Orders of the Day — Enterprise Bill — [1st Allotted Day]

House of Commons, 13 June 2002.

New Clause 4 — Excisions from reports: Part 3

Melanie Johnson (Labour, Welwyn Hatfield)

I beg to move, That the clause be read a Second time.

Alan Haselhurst (Deputy Speaker, Saffron Walden)

With this it will be convenient to discuss the following: Government new clause 5—Excisions from reports: Part 4.

Government amendments Nos. 235, 236, 240 to 242, 258 and 298 to 300.

Melanie Johnson (Labour, Welwyn Hatfield)

All the amendments relate to reports by the Office of Fair Trading and the Competition Commission. New clauses 4 and 5 and amendments Nos. 258 and 298 relate to excisions from reports. New clauses 4 and 5 make provision for the Secretary of State to have regard to the need to exclude certain information when publishing a report that she has received from the Office of Fair Trading or the Competition Commission. I shall be happy to give Members further details if they require them.

Nigel Waterson (Conservative, Eastbourne)

The Under- Secretary is right; we need not detain the House long on this group of amendments, but I have a few questions with which I should like to probe a little further.

The background to this matter is the formalisation of the status of the Office of Fair Trading. That harks back to Conservative legislation in the 1970s, which set up the original structures. It was common ground in Committee that it was right to revisit the matter, and we broadly support the basic proposals and the new powers and functions of the OFT.

There were various debates in Committee, which I do not intend to rehearse, about the contents of the differing reports that will be produced under the Bill when enacted. We as a party have been keen to emphasise the concern of business—whether it be the CBI, the mention of which seems to raise the hackles of the hon. Member for North-East Derbyshire (Mr. Barnes), or any other business organisation—that, no matter how laudable the aims of the legislation, and particularly this part of the Bill, in protecting consumers and people generally against malpractice, it must be borne in mind that unless such matters are dealt with properly, there can be enormous costs to businesses, partly because confidential or commercially sensitive information may find its way into the public domain.

We already know about the extra £15 billion worth of costs that have been heaped on business under this Government, and about the worries about red tape to which organisations such as the Institute of Directors have drawn attention. Indeed, we know about the CBI's figure of £5.8 billion a year extra in taxes on business under this Government. Against that disastrous background, it is important that we do not heap further burdens on business.

New clauses 4 and 5 are similarly worded. In both new clauses, subsection (2) refers to the publication of matter that would be inappropriate, and new clause 4 goes on to say that the body that has prepared the report—whether it is the OFT or the Competition Commission—will advise the Secretary of State on matters to be excluded by him or her when the report is published. Is it considered that the Secretary of State will feel able to make further excisions from such reports? I am asking, perhaps over-laboriously, whether the Secretary of State will be able simply to accept or refuse the proposals of the body preparing the report, or whether it is envisaged that she or he will have, as it were, a final censor's job and make his or her own excisions on top of those proposed by the body.

The other issue is what is defined as inappropriate. The new clauses helpfully refer to section 238, which sets out three or four different considerations: first, matters that are contrary to the public interest; secondly, commercial information where disclosure might significantly harm legitimate business interests; thirdly, information related to the private affairs of the individual, the disclosure of which might significantly harm the individual's interests; and fourthly, whether the disclosure of any such information is necessary for the particular purpose. Does the Under-Secretary regard that list as exhaustive? Could the term "inappropriate" be used to cover all matters which are of perfectly understandable concern to those who are the subject of the report, or, indeed, to Ministers and those who advise them?

Under clause 43, where the Secretary of State issues an intervention notice, the OFT will produce a report on the public interest issues, including representations that it has received. Again, I assume that all that applies equally not just to the conclusions in the report, but to all the, as it were, second-hand information given by way of evidence to the OFT. Otherwise, of course, there might be a disincentive for people to be wholly open and honest in making such representations.

Where the Secretary of State refers matters to the Competition Commission, the reports under clause 44 will be based on an initial investigation under clause 60 and where the Secretary of State refers a matter under clause 61. As I understand it, those are all instances in which the proposed provision would bite.

The principal issue that we want to raise is whether the lists that I have gone through are exhaustive, or whether there is an element of flexibility, which we would welcome, in excising what is inappropriate. We on the Opposition Benches might take some modest credit for persuading Ministers that the issue should be taken even more seriously in the Bill than it was originally. Subject to those explanations, we would welcome a tightening of the provisions.

Andrew Lansley (Conservative, South Cambridgeshire)

I confess that I am slightly confused by the Under- Secretary's suggesting that this group of amendments is entirely confined to matters of excision of information from reports. As I understand it, some of the Government amendments do something substantively different. I want to explore why amendments Nos. 235, 236, 240 and 242 are necessary and what is intended by them.

The Under-Secretary has written to us to clarify the purpose of the amendments. Under the first two amendments in respect of mergers, and the second two amendments in respect of market investigation references, where a public interest intervention notice has been served, the OFT or the Competition Commission will report to the Secretary of State.

Under the Bill as previously drafted, the OFT or the commission would have had the opportunity to make recommendations to the Secretary of State as to the actions that she could take under the legislation. As far as I am aware, the provisions for mergers appeared in clause 41 and those for market investigations appeared in a later clause. It would have allowed the Secretary of State to receive undertakings under clause 151 and to make orders under clause 155.

The Government amendments will mean that the commission can recommend to the Secretary of State that she should take other action, but that action is not specified. So I have a very simple question: what is the other action? If the action falls within the confines of the remedies set out in the respective provisions available to the Secretary of State, why is it not already sufficient for the OFT or the commission to be able to specify such remedies? If the action is beyond the confines of the Bill and what is available from the relative undertakings that can be derived from it, why are the additional remedies not specified in the Bill? I confess that nothing in the correspondence that the Under-Secretary has provided to us specifies what the other action might be, and under what legislative form it sits.

Melanie Johnson (Labour, Welwyn Hatfield)

The hon. Member for Eastbourne (Mr. Waterson) asked whether the Secretary of State would be able to make her own excisions as well as those suggested. The answer is yes. The list of inappropriate coverage takes account of all the issues that the hon. Gentleman highlighted. It is not exhaustive, but we are not aware of any considerations other than those currently in the text. I hope that I have reassured him on that point.

The hon. Member for South Cambridgeshire (Mr. Lansley) raised several points and he is right to suggest that other issues are involved. He referred to Government amendment No. 242, but that relates to the voting rules for the decisions taken by the Competition Commission's reporting panels. Perhaps he meant to refer to amendment No. 241, but that was not absolutely clear.

Amendments Nos. 235, 236, 240 and 241 correct drafting oversights in clauses 46(7)(b) and 62(4)(b). These two paragraphs deal with the Competition Commission's ability, in its reports in public interest and special public interest cases, to recommend the taking of remedial action by other persons, and other than in the form of undertakings accepted or orders made under part 3.

Such action might include, in the case of Ministers, the amendment of existing legislation—whether by introducing new primary legislation or by using delegated powers to amend existing legislation—so as to remove a regulatory barrier to entry and to prevent a merged firm from exploiting a position of market power. Recommendations for the taking of such action are provided for in non-public interest merger eases by clauses 34(3)(b) and 35(2)(b).

As currently drafted, the reference to

"the taking of action by other persons"

in clauses 46(7)(b) and 62(4)(b) appears immediately after a reference to the taking of remedial action under the Secretary of State's part 3 powers, thus apparently excluding the possibility of the commission's recommending in public interest or special public interest cases that the Secretary of State should take remedial action other than under her part 3 powers.

Although such action is likely to emerge only very rarely as part of a reasonable and practicable remedial strategy in a merger case, it was not our intention to prevent the commission from being able to recommend that the Secretary of State should take remedial action of this kind in public interest or special public interest cases. The amendments ensure that this possibility is preserved.

Question put and agreed to.

Clause read a Second time, and added to the Bill.

New Clause 5 — Excisions from reports: Part 4

New Clause 3 — Use of fines by OFT

Nigel Waterson (Conservative, Eastbourne)

I beg to move, That the clause be read a Second time.

Alan Haselhurst (Deputy Speaker, Saffron Walden)

With this it will be convenient to discuss the following: Amendment No. 3, in clause 4, page 2, line 24, at end insert—

'and

(d) an assessment of the additional costs to business of the exercise of its functions.'.

Government amendment No. 156.

Amendment No. 6, in page 2, line 34, leave out—

'seriously and prejudicially affect the'

and insert—

'significantly harm the legitimate business'.

Amendment No. 210, in clause 6, page 3, line 9, after "consumers", insert "and producers".

Government amendment No. 157.

Amendment No. 8, in page 3, line 20, leave out—

'seriously and prejudicially affect the'

and insert—

'significantly harm the legitimate business'.

Amendment No. 211, in clause 8, page 3, line 35, after "consumers", insert "and producers".

Government amendment No. 223.

Amendment No. 212, in page 3, line 39, after "consumer", insert "and producer".

Amendment No. 213, in page 3, line 41, after "consumer", insert "and producer".

Amendment No. 214, in page 4, line 1, after "consumer", insert "or producer".

Amendment No. 215, in page 4, line 3, after "consumer", insert "or producer".

Amendment No. 216, in page 4, line 9, after "consumers", insert "and producers".

Amendment No. 217, in clause 9, page 4, line 18, leave out from beginning to "section" in line 19.

Amendment No. 218, in clause 11, page 5, line 2, after "consumer", insert "or producer".

Amendment No. 219, in page 5, line 5, after "consumers", insert "or producers".

Amendment No. 10, in page 5, line 6, leave out "90" and insert "60".

Amendment No. 11, in page 5, line 13, leave out subsection (4).

Amendment No. 220, in page 5, line 15, after "consumer", insert "or producer".

Amendment No. 221, in page 5, line 18, after "consumers", insert "or producers".

Amendment No. 222, in page 5, line 34, at end insert—

'and—

(c) "producer" means an individual involved in the manufacture, production or sale of goods or services.'.

Nigel Waterson (Conservative, Eastbourne)

Our new clause and amendments again deal with the general functions of the OFT. The hon. Member for North-East Derbyshire (Mr. Barnes) has also tabled amendments, and I look forward to our usual fascinating debate.

We debated the provisions of new clause 3 in Committee, and it is part of the Opposition's responsibility to make choices about the issues to which we wish to return on Report. We thought that this issue was worth debating again, because it is important and because we did not think that the Under-Secretary's response in Committee was adequate. As she has had more time to reflect on the matter, we might now make more progress. A glance at the new clause shows that it would determine the fate of fines determined under chapters I and II of the Competition Act 1998 and use them for the benefit of consumers.

Substantial income might be derived from such fines in any given year, and that money could be applied for the remedial benefit of consumers in general. The Consumers Association has publicised the case in which a car manufacturer—I forget which one—agreed to donate substantial funds to the association as part of the settlement of potential proceedings. The association undertook to use that money to inform consumers about the purchase of cars, including purchase from suppliers based on the continent. When the offence alleged is predatory pricing, the consumer will have benefited from lower prices, albeit at the longer-term loss of competition. In such cases, under current legislation consumers would be unlikely to recover damages. However, if the funds obtained were applied for the benefit of consumers in general, that would sensibly reflect the fact that there is no individual remedy.

If the Under-Secretary's reply is based on the one that she gave in Committee, I know that she will say that there are separate provisions in the Bill for funds to be applied for consumer information and education. We welcome that. However, the new clause would ensure the use of a separate stream of funding to consumers in general.

I have already given a couple of examples, and another one would arise when consumers had clearly been disadvantaged but it was impossible to identify or trace those harmed. Something may have gone on for many years across an entire market without records being kept of the people involved. In another example, many people might have lost a tiny amount as the result of a harmful practice. However, recognition should be made of the fact that there has been misdoing by the companies involved.

The Minister was less than convincing when she addressed the problem in Committee. One of her defences was that we might encourage the OFT to operate a slash and burn policy, and go out of its way to find people so that it could produce the stream of funding. That is far-fetched. In fact our suggestion would make sensible use of the funds, unlike the alternative, which allows them to disappear into the black hole of the Treasury.

We discussed an amendment similar to amendment No. 3 in Committee, and I accused the Minister of intransigence. I had hoped that she might reconsider her case, because we need to assess the additional costs to business that will arise when the OFT exercises its functions. The Conservative party is keen to stick up for businesses, large and small, when it comes to the extra burdens and costs that are heaped on them. There is a cumulative process of placing more burdens on business, and those have a particular impact on smaller firms.

It is important to make a regular assessment of the additional cost to business of the OFT's exercise of its functions. That is eminently sensible. We debated how to assess that burden in Committee, and it is worth trying to work out whether the burdens on business are substantial, as we fear they might be, and how they stack up against the benefits to consumers. Unbelievably, the regulatory impact assessment of the Bill concluded that its provisions would impose no extra cost burden on business. We do not accept that, and it requires explanation.

In Committee, my hon. Friend the Member for Huntingdon (Mr. Djanogly) gave the example of a company that started to trade in a new market. It received a letter from the Department of Trade and Industry saying that the trade was against the public interest. In effect, the Department threatened to wind up the company and prosecute the directors. The company took legal advice and was very worried. It would have cost a great deal to clear the company's name, and the matter never went to court. The director involved settled with the Department, the company was wound up and various other measures had to be taken. The company simply did not have the resources—or, perhaps, the courage—to sit out the argument with the powers that be.

We all accept that the OFT needs to be beefed up and provided with more staff and resources. I often see job advertisements for the OFT in the papers—not that I make a habit of looking through the appointments sections; I merely have a wistful curiosity about all those positions that allow people to earn more than I do. The OFT is obviously building up its staff in anticipation of the changes. When the Bill receives Royal Assent, they will be like coiled springs, waiting to leap into action. The OFT will have massive resources and deep pockets, which may not be true of the companies with which it deals.

Amendments Nos. 6 and 8 replace similar amendments tabled in Committee. The phrase

"significantly harm the legitimate business"

is important. We must carefully tie up the requirements of the investigating authorities. We want to harmonise the words used in part 1 and part 9. Our amendments would tighten the obligation for the OFT to ensure that it chooses to use its powers in a judicious way.

We debated recent dawn raids involving the Serious Fraud Office and other prosecuting authorities. Although such action might be relevant and necessary in certain cases, we want to ensure that restraints and constraints on the new authorities are included in the Bill. We do not want the new authorities, flush with new resources, responsibilities and powers, aggressively and vigorously to pursue companies that may be innocent and blameless. The disruption of a company's business and the undue publicity could have a serious effect on it.

I expect the OFT to take a more rigorous view of company raids than other authorities. Only a few weeks ago, several pharmaceutical companies were subject to a dawn raid, and it is staggering how the details of raids are often firmly in the public domain and the media before they take place. That is of great concern, especially as we still operate under the premise that people are innocent until proved guilty. Such cases are usually complex and take many months, or even years, to resolve. Although prosecutions are often not pursued or are unsuccessful, incalculable damage is inflicted in the meantime on the interests of the companies under investigation.

Amendment No. 10 deals with super-complaints. Those are an important and useful innovation, strongly supported by all the main consumer bodies. They ensure that something that is happening across the country does not have to be pursued by individual trading standards departments, but by a super-complaint brought, typically, by a consumer body. The Bill specifies, however, that the OFT should publish a response to a super-complaint within 90 days. We agree that there should be a limit on the time taken to respond, but our amendment suggests 60 days. There can be no practical objection to that. Extensions of time could always be applied for and given.

It is almost inevitable that substantial publicity will be generated, especially by the first super-complaints. They will be a novelty and probably come on the back of a substantial consumer campaign on a particular malpractice or piece of sharp trading. If such publicity is generated and it blights the activity of a company or group of companies, it is important that the period should be as short as possible. On the other side of the coin, it must surely be in the interests of consumers that such matters be resolved as speedily as possible.

The sister amendment, amendment No. 11, would remove subsection (4) from clause 11, which allows the Secretary of State to take the power to amend the time limit, presumably up or down. In Committee we debated the best intentions of this particular Secretary of State and those who advise her, but we still think that the clause should be changed.

Harry Barnes (Labour, North East Derbyshire)

Some 13 amendments are in my name and in those of my hon. Friends. They fall into three categories. In some, the words "and producers" is inserted after the word "consumers". There is one category where that operates in connection with the super-complaints procedure. A separate amendment seeks to keep alive section 12 of the Fair Trading Act 1973, as compared with certain aspects of this legislation where it affects producers and the public interest. I have much more sympathy with the Fair Trading Act than with some items in this Bill, even though there is much more in the Bill which deals with consumers, which is a distinct improvement.

As I said, I want to insert "and producers" after "consumers". While all of us cannot exist without being consumers, we depend on producers, and I hope that the great majority of us are producers for considerable sections of our lives. We are producing legislation on this occasion, so we are part of that procedure. Everyone is just about covered by the categories of "producer" and "consumer", but that does not mean that the way in which they operate is the same, or that they have identical interests.

Sometimes, the consumer interest may rub up against the producer interest. The cheap production of goods and services may be a consumer interest, but the people who are directly producing goods—working people by hand or by brain—may not wish to have their goods sold at the cheapest possible price all the time. They may want to raise some resources for themselves, so that they themselves can begin to become effective consumers. If we put all our eggs in one basket—with the consumer—we do not seem to serve our constituents in as full and as good a way as possible. That is the reasoning behind the amendments that insert the words "and producers".

I attempted in Committee—it has already been dismissed to some extent by the Opposition Member who talked about G.D.H. Cole—to draw that distinction. I was a bit late in doing that. This is complex legislation, and the day after I found out that I had been placed on the Bill, I had to turn up at one of the meetings to try to fathom what we were dealing with.

By the time I had tabled an amendment to introduce the word "producers", it was in a rather odd position—it meant producers being involved merely in matters that were of consumer interest. That will be the case to some extent with some of these amendments, but the main intention is to say that producers will have specific producer concerns themselves. In particular, the producer provisions in connection with the super-complaints procedure in amendments Nos. 218 to 222 are meant to produce a situation in which producers, as defined in amendment No. 222, will be able to have a say and an influence, and to make representations to the OFT about their concerns and their interests, in the same way as consumers do.

It is not entirely a G.D.H. Cole measure, as the producers are not defined just as being workers by hand or by brain. They are defined as people who are involved in the productive selling and manufacturing system, so it cuts across class barriers to some extent. The Minister may have some problem in determining the weight that should be given to different sections. I want to refer to the concerns and interests of the TUC and particular trade unions in such matters.

