this morning to emphasise that the essence of the defence is the dishonest agreement. It is curious that in subsection (3) the emphasis is differently put on implementation. I appreciate that that will not be fatal to the creation of the offence or the founding of jurisdiction. However, in the interests of completeness and neatness, some reference to the perfection of the agreement would be appropriate.

Melanie Johnson (Labour, Welwyn Hatfield)

Under the offence, prosecutions may be brought for agreements that are implemented, or intended to be implemented, in the UK. That includes agreements that are reached abroad and intended to be implemented in the UK. However, subsection (3) requires that in those circumstances, some subsequent action must have been taken to implement the agreement in the UK. That action could be no more than a clear instruction by telephone or e-mail into the UK to implement the agreement. It would be for the courts to determine whether such action had been taken. Those are the arrangements envisaged in the clause.

The hon. Member for Huntingdon mentioned other states. We make legislation that impacts on business that is conducted in this country or on matters that relate to this country, so his point would not be relevant to the Bill. It is a bit of a novelty to listen to

Conservative Members arguing that we are being insufficiently European in our approach.

Question put and agreed to.

Clause 181 ordered to stand part of the Bill.

Clause 182 - Extradition

Nigel Waterson (Conservative, Eastbourne)

I beg to move amendment No. 92, in page 132, leave out lines 31 and 32.

This is a fairly short point but it fairly puzzling to say the least. Clause 179 contains the main offence, the so-called cartel offence. Clause 179(1) makes it clear that there must not only be dishonesty but the individual must agree

''with one or more other persons to make or implement, or to cause to be made or implemented, arrangements of the following kind''.

The offence clearly involves people coming together and agreeing something. It is not therefore clear what the purpose is of 182(b),

''conspiracy to commit such an offence''

and (c),

''attempt to commit such an offence.''

The main offence involves agreeing to enter into certain arrangements, as opposed to implementing such arrangements, and so it seems somewhat contradictory. Is it possible under English law to have a conspiracy to agree to enter into something, when the main offence involves agreeing to enter into a cartel?

One or two questions at this point may obviate the need for a full stand part debate. How will these arrangements for extradition to this country from overseas interact with the law in the United States? There are reports in all the media today of the outcome of the Sotheby's-Christie's trial in the US. One of the main offenders, Mr. Taubman, is on his way to ''Club Fed'', whereas Sir Anthony Tennant will avoid trial and punishment as long as he does not go the US. Under existing US law, as I understand it, he cannot be extradited for trial for his involvement in antitrust breaches. How will the US authorities view the fact that we will give ourselves the power to extradite people from the US to here, but there is still no power to do the opposite? Is the Under-Secretary aware that the US intends to change its rules to fit in with ours?

There has to be an element of give and take about extradition. In the not too distant past countries such as Spain became a haven for British criminals because the extradition laws did not allow them to be extradited back here. Can the Under-Secretary help? She may care to write to us about this. I hope that the point of the amendment is clear: including offences of conspiracy or attempt to commit an offence is unnecessary given the nature of the main offence.

Melanie Johnson (Labour, Welwyn Hatfield)

The amendment would remove the possibility of extradition for conspiracy or attempt to commit a cartel offence. The inchoate offences of attempt or conspiracy to commit an offence apply

automatically by virtue of the Criminal Attempts Act 1981 and the Criminal Law Act 1977. The UK law recognises that conspiring to commit a crime and an attempt to commit a crime are serious and should not be put beyond the reach of the law. Prosecuting such offences is an important aspect of deterring criminals and enables investigatory bodies to step in and prevent the crime from being carried out and harming millions of customers and other businesses.

For example, if two senior employees of the same company come together to agree a plan to contact other competitors to agree to fix prices, a conspiracy offence has been committed. The UK law recognises the importance of including those offences. We believe that we should not diminish their seriousness by removing from the scope a possible extradition request. We also believe that it is important for international judicial co-operation and combating cross-border crime to allow for extradition, not only for the substantive offence but for the conspiracy to commit and the attempt to commit the offence. That will act as a strong deterrent to criminals and send a strong signal that nobody should escape justice simply by crossing a national border.

There are four categories of UK extradition partners: the European convention on extradition partners, Commonwealth partners and Hong Kong bilateral treaty partners where the treaty was signed after 1989 and bilateral treaty partners where the treaty was signed before 1989. With regard to the first three groups of extradition partners, no specific measures are required to be added to new criminal offences such as this one in order to be able to extradite under other provisions of the Extradition Act 1989.

In respect of those three groups, the criteria for extradition are that the offence carries a sentence of imprisonment of 12 months or more and dual criminality applies. Both criteria must be satisfied in respect of this offence. Therefore, the proposed amendment would not affect any of these groups of extradition partners. It would not make sense to exclude the offences for the group with whom the UK signed bilateral agreements before 1989, particularly the United States. I therefore hope to persuade Opposition Members to withdraw the amendment.

The hon. Member for Eastbourne asked why we need the provision. To commit an offence as defined under clause 179 requires the involvement of at least two different undertakings at the same level of the supply chain. A director who conspires with his sales manager to arrange a cartel to fix prices will be caught under the conspiracy to commit an offence provision in clause 179. We believe that such behaviour should not be beyond the reach of the law where a court could prevent the establishment of a cartel at an early stage.

In relation to extradition with the United States, which was a further point of the hon. Gentleman, such requests are not automatic. Automatic extradition requires both states to prosecute an offender for an identical criminal offence. There are some differences between the United Kingdom offence created under

the Bill, and the United States offence brought under the Sherman Act. The US offence is not based on dishonesty, therefore a request would need to be reviewed by the UK courts to establish whether the request fulfils the criteria of it being a case where the offence applies in nature to both jurisdictions. Such a review by the courts provides an extra safeguard against automatic extradition, which is ultimately a matter for the courts to decide.

Nigel Waterson (Conservative, Eastbourne)

I am grateful for that clarification. Is it the Under-Secretary's understanding that extradition would be automatic if matters were the other way around; if we were requesting extradition for a US or English citizen in the United States to come and be prosecuted here for a clause 179 offence?

Melanie Johnson (Labour, Welwyn Hatfield)

I may have to write to the hon. Gentleman on that point.

Nigel Waterson (Conservative, Eastbourne)

That leaves me in a slightly unsatisfactory limbo because that last point—

Melanie Johnson (Labour, Welwyn Hatfield)

I believe that it works both ways. I can clarify the matter to that degree without taking the trouble to write to him.

Nigel Waterson (Conservative, Eastbourne)

I should be grateful if the hon. Lady would write to me in any event so that we are clear about the matter. Occasionally, our deliberations touch on the real world, and at the moment the real world is quite interested in the Christie's-Sotheby's case, which is an instance where there is a stark distinction between the fates of one defendant and one possible defendant. One of them in English and does not intend to leave these shores and go to the USA, so he cannot be extradited to the USA for such an offence under US law. I am keen to return to my original question on the issue, which was whether the Government envisage that there should be reasonably easy extradition between here and the USA. The Under-Secretary has already implied that there could be a procedural step because the dishonesty requirement does not appear in the rather ageing US legislation, but I am keen to pin down how it would work the other way around.

Melanie Johnson (Labour, Welwyn Hatfield)

I shall give the hon. Gentleman a little more detail that will put him fully in the picture. It is the case, as I suggested a moment ago, that the US to UK extradition works exactly as the UK to US extradition would work. That is determined by the 1972 treaty. All of the arrangements that I sketched out concerning extradition to the US parallel the terms of extradition back to the UK.

Nigel Waterson (Conservative, Eastbourne)

The Minister has already put her finger on one clear distinction—that because there is no dishonesty requirement under the United States equivalent anti-cartel legislation, a US court would feel able to investigate whether there were a prima facie case based on dishonesty. However, I am still a little unclear and, rather than court madness on the matter, I shall await the letter, as should the Minister, to be sure of the precise position.

Melanie Johnson (Labour, Welwyn Hatfield)

I am very clear on the precise process. It is exactly the same. If there is an extradition request by the United States, extradition is not automatic because of the slight difference in the

regimes. They need to be identical for it to be automatic and, as the hon. Gentleman is aware, the United States offence is not based on dishonesty. In the case of an extradition request by the United States, that request will have to be reviewed by the UK courts. If matters are the other way round, they will have to be considered by the United States courts. It is exactly the same, whichever way round one looks at it. I hope that that entirely clarifies the matter for the hon. Gentleman.

Nigel Waterson (Conservative, Eastbourne)

It does theoretically but, returning to the practicalities, on what basis, so far as the hon. Lady is aware, could Sir Anthony Tennant not be extradited to stand trial side by side with Mr. Taubman?

Melanie Johnson (Labour, Welwyn Hatfield)

I am not sure that I can comment on individual cases but, if that is what the hon. Gentleman is driving at, he did not previously mention a specific case except to say that the matter was interesting in the context of that case. If his question is specific, I can look at whether there is an answer to it but I would not want to attempt that answer thinking on my feet at this moment.

Nigel Waterson (Conservative, Eastbourne)

I do not think that we can take the matter much further forward, but it helps to examine a particular case when looking at how something will work in practice, and fate landed one in our laps only this morning. Most newspapers rather baldly say that it was not possible to extradite Sir Anthony Tennant to face trial. That might just be journalistic over-simplification. There might be perfectly good procedural or evidential reasons why Sir Anthony Tennant has quite rightly not been troubled at all. However, I cannot help but feel that, in the longer run, the United States authorities are bound to take a dim view of us trying to extradite their residents or citizens to face anti-cartel charges here when they are having difficulties extraditing people resident in this country to the USA, especially in such a high-profile case.

Melanie Johnson (Labour, Welwyn Hatfield)

There is no possibility of that at this moment because the matter is not defined as criminality at this point. There is no regime that covers it. Were this Bill enacted, my understanding is that Sir Anthony Tennant probably could have been extradited. Again, I hope that that clarifies the hon. Gentleman's understanding.

Nigel Waterson (Conservative, Eastbourne)

Sadly, it makes me more confused. I was under the impression that clause 182 deals with the extradition of people from other countries to this country to face trial here. Is the Minister saying that it deals with the opposite situation, in which residents or citizens of this country can be extradited to face trial in foreign courts? I cannot believe that that is possible, but if it is indeed what the clause means, I would be fascinated to hear it. In any event—

Melanie Johnson (Labour, Welwyn Hatfield)

I am not sure whether I can help the hon. Gentleman. I do not seem to be succeeding in helping him here, so it might be better for me to write to him. My understanding is that extradition requests are based on the nature of the legal and criminal regimes in the two countries party to the arrangement. We are dealing here with extradition to other

countries, but that will not assist in terms of extradition to the United States specifically.

Nigel Waterson (Conservative, Eastbourne)

Perhaps I am beyond help on the issue. I had better read Hansard carefully when it comes out and if a letter is in the offing, that will be very helpful. The Minister has been trying very hard to be helpful on the matter and, on that basis, I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

The Chairman, being of the opinion that the principle of the clause and any matters arising thereon had been adequately discussed in the course of the debate on the amendment proposed thereto, forthwith put the Question, pursuant to Standing Orders Nos. 68 and 89, That the clause stand part of the Bill.

Question agreed to.

Clause 182 ordered to stand part of the Bill.

Clause 183 - Investigation of offences under section 179

Jonathan Djanogly (Conservative, Huntingdon)

I beg to move amendment No. 94, in page 132, line 41, at end insert—

''insofar as relevant to the investigation of the offence under section 179 which it is suspected has been committed''.

The fundamental effect of clause 183 is to provide the OFT with the same powers that the SFO currently has under the Criminal Justice Act. Again, the Government seem to be introducing provisions—although the Under-Secretary will deny this—that have the implication of undermining the SFO and that undermine the OFT in the process. In the context of our earlier debate on initiating proceedings, I mentioned the potential problems, in relation to the powers of the OFT and SFO, for the transparency and reputation of this country's courts.

We have no less of a problem over giving the OFT new powers of investigation. Those powers could significantly undermine the business community's confidence in the OFT, which is currently based on its understanding that the OFT is part of a system that ensures fair trade, rather than being, conceptually, a criminal agency. In any event, the amendment is appropriate in that any investigation undertaken should be relevant only to the suspected criminal infringements of clause 159.

I heard the Under-Secretary say earlier that the Government do not immediately intend to turn the OFT into a prosecution agency, but that is the clear purpose of this legislation. If that is to happen, we must look at the matter in a different light from that in which we have in the past. The amendment might give some small comfort to companies that an anti-cartel investigation mounted by the OFT will not be used as some kind of general fishing expedition.

Alistair Carmichael (Liberal Democrat, Orkney and Shetland)

I support wholeheartedly the amendment that the hon. Member for Huntingdon has proposed. At the moment, I am seriously concerned that clause 183(2) as currently worded will be a licence for fishing expeditions. One always

remembers, of course, that Al Capone was caught for his tax evasion and one can imagine that some minor offence might be the basis on which the OFT goes into a company and that, once there, it will run amok. There must be proper and meaningful controls over that in the Bill, and the amendment would achieve that.

Melanie Johnson (Labour, Welwyn Hatfield)

I think that there is some misunderstanding about what the amendment would achieve. I hope to persuade Opposition Members not only that they should support anything that brought Al Capone to justice—if there has been an implication of anything different—but that the amendment is unnecessary and superfluous. It seeks to limit the circumstances in which the OFT can use its powers of criminal investigation to investigate suspected cartel offences, in order to ensure that the OFT uses its tough new investigatory powers only in appropriate circumstances. We believe that that is a fit and proper safeguard and have already included an adequate provision to that effect.

Subsection (2) states that the criminal investigatory powers are exercisable

''only for the purposes of an investigation under subsection (1)''.

Under subsection (1), the OFT may only

''conduct an investigation if there are reasonable grounds for suspecting that''

the cartel offence ''has been committed''. I entirely sympathise with the points that the hon. Members for Huntingdon and for Orkney and Shetland (Mr. Carmichael) made, but I believe that the amendment is otiose.

Mark Field (Conservative, Cities of London and Westminster)

When the Under-Secretary referred to clause 183, she said that the OFT may conduct an investigation only if there are reasonable grounds. That is not what subsection (1) says. It gives far broader discretionary power and does not confine the OFT's power in the manner that she says it does. It gives almost carte blanche discretion, provided that there are reasonable grounds. The word ''only'' does not appear in subsection (1) at all.

Melanie Johnson (Labour, Welwyn Hatfield)

Subsection (2) in my copy of the Bill says:

''The powers of the OFT under sections 184 and 185 are exercisable, but only for the purposes of an investigation under subsection (1)''.

The word ''only'' does appear.

Mark Field (Conservative, Cities of London and Westminster)

The hon. Lady is right that subsection (2) is contingent upon subsection (1), but subsection (1) gives a very wide discretion. The word ''only'' does not appear in it.

Melanie Johnson (Labour, Welwyn Hatfield)

I can read what subsection (1) says, as anyone can. It says:

''if there are reasonable grounds for suspecting that an offence under section 179 has been committed.''