Various trade unions have pressed us on the matter. Members of the Committee received a letter from the Transport and General Workers Union's agriculture food section, in which it suggested that producers' interests should be considered as well and that we should have something about that in the Bill, presumably in line with the type of measures I am putting forward.

I saw one representation relating directly to the Bill in the Financial Times on the day of Second Reading. It was from Ed Sweeney, general secretary of Unifi, the financial sector trade union, who said:

"Consideration should also be given as to whether the new 'super-complainant' procedure (that will enable certain consumer organisations to have the right to compel initial investigations by the Office of Fair Trading into specific markets) should be extended to other third parties."

That is what I am attempting to do with the amendments.

I am keen that we should progress because I am interested in the public interest provisions. I would not want to talk myself out on those, but I have an amendment that seeks to preserve section 12 of the Fair Trading Act 1973. It allows the Secretary of State to give directions to the Director General of Fair Trading on a number of issues, including prioritising in order to identify practices that may adversely affect consumers; determining priority markets requiring assessment as to whether a monopoly exists; and deciding whether to refer monopoly cases to the Competition Commission, or trade practices to the consumer protection advisory committee under part II of the Fair Trading Act.

The right to refer monopoly cases to the Competition Commission is part of the argument that I will seek to advance later when we deal more particularly with mergers and the public interest provisions, but Unifi and the wider labour movement are clearly concerned that mergers and monopoly development situations will seriously affect the well-being of people and the future of their firms, which may close. In those circumstances, producer interests in terms of earning one's livelihood are to the fore. The Secretary of State needs to be able to continue to take that into account as an interest.

If we have producer bodies and a producer's super-complaints procedure, that will provide an avenue for bringing concerns to the attention of the Director of Fair Trading. In addition, later amendments will enable such matters to be brought to the attention of the Secretary of State so that he or she can act. Amendment No. 217 is necessary to facilitate matters that appear later in the Bill. I hope that the Minister will respond favourably to the notion that producer interest can be squeezed by this sort of legislation, admirable though it is in dealing with consumer interests. There might be a need for balance if other viewpoints are to be put forward.

G.D.H. Cole suggested in his early days that Parliament should be reformed and there should not be a House of Lords and a House of Commons. He advocated that instead there should be a House of Producers and a House of Consumers. The consumers would be rather like the House of Commons because we are all consumers. The producers would be organised through guild trade unions—presumably there would be a form of indirect election—and would operate the other House. He thought that within a socialist society these bodies would not conflict with each other. However, he felt that if they were in conflict, over-riding provision should be given not to the House of Consumers but instead to the House of Producers, that being the nobler ideal.

Without going as far as G.D.H. Cole would have wanted, perhaps we can learn something from some of the things that he said.

John Pugh (Liberal Democrat, Southport)

First, I shall respond to the hon. Member for North-East Derbyshire (Mr. Barnes). One suspects him of trying to introduce social revolution on the back of the Bill, that is by smuggling in Marxism through the back door. I am sure that that is not far away from the plot. In this instance, however, he seems to seek only an innocuous change of wording. Clause 6(1) states:

"The OFT has the function of . . . making the public aware of the ways in which competition may benefit consumers".

If the amendment were agreed to, the subsection would provide that

"competition may benefit consumers and producers."

In that event, the OFT would have a more difficult job. Some producers will not significantly enjoy any benefit of competition. In some instances, they would like no competition.

I move on to the issues raised by the hon. Member for Eastbourne (Mr. Waterson), and on some I do not want to trespass. There is a sophisticated legal debate on the appropriate term for legal proceedings. That is whether it should be 90 days or 60 days. I can leave that to others.

The spirit behind the idea of using fine income to reprocess for the benefit of the consumer seems to be entirely correct. It has an element of earmarking, which is attractive. There is also the element of restitution. Presumably those who are offended will have an opportunity to contribute to the common good. It even brings in modern concepts such as hypothecation. It seems that the idea will do good.

The Minister's argument appears not to be that the idea will not do good, but that it may lead to further harm. It is suggested that the OFT will take an aggressive attitude towards charging producers that it thinks errant or wrong and accumulate money to use for other purposes that it has in mind. That is an objection in principle to many fines in many places. The same objection could be made in respect of traffic-calming measures and speed cameras, for example. It could be made also in terms of traffic wardens. There seems not to be a fundamental objection.

The wording suggested by the hon. Member for Eastbourne is surprisingly mild. It is that the OFT will consider whether any fines that are imposed under chapters 1 and 2 of the Act might be applied for any purpose. The wording does not command the OFT to do that. It merely gives a power to the office should it consider that to be an appropriate and good thing to do. The Minister might well wish to revisit this idea. Ministers are not loth to throw away powers unnecessarily offered to them. In this instance, the hon. Gentleman is offering a new power to the Government, in a sense. The OFT is not exactly the same thing as the Government, but it may find the process of administration useful in future circumstances.

I disagree with the hon. Gentleman on one issue, and it is an issue on which we disagreed in Committee. It relates to illustrating the additional costs that are incurred by business as a result of the various procedures in which the OFT will engage when investigating mergers, cartels and the like.

I share the hon. Gentleman's scepticism in that the Government are often thoroughly wrong when they talk about the effects of a piece of legislation, the red tape that will be involved and the cost to business. We have the shocking example of the Government declaring not too long ago that the effects of the increased burden on care homes would be cost neutral. I think that that is what the Government's investigation showed. Everybody accepts that the costs amount to about £300 million. If the effects of that legislation are cost neutral, care homes are behaving in an add way: they are going out of business.

There is a problem, and it was aired in Committee. An easy assessment to make is that of the costs involved in complying with a piece of legislation. The Government should get that right, and conventionally they get it wrong. However, businesses can do all sorts of things in responding to an investigation into their affairs. For example, they can hire the most expensive lawyers in the land. They can engage their top management night and day. They can inflate costs as and when they wish. In this context, they are not merely complying; they are reacting. Although I am sympathetic to the remarks of the hon. Member for Eastbourne, I see no realistic way in which business costs can be quantified in this instance. Therefore, there is no purpose in producing statistics that have little meaning, although the Government do it quite frequently.

Richard Page (Conservative, South West Hertfordshire)

I shall speak specifically to amendment No. 223. I wish to reinforce the remarks of my hon. Friend the Member for Eastbourne (Mr. Waterson) about the timetabling of consideration. It is ridiculous that we shall try to get through about 200 new clauses and amendments in about four and a half hours, and especially an item as important as amendment No. 223, which deals with the codes of conduct and behaviour of trade associations.

In making my short contribution, I shall worry the Minister by saying that I am broadly in favour of amendment No. 223. I welcome it, but I feel that it should go a little further. The provisions set out in the Bill needed to be amended in any event to take it into account that trade associations should properly be representative of the area of commerce or industry in which they operate, and that their finance, organisation, policies and procedures for redressing consumers' complaints should be as transparent as possible. These considerations are not taken into account in the Bill.

When the Secretary of State addressed the issue of consumer codes of practice on Second Reading, she told the House that provided they would be effective in protecting consumer interests and would meet core criteria yet to be defined, the Bill would include

"measures to enable the OFT to give formal approval to voluntary industry codes of practice . . . and to promote the benefits of those codes to consumers and businesses."—[Official Report, 10 April 2002; Vol. 382, c. 49.].

We all say amen to that. I do not think that anyone would quarrel with such an outcome if it could be achieved. However, there is an issue that was not made clear on Second Reading, nor was it made clear in Committee, and the issue still remains obscure. The amendment does not make clear where the boundary will lie between the criteria that the OFT will be specifying and where the voluntary codes of practice will take effect. They will be drawn up by trade associations and others, to be submitted to the OFT for its approval.

The House, as well as consumer groups and trade associations throughout the country, will want to know where they stand before the Bill comes into effect. They will not want to await an interpretation by the OFT in the fullness of time.

I know, Mr. Deputy Speaker, that you were in the House, as I was, when it passed legislation that led to the establishment of the Child Support Agency. We passed that legislation because it was absolutely right that parents who were not looking after their children should be called to account and made to contribute to looking after them. Everybody was agreed and the Bill went through Parliament in record time. However, none of us suspected that the rules and regulations that would follow, introduced by the civil service, would create a nightmare in years to come and clog our surgeries with problems for month after month. We are finally getting on top of things, but if we had known what was to come, we would have been rather more circumspect in deciding what to put into legislation.

I hope that we shall hear something helpful from the Minister. Organisations outside the House have already picked up the issue and have started to run with it. The CBI has made it clear that it wants further discussions on the framework and the principles that the OFT will be using to ensure that codes of practice will be

"fair and workable for both businesses and consumers."

Citizens advice bureaux have already commented on the likelihood that the OFT will start to receive complaints that it should not have approved some codes in some instances and should have approved codes in others, or that the codes are not working properly. Those reactions will be the inevitable result of not spelling out the core criteria to be met and failing to explain how much room trade associations have in formulating proposals for the code of practice. An outline of the thinking behind the scenes would therefore be appreciated. I am anxious that Ministers are more concerned about putting in place a framework of regulation—indeed, the Bill should have been called the enterprise regulation Bill—than about achieving a proper balance between consumers' interests and ensuring that business is free to serve customers and consumers to the best of its ability. Government amendment No. 223 is worrying because it seems to show where the Government's priorities lie.

On Second Reading, in the spirit of helpfulness and co-operation that I obviously like to adopt, I made clear my concerns about the need for proper recognition of trade associations and the role that they should play in arrangements for protecting consumer interests. I have since had several discussions with trade associations and Mr. Mark Boleat, who is not only a professional consultant but has been the director general of two of the largest trade associations in the country. He served in one for quite a few years, then moved to an even bigger organisation and has now set up his own consultancy practice. He has another tremendous merit as he is a constituent of mine, which obviously gives him every possible advantage. I listened to him with great interest and am grateful to him and a number of trade associations for their advice and assistance. They emphasised the fact that it is essential that trade associations, which will effectively draft consumer codes of conduct under the Bill, should be as representative of the industry as possible. If Ministers are aware of that point, they have not given any sign of it.

I do not want to be too prescriptive, but codes of conduct should be given only to leading trade associations, which enjoy at least 50 per cent. representation of the industry; I shall not object if that representation is 60 or 70 per cent. Some years ago, I went to Japan, where I expected to see a Minister but, instead, I was ushered into the presence of the Japanese shipbuilding trade association, the most powerful body in the area, with only one company not being a member. I rapidly came to the conclusion that the association was highly instrumental in Government business and in driving forward a number of activities, including exports and Government financial measures to help the industry. I commend that example to the Minister. My constituent, Mark Boleat, wrote a book some time ago—I do not recommend it unless people suffer from insomnia and want to go to sleep—on the history of trade associations. When I read it five years ago, it covered 1,400 trade associations.

The DTI cannot possibly have enough officers to deal with so many associations. Different associations need to be brought together so that the DTI can give a focus to a sector rather than trying to deal with hundreds of warring trade associations; that can only be beneficial for the economy. I make that point in the spirit of co-operation and helpfulness which is in my nature, as everybody in the House knows.

Trade associations seeking approval from the OFT for consumer codes of practice should make available to the public their membership, finances and strategic plans both on the internet and in hard copy. Trade associations should make the public as consumers aware of the composition of their governing bodies, policies and procedures for dealing with complaints. I do not doubt that the OFT will consider that when it looks at the codes submitted to it. I do not advocate a wholesale return to the guild system of the middle ages, but it had some good points; if anyone was not up to scratch in the production of a particular service or product, they either had to get up to speed or were put out of business. Codes of conduct should have some insurance backing; trade associations should ensure that every single member of the sector has insurance cover so that if it goes bust or produces faulty work, the consumer is protected. That will make a trade association's logo meaningful; every consumer will know that if they go to a company belonging to the association they will have redress if something goes wrong. If a company goes bust, consumers will not be left with faulty products or services.

The Government amendment, which alters the regulatory mechanism, does not advance that proposal. I hope that I am pushing at an open door; nothing in my suggestion should come as a surprise to Ministers. The Department published a guide on best practice models for trade associations as long ago as 1996; since then the subject has been thoroughly investigated by the Trade Associations Forum. The criteria that trade associations and others must meet when submitting consumer codes to the OFT for approval are sufficiently important to merit much more discussion than we can give them today. The Government amendment characteristically leaves the matter to the OFT, presumably in consultation with the Department, to determine. That is not good enough; it is in no one's interest for the OFT to set out guidelines on consumer codes that are likely to raise business costs substantially or prove too bureaucratic. On the other hand, consumers need reassurance about the procedures for complaint and redress offered by trade associations, and must have confidence in the OFT's regulatory role. Those issues have been passed over, so I would be grateful if the Minister could offer me some reassurance in her reply.

Mark Field (Conservative, Cities of London and Westminster)

You may be relieved to have begun chairing the proceedings now, Mr. Deputy Speaker, and not to have played any part in Committee, where debate was wide-ranging. Similarly, the last three contributions have brought forth thoughts on the socialist philosopher Mr. Cole, the care home crisis and the Child Support Agency; there are no immediate comparisons among those three subjects.

I agree with much of what my hon. Friend the Member for South-West Hertfordshire (Mr. Page) said. At Conservative party conferences, we are used to hearing the calls of many activists to bring back various things, but I have not yet heard of anyone going back as far as the middle ages. Perhaps we will hear other singular proposals in our debate.

I took on board my hon. Friend's claim that it would have been better to call the Bill the enterprise regulation Bill; that point is central to the concerns of my hon. Friend the Member for Eastbourne (Mr. Waterson). I acknowledge the fear that the OFT will flex its muscles too often. We must ensure that that temptation is kept to a minimum.

The key consideration is the cost to business. I am probably less sanguine than many of the professional bodies that wrote to members of the Standing Committee about the power of super-complaints. I am concerned that the self-appointed consumer champions will have far too much authority in relation to certain aspects of the Bill. There is a risk that legitimate business interests will be significantly harmed, so I hope that the Minister will give fair consideration, as she did in Committee, to the time limit for responses. A 60-day limit is sufficient. How will the Minister exercise her discretion to vary or override the current 90-day limit, a subject tackled in one of the Conservative amendments?

Melanie Johnson (Labour, Welwyn Hatfield)

Our amendments Nos. 156 and 157 deal with the need to exclude any information relating to the affairs of a particular person or business

"the publication of which would or might seriously and prejudicially affect the interests of that person"

or business. In Committee the hon. Member for Eastbourne (Mr. Waterson) rightly said that it would make enormous sense to replicate the wording in clause 235 for purposes of clarity and consistency. I agreed to consider the suggestion, and to be as helpful as I could.

As originally drafted, part 9 did not cover information obtained by the OFT under part 1. Clause 235 in its original form listed considerations to which public authorities must have regard before disclosing competition information, as defined. I shall not go into all the details, but following discussions on part 1, the Government reviewed the application of provisions in part 9, including clause 235. The upshot was the tabling of amendments that effectively render clauses 4, 5 and 6(3) redundant. Protection from unwarranted disclosure will now be provided in part 9. That will achieve the consistency throughout the Bill that Opposition Members—particularly the hon. Member for Eastbourne—wanted and which we agreed would be beneficial.

Amendment No. 223 seeks to tighten the definition of a consumer code of practice, and to ensure that the widest possible range of organisations can act as code sponsors. The hon. Member for South-West Hertfordshire (Mr. Page), sadly, could not be with us in Committee—not everyone had that honour—but we all agreed then that the amendment would be helpful in giving the OFT clear powers to implement its new codes of practice regime, whose purpose was to help consumers to find reliable businesses. It was, I think, the hon. Member for Cities of London and Westminster (Mr. Field) who described this as an "enterprise regulation Bill". I trust that "regulation" in this context would include an element of self-regulation, for here we see an element that is not entirely to do with regulation in the classic sense, but which is much more akin to self-regulation.

The hon. Member for Southport (Dr. Pugh) noted that as drafted the clause would allow guidance-only codes to be approved. That was not our intention. The clause has been redrafted to make it clear that only codes regulating the behaviour of those signed up to them will be approved. To be approved, a code will have to comply with the OFT's criteria, which do indeed regulate the behaviour of members. Consumers will have the reassurance of knowing that if there is a problem, it can be put right: to obtain OFT approval, a code must contain mechanisms for both redress and compliance. Problems will be resolved, and failure to comply with the code will be dealt with.

We removed the words "relevant association" in case that was construed as limiting sponsors to trade associations. I know that the hon. Member for South–West Hertfordshire is a great fan of trade associations, but we wanted to ensure that the widest possible range of organisations would be able to act as sponsors. They might include local authority trading standards departments with good-trader schemes, or owners of shopping centres who had signed up their tenants to a code of practice.

Trade associations' redress systems will have to be transparent and compliant to meet the OFT's criteria. The whole system is voluntary. The OFT will publish criteria with which sponsors must comply to seek approval. It will all be spelled out. There has already been some consultation, in which I think the CBI has been involved.

As I said, we are not dealing with just lead trade associations. We wanted the arrangement to be as open as possible, to ensure that there were plenty of methods of entry for small businesses, which might not be members of the smaller associations. The most important thing is for organisations to meet the criteria, so that consumers have the protection that they expect from compliance with the code. Businesses will not have to belong to a trade association and pay for a full range of services to gain the right to use the logo.

Richard Page (Conservative, South West Hertfordshire)

I did not mean my remarks to apply exclusively to trade associations as such, but is there not a danger that if every small organisation—I will not say "whipstitch organisation"—qualifies, the logo will be devalued? Moreover, such organisations will not have the back-up and the managerial strength to provide the various required protections for consumer complaints. Organisations will have to be of a certain size to have any credibility in this regard.

Melanie Johnson (Labour, Welwyn Hatfield)

Whoever fulfils the role will have to meet the same criteria. Obviously, that will be an issue if an organisation is too small to do so effectively, but there are a range of code sponsors that may not be small, but are not necessarily trade associations. I have mentioned local authorities, chambers of commerce and shopping centres, but registered charities could also be involved. It is not necessarily a question of scale.

What is important at the end of the day is that consumers get what they expect from the logo and the code. We believe that clause 8 will give the OFT the power that it needs to run the codes regime in the way that it envisaged in its original consultation document, issued in February 2001.

New clause 3, as we know, concerns fines. I will not go into detail, but, like Opposition Members, I am keen to encourage projects or activities that benefit consumers, and clause 267 already allows the Secretary of State to do that. The consumer grants fund that it will establish could be used to give financial assistance to projects in areas where a general class of consumers has suffered harm— I gave examples in Committee—but where it is not possible for all the individual consumers concerned to be identified or to seek redress.