It is specific and, in turn, refers to section 179 and the offence that we are talking about. There is a direct link.

I assure the hon. Gentleman that the Government's intention in the matter is exactly the same as his. There

is no difference. If for some reason the lawyers believe that the Opposition have raised further points, I shall certainly reconsider the clause. However, I believe that the amendment is superfluous and that the clause addresses the matter just as the hon. Gentleman and the Government would like.

Jonathan Djanogly (Conservative, Huntingdon)

I hope that the Government have realised that there is a problem with the wording, in so far as it would certainly be better if the word ''only'' were put in as the fourth word in subsection (1). To the extent that the Under-Secretary has said that the intent is that it will apply only in respect of section 179, I am pleased and, on that basis, I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

The Chairman, being of the opinion that the principle of the clause and any matters arising thereon had been adequately discussed in the course of debate on the amendment proposed thereto, forthwith put the Question, pursuant to Standing Orders Nos. 68 and 89, That the clause stand part of the Bill.

Question agreed to.

Clause 183 ordered to stand part of the Bill.

Clause 184 - Powers when conducting an investigation

Nigel Waterson (Conservative, Eastbourne)

I beg to move amendment No. 96, in page 133, line 2, leave out

'or any other person who it has reason to believe has relevant information',

and insert—

'past and present employees of the business of which the person under investigation is an officer or employee'.

Nigel Beard (Labour, Bexleyheath and Crayford)

With this it will be convenient to take the following amendments: No. 97, in page 133, line 17, at end insert—

'(5) A notice under subsection (1) must indicate the subject matter and purpose of the investigation'.

No. 98, in page 133, line 17, at end insert—

'(6) Any person of whom information is sought pursuant to this section shall not be required to provide such information, if the provision of that information would infringe the right to silence and/or the right against self-incrimination'.

No. 99, in page 133, line 17, at end insert—

'(7) Any person of whom information is sought pursuant to this section shall be entitled to have a lawyer of his choice present at all times throughout the investigation, and the OFT shall be required to advise'.

No. 101, in clause 185, page 134, line 9, at end insert—

'(3A) Any person of whom information is sought pursuant to this section shall not be required to provide such information, if the provision of that information would infringe the right to silence and/or the right against self-incrimination.'.

No. 103, in page 134, line 9, at end insert—

'(3C) Any person of whom information is sought pursuant to this section shall be entitled to have a lawyer of his choice present at all times throughout the investigation, and the OFT shall be required to advise.'.

No. 105, in clause 186, page 134, line 30, at end insert—

'(4) Any person of whom information is sought pursuant to this section shall not be required to provide such information, if the provision of that information would infringe the right to silence and/or the right against self-incrimination.'.

No. 106, in page 134, line 30, at end insert—

'(5) Any person of whom information is sought pursuant to this section shall be entitled to have a lawyer of his choice present at all times throughout the investigation, and the OFT shall be required to advise.'.

Nigel Waterson (Conservative, Eastbourne)

On any view, clause 184 and the following clauses contain some wide powers for the OFT. If members of the Committee have any role in life, it is to ensure that the powers are limited, clear and transparent and that they cannot be misused once the Bill becomes law. The amendments on clauses 184 and 185, grouped together, are designed to do just that.

We think that the current wording of clause 184 is too broad, as does the CBI, and could lead to individuals not actually related to the company using the offence and a potential investigation in a malicious or vexatious way. The requirement should be limited to past and present employees of the company. Indeed, that is precisely the group of people who are most likely to be involved in the investigations: people who are currently working for the company or previous employees, either in the role of providing information on behalf of the company or in the role of whistleblowers. It seems to us eminently fair and sensible that the power be limited in that way.

Amendment No. 97 makes it clear that the notice given under the clause must be specific. It must indicate the subject matter and purpose of the investigation. That is a question of fairness and due process. There has already been a concern expressed on the Opposition side of the Committee about potential fishing expeditions. We have seen investigations in the past where people in situ, as part of a dawn raid or whatever, grabbed everything in sight—computers, files or anything they could lay their hands on—only to have arguments later on about whether that was in the terms of the warrant that formed the basis of the investigation. The notice should be explicitly required to state the subject matter and purpose of the investigation. We cannot allow law-abiding businesses to find themselves investigated, raided or disrupted by people trying to find evidence on which to base an investigation, who have no prima facie reasons that they can set out in the notice for that investigation.

Amendment No. 98 is eminently fair; it would explicitly recognise the right to silence and the right against self-incrimination, with a requirement on the OFT to advise persons being investigated of their rights in that respect. That is another example of how the OFT investigations can and should be made more difficult—as long as the Minister is intent on bringing such draconian criminal sanctions. It is as simple as that. It is a question of fairness and following the same procedures as if people were being investigated for some existing criminal offence. There should be no infringement of the right to silence or the right against self-incrimination.

We have already raised the issue of human rights legislation at least once. I cannot for the life of me understand how the Secretary of State feels able to declare that the Bill does not contravene the human rights legislation. There are substantial arguments involved; once investigations start revving up, and high-grade lawyers are instructed by those being investigated, we will see the arguments being deployed. Matrix chambers and others will be wheeled out to develop the arguments at length, and at great expense. We may as well have it out now rather than later.

Amendment No. 99 puts down a perfectly clear requirement, in the context of alleged criminality, that any person should be entitled to have a lawyer of his choice present throughout the investigation, and that the OFT should advise people of their rights in that respect. I would have hoped that I did not need to develop that argument at any length. It seems axiomatic that it is the sort of right available to suspects in any criminal situation. It is the Government's decision to turn the matter into a criminal one. Therefore, they must accept all that goes with a criminal investigation.

Tony McWalter (Labour/Co-operative, Hemel Hempstead)

I hope that the hon. Gentleman does elaborate the point a little more because I fail entirely to understand his reasoning. At the moment, I am dealing with a case where a large number of people have alleged that a company is unfit to trade on a wide variety of matters, most of the evidence for which comes from customers and others who have been—one is tempted to say—the victims of its activity. Although there is corroborating evidence from employees—to cite amendment No. 96—it would not be of much use without other evidence from those who are not employees. Equally, I think similar activities, and amendment No. 99, would have the effect of frightening off people from allowing their perception of what has happened to have any real effective airing.

Nigel Waterson (Conservative, Eastbourne)

I am grateful for that intervention, but I cannot be as helpful as I would wish in response as I do not know on what basis the company was said to be unfit to trade.

We must be careful about allowing the cartel offence, which will be a serious offence with major criminal sanctions attached, to be misused to attack a company for which other remedies are already available. It may be that the company is unfit to trade because its goods are not merchantable or they never appear, or that it is overcharging for them or using abusive selling methods. Is the hon. Gentleman saying that unless there is prima facie evidence of that company being involved in a cartel—I am happy to give way if the hon. Gentleman can confirm or deny that—

Tony McWalter (Labour/Co-operative, Hemel Hempstead)

Just to clarify, yes I am saying that.

Nigel Waterson (Conservative, Eastbourne)

Then I would have thought that once the OFT has the prima facie information that a cartel offence has taken place, it is perfectly possible to fit our amendment into the clause for the subsequent

investigation. Our drafting would not necessarily obviate past or present employers from blowing the whistle in the first place, but I am happy to reconsider that.

In amendments Nos. 101, 102 and 105, we are talking about the provision of the right to silence, the right against self-incrimination and the obligation on the OFT to advise people, who are being investigated, of their rights. Amendments Nos. 103 and 106 refer to the entitlement to have a lawyer present. None of the amendments would do anything that would solidly fix the clause into criminal law and procedure. It is up to the Government to accept the proposition for which we have been arguing for what seems like most of our lives but has in fact been only a few hours: it is distracting and ineffective to introduce criminal sanctions.