In that sense, clause 267 surely has a wider application than the new clause, which I think is sensible. Although one of our priorities will be to fund projects relating to the markets in which the OFT has established a breach of competition rule, the clause will ensure consideration of financial assistance for a wide range of products or other work that would benefit consumers. That will not be confined to consumers who have suffered from anti- competitive practices for which fines have been imposed under the Competition Act 1998; it will benefit consumers more widely, and will ensure that a more strategic view is taken, both of consumer issues that need to be addressed and of the funding available.

As was said in Committee, fines are by their nature unpredictable in terms of both timing and amount. Consumer benefits linked to them would also be erratic and unpredictable. Furthermore, fines can be imposed under the Competition Act only when the undertaking concerned has acted intentionally or negligently. Although such cases will frequently be those in which most damage is done to consumers, harm might also be done in other cases.

All that is, of course, in addition to our continuing ability to fund bodies such as the National Consumer Council which promote the interests of consumers.

For the reasons that I have given, I believe that clause 267 as drafted is better for consumers than the new clause and, indeed, makes it unnecessary.

Nigel Waterson (Conservative, Eastbourne)

I take the Under-Secretary's point about the income stream from the source. However, is it not part of the point that the use of the money should be linked to the reasons for the fines? Will she confirm that if we do not act, the fines will simply disappear into the public purse?

Melanie Johnson (Labour, Welwyn Hatfield)

There is no question of the fines disappearing into the public purse. They will be used for the projects and activities that I described.

Amendment No. 3 would require the OFT to produce a regulatory impact assessment every year. I do not have sympathy with the amendment because we could end up with regulatory impact assessments of every Act. That is a heavy bureaucratic burden. The OFT already has to consider the effects of its actions on business and it is therefore inappropriate and unnecessary to require it to quantify those effects in its annual report. We have a regulatory impact assessment of the Bill; we could argue about the detail if hon. Members wish. However, the OFT is not a legislative body and it will exercise only the powers that Parliament grants it. All the legislation that it enforces has been approved here and accompanied by an initial regulatory impact assessment. Now is the appropriate time to consider the additional costs that the new measure will impose.

There are statutory checks on the use of all the OFT's powers. For example, it cannot make a market reference unless it has reasonable grounds for suspecting that the reference criteria are satisfied. I expect that the OFT will not use its powers without good reason. The Bill increases its accountability in the system at all levels.

As I said when we considered Government amendments Nos. 156 and 157, amendments Nos. 6 and 8 have been overtaken by the deletion of clauses 4(5) and 6(3). We have therefore already dealt with those matters.

Amendments Nos. 10 and 11 cover the time allowed for the OFT to respond to super-complaints. The issue is whether 60 or 90 days are sufficient. The Opposition support the former and the Government the latter. There is not much meat in the argument, but I stick to my belief that a period of 90 days is right. We want to ensure that the OFT has sufficient time to consider super-complaints. If there is a case to answer, business will need to formulate a response and the OFT will need time to complete its analysis.

We believe that 90 days is the right period. However, if experience shows that super-complaints can be tackled properly in less than 90 days, the Secretary of State can curtail the statutory time scale by using the powers in clause 11(4). We should start with a time scale of 90 days and ascertain what happens. Amendment No. 11 would delete clause 11(4). As I said earlier, the flexibility should remain, so we cannot support the amendment.

Let us consider the points that my hon. Friend the Member for North-East Derbyshire (Mr. Barnes) made. He tabled amendments about producers and producer interests, which we recall from discussions in Committee. Amendment No. 210 seeks to ensure that the OFT makes the public aware of the ways in which competition may benefit producers as well as consumers and the economy, by providing advice and information.

Clause 6 gives the OFT the function of promoting to the public the benefits of competition for consumers and the economy. That reference to the economy already covers any relevant, if not all, producer interests. Indeed, producers are also consumers and both sets of interests need to be balanced, as my hon. Friend acknowledged. I therefore do not believe that it is necessary or desirable to specify producer interests in the clause.

The emphasis on consumers is surely right. Consumers are often unaware of the importance of competition for lower prices, higher quality and greater choice. Strengthening consumer knowledge of the benefits of competition, which strengthens the consumer voice, has a key role in improving economic performance.

Amendments Nos. 211 to 216 seek to widen the definition of a code of practice to include bodies that safeguard or promote the interests of producers, such as trade unions or business groups. That would allow such codes to be submitted to the OFT for approval under the new codes of practice regime. If the definition were widened, it would be outside of the scope of the scheme as set out by the OFT in its consultation paper. Its focus is solely on business-to-consumer codes of practice.

I do not suggest that there is no room for codes that protect producers, and there are almost certainly several perfectly good business-to-business and business-to- producer codes that benefit those involved. There is no reason for the codes not to follow best practice by making use of the OFT's criteria, if appropriate. However, the codes would not be eligible for OFT approval under the Bill.

Again, that is because we intend to help consumers find reliable businesses. Consumers do not always have access to sufficient data about businesses to make an informed choice. Often, they do not have the knowledge and experience to help them choose, for example, a reliable garage for car repairs. Producers such as trade unions or business groups are clearly more able to find good traders and better deals. That is why the scheme is limited to consumer codes.

Amendments Nos. 218, 220 and 221 would permit producer bodies such as trade unions, as well as designated consumer bodies, to submit super-complaints. Amendments Nos. 219 and 222 would enable super-complaints to be made about market features that harm, or appear to be harming, the interests of producers, who are defined in the measure.

We have made it clear that we view the Bill as a measure for consumers, and the focus on their interests benefits everybody. After all, we are all consumers, and companies that respond to consumers' needs are successful. That is to the advantage of the people who work in those businesses and the long-term viability of the businesses. To that extent, the Bill articulates the same values as my hon. Friend's amendments.

Mark Field (Conservative, Cities of London and Westminster)

The Under-Secretary rightly points out that we are all consumers. However, we must remember that that is so because we have successful businesses. We want them to thrive, which is why we tabled our amendments. Clearly, we must get the balance right, but we all rely on a thriving and successful business sector.

Melanie Johnson (Labour, Welwyn Hatfield)

The Government recognise the importance of a thriving business sector, which is the basis for our economic prosperity. Indeed, everything flows from that. Money for public services ultimately derives from that prosperity.

The intention of the super-complaints provision is to alert the OFT to market failures that significantly harm the interests of consumers. Individual consumers are unlikely to have access to that information, or the relevant resources or skills to formulate complaints. The aim is to enable consumer bodies to do that on their behalf. The procedure is designed to benefit consumers, and will therefore be available only to designated consumer bodies. Producer bodies do not have as their principal raison d'etre the protection of consumer interests. Producer bodies can already put complaints about market failure or other issues to the OFT, and nothing in the Bill prevents them from continuing to do so.

I want to speak about section 12 of the Fair Trading Act 1973. Amendment No. 217 would preserve that provision. The provisions relating to the consumer protection advisory committee will become superfluous because clause 10 abolishes it. As an independent body, the OFT should be free to set its own priorities in the new regime. The existence of the powers of direction under the Fair Trading Act could inhibit that freedom.

The amendment would change the intended functions of the OFT and would, in some cases, impose unnecessary burdens and constraints on it. I do not think that there would be a benefit to consumers, businesses or producers, and I therefore hope that my hon. Friend the Member for North-East Derbyshire will not press his amendment to a vote.

Regarding my earlier answer to the hon. Member for Eastbourne on fines, I want to clarify the fact that the fines will go into the Consolidated Fund, so they will be in the public purse, but the money from the new consumer grants fund will be used for the projects that I described. That concludes my remarks on the amendments in this group.

Nigel Waterson (Conservative, Eastbourne)

I am grateful to the hon. Lady for the trouble that she has taken to provide that explanation. I am pleased, not least because one of our concerns is being dealt with in a different part of the Bill; that seems to make sense. I do not want to prolong the debate about 60 days versus 90 days. We have probably beaten that argument to death, one way or another.

I was pleased that the Minister corrected what she had said earlier about fines. It is clear from the Bill that there is no mechanism for those fines to be diverted towards something useful for consumers, and that they will just go the way of all fines—that is, they will, as she has just confirmed, disappear into the Consolidated Fund.

I made it clear that we welcome the separate provision for funding for consumer information and so on, but it seems to us—alarmingly, perhaps, the Liberal Democrats seem to take a similar view—that it would be rough justice if the money could be directed towards consumers when fines were imposed. Diverting fines in that way would be particularly appropriate in cases of fines being imposed because of a particular practice or set of practices in which it was impossible to identify those who had been harmed. We therefore remain disappointed by the Minister's approach to the matter. We seem to have gone round in an enormous circle, having debated it more than once.

On business costs, I simply do not understand the problem. It would be a modest but necessary discipline on the new system if, once a year, or whatever, the Government were required to make an assessment of the costs to business of what they were doing. Otherwise, there would be no mechanism by which they could make a cost-benefit analysis of their activities. This is a modest proposal. It is all very well for the Minister to say that we would end up with regulatory impact assessments of every piece of legislation every year. If the legislation impacts directly on business, what would be wrong with that? We cannot keep on churning out pages and pages of legislation that affect business and add to its costs, without giving some thought to what it is costing the business community.

We are disappointed by the Minister's response on both those issues, but I shall not press the new clause to a Division. The matters should be further debated in another place, and I am sure that they will be. I beg to ask leave to withdraw the motion.

Motion and clause, by leave, withdrawn.

Schedule 1 — The Office of Fair Trading

Melanie Johnson (Labour, Welwyn Hatfield)

I beg to move amendment No. 89, in page 186, line 19, at end insert—

'(2) Sub-paragraph (1) does not apply in relation to any document which is, or is to be, signed in accordance with the law of Scotland.'.

Michael Lord (Deputy Speaker, Central Suffolk and North Ipswich)

With this it will be convenient to discuss Government amendments Nos. 90, 246, 247, 162 to 164, 284, 287 to 295, 185 to 187, 321, 322, 356 to 370, 98, 323, 188 to 190, 301, 135, 136, 192, 193, 302, 194, 137, 191, 303, 138 and 139.

Melanie Johnson (Labour, Welwyn Hatfield)

This is a big group of Government amendments, and I do not propose to speak to all of them. They are minor or consequential, and cover several different areas. I shall speak briefly to amendments Nos. 321, 322, 356, 357, 359, 360 to 369 and 370.

I place on record our thanks to the City of London Law Society for its help and support in developing these exemption provisions. This is a very technical and specialised area, and, on behalf of the Department and the Government, I thank members of the society for giving so generously of their time and expertise in meeting officials and commenting on the drafting of the clauses. The amendments clarify and bring greater certainty to the exemption provisions. I shall be happy to answer any questions that hon. Members may have on the other amendments. I commend the amendment to the House.

Amendment agreed to.

Clause 4 — Annual and other reports

Clause 6 — Provision of information etc. to the public

Clause 8 — Promoting good consumer practice

Clause 12 — The Competition Appeal Tribunal

Andrew Lansley (Conservative, South Cambridgeshire)

I beg to move amendment No. 147, in page 6, line 5, leave out "Secretary of State" and insert "Lord Chancellor".

Michael Lord (Deputy Speaker, Central Suffolk and North Ipswich)

With this it will be convenient to discuss the following: Government amendment No. 158.

Amendment No. 148, in schedule 2, page 188, line 12, at end insert—

'(1A) A person is not eligible for appointment as an ordinary member unless he appears to the Lord Chancellor to have appropriate experience and knowledge (whether of competition law and practice, other relevant law and practice, economic and business practice, or experience in relation to any sector of industry to which the Competition Appeal Tribunal exercises an appellate function'.

Government amendments Nos. 169 to 181.

Amendment No. 311, in clause 17, page 7, line 39, leave out "that" and insert "as to whether".

Amendment No. 312, in page 8, line 1, leave out "that" and insert "as to whether".

Amendment No. 313, in page 8, line 3, leave out "that" and insert "as to whether".

Amendment No. 314, in page 8, line 4, leave out "that" and insert "as to whether".

Government amendments Nos. 372, 159, 182 to 184, 252 to 255, 160 and 161.

Amendment No. 315, in clause 116, page 82 leave out lines 25 to 34 and insert—

'(5A) The Competition Appeal Tribunal may confirm or set aside the decision which is the subject of the appeal and may—

(a) remit the matter to the OFT, the Secretary of State or the Competition Commission as the case might be ("the original decision maker");

(b) cancel or vary any conditions or obligations imposed by the original decision maker;

(c) give such directions or take such steps as the original decision maker could have made;

(d) make any other decision which the original decision maker could have made.'.

Government amendments Nos. 256, 257, 296 and 297.

Andrew Lansley (Conservative, South Cambridgeshire)

This group of amendments relates to the Competition Appeal Tribunal. There are 29 Government amendments, which I am sure the Minister will tell us about in due course. I want to speak to amendments Nos. 147 and 148, tabled in my name, and I shall also refer to our amendments Nos. 311 to 314 and 315.

The purpose of amendment No. 147 is to change the responsibility for the appointment of ordinary members of the Competition Appeal Tribunal's panel. Hon. Members will recall that the tribunal was established under the Competition Act 1998, and consists of a president, a panel of chairmen and ordinary members. The ordinary members are appointed by the Secretary of State, as distinct from the Lord Chancellor, who is responsible for the appointment of the president and the panel of chairmen; that is carried forward into this Bill. The president and the panel of chairmen have responsibility not only for having competition law expertise but for ensuring that the tribunal behaves in a way that is consistent with the way in which a court would consider similar decisions.

As the Government have constructed the legislation, the Competition Appeal Tribunal indeed has to behave like a court in some respects, in that it applies the principles of judicial review to appeals that are made to it. It is, therefore, necessary for it to have legal expertise. For that reason, if for no other, appointment by the Lord Chancellor is to be sought after.

There is, however, a particular reason why I propose that the Lord Chancellor should also be responsible for appointing the ordinary members. Under the Competition Act, it was correctly felt that the ordinary members could be appointed by the Secretary of State because they would bring the additional expertise necessary to examine appeals on their merits, on issues relating to anti-competitive agreements or abuses of a dominant position. The cases brought before the tribunal demonstrate that experience not only of competition law but of economic analysis of competition is necessary to reach decisions on those issues. I shall come to appropriate expertise when I speak to amendment No. 148.

Other things being equal, the Secretary of State could continue to appoint the ordinary members of the tribunal, in relation to decisions on the Competition Act, without any problems. That is because the decisions that are appealable to the Competition Appeal Tribunal under the Competition Act come from decisions made by the Office of Fair Trading. Under the Bill, however, the decisions will not necessarily be made by the Office of Fair Trading or the Competition Commission. In certain circumstances, they will be made by the Secretary of State. Of course, under the Fair Trading Act 1973, such decisions used to be appealable to the High Court, so a judge would be responsible for assessing judicial review decisions made by the Secretary of State. However, the Government propose in the Bill that decisions made on judicial review grounds be appealed to a body whose members are appointed by the Secretary of State.

My primary contention in speaking to amendment No. 147 is that that is an unacceptable infringement of the proper independence of the tribunal in exercising its function. Indeed, such an independent and impartial tribunal is required by article 6 of the European convention on human rights. However, we could arrive at circumstances in which a decision made by the Secretary of State is appealed on judicial review grounds, but in which one of the members of the body to which it is referred is about to be reappointed—or not—by the Secretary of State. By the simple expedient of making the Lord Chancellor rather than the Secretary of State responsible for such appointments, we can escape that problem, so I commend the amendment to the Minister's consideration.

Amendment No. 148 is designed to extend the description of the experience that ordinary members of the Competition Appeal Tribunal should have. My reason for tabling the amendment is that it is clear that the tribunal will not only be asked to consider judicial review decisions, but be used as a body under sector-specific legislation. For those who care to look, schedule 9 gives a range of examples in which that arrangement will apply. The decisions that will be made by sector regulators, especially in respect of licence conditions, are not simply legal decisions, but relevant to economic analysis and require business experience.

That point was further brought home to me when it became clear that in the draft Communications Bill that is being scrutinised elsewhere—I am a member of its scrutiny committee—the Government intend that the Competition Appeal Tribunal be the body to which decisions made by the Secretary of State or the Office of Communications will be appealed. Those decisions will be substantive and not made simply on a judicial review basis, so general legal expertise and competition law expertise will not be sufficient for the panel in dealing with them.

To make the Bill more effective in terms of the availability of opportunities for appeals to be heard in respect of sector regulators' decisions on licence conditions, my second submission on amendment No. 148 is that the Minister should think seriously about extending the sort of business and economic analysis experience that panel members of the Competition Appeal Tribunal can bring to bear.

I want briefly to refer to amendments Nos. 311 to 314. The amendments deal with clause 17, which amends the Competition Act, and are intended to ensure that the question whether a claim for damages might be brought to the tribunal is determined not by whether the OFT has decided

"that . . . the prohibition has been infringed",

but by whether it has made a decision "as to whether" it has been infringed. The amendments do not stem only from the fertile imaginations of Opposition Members, but derive from the recommendations of the Joint Working Party on Competition Law of the Bars and Law Societies of the United Kingdom.

As I understand it—I apologise if I have misunderstood the joint working party—the purpose of the provisions as things stand is that a court can entertain an application for damages by a private party in respect of infringements or argued infringements of the anti-competitive agreements or in relation to prohibitions on abuse of a dominant position. The current structure of the Bill would mean that where the OFT has decided that such an infringement existed, an application for an award of damages would go to the Competition Appeal Tribunal. However, the concern is that those who wish to argue that there is an infringement by which harm has arisen and for which damages may be claimed could still go to the court to make a private claim.

For my purposes, I will be made comfortable if the Minister can assure me that it would not be possible for a further claim to be made when the OFT decides that such an infringement has not been made. If it is possible for the matter to be taken to the court when the OFT has decided that there is no infringement and has not proceeded, that will be an additional jeopardy. It is that jeopardy that the amendments are designed to remove, so that the issue rests with the competition authorities and the Competition Appeal Tribunal, as I think the Government would have intended.

Amendment No. 315 is intended to test the issue. Its purpose, which is to make decisions on merger references appealable to the Competition Appeal Tribunal on their merits, seems on the face of it to be a step too far. However, it is important to test the Minister out, especially as I do not think that that happened in quite the same terms in Committee. The question is whether the decision by the OFT on making a merger reference is sufficient for the subsequent investigation by the Competition Commission, which is usually the determining body in this regard, to be regarded as a full appeal by an independent and impartial tribunal. I think that the answer to that question is yes in terms of mergers, but for reasons that I shall come to in speaking to a later group of amendments, I think the answer is no in so far as market investigations are concerned.

If the Minister can further assure us that the Competition Commission is the appeal body for such purposes—the independent and impartial tribunal that is needed for appeal against a substantive decision on a merger reference by the OFT—we will be sure that we have the two-stage process that is necessary to give proper reassurance to those who are affected by competition decisions.

Vincent Cable (Liberal Democrat, Twickenham)

I should like to say a few words in support of proposals that seem sensible and constructive. I am not a lawyer either and I take my cue from the Law Society, but it seems to me that some perfectly justifiable points are being raised. In particular, I refer to amendment No. 315. I think that the question that is being asked—it has been put slightly differently from the way in which the hon. Member for South Cambridgeshire (Mr. Lansley) has put it—is about why there is a difference between the ways in which the Competition Act and the Bill work. As I understand it, the Competition Act allows a full and substantive appeal to be made on the basis of the merits involved, but the judicial review process for which the Bill provides is much more truncated. It is not obvious why the two matters should be dealt with somewhat differently, and the amendment is designed to provide not only a stronger process of appeal, but some consistency between the two measures. It would be useful to hear from the Minister the reasons why that difference is being maintained.

Melanie Johnson (Labour, Welwyn Hatfield)

The hon. Member for South Cambridgeshire (Mr. Lansley) has already covered the aims of amendments Nos. 147 and 148. On the first point, which is that the amendments would ensure that the Lord Chancellor would make all the appointments, as I explained in Committee, we are happy with the division of responsibilities that we envisage for the Lord Chancellor and the Secretary of State. I thought that the hon. Gentleman shot his own foot somewhat by pointing out that there would be a difference between the role of the chairman and president and that of the other appointees to the tribunal, as those on the panel of chairmen would have to understand what was consistent and behave as if the tribunal were a court. The tribunal is indeed a court, and it therefore makes sense that the people who are appointed have explicit qualifications. The Lord Chancellor obviously has an expertise that is at a premium in considering such questions. We believe that his involvement in those cases should ensure that we attract candidates of the highest calibre to be chairmen.

However, we believe that the Secretary of State for Trade and Industry is best placed to identify and select candidates with the necessary blend and breadth of experience and background to constitute ordinary members. They will not have to carry out legal roles, nor will they require legal qualifications. Such members will not necessarily be bringing specific legal expertise, but they will be expected to have expertise relevant to competition. They could be drawn from a wide range of backgrounds. The background could be legal but it could also be in economics, business, accountancy or other areas. For that reason, we believe that the right balance has been struck.

There are already measures in place to ensure that the ordinary members, chairmen and president can carry out their duties without any external influence being brought to bear. We have strengthened these measures. The only grounds for removing any member from office will be incapacity or misbehaviour. The scenario that the hon. Member for South Cambridgeshire entertained briefly of a member being removed is not an issue. Also, members and chairmen will be appointed for one eight-year term with no reappointment. Previously, members were appointed for shorter terms and then reappointed, so the break that the hon. Gentleman referred to did exist.

These safeguards, and others, will ensure the integrity of the tribunal's decisions. The division of responsibilities offers the best prospect of securing the required level of legal and other expertise on the tribunal.

On the second issue, we share the desire of the hon. Gentleman—if we have understood the intention of his amendment correctly; there appears to be a negative too many—to attract ordinary members with relevant expertise. We made a commitment in the White Paper that all members should have expertise relevant to competition. However, we have deliberately not included a specific requirement in the Bill because of the difficulties in formulating such a requirement. That is a very different situation from that for the legally qualified chairmen and president, whom we require to have experience of competition law and practice. That concept is relatively easy to define.

"Expertise relevant to competition" is much broader, and could come from working in business or from having an accountancy background, for example. We need to keep our options open if we are to attract members of the calibre required, and particularly if we want to attract candidates from diverse backgrounds and from all areas of the UK. The problems of definition do not arise here, as they did in the case of those who needed experience of competition law and practice. It is for that reason that we have made the change. I am entirely sympathetic to the points made by the hon. Gentleman.

The amendment represents the sentiment of what we are trying to achieve, but it is not necessary to require it in the Bill. We could risk excluding potentially very good candidates if we were to do so. I ask the hon. Gentleman to withdraw the amendment, recognising that the needs are being met.

Amendment No. 315 seeks to give parties a right to review the substance of any decision that is taken. The subject of what could constitute the appropriate grounds for review of a decision following a merger or market investigation was discussed in Committee. As I explained then, the Bill provides for parties who are aggrieved by decisions to have them reviewed by the CAT on the same grounds as would be applied by the courts on the application for judicial review. That is the situation under the Fair Trading Act at present, where decisions of the Secretary of State are open to challenge on judicial review grounds.

We continue to believe that judicial review is the right jurisdiction for appeals against decisions taken in merger investigations. That type of review by the CAT will ensure that the procedures followed by the authorities are fair and that the parties are given the opportunity to put their case. It will allow the CAT to re-examine any decision taken by the authorities to assess whether it is reasonable.

No merger is prohibited by law from the outset. It is for the authorities to decide case by case whether any merger will lead to a substantial lessening of competition and what steps should be taken to remedy that in each case. That could mean outright prohibition, or imposing conditions as the price of clearance.

Decisions will be based on an analysis of individual cases on their specific facts and an economic analysis of those facts by the authorities, acting in accordance with their statutory duties. They will not be evaluated against a defined prohibition by reference to an existing body of substantive competition law and jurisprudence, as would be the case with decisions under the Competition Act 1998.

A considerable amount of discretion needs to be exercised. It would be difficult for the CAT to assess whether the decision that has been made is right or wrong in objective terms. In this context, we clearly need to ensure that the process followed by the authorities was fair and that the parties were given the opportunity to put their case. A judicial review type of appeal is therefore appropriate.

Such a review by the CAT will also allow decisions to be assessed more quickly than would a full appeal on its merits. We consider that resolving these disputes quickly is particularly important in a merger situation where the market environment may be changing rapidly. The mechanism for challenging decisions made in relation to merger investigation references needs to ensure that the process followed by the authorities in a merger investigation is fair and that the parties are given the opportunity to put their case.

If, applying the principles of judicial review, the CAT considers the challenge to the decision is justified, the original decision maker can be asked to look at the decision again. We think that this is the most appropriate way to deal with the type of decision that will be made under these parts of the Bill.

The hon. Member for South Cambridgeshire asked about the Competition Commission, which is not an appeal body in the way that he envisages. The two bodies separately consider the issues involved in a case, but they do not formally consider an appeal. For both markets and mergers, we are happy that we have an overall structure that offers sufficient right of appeal. The combination of the Competition Commission and the CAT offers an opportunity for consideration of all the issues.

In relation to damages, one could in principle go to court in a case where there was no infringement found, but the court would have to have regard to the result of the OFT's decision.

Amendments Nos. 311 to 314 widen the basis on which claims for damages can be brought to the CAT by enabling claims to be brought where the OFT has found that there has not been an infringement of competition law. It is hard to envisage what basis there could possibly be for bringing a damages claim with respect to anti-competitive activity where it has been established that no infringement has occurred. As it stands, amendment No. 311 will not help those who have been harmed by anti-competitive activity to bring claims for damages, which is what I think the hon. Gentleman had in mind.

With that, I hope that I can persuade the hon. Gentleman to withdraw the amendment.

Andrew Lansley (Conservative, South Cambridgeshire)

I am comforted by what the Minister said about the measures for trying to secure the independence of the CAT, and about amendment No. 147. On amendment No. 148, I agree that we are looking for the same kind of objective. Looking back at the Competition Act 1998, which is amended here, I should be interested in whether there was some way of reflecting more substantively the range of experience that is required by the CAT as it accumulates these additional responsibilities. I understand that one would not want to do so in a way that frustrated the ability to appoint people who appear to have different but highly desirable experience, but it seems to me not to be beyond the wit of Government to achieve that. I must confess that, previously, it seemed to me that the reference to experience of competition law and practice seemed rather narrow and that it would be better to try to widen it, if that could be done.

I entirely understand the Minister's point about amendments Nos. 311 to 314. They could allow individuals to come to the tribunal in circumstances where the OFT decided that no infringement had occurred, but as she says, I doubt whether they would get very far. The question is, does that also mean that they would not get very far if they went to a court in such circumstances? She said that it is open to people to go to a court for a private action, but that the court would have to have regard to the OFT's decisions. Would it not be better to construct matters in such a way that people could not go to a separate court, but had instead to go to the tribunal? Given that the Government have created the tribunal as the appropriate body for hearing awards for damages, should it not also hear cases that could conceivably be brought in circumstances where an infringement had not been proved?

If I may, I shall leave the issue of appeals to be judged on its merits. I intimated my view that the two-stage merger process—involving the OFT, the Competition Commission and judicial review through the Competition Appeal Tribunal—is sufficient. However, for reasons that I shall explain later, that is not necessarily true in respect of market investigations. With those points in mind, I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 14 — Constitution of Tribunal for particular proceedings and its decisions

Schedule 3 — The Competition Service

Schedule 4 — Tribunal: Procedure

Clause 17 — Damages

Clause 18 — Claims on behalf of consumers

Schedule 5 — Proceedings under Part 1 of the 1998 Act

Clause 21 — Duty to make references in relation to completed mergers

Nigel Waterson (Conservative, Eastbourne)

I beg to move amendment No. 18, in page 11, line 7, leave out "shall" and insert "may at its discretion".

Michael Lord (Deputy Speaker, Central Suffolk and North Ipswich)

With this it will be convenient to discuss the following: Amendment No. 19, in page 11, line 7, after "(3)", insert "have a discretion to".

Amendment No. 21, in page 11, leave out lines 11 and 12 and insert—

'in the creation or strengthening of a dominant position, as a result of which competition may have been significantly reduced within any market or markets in the United Kingdom for goods or services'.

Amendment No. 202, in page 11, line 11, after "competition", insert—

'or substantial damage to the public interest'.

Amendment No. 22, in page 11, line 12, at end insert—

'or

(c) the creation of that situation has operated, or may be expected to operate against the public interest.'.

Government amendments Nos. 224 to 226.

Amendment No. 20, in clause 32, page 19, line 34, leave out "shall" and insert "may at its discretion".

Amendment No. 23, in page 19, line 38, leave out from "result" to end of line 40 and insert—

'in the creation or strengthening of a dominant position, as a result of which competition is likely to be significantly reduced within any market or markets in the United Kingdom for goods or services'.

Amendment No. 203, in page 19, line 39, after "competition", insert—

'or substantial damage to the public interest'.

Amendment No. 24, in page 19, line 40, at end insert—

'or

(c) the creation of that situation has operated, or may be expected to operate against the public interest.'.

Amendment No. 56, in page 20, line 7, at end insert—

'or

(d) the enterprise which is the subject of the proposed merger will become insolvent within the immediate future; the market shares of the enterprise would in any event go to the acquiring party; and there is no less anti–competitive way of selling the company.'.

Amendment No. 204, in clause 34, page 20, line 43, after "competition", insert—

'or substantial damage to the public interest'.

Amendment No. 25, in page 20, line 45, at end insert—

'or

(c) the creation of that situation has operated, or may be expected to operate against the public interest.'.

Amendment No. 26, in page 21, line 3, leave out from "result" to "or" in line 25 and insert—

'in the creation or strengthening of a dominant position, as a result of which competition may be significantly reduced within any market or markets in the United Kingdom for goods or services'.

Amendment No. 27, in page 21, line 8, leave out from "result" to end of line 10 and insert—

'in the creation or strengthening of a dominant position, as a result of which competition may be significantly reduced within any market or markets in the United Kingdom for goods or services'.

Amendment No. 28, in page 21, line 15, leave out from "preventing" to end of line 18 and insert—

'the creation or strengthening of a dominant position, as a result of which competition may have been significantly reduced within any market or markets in the United Kingdom for goods or services'.

Amendment No. 29, in page 21, line 20, leave out from "preventing" to "and" in line 23 and insert—

'the creation or strengthening of a dominant position, as a result of which competition may have been significantly reduced within any market or markets in the United Kingdom for goods or services'.

Amendment No. 30, in page 21, line 28, leave out from "practicable" to end of line 29 and insert—

'the creation or strengthening of a dominant position, as a result of which competition may have been significantly reduced within any market or markets in the United Kingdom for goods or services'.

Amendment No. 31, in clause 35, page 22, leave out lines 5 and 6 and insert—

'the creation or strengthening of a dominant position, as a result of which competition may have been significantly reduced within any market or markets in the United Kingdom for goods or services'.

Amendment No. 205, in page 22, line 5, after "competition", insert—

'or substantial damage to the public interest'.

Amendment No. 32, in page 22, line 6, at end insert—

'or

(c) the creation of that situation has operated, or may be expected to operate against the public interest.'.

Amendment No. 33, in page 22, line 11, leave out from "preventing" to end of line 13 and insert—

'the creation or strengthening of a dominant position, as a result of which competition may have been significantly reduced within any market or markets in the United Kingdom for goods or services'.

Amendment No. 34, in page 22, line 15, leave out from "preventing" to "and" in line 17 and insert—

'the creation or strengthening of a dominant position, as a result of which competition may have been significantly reduced within any market or markets in the United Kingdom for goods or services'.

Amendment No. 35, in page 22, line 22, leave out from "practicable" to end of line 23 and insert—

'the creation or strengthening of a dominant position, as a result of which competition may have been significantly reduced within any market or markets in the United Kingdom for goods or services'.

Government amendment No. 227.

Amendment No. 36, in clause 40, page 25, line 37, leave out from "prevent" to "and" in line 38 and insert—

'the creation or strengthening of a dominant position, as a result of which competition may have been significantly reduced within any market or markets in the United Kingdom for goods or services'.

Amendment No. 37, in page 25, line 40, leave out from second "from" to end of line 41 and insert—

'the creation or strengthening of a dominant position, as a result of which competition may have been significantly reduced within any market or markets in the United Kingdom for goods or services'.

Amendment No. 38, in page 26, line 1, leave out from "to" to end of line 2 and insert—

'the creation or strengthening of a dominant position, as a result of which competition may have been significantly reduced within any market or markets in the United Kingdom for goods or services'.

Amendment No. 57, in page 26, line 5, at end insert—

'(6) In making a decision under subsection (2), the Commission may also have regard to whether the enterprise which is the subject of the proposed merger will become insolvent within the immediate future; the market shares of the enterprise would in any event go to the acquiring party; and there is no less anti–competitive way of selling the company.'.

Government amendments Nos. 228, 230 and 231.

Amendment No. 39, in clause 43, page 29, line 14, leave out from "in" to end of line 15 and insert—

'the creation or strengthening of a dominant position, as a result of which competition may have been significantly reduced within any market or markets in the United Kingdom for goods or services'.

Amendment No. 58, in page 29, line 28, at end insert—

'or

(g) the enterprise which is the subject of the proposed merger will become insolvent within the immediate future; the market shares of the enterprise would in any event go to the acquiring party; and there is no less anti–competitive way of selling the company.'.

Amendment No. 40, in clause 44, page 30, line 7, leave out from first "of" to "the" in line 8 and insert—

'the creation or strengthening of a dominant position, as a result of which competition may have been significantly reduced within any market or markets in the United Kingdom for goods or services'.

Amendment No. 41, in page 30, line 15, leave out from "result" to end of line 16 and insert—

'the creation or strengthening of a dominant position, as a result of which competition may have been significantly reduced within any market or markets in the United Kingdom for goods or services'.

Amendment No. 42, in page 30, line 27, leave out from "result" to end of line 29 and insert—

'the creation or strengthening of a dominant position, as a result of which competition may have been significantly reduced within any market or markets in the United Kingdom for goods or services'.

Amendment No. 43, in page 30, line 33, leave out from first "of" to end of line 36 and insert—

'the creation or strengthening of a dominant position, as a result of which competition may have been significantly reduced within any market or markets in the United Kingdom for goods or services'.

Amendment No. 44, in page 30, line 41, leave out from "in" to end of line 43 and insert—

'the creation or strengthening of a dominant position, as a result of which competition may have been significantly reduced within any market or markets in the United Kingdom for goods or services'.

Amendment No. 45, in clause 46, page 32, line 8, leave out from "in" to "and" in line 9 and insert—

'the creation or strengthening of a dominant position, as a result of which competition may have been significantly reduced within any market or markets in the United Kingdom for goods or services'.

Amendment No. 46, in page 32, line 10, leave out from "any" to "the" in line 12 and insert—

'the creation or strengthening of a dominant position, as a result of which competition may have been significantly reduced within any market or markets in the United Kingdom for goods or services'.

Amendment No. 47, in page 32, line 25, leave out from "in" to "and" in line 27 and insert—

'the creation or strengthening of a dominant position, as a result of which competition may have been significantly reduced within any market or markets in the United Kingdom for goods or services'.

Amendment No. 48, in page 32, line 28, leave out from "any" to end of line 31 and insert—

'the creation or strengthening of a dominant position, as a result of which competition may have been significantly reduced within any market or markets in the United Kingdom for goods or services'.

Amendment No. 49, in page 33, line 6, leave out from "be" to "it" in line 7 and insert—

'the creation or strengthening of a dominant position, as a result of which competition may have been significantly reduced within any market or markets in the United Kingdom for goods or services'.

Amendment No. 50, in page 33, line 11, leave out from "preventing" to end of line 14 and insert—

'the creation or strengthening of a dominant position, as a result of which competition may have been significantly reduced within any market or markets in the United Kingdom for goods or services'.

Amendment No. 51, in page 33, line 17, leave out from beginning to "and" in line 19 and insert—

'the creation or strengthening of a dominant position, as a result of which competition may have been significantly reduced within any market or markets in the United Kingdom for goods or services'.

Amendment No. 52, in page 33, line 26, leave out from "be)" to end of line 27 and insert—

'the creation or strengthening of a dominant position, as a result of which competition may have been significantly reduced within any market or markets in the United Kingdom for goods or services'.

Amendment No. 59, in page 33, line 32, at end insert—

'(10A) The Commission may also have regard to whether the enterprise which is the subject of the proposed merger will become insolvent within the immediate future; the market shares of the enterprise would in any event go to the acquiring party; and there is no less anti-competitive way of selling the company.'.