During the stand part debate on clause 179, I said that one problem is that if one raises the ante by increasing the burden of proof and introducing criminal sanctions, many things will follow. The amendments are perfect examples of that. The Under-Secretary has an uphill task in arguing against them, because they are absolutely what is required under English criminal law and, I suspect, Scottish law. She has a difficult task in arguing that what the amendments cover should not be available in a given situation. What would be the reason for it? People can still end up in prison. Someone who has stolen a car and someone who has been convicted of a telephone theft could still share a cell in the same prison—perhaps they would not be in the same prison, but they would still be in prison, and would be entitled to all the defences, burdens of proof and everything else. That applies as much to someone who is alleged to have stolen a car as to someone who is alleged to have murdered somebody. It is therefore absolutely essential to include safeguards. I would be amazed if the Government disagree.

Tony McWalter (Labour/Co-operative, Hemel Hempstead)

I must not have made my point sufficiently clearly to the hon. Gentleman, so I rise to consolidate the point more accurately.

I simply do not agree that, during an investigation under any other aspect of criminal law, lawyers are present throughout. That is clearly not the case. Police conduct investigations by sifting witnesses and taking statements from people who allege certain things. Out of that, comes a prosecution case, at which point lawyers become involved. To have lawyers present throughout the investigation would, I repeat, intimidate some people who may have valuable things to contribute. They might be talked out of vouchsafing information if lawyers were always present. In that light, I hope that the hon. Gentleman will reflect that the amendments would not do what he thinks they would.

Alistair Carmichael (Liberal Democrat, Orkney and Shetland)

I am for the main part content to support the bulk of the amendments. However, one that gives me cause for pause is No. 96. It appears to be overly restrictive in terms of the class of people that it would cover. As I understand it, it would not allow the OFT, for example, to question an employee of a business other than the business with which the person under investigation was associated. It is of the essence

that there have to be two parties to such an agreement, and it would be sensible to allow the OFT to question employees of both businesses in relation to the person under investigation.

Nigel Waterson (Conservative, Eastbourne)

I should have thought it axiomatic in cartel investigations that it would take two to tango, and at least two companies would probably be investigated. With respect, the practical problem suggested by the hon. Gentleman would not arise because both companies, or perhaps a range of companies, would be under investigation. To take the example of bus companies, both of them would be under investigation and there would be no bar on talking to all their past and present employees.

Alistair Carmichael (Liberal Democrat, Orkney and Shetland)

That would probably be the case, but one can envisage scenarios in which it would not necessarily be the case. Indeed, the hon. Gentleman's proposed wording would restrict the investigation to a point beyond which it could not be the case, which would be undesirable. I share his concerns, however, about self-incrimination and the right to silence, and from that point of view the rest of his arguments are entirely sensible.

Amendment No. 97 seems to be an entirely sensible suggestion. It would make the scope of both the documents recovered and the investigation conducted at the time much clearer when they came to be examined in court. Whether evidence recovered is admissible in court would also be easily identifiable because it would have been recovered in a fair and transparent way.

Amendments Nos. 98 and 99 are also sensible. I cannot see how we can possibly hope to have legislation that is human rights-proof without a provision such as amendment No. 98. If it is not accepted, will the Under-Secretary tell us whether a person under investigation could acceptably answer a question by simply saying, ''No comment''? We have to be told about that before we can be persuaded that such an amendment is not necessary.

On amendment No. 99, access to legal advice and counsel throughout the course of any interview or disclosure process seems to be very sensible. With respect to the hon. Member for Hemel Hempstead (Mr. McWalter), that is not that alien to current criminal procedures. My understanding is that in England one's entitlement to access to legal advice at the point of questioning is quite strong. Since the implementation of the Scotland Act 1998 and the Human Rights Act in Scotland, there has been greater access to legal advice when, for example, people are questioned in a police station. I should have thought that that is exactly the sort of thing that the Government would have wanted to see in the Bill. At the moment, I find myself in a kind of bizarre wonderland—

Nigel Waterson (Conservative, Eastbourne)

Yes, you are a Liberal Democrat.

Alistair Carmichael (Liberal Democrat, Orkney and Shetland)

Indeed. The hon. Gentleman has noticed: how very perceptive of him. I find myself opposing the Labour Government and supporting the

Conservatives on a point about human rights and civil liberties.

Tony McWalter (Labour/Co-operative, Hemel Hempstead)

The hon. Gentleman says that one should be entitled to a lawyer throughout questioning, and I am perfectly happy with that. However, amendment No. 99 states that one should be entitled to have a lawyer present ''throughout the investigation''. An awful lot of investigating takes place before people arrive at the stage of being questioned.

Alistair Carmichael (Liberal Democrat, Orkney and Shetland)

That is a fair point. The amendment, however imperfectly framed, would give an entitlement that is not in the Bill at present, and that is, I think, very important. The final phrase of amendment No. 99, that

''the OFT shall be required to advise'',

provides something akin to a caution prior to questioning. There is nothing in the Bill that approximates to that.

It appears to me that the Government should take the clause away and examine it carefully, looking at how properly human rights-proof it could be. I am not up to speed on the full, most up-to-date case law on self-incriminations, subsequent to the Human Rights Act, but it is not that long since the giving of information under section 172 of the Road Traffic Act 1988—which requires a person suspected of driving a car at the relevant place and time to state whether he or she was the driver, and if not, who he or she believed the driver to be—was held to be incompatible with Scots law. That was subsequently overturned by the Privy Council, but my understanding and recollection—the Under-Secretary's advisers will have better knowledge of this—is that that was done on a narrow administrative basis. What we are talking about here concerns the fullest powers of investigation and could not in any sense be described as a narrow administrative point.

Mark Field (Conservative, Cities of London and Westminster)

I have a couple of minor points to make, although I must confess that I do not share the encyclopaedic knowledge of Scots law that the hon. Gentleman has.

Alistair Carmichael (Liberal Democrat, Orkney and Shetland)

The hon. Gentleman should count himself lucky.

Mark Field (Conservative, Cities of London and Westminster)

I suspect that I can indeed count myself lucky in that regard, especially on St. George's day, when we should all be proud.

I accept that, under clause 187, we shall discuss one or two safeguards that have been put into place for would-be defendants in this regard, and I understand the Government's desire to make clause 184 work. Clearly, we want to avoid the risk of documentary evidence being shredded, or the tipping off of individuals in advance of an OFT inquiry. I understand that some aspects of the clause give the OFT powers in that regard.

Nigel Waterson (Conservative, Eastbourne)

Does my hon. Friend agree that all the problems that we are discussing would fall away if the Bill did not include criminal sanctions for the cartel offence in clause 179? None of these problems would arise were that simply a civil matter.

Mr. Field: That is of course entirely true, but sadly the votes on clause 179 have been lost so we must move ahead on the basis that there will be criminal sanctions, which have such commensurate and contingent problems.

It seems sensible to include certain safeguards in the Bill. Even if the Under-Secretary assures us that the powers currently in clause 184 will not be exercised in the draconian way that several Opposition Members have painted, I have great concerns about those powers. It would make sense to have safeguards, and those suggested in the amendments are only right and sensible, given the increasing importance of human rights legislation in the UK and from Europe.

John Pugh (Liberal Democrat, Southport)

I should like to comment generally and then on the specific amendments, Nos. 96 and 97. There is a general concern that liability in the Bill as drafted is fairly vague but that penalties are highly specific. There is the possibility of serious criminal offences, but not the availability of the normal defences for people charged with them. Although the amendments might swing too far in the other direction in some respects, which was the point made by the hon. Member for Hemel Hempstead, there is real concern and a necessity for the Minister to respond to that in some way.