Government amendment No. 237.

Amendment No. 53, in clause 54, page 39, line 3, leave out "substantial lessening of competition" and insert—

'the creation or strengthening of a dominant position, as a result of which competition may have been significantly reduced within any market or markets in the United Kingdom for goods or services'.

Government amendments Nos. 238 and 239.

Amendment No. 54, in clause 70, page 51, line 5, leave out "substantial lessening of competition" and insert—

'creating or strengthening a dominant position, as a result of which competition may have been significantly reduced'.

Amendment No. 55, in page 51, line 12, leave out—

'substantial lessening of competition and any adverse effects resulting from it'

and insert—

'creating or strengthening a dominant position, as a result of which competition may have been significantly reduced'.

Government amendments Nos. 248 to 251.

Amendment No. 69, in clause 99, page 70, line 30, leave out Clause 99.

Nigel Waterson (Conservative, Eastbourne)

I shall set your mind at rest, Mr. Deputy Speaker, by pointing out that this group of amendments is not as fearsome as it might first appear. I shall take the House through at least those amendments for which I claim some responsibility.

Rather than imposing an obligation, amendments Nos. 18 to 20 would give the OFT the discretion to refer completed and anticipated mergers to the Competition Commission. The idea was debated in Committee on 25 April, but it was rejected by the Government on the basic ground that a broad discretion not to refer was appropriate where there is a two-stage referral process. However, as the Director General of Fair Trading would act alone on the basis of a more focused test, there would be less room for discretion. The Minister said that the new test should not result in a greater number of references. It is important to note that, broadly speaking—it is impossible to be wholly accurate on these matters—the Government's intention is that the number of references should not rise as a result of the provisions.

However, we are not wholly convinced, which is why we have tabled similar amendments on Report. The Bill introduces a significant change of emphasis. Under the Fair Trading Act 1973, the Secretary of State had the discretion to decide whether or not to refer mergers, acting on the advice of the director general. Since October 2000, the director general's advice has normally been accepted. Taken together, the formulations set out in clauses 21 and 32 require a reference to be made in respect of proposed and completed mergers, except in certain limited circumstances.

Lest anyone think that I am cleverer than I really am, the amendments were inspired by the joint working party of the Law Society and the Bar. [Interruption.] I am grateful that my comment has found favour with the Government Whip. It is therefore clear that concern exists outside this place that there will be almost routine or obligatory pre-clearance for mergers—a point that we made in Committee. It is fair to say that many parties already undertake such pre-clearance, but entirely at their own discretion. We—and others who are perhaps better placed to know—believe that a dramatic shift will take place. It will make practical sense for those who are contemplating a particular merger to obtain pre-clearance, which will in itself involve a major increase in applications.

The Law Society and the Bar also pointed out that there was no consultation on this change of policy, which was not included in the White Paper. I think it fair to say—I have not checked the relevant editions of Hansard—that the Minister gave no reason for her assumption that the provisions will not result in an increase in references. We want to press her hard on that issue.

The other issues—public interest, and the dominant position in terms of the test that should be applied in such cases—fall into two or three categories. You will be relieved to hear, Mr. Deputy Speaker, that many of the amendments in this group make the same point. We had a good debate on these issues in Committee, but some of the arguments bear repetition. Under the 1973 Act, the public interest test was established, and it is generally accepted that that needs revisiting. Some discussion took place in Committee on the merits of the dominance test—which is favoured by the Confederation of British Industry, for example—and what is known as the "substantial lessening of competition" test. One argument in favour of the dominance test is that it is the standard for assessing mergers under the EC regime. There is real concern that businesses operating in this country might face a stiffer test here than they would face under the European regime.

In Committee, my hon. Friend the Member for South Cambridgeshire (Mr. Lansley) pointed out graphically that, during the Standing Committee that considered the Competition Act 1998, Ministers expressed the strong view that there should be no disparity between regimes operating in Europe and in this country. Although not the most significant example, it shows how our system is in danger of drifting away from the European one.

I repeat the CBI's interesting quote concerning the Competition Act 1998:

"The demarcation line between domestic and EU mergers is sometimes not clear cut, particularly in more complex transactions. As a result it would be fairer and more sensible for companies operating across the European Union to have to comply with one standard as opposed to two differing ones."

That is an important point in principle, and an important point in practice. Like so many of these issues, having a different test—even a subtly different one—involves extra work and extra burdens for those who are trying to make businesses profitable. We do not resile, therefore, from our support for the amendments relating to the dominant position. I shall be interested to hear the Minister justify establishing a separate test from that operating in the European regime.

The other issue, dealt with in amendments Nos. 56 to 59, is one that we tried to import into the Bill from the United States and, indeed, Europe. That is the so-called failing firm defence. In the US, for example, four things have to be shown: that the failing firm cannot meet its financial obligations; that it cannot reorganise itself in bankruptcy; that it cannot find another buyer whose purchase would pose lesser anti-competitive risks; and that in the absence of the merger its assets would exit the market.

In the EU, we have had a fascinating discussion about the case of Kali-Salz/MDK/Treuhand, which is all about potash. In that case, the Commission set out three criteria: that the company would in any event go bankrupt in the immediate future; that the market share of that company would in any case go to the merging party; and that there was a no less anti-competitive way of selling the company. There is a slight difference in approach between the US and the EU tests, but that does not matter for our purposes, because we are trying to persuade the Minister that incorporating the so-called failing firm defence would be sensible.

In fairness, the Minister has not launched a full frontal assault on our suggestion. To summarise, possibly unfairly, her reply to the discussion in Committee, she said that the prospects for a particular company would be taken into account in any event, so it was not necessary to spell that out. I do not wish to labour the point, but if such a defence is good enough for both the US and the EU regimes—albeit with slightly different tests applying—we should seriously consider including it in the Bill for application to our system.

Amendment No. 69 would remove clause 99. Our problem with that clause is that it would give the Secretary of State extremely wide powers to modify clauses 94 to 98 on the mergers regime. The power is too broad and any significant change should be a matter for primary legislation. Again, our arguments did not find favour with the Minister in Committee, but I hope that we will have better luck on Report. I commend the amendments to the House.

Harry Barnes (Labour, North East Derbyshire)

I tabled amendments Nos. 202 to 205, which would place the issue of public interest back into the Bill. Amendments Nos. 304 and 305 in the next group also address that issue. The difference between the two sets is that the present ones relate to the director general of the OFT and the later ones relate to the position of the Secretary of State. My remarks about the public interest will relate to both sets of amendments, but I shall try to keep in order. I may not need to repeat my remarks when we come to the next group of amendments on the Secretary of State's role because I will have already addressed the issues in relation to the role of the director general.

When the hon. Member for Eastbourne (Mr. Waterson) moved the amendments, he said that they were not fearsome. However, I hope that my amendments will be viewed as slightly fearsome, because I am very concerned about the issue. In Committee, I explained the problems in my constituency associated with the takeover and immediate closure of Biwater, and the loss of 700 jobs. The provisions in the Fair Trading Act 1973 would have allowed that takeover to be referred to the Competition Commission on the ground of public interest, and if that had been done by the OFT or the Secretary of State, it is likely that those jobs would still exist today and that a profitable and viable firm, with its export market, would still be in operation.

Since that time, I have been interested in the provision in the 1973 Act that allows such reference and why it was not acted on in the Clay Cross case. I became aware that the DTI sought to remove the provision from the legislation through a consultative document and a later White Paper. I have always pressed for the provision to be retained.

It is a modest measure. The Fair Trading Act 1973, which contains the provisions about the public interest, was introduced by the Heath Government. In 1973, I was fighting that Government on their housing finance legislation and ended up in court, with several other people, in relation to its abject provisions. It can be seen from that that I did not generally share the Heath Government's attitudes, but it is interesting that I am now seeking to defend a measure from that period against a worse proposal from this Government.

Nigel Waterson (Conservative, Eastbourne)

My first task as researcher to Sally Oppenheim, who was then the Member of Parliament for Gloucester, was to assist her in her work as a member of the Committee dealing with the housing finance legislation. It was a gruelling battle by any standards, but in those days the Opposition were allowed much more licence than they are now.

Harry Barnes (Labour, North East Derbyshire)

Perhaps some licence will be granted to the amendments before us now.

The Fair Trading Act 1973 provides that the Secretary of State or the director general of the OFT may refer a merger to the Monopolies and Mergers Commission, which later became the Competition Commission, when it is in conflict with the public interest, which is defined to cover job losses, the loss of industry in an area, the loss of export trade and factory closures. The present Bill contains very limited provision on the public interest. Clause 57 contains an element of public interest, in that the Secretary of State may refer a bid on grounds of national security and can seek an order in the House for something that is as yet undefined but appears to be a sort of fall-back position for making a reference on the ground of public interest.

The Opposition and their friends in the CBI are running worried about clause 57, because they think that it could release all sorts of hobgoblins and create huge difficulties. The TUC and many others think that the problem is that clause 57 is just dead words. It does not mean anything and we cannot envisage any circumstances in which the provision would be used. We cannot persuade the Minister to give us any theoretical examples of the circumstances in which it would be used, so we cannot tell whether it is possible that it could be used to defend the interests of the trade unions in any way in the future.

In 1973, when the Fair Trading Act was passed, Labour was in opposition and it adopted the position that the TUC has adopted now on this issue. The Labour party wanted the public interest provisions to be extended; it did not want their virtual removal, which is the position with this Bill.

Things were somewhat different in those days. Tony Benn was shadow Secretary of State for Industry. An interesting debate took place in Standing Committee, where some interesting people moved amendments to improve and strengthen the public interest provisions. They included Bruce Millan, the then Opposition spokesman on industry and aviation, who later became a Commissioner in Europe, and the late John Golding—the Library tells me that he was then an Opposition Whip, in which case I am not sure why he was tabling amendments, but he was certainly associated with the Labour Front-Bench team. My right hon. Friend the Member for Swansea, West (Mr. Williams) was the industry spokesperson. They all had some interesting things to say about extending the public interest. The logic of their position would be to be aghast that we are now virtually ridding ourselves of any concern about the public interest, apart from matters of national security.

In Standing Committee B on 3 April 1973, Bruce Millan, opposing the Heath Government, introduced an amendment that would strengthen the resolve of the Fair Trading Bill. He said:

"If the amendment were accepted, it would slow down mergers to some extent. This is one of the purposes of the amendment, and I want to make that explicit. If people involved in mergers had to prove positive good, the number of mergers going through would be reduced. That would be a good thing. I am not in favour of mergers going through unless it can be demonstrated that there is some public good arising."—[Official Report, Standing Committee B, 3 April 1973; c. 1078.]

Certainly, the merger that took place in Clay Cross was in every way contrary to the public interest and the public good. It is to the detriment of the former Secretary of State for Trade and Industry that he did not refer that matter to the Competition Commission—nor did the Office of Fair Trading do so.

In my amendments I am asking the OFT to use these provisions, hopefully in the spirit of the 1973 legislation, and not to ignore them. In the case of Biwater, the report that was issued to the Secretary of State, which said that it was okay for the takeover by Saint Gobain in France to take place, did not reveal that the Director General of Fair Trading knew that the plant would close. In fact, when I raised that matter with the Department of Trade and Industry in the House, I was told that it did not need to know that and that it was not a material consideration. It was certainly a material consideration to the people in Clay Cross and the surrounding area, where 700 people within a five-mile radius lost their jobs. Often, they were mature workers and it was very difficult for them to find any other reasonably paid employment. When Bruce Millan was speaking in 1973, the Labour party was aware of such concerns.

The late John Golding also tabled amendments to the 1973 legislation. He was not known as a left winger in the Labour party. He would in many ways seek out the left and try to contain its activities. However, we are now past that stage. The Enterprise Bill is the avenue through which we are trying to get the economy moving—to produce the dynamic economy and the free markets that are associated with it—and it follows a somewhat different pattern from the one with which many of us would normally be associated.

After the Minister had replied to John Golding, the latter replied:

"The Minister is insensitive to the impact of mergers on the lives of these people. He is insensitive, too, in respect of the damage being done in industry at present."—[Official Report, Standing Committee B, 5 April 1973; c. 1098.]

Much damage is being done to manufacturing industry now, some 29 years later. I hope that the present Minister is not insensitive to those concerns and will ensure that moves are made to establish means by which the public interest could be re-established in the Bill.

At the Report stage of the 1973 legislation, my right hon. Friend the Member for Swansea, West introduced a measure similar to the one put forward by John Golding in the Standing Committee. My right hon. Friend pointed out:

"when a merger takes place not only the shareholder is involved. Whereas the shareholder's risk is a financial one, it is not as absolute a financial risk as that of the worker, because the average shareholder spreads his holding over eight to 12 companies."

I do not know what the figures are today, but a similar argument could be used. He continued:

"That contrasts with the position of the worker in industry who, particularly if he is employed in one of the less-favoured areas of the country in employment terms, finds that his loss is absolute, complete and, in far too many cases, permanent. The only capital that a worker has is his skill and his job. The more specific the skills of the firm in which he works and the smaller the locality, the less likely it is that he will find an alternative outlet for his investment in industry—namely, his training and his skill."—[Official Report, 17 May 1973; Vol.856, c. 1817.]

As I said, that comment is certainly of great relevance to the case that brought these matters to my attention.

The TUC and major trade unions feel that there should be provisions to take account of the public interest. I am suggesting, rather moderately, that we should merely return to the position held by Ted Heath in 1973. The left wing is now defending Selsdon man against the further extension of those powers in another direction.

Nigel Waterson (Conservative, Eastbourne)

Before the hon. Gentleman gets too carried away, does he agree that he and the Government are at one on the issue, even though they approach it from completely different directions? As we shall debate in more detail when we come to the next group of amendments, the Government seem to take the view that the public interest will have to be expanded and are trying to take the powers to do so, but they will not tell any of us what they have in mind. 5 pm

Harry Barnes (Labour, North East Derbyshire)

I offered an answer earlier when I pointed out that the Conservatives and the CBI saw these provisions as hobgoblin arguments and believed that all sorts of evils would spring forth—as regards their interests—owing to the Secretary of State's ability to extend such powers by order, as a fallback position. However, that is not the same as the introduction of a specific enabling commitment, such as the one included in the 1973 legislation, for the Office of Fair Trading and the Secretary of State; it is certainly not as good as what the TUC really wants—a provision whereby action must be taken in the public interest in certain circumstances.

Although the current proposals would sideline the 1973 legislation, the public interest provision has not been greatly used since the early 1980s. From Thatcher's time, that has been the policy of successive Governments. However, public interest concerns have crept through in some cases. It is difficult to define them because the Secretary of State or the Office of Fair Trading do not refer matters to the Competition Commission on public interest grounds A, B, C or D. They make a submission that argues which matters should be investigated, but it is not always easy to sort out whether those are the acceptable competition grounds to which the Government have referred or the unacceptable public interest considerations.

Other bodies can take on board the public interest considerations. For example, when the MMC recommended blocking BSkyB's attempted takeover of Manchester United, it used a public interest argument as well as a couple of competition arguments. My research briefing notes:

"Because it would tend to reinforce the wealth gap between weaker and stronger clubs, and to give BSkyB additional influence on League decision-making, the merger would 'have the adverse effect of damaging the quality of British football'."

The last Secretary of State for Trade and Industry to make direct use of the provision was my right hon. Friend the Member for Derby, South (Margaret Beckett), the present Secretary of State for Environment, Food and Rural Affairs. In 1997, she made a reference on public interest grounds in the PacifiCorp Energy Group plc case, where an energy supplier wanted to extend its operations in a particular sector. The MMC cleared the bid and found that it would not operate against the public interest, but the reference was made on those grounds and some interesting recommendations were made in the report in order to contain similar operations.

A case in 1995 affected my constituency. Stagecoach Holdings plc attempted to take a 20 per cent. stake in Mainline Partnership Ltd. I have regular problems with both companies, especially with Stagecoach whose buses do not turn up, or are late, or miss stops. Public inquiries were held in Mansfield and Chesterfield about aspects of its provision, including, in the Mansfield area, the collapse of certain buses which were towed away on the orders of the traffic inspector.

In that case, although the commission did not rule against the 20 per cent. stake holding, it said that it should not be extended. My research briefing notes:

"Arguably, this is an example of a non-competition element influencing the public interest test, albeit through its effect on competition."

As I pointed out earlier, there are avenues that can be used.

Further back, there are other examples. In 1988, a reference was made when the Government of Kuwait attempted to take over British Petroleum Co. plc. There was also a reference in 1982 when the Hong Kong and Shanghai Banking Corporation attempted to take over the Royal Bank of Scotland.

The measures may not have been used as they should, but that does not mean that they did not exist. They existed so that people could put pressure on their elected representatives and Governments to gain responses for their concerns.

The current political climate may be against those matters being dealt with, and the attitude that existed in the Biwater case may persist, but the climate can at least change, circumstances can alter and different pressures can be applied if the measure is in place.

The Government should be concerned with those issues, but they claim that it is very good that they are now at arm's length from them because of the measure; it keeps them out of things. However, the measure keeps the democratic process, argument and pressure away from involvement. Of course the Government should not manoeuvre, fiddle, spin and do the things that people claim they do to get their way; they should act openly and we should be able to see what is taking place.

The Government should act openly and be subject to representation and pressure from organisations. The democratic process involves not just voting at elections, but people being mobilised and organised and having rights to represent their sets of views and ideas, and the pressure group system is supposed to be part of the democratic process.

So the public interest argument has been used in various arenas, and we need to try to preserve it in the future. Even though we could ideally do with such a measure now, I would be chancing it even more if I were to move amendments to try to improve things in the way that John Golding, Bruce Millan and my right hon. Friend the Member for Swansea, West did way back in 1973.

I want to mention some of the support for my proposals in the trade union movement. In Committee and now on Report, the Bill has been dominated by dollops of representation and amendments from the CBI. Other amendments have come from the Consumers Association and other more acceptable avenues, but it seems as though we have just had to sit here, gritting our teeth, while all that has shot forward, normally in the shape of probing amendments, so that the CBI's view could be presented.

We have heard nothing about the TUC's view. Perhaps the TUC and some of the major trade unions should have made a greater effort to ensure that members of the Standing Committee and other hon. Members, including Labour Members, were informed of such things. Perhaps, to an extent, that shows the way the balance of forces has altered in this country. The TUC felt it needed to make formal representations and to produce documents and reports; it was not going to try to stimulate a rebellion on the Back Benches of the Labour party, so some of us have had to try to do that ourselves on this occasion.