I slightly disagree with my hon. Friend the Member for Orkney and Shetland on amendments Nos. 96 and 97. He found fault in the revision, but I think that there is scope for revision. My concern is that the phrase ''or any other person'' is far too vague. That ''any other person'' may well be a supplier. According to clause 192, if people do not co-operate they run the risk of six months in jail.

Rather more disturbingly, if that ''any other person'' recklessly makes a false statement, they run the risk of two years in jail. There probably is not a person in the Room who has not at some time recklessly made a false statement. The clause says not ''knowingly'' but ''recklessly''. I wonder whether all those people investigated, who may not be the people directly in the frame, would be aware of that. We are reaching a point where it may not be simply a case of warning people being charged that anything may be taken down in evidence and used against them, but also anyone who appears as a witness in that context.

My second concern regarding amendment No. 97 takes issue with the vagueness of the demands for documentation. The clause says:

''to produce, at a specified place and either at a specified time or forthwith, specified documents, or documents of a specified description, which appear to the OFT to relate to any matter relevant to the investigation.''

I am not concerned about the OFT asking for details and information that would be kept normally and demanded by company law, VAT inspectors and so on. However, if it is left completely open, there might be someone—perhaps through non-culpable carelessness—who loses a document that the OFT has demanded. People under investigation may not have a document, or may have disposed of it quite

innocently because they might not be very sophisticated.

If a document is not available for whatever reason, subsection (4) states that the person who does not have the document must explain where it is. Of course, the implication would be that they had lost, or worse still, destroyed the document. Later elements of the legislation state that they must prove that they have not destroyed the document. Those concerns make the case for tightening the clause so that the people in the frame are those who deliberately and malevolently form cartels on an anti-competitive basis. People who have simply been less than adequate book-keepers should not get caught in the net.

Jonathan Djanogly (Conservative, Huntingdon)

The hon. Gentleman suggested that he did not know anyone who had not made a reckless statement. Was he referring to hon. Members' election addresses?

John Pugh (Liberal Democrat, Southport)

Certainly not.

Jonathan Djanogly (Conservative, Huntingdon)

I wonder whether breaches of party manifestos will come within the scope of the new consumer law.

It is easy to assume that the legislation will just get the bad guys, but the reality is that when the OFT mounts an investigation, for every person from whom it obtains information, it will see a dozen who have had nothing to do with the cartel. Even if they did, they were probably involved in a company operating a cartel without their knowledge. The vast majority of people will be innocent of any crime.

Ken Purchase (Labour/Co-operative, Wolverhampton North East)

Has the hon. Gentleman heard the phrase, ''We are trying to eliminate people from our inquiry''? That is a time-honoured way of going about such matters. We sometimes need to see people in all sorts of circumstances, simply to eliminate them from the inquiry. He speaks as if there is no body of experience or law that already covers much of the investigative process that we are debating. It is essentially about protecting those who may not be involved.

It is reasonable that we should get on with it. The clause is a very important part of the Bill, we need it, and I think that we are getting some obfuscation from Opposition Members.

Jonathan Djanogly (Conservative, Huntingdon)

I resent that last remark. It was an outrageous thing to say in the context of a debate on the rights of people who are subject to investigation. I have not heard anything in the debate so far that one could call obfuscation.

However, the hon. Member for Wolverhampton, North-East (Mr. Purchase) has a point, which he did not specifically express. Amendment No. 96 is different from the others, as hon. Members have said. It deals with who can actually be investigated, whereas the other amendments deal with what happens when someone is investigated. That is an important point, because the issues are very different. To that extent, I believe that the grouping of the amendments was probably slightly confused.

I have been speaking about innocent people who are caught up in an investigation. I have seen that at first-hand, and it is distressing, even for people have nothing to fear because they are not guilty. Everyone has rights—even those who are guilty—throughout the investigation, and the hon. Gentleman must appreciate that important point. I shall stop there, but I certainly support the amendments.

Melanie Johnson (Labour, Welwyn Hatfield)

Frankly, the group of amendments is something of a curate's egg. I hope to explain to Opposition Members why I believe that. I hope also to persuade them that perhaps they have been making somewhat heavy weather of some of the issues, although I agree that there are some important considerations.

Amendment No. 96 would restrict the power to past and present employees of the business under investigation. We believe that such a restriction would place far too serious a limit on an investigation. It is not clear why Opposition Members think that it would be such a good idea. As some hon. Members have pointed out, the information that is relevant to the investigation may be held by undertakings or individuals who are not, and never have been, connected to the business of the person under investigation. Such a restriction could also lead to difficult questions as to who constitutes an employee or an ex-employee of a relevant business. For example, are agency staff or contractors to be included in the definition? For those reasons, such a restriction would make effective investigation very difficult.

John Pugh (Liberal Democrat, Southport)

, I accept the Under-Secretary's point. However, if some of those marginal people are interviewed by the OFT, they are subject to the same severity of punishment as anyone else if they make a false or inadvertently false statement. Is there a procedure whereby they might be warned of the significance of what they are saying? They may have had only a temporary connection with the company concerned.

Melanie Johnson (Labour, Welwyn Hatfield)

Perhaps I can come back to that point in a moment.

The OFT needs the freedom to pursue any investigation in the most effective way. It should not be restricted from the outset with regard to those whom it may ask to produce relevant information or to answer questions relevant to the investigation. I understand that the hon. Gentleman is interested in the situation of people who are drawn into the investigation to provide information that is or might be relevant.

Tony McWalter (Labour/Co-operative, Hemel Hempstead)

Does my hon. Friend agree that amendment No. 96 would mean that if a cartel were being set up in a smoke-filled saloon bar between A and B, and somebody overheard the conversation, the OFT would not be allowed to implicate them in the investigation into the cartel?

Melanie Johnson (Labour, Welwyn Hatfield)

Indeed. That would almost certainly be the case. I urge the Committee to resist the amendment. It is not at all helpful as it would make investigations much more difficult.

Amendment No. 97 is designed to add a requirement for the OFT, when investigating under a written notice, to indicate with that notice the subject matter and purpose of the investigation. It would add a safeguard providing any person under investigation with certainty of the grounds on which they are being investigated. The OFT is already required to state the purpose and subject matter of a investigation on any notice it issues under its powers to investigate civil offences. We welcome the extra safeguard and agree to consider how most appropriately to add it to the provisions. If, when the time comes, the amendment is withdrawn, I will undertake to consider the matter further and how to proceed in the most appropriate manner.

Amendments Nos. 98, 99, 101, 103, 105 and 106 are designed to provide the right to silence, the right against self-incrimination and the right to legal representation to persons being investigated for the cartel offence. Such safeguards are indeed proper and necessary where evidence given by someone under investigation may later be used as evidence in court against them. OFT officers investigating a criminal offence will have regard to the codes of practice for criminal investigations in England and Wales, as provided in the Police and Criminal Evidence Act 1984. I will talk about the position in Scotland in a moment.

Section 67(9) of PACE states:

''Persons other than police officers who are charged with the duty of investigating offences or charging offenders shall in the discharge of that duty have regard to any relevant provision of such a code.''

OFT and SFO investigators are

''persons other than police officers''

for the purposes of undertaking criminal investigations. The purpose of PACE is to protect suspects where investigators are trying to obtain evidence that can be used against them.

Where OFT investigators are seeking voluntary statements from those under investigation, they will be subject not only to the safeguards that the amendments are designed to introduce but to all the other requirements of PACE such those governing the granting of breaks, embassy access and the meeting of religious needs.

Jonathan Djanogly (Conservative, Huntingdon)

Would it be necessary for the person being questioned to be read their rights at the time at which the investigation started, rather than some later time?

Melanie Johnson (Labour, Welwyn Hatfield)

I am assuming that any investigation would have to be conducted according to the codes of practice for criminal investigations, just as any other similar investigation would—that is under the voluntary arrangements, when information is given voluntarily. Where OFT investigators seek information under compulsion using the powers conferred by clauses 184 to 186, PACE does not apply.

However, clause 188 does provide protection against self-incrimination. In other words, any information obtained under compulsion cannot be used against the person who made it in court, except in very limited circumstances. That safeguard mirrors

that provided to persons subject to a fraud investigation using powers conferred on the SFO by section 2 of the Criminal Justice Act 1987.

A suspect has no right to have a lawyer present when being interviewed under compulsory powers. However, in the interests of fairness and unless it would unduly delay or obstruct the investigation, the SFO would advise persons under investigation that they might wish to seek legal representation, and the OFT will follow SFO practice in that respect. I hope that that explains the situation for England and Wales.

In the case of suspects being cautioned in Scotland, PACE does not apply. When the OFT is seeking voluntary statements from suspects in Scotland, it will nevertheless give a caution in line with normal practice under Scots common law. Omitting to give a common-law caution before questioning a suspect would place the admissibility of the evidence in doubt. As I said earlier, the Crown Office will be providing training in Scots law and practice to OFT investigators. When the OFT is seeking information from suspects in Scotland using its compulsory powers, clause 188 will have effect. As I explained a moment ago, that clause restricts the use to which the information provided under compulsion can be put in court.

Alistair Carmichael (Liberal Democrat, Orkney and Shetland)

The provisions as they stand seem to make it particularly difficult for the prosecution rather than for the defence. We accept that questions can be asked during an investigation of someone who, it subsequently becomes apparent, should be charged but it is quite inconceivable that, if powers of compulsion have been used, they cannot—or so the Minister tells us. I suggest that there might be some merit in the Law Society of Scotland's briefing, which suggests that there should be a measure of prior judicial oversight to protect the position of all parties in that respect.

Melanie Johnson (Labour, Welwyn Hatfield)

As I have said before, the powers of investigation conferred on the OFT under the Bill are entirely necessary and proportionate for the detection and successful prosecution of offences. The hon. Gentleman is making a point. I had hoped to persuade him that we were in entirely the right place; I seem to have persuaded him that we are in the wrong place but for a different reason. I take it that he will not support the amendments on that basis. The powers include the power to require information under notice without the requirement for judicial approval. Those powers are not unique; other enforcement agencies use them in the investigation of similarly serious crime. Indeed, the powers in the Bill have been modelled on the powers conferred on the SFO in the Criminal Justice Act 1987. I have no reason to believe anything other than that they are entirely compatible with the European convention on human rights.

I am sure that the hon. Member for Orkney and Shetland is well aware that there is no absolute right to a solicitor in Scotland. However, Scottish case law has established the principle that if a suspect asks for a solicitor and the investigating officer refuses the request, the refusal can be used as evidence in determining whether the interview was fair. In

practice, the OFT would offer a suspect under Scottish jurisdiction access to legal representation whether or not it was seeking voluntary statements that could be used as evidence against that suspect. For those reasons, I shall take away amendment No. 97 and consider the matter further, but I hope that I have persuaded the hon. Gentleman that he should withdraw the amendment.

Nigel Waterson (Conservative, Eastbourne)

I am most grateful to the Minister for her careful explanation. With the possible exception of amendment No. 96, we are extremely wedded to the principles set out in the amendments. We shall read carefully what she had to say. On such things as the right to silence, self-incrimination and legal representation, we want to be absolutely clear that, in this sort of investigation, an accused or a potential accused will have the same rights as any other person under suspicion under any other circumstances. The Minister has gone some way to reassuring us on that, but we shall be taking advice on specific points.

I want to be absolutely clear that, as the Bill stands, evidence that is obtained without those safeguards will be regarded as tainted, that it would never come to a full investigation or that it would be struck out later because the evidence had been obtained without following those procedures, as would be the case in other criminal matters. There should be no difference whatever between the procedures followed to protect the accused in this case and those followed under any other sort of criminal prosecution. We shall reconsider the point. We are grateful to the Minister and we shall seek detailed advice on everything that she has said. If she would like to send us anything to reinforce what she has said, that will be welcome. On that basis, I am happy to withdraw the amendment.

Melanie Johnson (Labour, Welwyn Hatfield)

Let me just confirm, to reassure the hon. Gentleman, that I see that there is no difference.

Nigel Waterson (Conservative, Eastbourne)

I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 184 ordered to stand part of the Bill.

Clause 185 - Power to enter premises under a warrant

Alistair Carmichael (Liberal Democrat, Orkney and Shetland)

I have a few concerns about the clause, and I return unapologetically to the point that I made on Second Reading. I draw the Committee's attention to clause 185(5)(b), which defines ''Court'' in Scotland as the High Court of Justiciary. It seems bizarre that only the High Court of Justiciary is to issue a warrant in Scotland. Is the wording of the clause influenced by the fact that the High Court in England and Wales and the High Court in Northern Ireland are to be given the power to grant warrants? I understand from my consultants in English criminal law and procedure, the hon. Members for Huntingdon and for Cities of London and Westminster (Mr. Field), that the High Court in England is a court of civil

jurisdiction. The High Court of Justiciary is clearly a different sort of beast; it is an exclusively criminal jurisdiction.

As the normal procedure in the investigation of all offences is to give the power to seek a warrant to the procurator fiscal, who then goes to the sheriff court to obtain a warrant for investigation, at the very least I should think it appropriate for the warrant to be obtained from the sheriff court as well as the High Court. Given that there are some 22 senators of the College of Justice—judges in the High Court in Scotland—there is no need to burden them in the way proposed. I do not see why, either, the procurator fiscal should not be given the power to seek the warrant. I cannot think of another instance, with the possible exception of a few customs and excise offences, in which the procurator fiscal is not given the power to seek a warrant. I should be grateful if the Under-Secretary explained why the clause is so worded. It serves to reinforce my suspicion that the drafting of the Bill does not take sufficient account of separate Scots law and criminal procedure.

Jonathan Djanogly (Conservative, Huntingdon)

I should like to touch on a couple of errors. The first relates to the status of the documents that may be seized or handed over under subsection (1). If they are handed over or seized in respect of a criminal investigation, can they then be used for civil proceedings as well? If a company were willingly to give the OFT confidential information as part of a civil investigation relating to what turns out to be a criminal offence, or for any other reason—perhaps as a market-testing expedition—could that information be used in the criminal trial?

My other question relates to the fact that in subsection (2)(b) and (c) the documents are referred to as of the ''relevant kind'', but in paragraph (d), which deals with electronic mail, the information concerns

''relates to any matter relevant to the investigation''.

So, a different formula of words is used for what seems to be the same thing. I would be interested to hear from the Under-Secretary whether there is any particular reason for that.

Melanie Johnson (Labour, Welwyn Hatfield)

As the hon. Member for Orkney and Shetland knows, the Bill proposes that warrants should be granted by the High Courts in England and Wales and in Northern Ireland and by the High Court of Justiciary in Scotland. The objective is to ensure the right level of scrutiny. I hear what has been said about it being the usual business of sheriffs in Scotland to grant warrants for criminal investigations into even the most serious offences. I am grateful for the comments that have been made, and I will consider whether we should revise the clause in that respect. However, I assure the hon. Gentleman that we have liaised extensively with Scottish legal experts and taken their advice.