In September 2001, the TUC produced a document in response to the White Paper that led to the Bill in which it discussed politicians' roles—the issue that I have been raising. It stated:

"The TUC has concerns about removing Ministers from the decision-making process on mergers. While advice may usefully be given by those with expert knowledge, Ministers remain publicly accountable for their actions in a way that competition authorities are not. As argued above"—

in its earlier arguments—

"if the competition authorities are going to take greater responsibility for decisions on mergers and other aspects of competition policy, it is essential that their accountability is also enhanced.

The White Paper states that Ministers will retain a role in relation to 'exceptional public interest' issues, but gives no guidance on the circumstances in which this might be appropriate. The TUC believes that it would be useful for the Government to promote a fuller discussion of what might constitute an exceptional public interest."

We tried to promote such a discussion in Committee, but exceptional public interest is still something we know not—it will not speak its name to us.

The general secretary of the TUC wrote to the Secretary of State for Trade and Industry on 20 March saying:

"As you will be aware, the TUC has consistently argued that mergers and takeovers should be regulated to operate in the public interest, and that employment effects should be taken into account alongside the impact on competition when judging a bid."

He then suggested amending the Bill to provide an avenue for written representations to be made in order that that door should be left open.

The Secretary of State replied on 9 April, repeating the points about clause 57 to which I have referred, but offering nothing else. The letter indicated that the Government were moving in a different direction. I at least hope that the Under-Secretary will be able to say that there will be a response to the general secretary's suggestion through suitable amendments in the Lords.

The argument is further pressed by Roger Lyons of the MSF section of Amicus. In its huge document on mergers, it expresses the need for ministerial answerability on these matters and for the ability to take things up. At a meeting in the House on 23 April, John Edmonds discussed these matters, and I have copies of statements of the GMB's position and its submission to the European Commission's Green Paper on merger matters.

I have letters from Unifi on the subject. I quoted its General Secretary, Ed Sweeney, earlier. In his letter to the Financial Times, he says:

"Unifi's concern is that no consideration will be given to the 'social' implications of mergers. Unifi believes that the consequences of mergers do sometimes need to be considered beyond the 'economic' and that the proposed reforms do not allow a mechanism for that consideration."

I also have letters from Equity, the National Union of Journalists, the Prison Officers Association and the National Association of Educational Inspectors, Advisers and Consultants, which all stress similar points. So there is a strength of feeling in the trade union movement that there should be a response. It is only correct that that view should be expressed in this debate.

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

My hon. Friend has not focused in his quite lengthy speech on what the consequences of incorporating the wording in the Bill might be. Although, with regard to the football analogy that he mentioned, I might accept that it is very boring that in Scottish football Celtic or Rangers always win, and that they have a virtual monopoly on all the trophies, I am not clear what the Government could do to arrange matters so that Scottish football became more interesting, or how other forms of dominance of various markets would be resisted in detail by my hon. Friend's amendment.

Harry Barnes (Labour, North East Derbyshire)

My amendment would not do what my hon. Friend seeks. We would need other amendments and legislation to do that. However, the BSkyB case was considered because of the implications of putting Manchester United at the centre of the market. That would have had an impact on other teams and their ability to survive. However, my amendment would not lead to the transfer of resources to assist people. We would need alternative measures to do that.

My amendment relates to references to the Competition Commission by appropriate bodies, particularly by the OFT. It should be able to argue its case and Ministers should be able to consider cases such as the one that occurred in Clay Cross. They should be able to assess the masses of evidence coming to them and the alternative viewpoint that might be provided by the OFT. They should grasp the nettle and be prepared to say that certain cases would have an adverse impact on an area. They should allow the Competition Commission to consider such cases. It might not necessarily produce the answers that I want, but such avenues should be open.

I know that the Government are worried about excessive intervention in the economy and about the dangers of knocking back competitive elements within it. However, surely, in an age of massive technological change in which we are moving forward to new types of industry, it is possible to approach the issue in as organised and as regulated a way as possible so that people's interests are protected as they develop new skills and are given new opportunities. We do not do that.

My attention was drawn to the Bill by an anonymous letter that I received from the British Bankers Association. [Interruption.] I meant not an anonymous letter, but an internal memo that was sent to me anonymously. Someone said that I might be interested in what the Bill will do. Although the British Bankers Association later claimed that the memo was an elaborate hoax, it is so detailed that it does not appear to be one. It points out that the association's members should keep quiet about the issues until the Bill slips through the House. It suggested that the Bill would not cause much bother.

When I came into the Chamber after receiving the letter, I discovered that a cosy teach-in was taking place between those on the two Opposition Front Benches and those on the Government Front Bench. No Divisions were taking place and there was not much hassle. Conservative Members obviously want much more from the Bill but they probably feel that they have done very well. The memo told the association's members to be non-committal if an MP approached them and to wait until the Bill becomes law. They would then be able to use it. The memo then described exactly what was in the Bill in terms of the hobgoblins that I have mentioned.

I hope that we can remove some of the hobgoblins and that we, at last, will have the opportunity to say that the public interest is back on the agenda. It is worth holding on to and some of us should think about promoting it in a different set of circumstances. Perhaps we could introduce legislation, as my hon. Friend the Member for Hemel Hempstead (Mr. McWalter) suggested. I feel strongly about that and I am minded to divide the House if the Government cannot demonstrate that they will at least pick up on the comments made by John Golding.

Vincent Cable (Liberal Democrat, Twickenham)

The arguments are well trodden. They were made in Committee, but as important principles are at stake we need to continue to debate them at least until the Bill reaches the other place.

I have several points to make. The first relates to clause 21, which deals with the facility with which merger references can be made. Like the hon. Member for Eastbourne (Mr. Waterson), I am struck by an apparent contradiction. The Minister said on Second Reading that she did not expect more merger references to be made. I found that difficult to square with the terms of the Bill, which clearly imply that merger references will occur almost as a matter of routine. However, that meant that I, unlike the hon. Gentleman, was pleased with the Bill, because more merger references are desirable.

There is a long history of mergers in the United Kingdom, the United States and elsewhere; the practice has been fashionable. They have been driven by management, which has a vested interest in size, and by the fee incentive for the merchant banking institutions. Invariably, as much of the economic and management literature shows, not only do mergers reduce competition to the detriment of consumers, but they do not benefit shareholders much either. An altogether more sceptical view is necessary, and that does not square with how the Minister sees the Bill rolling out. It is useful that the amendments allow us to continue to tease out what will happen.

I do not share either the geographical or the ideological stance of the hon. Member for North-East Derbyshire (Mr. Barnes), but an important point was buried in his contribution, and we need to keep it alive. I would approach the problem in terms of accountability. I agree in general with the idea of political independence, and that there should not be routine political interference in merger references. In that sense, the Bill takes us a step forward.

However, we have lost what elected politicians bring to bear to policy issues. We are elected to take account of the public interest and there is a fear that we are throwing out the baby of public accountability with the bathwater of political interference. We need to find a way to put it back. I would prefer to do that by having much stronger political accountability.

Indeed, I argued in Committee that we need a mechanism so that the chairman and other officers of the OFT receive the political scrutiny to which the Monetary Policy Committee is subjected by the Treasury Committee. It comes before Parliament at regular intervals and MPs, through the Select Committee system, have a veto over appointments. That helps to ensure that the officials appointed by Ministers to perform a specific task are kept aware of the public interest. However, the Government are unwilling to go down that road, so another way to tackle the problem is required. In that respect, the approach of the hon. Member for North-East Derbyshire is helpful.

The hon. Gentleman's approach is helpful for another reason, too. Some of my colleagues and I have a vivid recollection of the Utilities Bill, which was in many ways a good piece of legislation. However, the regulator's terms of reference on competition were narrowly defined. Many problems were generated by the automatic application of the new legislation to the new electricity trading arrangements—NETA—auctioning system, which crippled the combined heat and power sector and the renewables sector. The regulator could only throw up his hands and say, "Look. Parliament hasn't given me the flexibility to take account of the public interest." It is important that we do not repeat that mistake. Some form of words—it does not necessarily have to be the form of words suggested by the hon. Member for North–East Derbyshire—must be found. If it cannot be found this afternoon, I hope that it will be found in another place.

One of the amendments tabled by the hon. Member for Eastbourne is right. The conflicts, or at least the incompatibilities, between British and European legislation on the competition sector as it relates to merger references, have worried us from the outset. As we have discussed the matter, it has become clear that some of the initial concerns of business were rather exaggerated. The European Commission is clearly reforming its competition practices in ways that will make them somewhat more compatible with our own legislation. None the less, there are areas in which we are proposing something fundamentally different from European practice. It seems unnecessary, particularly in the cases that the hon. Member for Eastbourne has mentioned. That could be remedied by amendment, so I commend the changes.

John McDonnell (Labour, Hayes and Harlington)

I am following the lead of my hon. Friend the Member for North-East Derbyshire (Mr. Barnes) in seeking some form of assistance and succour from those on the Front Bench on this issue, because I am desperate to vote for the Government at least once this week. Some passing phenomenon described us as "all Thatcherites now". I note that the Prime Minister denied that yesterday, but my hon. Friend has smaller ambitions: he is desperate for us all to be a bit Heathite now, and come back to some concept of the public interest. There is the potential for avoiding a vote on amendment No. 202, although I, like my hon. Friend, will call for a vote on it unless the Minister can convince us otherwise. Obviously, we would like to put that request formally to you, Mr. Deputy Speaker.

We want some assistance—an explanation of how the public interest is to be maintained as a result of the Bill. Clause 57 refers to the public interest being maintained for national security, but there is also a reference to public security, based on previous legislation that we have debated in the House.

I would welcome a view on whether public security means a safety regime for the general public, whether it means security of employment for the workers employed in a company, and whether it involves protection of the local environment in which a company is located, the health of the community that lives around that company's premises, and the quality of life of the work force and all those who have any relationship with the company.

If we can gain some assurances on the record tonight that public security as referred to in clause 57 encompasses all those elements, I do not think that there will be a need for a vote on amendment No. 202. However, if there is not clarity from those on the Front Bench that the public security definition within clause 57 encompasses all those, we will need to press the matter to a vote this evening, if only to ask that the other place consider restoring the public interest definition in some form. I agree with our opposite number on the Liberal Democrat Benches, the hon. Member for Twickenham (Dr. Cable), about that.

This may not be the exactly correct form of words, but there needs to be a form of words that reiterates that fact clearly. Why? Briefly, because as demonstrated in the post-privatisation world, respect for the public interest is needed more now than ever before. We have seen some horrendous examples of the public interest being ignored, which has had an effect on the community overall. That is why I ask for those assurances.

There will be a danger if the public interest is not clearly defined in the Bill. The Government may not want to exercise existing powers, or any powers, to protect the public interest, but the hands of future Secretaries of State, future Governments—who may not be Thatcherite, as someone described us, but may want to be more interventionist in the interests of the public overall—are being fettered.

The problem with the Bill is that there is no sense of the common good. There is no sense of the responsibility of Government to protect the common interest of the community overall. I urge those on the Front Bench at least to define clearly how they see clause 57 operating in relation to the reference to public security. If it encompasses all the elements that I have described, there is no need for the vote. If it does not, we will need to vote this evening, so that we can signal to the other place to make the appropriate amendment.

Adam Price (Plaid Cymru, Carmarthen East and Dinefwr)

I had not intended to speak in this debate, but I was inspired by the contribution of the hon. Member for North-East Derbyshire (Mr. Barnes) to add my voice and offer the support of Plaid Cymru and the Scottish National party to the principles that he enunciated, if there is a vote on amendment No. 202.

As we are discussing collusion, I think that there has been a degree of collusion between the occupants of both Front Benches to give the impression that the shift in competition policy from a basis of the public interest to a purely competition-based approach is somehow completely uncontroversial. It is not. It is a matter of concern. In summarising responses to the White Paper, the Department of Trade and Industry referred to

"almost unanimous support for replacing the current public interest test with more focused competition."

Almost unanimous is not, of course, unanimous. As we have heard, there are important stakeholders who have voiced their concern and their opposition to a narrower competition-based approach.

I was interested in the Prime Minister's response to the assertion of the right hon. Member for Hartlepool (Mr. Mandelson) that we are all Thatcherites now. One of the Prime Minister's reasons for demurring was that Thatcherism had sought to isolate us in Europe. In this instance, we are seeing a shift to a more United States-based approach, which will hinder moves towards harmonisation of European merger policy.

I agree with the hon. Member for North-East Derbyshire that clause 57 does not provide us with the assurances that we seek. Indeed, the chairman of the Competition Commission has said that he believes that there will need to be a high burden of proof to add to the exceptions of public or special public interest. I understand that it is envisaged that provisions in the draft communications Bill will be added to the list that at present contains only national security.

There is an important issue. Some of us believe that the efficient functioning of markets is not the only consideration when it comes to industrial or regional policy. Merger activity can have a distorting effect on regional economic development. We have certainly seen that in Wales, where companies that are successful and reach a certain critical mass are taken over. The headquarters are then located outside the regional economy, and that has long-term implications for the pattern of economic development. There are also wider issues in the context of economic policy.

We have heard the concerns of the trade union movement, and especially of Unifi, the financial services union, which has led the assault, as it were, from the trade unions. The financial services sector has seen a great deal of merger activity and has suffered for it, in terms both of job losses and of service provision at a very local level. That would not be covered by the terms of the Bill.

Sometimes the public interest would favour loosening some of the competition rules. We have heard of the problem with producer co-operatives in the dairy sector and the wider agricultural sector. There needs to be a public interest basis so that wider issues can be taken into account.

It should be clear, certainly to Labour Members, that mergers affect consumers and communities. The hon. Member for North-East Derbyshire is seeking to uphold the principle that applies to those who used to be referred to as stakeholders. When we make decisions on such matters, we need to take account of a wide range of interests, not only consumer interests or competition policy.

Dennis Skinner (Labour, Bolsover)

I congratulate my hon. Friend the Member for North-East Derbyshire (Mr. Barnes) on persevering with this issue, which goes back a few years. A merger took place in Clay Cross in his constituency, which he has raised on the Floor of the House many times; he and I also raised it in Westminster Hall. There was a lot of hand-wringing, as often happens with a lot of mergers when people get sacked; the Department gave the impression that it would love to be able to help, but could not.

The Government cannot do the things that it would like to do principally because of the climate created by the Single European Act. A few years ago Thatcher introduced it, guillotined debate in the House of Commons and shovelled it through. Now everything is wrapped up with the Common Market; that is part of the problem experienced by Governments here and elsewhere. I hope that minority parties that now say that they are sympathetic to my hon. Friend's position realise that the wonderful Common Market that they have fallen in love with is part of the problem.

The Biwater merger at Clay Cross prompted my hon. Friend to start the process that we have heard about today. Seven hundred people were told that Biwater was finished and would become part of Saint Gobain, a French firm. They were told that everything would be okay, although a few people might be shifted here and there—but within a few hours they had all lost their jobs, which is why the amendment is ultra-important.

I got the clear impression that the Government would like to resolve the problem. Next time a merger takes place, there will be a lot of hand-wringing and many people will say, "We'd love to do something, but we can't." The least the Government can do is tell my hon. Friend, "We've listened carefully to your case and we know that you've pursued it for a long time. We'll have a look at the amendment and, if necessary, deal with it in another place." As my hon. Friend the Member for Hayes and Harlington (John McDonnell) has just said, if the problem is to be dealt with elsewhere, we shall be quite happy for it to fall into such an embrace.

Let us not kid ourselves; if there is a merger in future and several hundred or several thousand jobs are lost, let us not have any more hand-wringing or any more of the business of everyone feeling sorry about the problem. We could remedy the problem today if the Government agreed to the moderate suggestion made by my hon. Friend the Member for North-East Derbyshire.

John Pugh (Liberal Democrat, Southport)

Before the hon. Member for North-East Derbyshire (Mr. Barnes) ignited our debate with an unexpected note of controversy, there was widespread agreement about the Bill's objectives. Most parties accept that an active free market that satisfies discriminating consumers is a good thing. The Bill seeks to prevent bad things, such as anti-competitive mergers, cartels, consumer rip-offs and the pitfalls of enterprise, including unnecessary insolvency.

Paradoxically, there has been cross-party, and probably international, agreement that a classic free market involves state regulation and a structured environment. Usually, free markets and state regulation are regarded as antithetical, but at the moment a third way appears to carry all before it. In Committee there was argument not about the content of the Bill but about its mechanics; Conservative Members examined in immense detail not the Government's intentions but the way in which they will deliver them. A persistent allegation was that some of the Government's methods might defeat some of their objectives. That accusation was not unreasonable, given the Government's track record of unnecessary bureaucracy.

To be fair, I must add that the CBI has similar fears. In theory, it is not in favour of cartels, consumer rip-offs or mergers that inhibit competition, because they damage trading interests as much as anything else. Nevertheless, all its submissions to the Select Committee have generated a certain image—that of worry about vexatious complaints, bureaucratic bullying, trial by the media as mergers are tested, legal confusion and lobby-group grandstanding, along with a constant commercial angst about exactly where the law is leading everyone. I am sure that that is not the Government's intention, but as Conservative Members have argued, it may be the result. It is important that that does not happen, especially if we are to bring criminal law into commercial practice.

So far the Government have not succeeded in allaying the CBI's fears, and arguably they cannot do so at this stage. Law has not become practice yet, and we have not yet seen the natural history of the Bill. Supplementary guidance has not yet arrived. It was evident in Committee, however, that significant issues already exist in relation to the clarity of the legislation—I am thinking of simple matters such as the distinction between hard-core and soft-core cartels—and coherence between this and existing English law, European law and Scots law.

The reference to mergers is crucial. My angle is different from that of the hon. Member for North-East Derbyshire. There are two tests for merger references. First there is the turnover test: is a company's turnover £45 million? It must be, for the company to be of real interest. Then there is the market-share test.

The turnover test has been debated by the CBI, which suggests that the figure should be £75 million. I have a worry, which we voiced in Committee, about the market-share test. It does not seem in any way to inhibit local monopolies. My hon. Friend the Member for Orkney and Shetland (Mr. Carmichael) pointed out that if two airlines fly to Orkney and one takes over the other, there are plenty of other airlines in a national context, but there is no other airline flying to Orkney.