Alistair Carmichael (Liberal Democrat, Orkney and Shetland)

Is the Under-Secretary telling the Committee that the Crown Office was consulted and pronounced itself satisfied with the High Court of Justiciary having a warrant-granting power, because I have information to the contrary?

Miss Johnson: I can only be advised on the matter, but that advice is that the Crown Office was consulted and was content.

Alistair Carmichael (Liberal Democrat, Orkney and Shetland)

Would the Under-Secretary be prepared to make that information available?

Melanie Johnson (Labour, Welwyn Hatfield)

We do not normally make such information available, but I can take further advice on the details of the matter, and I assure the hon. Gentleman that that is the advice that I received.

Mark Field (Conservative, Cities of London and Westminster)

Is that advice in writing, and could it be made available for Thursday's sitting, so that we could all be satisfied on the matter?

Melanie Johnson (Labour, Welwyn Hatfield)

I do not see any reason why hon. Members are taking this line. I have said that I am grateful for the comments that have been made and will consider whether we should revise the clause. We can make a mountain out of a molehill, if Opposition Members wish, but it is not normal to share policy advice.

Alistair Carmichael (Liberal Democrat, Orkney and Shetland)

I merely want to make clear my concern, which I have already expressed on several occasions, that the Bill takes insufficient account of Scots law and procedure. That is my sole reason for wanting that information to be put in the public domain.

Melanie Johnson (Labour, Welwyn Hatfield)

I am listening to the hon. Gentleman, and I am aware of his concerns, which have been noted. For that reason, I am saying that we will consider whether any revision of the clause is necessary. This debate is getting us no further, because we are all reporting what has been said to us about how the arrangements work. I want to turn to the point raised about information collected under the criminal powers. If information is so collected, it can be used for civil investigations, if it has been properly obtained. So, the answer to that question is yes.

Question put and agreed to.

Clause 185 ordered to stand part of the Bill.

Clause 186 - Exercise of powers by authorised person

Jonathan Djanogly (Conservative, Huntingdon)

This clause ties in with clause 185(4), which deals with people who are authorised in a warrant to accompany the named officer who is executing the warrant. I would be interested to hear a little more about how the clause will work in practice and what its purpose is. I know that, under clause 194, the same type of power will be provided in respect of warrants issued under the Competition Act 1998. However, I would be interested to know whether there are any previous examples of such a provision in legislation, and whether any common-law cases have led to the need for the provision. More specifically, could the authorised persons be contracted-out specialists, and if so, will they come from the private or public sectors?

Melanie Johnson (Labour, Welwyn Hatfield)

We do not envisage that the power that the clause gives the OFT will be used regularly, but it is important because it allows the OFT to

involve experts from other agencies and institutions who might be involved in a cartel investigation or aspects of that investigation. Experts might be needed if the offence is committed in a specialised market or involves specialised knowledge on behalf of the investigator, such as specialised financial accountancy or information technology expertise.

Jonathan Djanogly (Conservative, Huntingdon)

I would be appreciative if the Under-Secretary defined the use of the word ''institutions''. Would they be purely public sector institutions, or could they be private?

Melanie Johnson (Labour, Welwyn Hatfield)

They would be any institution that can provide expertise under an arrangement with the OFT under the powers. However, I expect that it would often be public sector organisations that would have that expertise.

The clause also allows the OFT to involve officers from the Serious Fraud Office who could aid an investigation. An important safeguard in the clause is that no person is bound to comply unless the authorised person, whoever he or she may be, can produce evidence of his or her authority. In fact, the OFT has said that it would always expect such persons to be from public bodies.

Mark Field (Conservative, Cities of London and Westminster)

I am slightly concerned about the practical reality. In the early days of the legislation coming into play, it is likely, given the climate of cartel-busting in Europe, that the OFT will be stretched and will have an enormous number of tasks ahead of it. It is possible that as a result it may wish to hive off some of its work to private-practice law firms, for example, which would do some of the basic investigation. Would such an employee be a ''competent person'' for the purposes of the clause, even if he or she were not a public sector official? I should be interested in some guidance on how that will work, given the difficulties that the OFT may face.

Melanie Johnson (Labour, Welwyn Hatfield)

My understanding is that such an employee could be a ''competent person'' under certain circumstances, but people's exact backgrounds will not make any difference, because they will all work under OFT control and will be subject to all the safeguards associated with the powers of investigation. As is often the case, someone working for the OFT under such conditions will, to all intents and purposes and in terms of the requirements placed on them, be part of the OFT. That safeguard is in place.

Jonathan Djanogly (Conservative, Huntingdon)

With respect, there is a big difference between the public and private sectors, not least in conflicts of interest or previous knowledge. For instance, if a private investigator or institution were used, we would have to ask who they worked for previously as there might be conflicts of interest.

Melanie Johnson (Labour, Welwyn Hatfield)

Clearly, it would be unsatisfactory for a conflict of interests to arise. The competition authorities always have to consider who is involved in a matter and whether there are conflicts of interests, as is the case in other fields of life.

Question put and agreed to.

Clause 186 ordered to stand part of the Bill.

Column Number: 208

Privileged information etc.

Mark Field (Conservative, Cities of London and Westminster)

I beg to move amendment No. 107, in page 134, leave out line 43.

I should like to say a few words on the clause and proposed amendment. Several hon. Members have a legal background and take legal professional privilege for granted. Outsiders are often cynical about the whole idea of professional privilege. I am looking with an eagle eye at the hon. Member for Wolverhampton, North-East, who is chuntering away at the prospects that legal professional privilege brings with it.

However, we should remember that professional privilege is not primarily about protecting the lawyer or relevant professional—in subsection (2), the banker—but the interests of the client. Subsection (2) states:

''A person may not under section 184 or 185 be required to disclose any information or produce any document in respect of which he owes a an obligation of confidence by virtue of carrying on any banking business unless'',

under paragraph (a)

''the person to whom the obligation of confidence is owed consents to the disclosure or production'';

in other words, unless privileged information protection is waived by the person in whose interests the privilege exists. Or, under paragraph (b)—to which we object, so we want the second tenet deleted—

''the OFT has authorised the making of the requirement.''

In respect of fairness and due process, it is unjust that the OFT has this power of override. An item of information is privileged and the person whose privilege is protected may be keen for it to remain in confidence, but without the amendment the OFT has full discretion to override it. Will the Under-Secretary explain why, given the draconian powers in other clauses, an OFT override is necessary?

Alistair Carmichael (Liberal Democrat, Orkney and Shetland)

I share some the concerns of the hon. Member for Cities of London and Westminster. I am pleased that the Bill deals with privilege and it is sensible to extend its compass to include bankers. It is rendered somewhat meaningless, however, by granting the power in the first place and then allowing it to be waived by the person conducting the investigation. Sometimes it might be appropriate to waive banking privilege, but why cannot that be done after some level of prior and conditional scrutiny, perhaps through an application to a judge in chambers explaining why the information should be put into the hands of the investigating authorities? Did the Under-Secretary reflect on that in her preparation for the Bill? Is that not a more suitable avenue to explore?

Melanie Johnson (Labour, Welwyn Hatfield)

Can I go back to the origins of banking professional privilege, which lie in the Criminal Justice Act 1987? We used that as a model for the investigatory powers in cartel offences. Section 2 of the 1987 Act confers powers of investigation on the SFO with respect to serious fraud investigations. Since the OFT and SFO will work closely together on cartel investigations, the Government want to ensure that the investigatory powers of the two bodies are

aligned as closely as possible. Section 2(10) provides for banking professional privilege and section 2(10)(b) provides a director of the SFO with the power to override that privilege. The provision here exactly parallels the 1987 Act.

Clause 187(2) seeks to replicate the arrangement. The amendment would deny an equivalent power to the OFT, which could seriously hamper investigations. No one would deny that the ability to follow money trails is an important power for a cartel investigator. Corrupt payments can be made to seal cartel deals, and individuals involved in bid-rigging and market-sharing can receive sweeteners and pay-offs. The banking trail is important in all those respects. Evidence of such activity is often crucial to securing a conviction, so the OFT needs access to bank records if they are relevant to an investigation.

The Government considered leaving out the banking privilege and the override. In contrast with legal professional privilege, there is no legal requirement to respect banking privilege, but we decided that the OFT board should consider in each case whether banking privilege should be respected. That will provide an additional procedural check before bank records can be accessed, and precisely mirrors the tried and tested process followed by the SFO.

I hope that, in the light of my explanations, the hon. Gentleman will withdraw the amendment. If he does not, I shall ask the Committee to oppose it.

Mark Field (Conservative, Cities of London and Westminster)

On balance, I will withdraw the amendment, but a concern has been highlighted. I am reassured in part that a lot of consideration has gone into the provision and that it was not just added as an override. Clearly, there are distinctions between the 1987 Act and this Bill, not least in relation to the potential powers of the OFT, as we discussed at length earlier. One concern that arose was that the OFT had powers over and above those of an investigator and was much more similar to a prosecutor, which of course relates to the SFO's powers under the 1987 Act and the power to override.

I am not entirely comfortable with the explanation that we have heard. However, on balance, we probably want to move on at this juncture, so I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Mark Field (Conservative, Cities of London and Westminster)

I beg to move amendment No. 108, in page 134, line 43, at end

insert

'( ) For the purposes of this Part, 'privileged communication' shall have the same meaning as in section 30 of the Competition Act 1998.'.

The amendment is about good housekeeping as much as anything. Indeed, in the light of the explanation that we heard under the previous group of amendments, I hope that the Under-Secretary will be happy to take this amendment on board on the basis that good housekeeping means that the 1987 Act and this legislation should have parallels. There is also a view that the issue of privileged communication should at least be married up with the Competition

Act 1998. It has more in common with the Bill than even the 1987 Act, which introduced the concept of banking privilege.

Our proposal is fairly straightforward. The concept of privileged communication should have the same meaning in the clause and the Bill as it does in section 30 of the 1998 Act. That change would avoid inconsistency, and I hope that it is not objectionable to the Under-Secretary.

Melanie Johnson (Labour, Welwyn Hatfield)

I should like first to clarify what I think the amendment means. It is designed to align the meaning of the phrase ''privileged communication'' in part 6 of the Bill with the definition of ''privileged communication'' in section 30 of the Competition Act 1998. In fact, the term ''privileged communication'' does not appear in part 6, but I believe that the hon. Gentleman is attempting to align the definitions of information that is subject to legal professional privilege in the Bill and the 1998 Act.

The investigatory powers and the safeguards for their application are based on the powers conferred on the SFO by the Criminal Justice Act 1987. The provisions relating to the protection of legal professional privilege use different words from those in the 1998 Act but, in principle, the legal effect is the same.

OFT and SFO officers will work together on cartel investigations. The Government simply want to ensure that they operate under powers that are as similar as possible, so we want to retain the wording based on the 1987 Act. That is our rationale. In the light of that explanation, which is akin to the one that I gave on an earlier amendment, I hope that the hon. Gentleman will withdraw his amendment.

Mark Field (Conservative, Cities of London and Westminster)

We will be happy to do so, as we have made our point about the need for consistency. It would be perverse to have two, albeit slightly disparate, tests, given the strong connection between the 1998 Act and the Bill. However, we spent 15 years trying to align banking privilege to the 1987 Act. I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

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

Alistair Carmichael (Liberal Democrat, Orkney and Shetland)

I am delighted that legal professional privilege is in the clause, and that the Government accept that it is important. Will the Under-Secretary explain ''in the High Court'' in subsection (1)? Does it mean that privilege is allowed only in proceedings in the High Court, and not in summary proceedings, which in Scotland would be held in the Sheriff Court? If it does, I was not aware of it.

Melanie Johnson (Labour, Welwyn Hatfield)

I am grateful for the hon. Gentleman's question, which I cannot answer at this point. [Interruption.] I may now be able to answer it. The answer is no. Subsection (3)(a) states that the High Court is also the High Court of Justiciary, so in that sense the privilege applies only to the High Court. I hope that that clarifies matters.

Alistair Carmichael (Liberal Democrat, Orkney and Shetland)

They are as clear as mud. Does ''in the High Court'' mean that legal professional privilege

attaches to proceedings taken in the High Court of Justiciary, or is it suggested that privilege is somehow different in the High Court of Justiciary? If it is, I was not aware of it.

Melanie Johnson (Labour, Welwyn Hatfield)

I will answer the hon. Gentleman's question in writing.

Question put and agreed to.

Clause 187 ordered to stand part of the Bill.

Clause 188 ordered to stand part of the Bill.

Clause 189 - Use of statements obtained under competition act 1998

Nigel Waterson (Conservative, Eastbourne)

I beg to move amendment No. 109, in page 135, line 22, leave out from '2002' to end of line 26.

It will be obvious from the wording of the amendment that my comments will be short. Clause 189 deals with the use of statements obtained under the Competition Act 1998. Such statements are obtained in what are in effect civil proceedings, and are used under legislation that introduces some serious criminal sanctions, as we debated at, perhaps, inordinate length. The clause entitles the prosecution to use statements obtained under the Competition Act 1998 if they are inconsistent or contain voluntary admissions. The prohibition on the use of those statements should be wider than it is, as the statements were obtained in civil proceedings and therefore in a more relaxed atmosphere than subsequent criminal proceedings. The CBI supports the amendment. Great care should be taken when evidence in statement form is cross-fertilised from civil proceedings to criminal proceedings, not least because one hopes that the people involved in the civil proceedings will be as open and co-operative as they can be. It is in the interests of the Under-Secretary, the OFT and the relevant authorities to accept the amendment, so that people can be as helpful as they want in giving prior statements in proceedings under the 1998 Act.

Jonathan Djanogly (Conservative, Huntingdon)

The clause recognises that there will have been civil proceedings before the criminal proceedings. Should not the OFT have to make up its mind whether to commit to a criminal trial first, and then effectively be stopped if it decides to go down the civil route before the criminal route?

Alistair Carmichael (Liberal Democrat, Orkney and Shetland)

I am not minded to support the amendment. The entitlement to put a prior inconsistent statement to a witness in the course of evidence-taking is important. That has particular implications in Scottish criminal procedure in as much as it can be adopted in certain circumstances; in any event, it can be used to strike at the witness's credibility. The deletion of the subsections would remove that and I can see no good reason to do so.

Melanie Johnson (Labour, Welwyn Hatfield)

The safeguard prevents statements that have been obtained under compulsion in a civil

investigation under the Competition Act being used against the person who made them for the purpose of prosecuting the new offence. It is common practice in criminal law for persons to lose that protection where they make inconsistent statements or voluntarily provide information. Our approach is entirely consistent with sections 2(8) and (8AA) of the Criminal Justice Act 1987. We therefore resist the amendment. I hope that the hon. Gentleman will withdraw it.

Nigel Waterson (Conservative, Eastbourne)

We are all keen to make progress. I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 189 ordered to stand part of the Bill.

The rest of the debate is in Hansard.