I know that newspapers are a special case, but nearly every newspaper in my constituency is owned by one company. Not long ago, the one independent company was taken over. It set itself up independently and survived somehow, but what had happened was a definite merger.

It could be argued that all my constituents who wanted to place advertisements in newspapers could advertise in the Burnley Bugle or the Middlesbrough Mercury. There were plenty of newspapers around—but there were no more newspapers in that area; one newspaper had an overall monopoly. Something that is theoretically not an issue is a very big issue in practical terms. A flaw in the Bill is the fact that we fret over big national mergers, although in those cases some choice is preserved at the end of the day, while there is no facility for dealing with local mergers by which choice is abolished.

The examples I give can be replicated. Members can cite cases in their constituencies. Taxi drivers, for instance, can form a consortium; there can be just one company in a whole area. Theoretically, someone in Leicester could get a taxi in Wolverhampton or London, say—but they cannot actually do that. Effectively, people faced with a complete local monopoly have no choice.

I genuinely understand the Government's reluctance to go further than they have. If a village contains two shops and one takes over the other, it is not desirable for the villagers to suggest that the OFT should investigate. I suggest, however, that there are simple ways in which local monopolies can be dealt with as national monopolies are. The number of consumers affected might be relevant, or perhaps the support of local trading standards authorities could be required.

This is wholly in line with the spirit of the Bill. We want to enact legislation that will stop large companies snuffing out small companies locally. Small companies do not start as national companies with national shares in the product they are producing, or as international companies; they start as local companies.

I realise that there are drafting problems and problems of work overload, but it is not possible to create a national climate of enterprise without encouraging a local climate of enterprise. National considerations also apply locally. The public interest defence or the failing firms defence could be used, and compensating consumer gains could be cited. However, if anti-competitive mergers can sustain themselves locally and prevail, local citizens suffer the same ill as when that happens nationally.

Let us consider the cartel analogy. We do not specify the size or turnover of the cartel; we simply define it by its effect. That should also apply to mergers. References to the OFT should be based on a merger's effect on consumers, not some artificial decision about size or market share.

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

I am sad not to share the view of my hon. Friend the Member for North-East Derbyshire (Mr. Barnes). However, I believe that it is important to present a counter-argument. The Bill deals with fair trading and makes a substantial contribution to its development. Loading it with goals and burdens that such Bills cannot tolerate goes further than is reasonable.

My hon. Friend mentioned the boring position in Scottish football because of the domination of Celtic and Rangers. That is an interesting example because the reason for it is the wealth of both clubs compared with that of all the others in the league. They have the dominance that comes with wealth. I was keen for Manchester United not to be taken over by BSkyB because we would otherwise end up with one football club so rich that it was worth all the others put together. Absolute dominance in the market means that the consumer gets cheated and has less of the commodity to purchase and less of a service to enjoy.

The Bill tries to make it easier for small businesses to start up and consolidate so that, over time, the position of even the wealthiest and most dominant suppliers is challenged. I am a member of the all-party small business group, and the Bill's aim is laudable and important to achieve.

Sometimes the methods that large and wealthy companies use to dominate the market mean cheating workers and consumers. In Committee, I said that I was introduced to such matters when my father tendered for a small-scale contract to paint some houses in Hemel Hempstead and found that others were tendering at an extraordinarily low price. After he had lost the contract, he was told that others had stolen the paint and could therefore put in an unfair bid. That meant that those who made fair bids were put out of business and out of work.

Dominant companies and suppliers can consolidate their position through cheating their workers, not recognising trade unions, paying low wages, adulterating the environment and a host of practices that are vital components of unfair trading. The Government are not Thatcherite because they have tried to introduce measures apart from the Bill to counteract the effects of such practices through, for example, environmental protection and trade union recognition. It is not the job of this Bill to incorporate those measures, because they can be dealt with elsewhere. This Bill is about trying to provide an environment in which, if there is a dominant supplier in a particular trade, there is strong potential for the activities of that supplier to be called into question—notably, the activity of forming cartels or mergers, which are often a way of cheating workers and customers alike.

Harry Barnes (Labour, North East Derbyshire)

I hope that my hon. Friend does not misunderstand my position. I have been supportive of all the measures in the Bill concerned with insolvency, establishing consumer rights, and helping small businesses. I am not opposed to the Bill in general, but there are matters relating to public interest and producer concerns that I would like to see incorporated in it. From what my hon. Friend has said, there might also have been a misunderstanding about my attitude to BSkyB. I supported the decision of the Competition Commission on that issue, because it took it partly on the ground of public interest.

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

I understand where my hon. Friend is trying to get to; I am just not convinced that his amendment will get him there. That is partly because he wants there to be powers that it is difficult to imagine being operated. To return to the Scottish football example, one way of ensuring that other Scottish teams had much more say than they do now would be to impose a maximum wage on footballers, so that the benefit of certain organisations being massively rich compared with others would be counteracted by very strong regulations that made it more difficult for wealth to dominate.

Another way of achieving that aim would be to have a fantastically powerful wealth tax to appropriate huge resources from the very wealthy football clubs and redistribute them among the others. There is a variety of ways of achieving that, and perhaps this is the time to ask why those clubs have such a dominant place in the market. I also agree with the hon. Member for Southport (Dr. Pugh) when he said that local monopolies and local dominance lead to consumer and employee impoverishment. The fact remains, however, that these matters can be returned to.

My hon. Friend the Member for North-East Derbyshire should accept that the Bill makes a contribution to addressing the problems that we face in trying to ensure that consumers have a genuine choice, and that workers have a genuine opportunity to work for companies that do not violate the environment or systematically violate workers' rights. I hope that he will not divide the House on this issue, and I look forward to working with him on this agenda on other Bills, because there is important work to be done.

Melanie Johnson (Labour, Welwyn Hatfield)

In responding to what has been a lengthy and wide-ranging debate, I should like to thank hon. Members for their contributions.

I shall deal first with amendments Nos. 18, 19 and 20, which are uncontentious. They would provide the opportunity for discretion on the part of the OFT, rather than a duty to refer. The Bill already gives the OFT discretion in certain circumstances, when that is appropriate. A variety of such circumstances is listed in subsection (3) of clauses 21 and 32. Amendments Nos. 18 and 19 would extend the OFT's discretion in completed merger cases, and amendment No. 20 would do so in proposed mergers, beyond the particular circumstances set out. The Government believe that the exceptions set out in the two clauses cover all the circumstances in which discretion is appropriate, and do not anticipate any other circumstances in which such discretion will be needed. We do not believe, therefore, that the amendments have any value.

We do not believe that the number of references will increase as a result of the duty to refer. I reiterate what I said in response to the hon. Member for Eastbourne (Mr. Waterson) and other hon. Members: we do not think that that duty will lead to a situation in which pre-clearance is almost obligatory. Those who have raised such concerns seem to be ignoring the fact that the OFT will apply a competition test to determine whether it has a duty to refer. Only cases that could lead to a substantial lessening of competition will be referred. That is the basis on which the OFT currently advises Secretaries of State, so we do not anticipate or accept that the incidence of references will increase because of the new arrangements. I hope, therefore, that I can persuade hon. Members not to press the relevant three amendments.

I turn now to amendment No. 21 and associated amendments that deal with the question of the substantial lessening of competition test versus the dominance test. First, the Opposition have tabled a large group of amendments on this matter, as the hon. Member for Eastbourne commented. The amendments would replace our substantial lessening of competition test with a European-style dominance test. That is a slight turn up for the books, because the Opposition are not frequently taking the European route these days.

I should like to stress at the outset that the Government have consulted carefully and extensively on the choice of competition tests for the new mergers regime. The question was first raised in our consultation document on reform of the merger regime in August 1999, and a further consultation occurred subsequently. In addition, officials have met lawyers, economists and other experts to discuss the new regime and the most appropriate competition tests to apply.

A very large majority of those who responded to the consultation favoured a substantial lessening of competition test. They believe that that represents a better economic test than the dominance test that is currently used in the European Community merger regulation. One of the responses that we received came from the City of London Law Society, whose members are obviously experts on competition. It stated:

"The Group does not favour the adoption of a dominance test due to its inflexibility in dealing with a range of situations including oligopolistic dominance and highly leveraged acquisitions. It does not see any benefits from having the same substantive test at a national level as in the ECMR. Additionally, it should be noted that other established merger control regimes within the EC have not found it necessary to adopt the ECMR test."

Indeed, the substantial lessening of competition test comes closest to the competition analysis that is currently applied by the UK authorities. It has the key advantage of allowing the authorities to concentrate on the overall effect of a merger on competition rather than on the structures, and will allow them to act wherever there is an increase of sole, joint or collective market power resulting from a merger.

The key concern about the dominance test is the uncertainty about allowing the authorities to take action where a merger will not lead to one firm having a substantial market share of 40 per cent. or more, but will nevertheless increase the likelihood of firms remaining in the market and acting in an anti-competitive way. To use economic terms, there is considerable uncertainty about whether a dominance test is effective in dealing with the creation of non-collusive oligopolistic markets. European law has developed the concept of collective dominance to try to bridge the gap, but its application is uncertain and the concept strains the normal meaning of dominance.

The substantial lessening of competition test is superior in alluding to the impact of a merger on the whole market, rather than concentrating on the position of a particular market participant. It was because of concerns that the dominance test did not satisfactorily cover collective dominance cases that both Australia and New Zealand recently switched from a dominance test to a substantial lessening of competition test. That happened in Australia in 1993 and in New Zealand last year. Among our European Community colleagues, the Irish Government have recently adopted a similar test, and Spain also has such a test. It is also noteworthy that the Green Paper on reforms to the ECMR raises a substantial lessening of competition test as a possible option to replace dominance. The issue is also well understood in a number of other jurisdictions: the United States, Japan, Canada, Australia and New Zealand.

I could speak at considerable length on this subject, but I will not do so, as time is of the essence. I believe for all the reasons that I have given that we have got the right test.

I should like briefly to quote the hon. Member for South Cambridgeshire (Mr. Lansley), who put the position well in Committee when we debated the test of choice. He said that if we had a chance of ensuring a merger control regime that was likely to provide pressures and incentives conducive to competition in general and to a greater intensity of competition in the UK than in other parts of the EU, we should take it. For all the reasons that I have given, we believe that we have the right test, and I urge that those amendments be withdrawn.

I should like now to turn to the amendments dealing with the restoration of the public interest test, which have been the subject of much debate this afternoon. The replacement of the current public interest test in the Fair Trading Act with a competition test is, of course, one of the cornerstones of the proposed new merger regime. Focusing the Bill on competition will provide better merger regulation. It will improve the clarity of the framework for decisions and the predictability of the decisions made under it. The wider the range of factors that can be taken into account, the less certain and the less predictable the outcome.

The change will also bring our statute into line with other major international jurisdictions; the US, the European Commission, France, Germany, Canada and Australia. Switching away from a public interest test to a competition test for assessing mergers has involved hard thinking and tough choices, but it is a focused policy. It means that certain factors that could previously have been taken into account—I emphasise the word "could" as opposed to "were" or "would be"—will no longer be capable of being taken into account. We think, as a matter of policy, that that is right. The reform is not just about improving the predictability of decisions or aligning the regime with others. It is necessary because we believe that, in the vast majority of cases, the economy is best served if mergers are assessed solely on the basis of their effect on competition.

Merger regulation is best aimed at safeguarding the competitive intensity in the economy. Competition provides the spur for businesses to be more productive, innovative and efficient, and better able to provide long-term sustainable employment and better products and services for consumers—my hon. Friend the Member for North-East Derbyshire and I share those aspirations.

Adding additional factors to the test for mergers would create barriers to market re-structuring. We think it is wrong to create such barriers unless there are significant anti-competitive effects. Restructuring must be possible if companies and markets are to remain dynamic and competitive.

I recognise, of course, that mergers can have adverse regional and employment impacts in the short term. There are hard cases; my hon. Friends have referred to cases in their constituencies, including the Biwater case. However, I do not think the answer is to step in to block mergers.

The task for the Government—one that we are pursuing—is to make sure that the economy as a whole is strong and to help people to adapt and get new jobs. We must make sure that for every job and every business that disappears, there are new companies springing up and small companies growing. We have a vibrant, dynamic economy. We have the lowest unemployment rate since the 1970s and the lowest inflation and interest rates since the 1960s. We have record numbers of people in work, because private sector employment increased by 1.25 million over the last five years. We are, of course, the No. 1 destination for foreign direct investment into Europe.

I would like to make a further important point to set the merger regime in the context of how the existing Fair Trading Act regime has operated. In practice, competition has been the principal factor in UK merger policy for years. In 1984, the then Secretary of State for Trade and Industry, now Lord Tebbit, announced that references would be made primarily on competition grounds. That doctrine has been pursued by every subsequent Secretary of State.

We must look at why independence from political interference and involvement is important in this regard. I remind my hon. Friends that there is a direct parallel between what we are doing here and what my right hon. Friend the Chancellor of the Exchequer did in the legislation relating to the Bank of England in 1997. Before then, there was clearly political involvement in decisions about interest rates, decisions that were made, at the end of the day, by Ministers. As hon. Members know, such decisions are now taken by the Monetary Policy Committee, and are therefore taken at arm's length from political interference. That has not had an adverse effect; indeed, it has brought remarkable benefits. We took the right decision in that regard, and we are taking the right one here.

On the question of the Bill's providing for the Secretary of State to make an order defining public interest issues that might be taken into account in considering a merger, when such issues arise it is Ministers themselves who will take decisions about a merger. The Bill will define as public interest considerations only national and public security concerns. However, we have built in appropriate checks on Ministers intervening easily in other areas. We have stipulated that additional criteria will be defined by order, subject to affirmative resolution of both Houses of Parliament. I am aware that some Opposition Members dislike that for one reason, and some Government Members dislike it for another. However, that power provides an important safety valve for the new regime, and ensures that very exceptional cases can be dealt with appropriately. In that sense, we have got the matter entirely right.

As I said, public interest considerations must be specified in the new legislation as relating to national security. Having consulted on whether new powers are necessary, we concluded that they are not. As my hon. Friend the Member for North-East Derbyshire knows, the existing power enables us to add further considerations. The process will be transparent and subject to parliamentary approval, and the Secretary of State must give reasons under the terms of clause 104(7). Safeguarding competition is just one aspect of our duty to protect the public interest. As I said, matters such as employment are dealt with through other targeted measures. My hon. Friend will acknowledge the tremendous progress that the Government have made in terms of economic growth, employment, prosperity and the provision of public services.

In the light of these changes, my hon. Friend also expressed his concern about the important issue of accountability. We have built in additional accountability elements, a long list of which I could run through. Although accountability will not be achieved through ministerial decision making, there will be additional transparency and checks and balances. For example, the OFT and the commission will have to publish their reasons for taking key decisions such as reference decisions, and for not referring.

The commission's chairman has also made a commitment to publishing during an inquiry provisional conclusions on the competition aspects of a merger or market. Decisions will not come, therefore, like a bolt from the blue. There will be open discussion of provisional findings, and of the remedies for dealing with them. The tests themselves will be focused. They will be conducted within a tighter procedural framework, and a number of institutional checks and balances will be established. For example, the OFT board will replace the Director General of Fair Trading as the pinnacle of the OFT's operation. Taken together, the measures show that we have got things right. I appreciate my hon. Friend's concerns, but I believe that adopting these measures will bring real benefits.

On failing firms, if an authority believes that a firm will in any case exit the market because it is failing, that judgment will influence the assessment of whether the merger may be expected to result in substantial lessening of competition. Another relevant consideration is whether the failing firm's market share is likely to fall to the acquiring firm in any event. It is not a question of weighing the position of a failing firm against the problems created by a substantial lessening of competition. If Opposition Members are suggesting that saving a failing firm should take priority over guarding against anti-competitive markets, I must disagree. It would not be appropriate to allow mergers to proceed that would result in a substantial lessening of competition, simply because one of the firms involved was failing.

I hope, therefore, that hon. Members will not wish to press amendment No. 69 to a vote and I urge the House to resist it. I commend, however, the technical Government amendments that are part of this group.

Nigel Waterson (Conservative, Eastbourne)

When I moved amendment No. 18—it seems like half a lifetime ago—I had no idea of the great fissures that were about to open up in the modern and the not-so-modern Labour party. I hope that we will hear no more from Ministers about having plenty of time to debate the Bill, because the harsh reality that is staring us in the face—especially if we now have a Division—is that we will not even begin to debate the issues of cartels and market investigations. On any view, that is wrong. I do not wish to waste quarter of an hour by pressing our amendments to a vote. We are not happy with much of what the Minister had to say, but we have rehearsed the arguments before and I am happy to say that I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Amendment proposed: No. 202, in page 11, line 11, after "competition", insert—

'or substantial damage to the public interest'.—[Mr. Barnes.]

Clause 24 — Extension of time-limits

Clause 31 — Supplementary provision for purposes of sections 24 and 30

Clause 39 — Section 38: supplementary

Clause 41 — Intervention by Secretary of State in certain public interest cases

Nigel Waterson (Conservative, Eastbourne)

I beg to move amendment No. 63, in page 26, line 28, leave out from "57" to end of line 29.

Sylvia Heal (Deputy Speaker, Halesowen and Rowley Regis)

With this it will be convenient to discuss the following: Government amendment No. 229.

Amendment No. 142, in clause 45, page 31, line 36, at end insert—

'(5A) The Secretary of State shall not make a reference under section 44(3) or (5) when a relevant public interest consideration which is mentioned in the intervention notice has not been finalised.'.

Government amendment No. 234.

Amendment No. 304, in clause 57, page 40, line 15, after "of" insert "(a)'

Amendment No. 305, in page 40, line 15, after "security" insert—

'(b) maintaining and promoting the balanced distribution of industry and employment in the United Kingdom;

(c) maintaining and promoting competitive activity in markets outside the United Kingdom on the part of producers of goods, and of suppliers of goods and services, in the United Kingdom.'.

Amendment No. 197, in page 40, line 15, at end insert—

'(1A) The interests of plurality in newspaper ownership are specified in this section.'.

Amendment No. 198, in page 40, line 18, at end insert—

'(2A) In subsection (1A) "newspaper" shall have the same meaning as in section 57(1)(a) of the 1973 Act; and in this subsection "plurality" means a diversity of ownership that is sufficient to ensure that the public have access to the accurate presentation of news and free expression of opinion.

(2B) In applying the interests specified in subsection (1A) no account should be taken of plurality in newspaper ownership if the relevant merger situation concerns the transfer of a newspaper or newspaper assets to a newspaper proprietor whose newspapers have an average circulation per day of publication amounting, together with that of the newspaper concerned in the transfer, of fewer than 500,000 copies.

(2C) In subsection (2B), "newspaper proprietor" shall have the same meaning as section 57(1)(b) of the 1973 Act; and the calculation of circulation per day shall be by such means as the OFT or (as the case may be) the Commission shall determine.'.

Amendment No. 143, in page 40, line 19, leave out subsections (3) and (4).

Government amendments Nos. 243 to 245.

Nigel Waterson (Conservative, Eastbourne)

As this may be the last group of amendments that we can deal with before 7 pm under the guillotine procedure, it may be helpful if I point out that we intend to press amendment No. 63 to a Division, as we feel strongly about it. The group deals with public interest and mergers, but there will be some echoes from topics that we discussed in the debate on the previous group.

At present, the only definition of public interest appears in clause 57. The clause defines public security in the terms set out in the European merger regulations. We had a significant number of debates on these matters in Committee. Our starting point is that the provision is crucial, so it is right that it should be firmly stated in the Bill. Our approach is rather different from that of the hon. Member for North-East Derbyshire (Mr. Barnes), and our concern is that it should not be open to the Government to add a new ground of public interest when they feel like it.

When we pressed the issue in Committee, the Minister was wedded to the power to extend the definition, but she was wholly unable to say—in fairness, she said the same this afternoon—what possible category she might have in mind to add to the definition in the Bill. Nevertheless, the Government's position seems to be that it is imperative to include the power.

The effect of amendment No. 63 would be to remove the Secretary of State's ability to consider public interest considerations not listed in the legislation. We debated a similar amendment in Committee. As the Bill stands, the Secretary of State could simply add a new public interest consideration, or more than one such consideration, in response to a specific merger or proposed merger, as it arose.

Apart from anything else, that could involve enormous uncertainty for those in the business sector. When embarking on a merger, they would not know whether the goalposts would be moved in due course by the addition of a new public interest ground because the Secretary of State had decided to change the rules. That is another good reason why any other public interest consideration—whether media plurality, which we shall come to in a moment, prudential rules or anything of that sort—should be identified in the primary legislation.

If it is not possible to identify those considerations now and they arise later, it should be possible to add them to the Act, as it will then be, by primary legislation. If something arose that was so important and so unforeseeable that no one can even imagine what it would be, any Government ought to be able, possibly with cross-party agreement and—who knows?—possibly even with the agreement of their Back Benchers, to put through the House the necessary primary legislation, and quite quickly, if needs must.

There is also a side issue. If we leave open this great loophole, it merely returns us to what I am sure the Minister would regard as the bad old days of political involvement in such matters.

I shall touch briefly on amendments Nos. 142, 197 and 198 tabled by my hon. Friend the Member for South Cambridgeshire (Mr. Lansley), who will develop the arguments in detail. Amendment No. 142 relates to the Secretary of State's power to make merger references arising from a public interest intervention notice. My hon. Friend will develop the reasons for the amendment. Amendments Nos. 197 and 198 deal with the plurality of newspaper ownership. The effect of amendment No. 143 echoes that of amendment No. 63.

It is impossible to consider what the Government have in mind in changing the law on mergers and takeovers without considering how those matters have been dealt with up till now.

We argued in Committee—with some justification, I think—that all we are doing in the Bill is regularising what has been practice for a considerable time. Under the so-called Tebbit guidelines, there has been a kind of self-denying ordinance among successive Secretaries of State of both parties that they would look narrowly at competition issues when reaching their decisions. It is fair to say that there is an element of cross-party consensus that seeming political involvement brings the system into disrepute. The average member of the public finds it difficult to distinguish between a politician making a decision on non-political grounds and one making a decision on political grounds.

Fast-forwarding from the Tebbit doctrine, we come to 26 October 2000, when the then Secretary of State, the right hon. Member for Tyneside, North (Mr. Byers)—a familiar name in the House—announced that Ministers would accept the advice of the Director General of Fair Trading on takeover matters, save in exceptional circumstances.

Enter stage left the figure of Mr. Richard Desmond, whose Northern and Shell media group on 22 November of that year paid £125 million for Express Newspapers Group. Mr. Desmond had a busy week, because only four days later, on 26 November, he had a half-hour chat at No. 10 with the Prime Minister.

Mr. Desmond has forced himself into the consciousness of many of us recently through the titles of some of the magazines that he publishes, as well as through his newspaper activities. The list of publications is very long; I was going to say that it is impressive, but it is long. There are titles such as Weird Sex Special—[Interruption.] That is obviously familiar to the hon. Member for Wolverhampton, North-East (Mr. Purchase).

Titles include Horny Housewives, Mega Boobs, and for the real enthusiast, The Very Best of Mega Boobs. There is also a magazine called Mothers-in-Law. I could go on; I probably will. Asian Babes is another title that is not unfamiliar. In fairness, Mr. Desmond also publishes magazines such as Worldwide Golf, which as far as I can tell has nothing to it other than an interest in the game of golf.

In any event, the issue arose whether the then Secretary of State would refer the takeover of Express Newspapers. Events had moved on by that stage. During the new year celebrations of 2001, Mr. Desmond had told senior Labour figures that he was willing to offer them free advertising in the run-up to the election.

January was a busy month; Mr. Desmond's editor at The Express resigned, and on 7 February, the then Secretary of State announced that he would not refer the takeover of The Express to the Competition Commission. Only eight days later, on 15 February, it is understood that the Labour party banked Mr. Desmond's cheque for £100,000. To show that relations were particularly cordial and fraternal, Mr. Alastair Campbell attended Mr. Desmond's 50th birthday party in December.

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

Does the hon. Gentleman accept that his remarks seem to be rather tenuously linked to any arguments that might encourage us to support amendment No. 63?

Nigel Waterson (Conservative, Eastbourne)

That is more a matter for the Chair, although I do not accept the proposition for a moment. We are discussing public interest in mergers. The hon. Member for North-East Derbyshire, who has strong views about almost everything, although he puts his arguments with a certain charm, has strong views about whether Ministers of the Crown should be able to intervene in employment matters. He made a powerful case on that in the previous debate. However, some people and certainly some members of the Labour party have similar views about the activities of the party's donors, such as Mr. Desmond.

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

Does the hon. Gentleman accept that many Labour Members believe that Mr. Desmond's activities, so long as they are legal, are a matter for him and his shareholders? However, many of us would not take a penny-piece from a man who is nothing but a pornographer.

Nigel Waterson (Conservative, Eastbourne)

I am not sure what the hon. Gentleman's point is. That is his description of the gentleman involved, not mine. However, the Labour party has taken £100,000 in penny-pieces.

It is interesting that when the Prime Minister was interviewed by Jeremy Paxman, who also reeled off a list of names of magazines, the Prime Minister seemed to invert the issue—

Sylvia Heal (Deputy Speaker, Halesowen and Rowley Regis)

Order. I hope that the hon. Gentleman will be a little more concise and address his remarks to the amendment.

Nigel Waterson (Conservative, Eastbourne)

Let me bring events forward to the present day and to the revelations that appeared in The Sunday Telegraph last Sunday. It reported:

"The Department of Trade and Industry conceded yesterday that there had been no scrutiny of Mr. Desmond's on-line services which allowed paying customers to ask models to perform live sex acts."

I shall not go into any more detail than that, Madam Deputy Speaker, because I am sure that you would not wish me to. However, the criteria to be applied in the case of a major takeover—for example, of a newspaper—are extremely interesting and are relevant to the competition provisions in the Bill.

We are told that the Bill will put into legislation what has become the practice and that, under the Tebbit doctrine and the position as stated most recently by the then Secretary of State in 2000, the broader issues will not be taken into account. It is important to consider what has been happening and whether the provision is necessary.

When these issues came into the public domain, the attitude of the former Secretary of State was that he had merely followed the advice of officials. I assume that that is what will happen by law if we pass these provisions in the Bill. However, when the report of the Director General of Fair Trading saw the light of day, a different picture emerged. The director general had advised the Secretary of State that, on the competition issues, he could see no reason to refer the bid, but he pointed out that what he described as the non-competition issues were a matter for the Secretary of State. That is a subtle and rather important difference from what the former Secretary of State had told us earlier.

It emerges that the Home Office had been asked to advise, as had the Department for Culture, Media and Sport, about Mr. Desmond and his activities. The Home Office tetchily concluded that, as he was not breaking the law, it had no further comment to make. However, as The Sunday Telegraph has now revealed, neither it nor anyone else was asked to consider the websites operated by the companies controlled by Mr. Desmond.

It is important to quote the hon. Member for Calder Valley (Chris McCafferty), who is reported as saying:

"I am astonished. It takes my breath away that the Government failed to examine the very worst side of Desmond's empire. There should have been a thorough investigation at the time. The Government should make amends by launching a thorough investigation now."

Other Labour Members expressed similar concerns.

We must examine how the matter was dealt with, as there are major questions about how the DTI chose to conduct its investigation into the takeover of Express Newspapers. It would be, at the very least, surprising if Mr. Desmond's colourful websites were not taken into account. We need to be told the precise criteria on which the former Secretary of State based his ultimate decision not to refer the bid, especially as the decision was followed only a few days later by a large donation to the Labour party.

Melanie Johnson (Labour, Welwyn Hatfield)

The hon. Gentleman is inviting me to comment on what happened. It is hard to understand the relevance of his case to amendments Nos. 197 and 198—[Interruption.] I am seeking Madam Deputy Speaker's guidance. In light of the hon. Gentleman's concerns about pressures on time, it is hard to understand how his argument relates to the amendments.

Sylvia Heal (Deputy Speaker, Halesowen and Rowley Regis)

I have drawn the hon. Gentleman's attention to the fact that he must speak more directly to the amendments, and I do so once again.

Nigel Waterson (Conservative, Eastbourne)

I have made my points on that issue. I was not aware when I gave way to the hon. Lady that she wanted to make a point of order.

It is necessary to give the provisions careful consideration. Some of the amendments are new, in particular those that relate to newspapers, on which my hon. Friend the Member for South Cambridgeshire may wish to comment. Others are familiar from our deliberations in Committee.

We are worried that the Secretary of State will reserve not only powers to act in the public interest, but the power to add to the criteria as they relate to the public interest. We do not know what the Government have in mind, which is understandable because they do not know what they have in mind. We feel strongly about the matter and intend to press the amendment to a Division. If the Government have nothing in mind, and I am sure that they are being open and honest with the House, they should leave the public interest definition as it is, without the power to add to it by regulation.

Andrew Lansley (Conservative, South Cambridgeshire)

Before I comment on the amendments, I want to explain why Mr. Desmond and the handling of his case by the then Secretary of State is relevant.

As Mr. Desmond was not a newspaper proprietor, his acquisition was not considered under the special newspaper transfer regime, as set up by the Fair Trading Act 1973. Instead, he was considered under the normal merger regime. As my hon. Friend the Member for Eastbourne (Mr. Waterson) made clear, the possible threat to the public interest by the acquisition of Express Newspapers by Northern and Shell could have been considered by the OFT. However, because it put competition as a primary duty, it chose to have no view and referred the problem to the Secretary of State who, although recognising that he had a responsibility, chose not to exercise it. My hon. Friend took us through the conjecture and speculation on why he chose not to consider the wider issues of public interest. We should not count out the fact that they exist, however.

The hon. Member for Wolverhampton, North-East (Mr. Purchase) and others, including the Prime Minister, seem to suggest that what is legal is by definition okay, and what is done legally must therefore be in the public interest. There is no mention of a subset of activities in relation to the ownership of newspapers under existing legislation that are legal but could adversely affect the public interest. I am afraid that the evidence points to the opposite.

In 1990, the Monopolies and Mergers Commission made a report on Mr. David Sullivan and his acquisition of the Bristol Evening Post. I will not quote at great length, but paragraph 6.13 of the report says:

"Were someone of Mr. Sullivan's business background and interests"—

it may be recalled that Mr. Sullivan owned the Sunday Sport and other related newspapers—

"seen to have a significant influence in their affairs",

that is, the affairs of the Bristol Evening Post and Western Daily Press,

"their reputation could well be seen as compromised, particularly where the reporting of events with sexual aspects was involved. Were he to have acquired effective management control these effects could be expected to be more pronounced."

Essentially, the Monopolies and Mergers Commission was applying a test in relation to the accurate presentation of news and free expression of opinion.

The issue, therefore, is this. If at that time the consent to a transfer of a newspaper title was refused under the special newspaper transfer regime by reference to that test of the public interest—interestingly, we understand that the Government intend at some point to introduce a test of the public interest in relation to the plurality of newspaper ownership—surely the two things are related. The question whether the Government believe that there is a public interest in the ownership of newspapers and the consequences that flow from that for the accurate presentation of news or for free expression of opinion must be of the essence in relation to the amendments. I hope that I have demonstrated why the handling of Mr. Desmond's case is relevant to their consideration.

I shall deal first with amendments Nos. 197 and 198, which relate specifically to newspapers. On a number of occasions—interestingly, she even managed to do it earlier this afternoon—the Minister has asserted to the Committee and to the House that the Government have no intention of adding additional public interest, to be specified under clause 57. However, in paragraph 9.7.4 of the document published as a policy narrative to accompany the draft Communications Bill, the Government express their future intention in relation to that Bill, and, on newspaper ownership, state:

"the Secretary of State will retain the power to refer transfers for wider investigation by the Competition Commission by an extension of the provisions in the Enterprise Bill dealing with 'exceptional public interest' . . . cases."

Therefore, unless the Minister tells me something to the contrary, it is clearly the Government's intention, subject to consultation and scrutiny of the Bill, to bring newspaper ownership under clause 57 by way of an additional specification of national interest, but apparently we are not to debate that at this stage.

Before the Minister intervenes to say that amendments Nos. 197 and 198 do not do all that is required, I understand that subsequently clause 66 would need to be deleted and schedule 26 concerning repeals of the 1973 Act amended. One would have to remove the existing special newspaper transfer regime, but it is important, if we are legislating for what is to be in the Bill, that we do it now and have a clear indication of the circumstances in which Ministers would wish to specify an additional public interest. Plurality of newspaper ownership is one that has been suggested.

Two sets of amendments seek to do slightly different things. That is why they are slightly testing the Minister. Amendment No. 143 would remove from the Secretary of State the ability to specify additional public interest considerations. My personal inclination is that relying on the general merger regime and competition considerations should be sufficient. I accept the argument that national security and what flows from it is an exception, but that should be the only exception. If I were pressed, I would say that amendment No. 143 should be pursued. I would similarly support amendment No. 63. It is likewise designed to remove from the Secretary of State what might otherwise become a politically motivated opportunity to inject additional public interest considerations that are not transparent in advance and not transparent to the marketplace for those who are contemplating or executing mergers.

If we are to have any additional forms of public interest, we should be told what they will be. My purpose in tabling amendments Nos. 197 and 198 is to ensure that we can know precisely, by way of the Government's response in due course—there might be one—what kind of newspaper ownership regime is contemplated. If, until now, a special newspaper transfer regime has operated on the basis of confining itself particularly to the accurate presentation of news and the protection of free expression of opinion, I believe that that is a sufficient basis upon which to undertake an examination of plurality of newspaper ownership. Those can be the factors for which we look. Is the diversity of newspaper ownership sufficient to deliver that?

To whom should that test be applied? Clearly, the merger regime has its own test in terms of market share and turnover. However, we have discovered over years past that where newspapers are concerned—I quote from the Government's "Consultation on Media Ownership Rules"—

"This regime has imposed significant costs on the industry and yet, out of 172 cases considered by the Secretary of State since 1980, only three have been refused and five given approval subject to conditions."

It is important that we structure a regime that is more deregulatory than that which went before it. We should not merely replicate the special newspaper transfer regime in new legislation.

It is interesting that the Government's consultation goes on to state:

"In no case has the Competition Commission found that the acquisition of purely local newspaper titles would be against the public interest on freedom of expression grounds."

Ministers and the Competition Commission have often found that quite high local concentrations of newspaper ownership are consistent with a continuing plurality of voice in the sense of free expression of opinion. To respond to customers in those areas, newspapers often find that they must be responsive in that way. The opportunities for concentration of local newspaper titles throughout the country, although that has happened in recent years, has not necessarily led to centralised editorial opinion imposed on local newspapers from the controlling interest.

One of the consequences that flow from that is that the newspaper ownership regime could be structured in a way that excluded local newspaper titles. For these purposes, as a proxy, I have adopted the threshold of a circulation of 500,000 newspapers a day. That is a limit above which transfers of newspaper titles could be considered.

Whether that approach should apply to existing newspaper proprietors or transfers of ownership in any circumstances is a difficult question. It is difficult to argue that maintaining plurality of newspaper ownership could mean that someone would be barred from the acquisition of a newspaper if he or she was not already a newspaper proprietor and there was no concentration of newspaper ownership.

The only circumstances in which that could be done would be if one were to reintroduce some test of whether someone acquiring a newspaper was a fit and proper person to do so. As the Minister said in Committee, and in her subsequent letter, it is difficult to envisage circumstances where someone could be excluded, on competition grounds, from owning a newspaper or acquiring an enterprise on the basis of whether he or she was a fit and proper person. That should be considered on the basis of disqualifications under the Companies Acts. However, with newspapers, a further question could arise about whether someone is seeking to limit the free expression of opinion or the accurate presentation of views by acquiring a newspaper. It is therefore important to find out more about what the Government are seeking to achieve by extending clause 57, contrary to their previously stated intention.

Amendment No. 143 would make competition the sole factor to be considered in the operation of merger policy, with the exception of national security. Amendment No. 142 is more technical; it will not be immediately obvious to people who are not as familiar with the Bill as Committee members that in clause 44, after the Secretary of State has given a public interest intervention notice and a reference back to him or her has been made by the Competition Commission, he or she has four options for subsequent decisions, two of which can be made in circumstances in which there is a finding of a substantial lessening of competition if a merger is completed or is being contemplated. The two remaining circumstances, given in clause 44(3) and (5), are ones in which there is no finding of a substantial lessening of competition, and the Secretary of State can take account only of public interest considerations.

Ministers have an obligation not to make a reference in or after the period of 24 weeks during which the Secretary of State is allowed to try to resolve the question of public interest by laying an order before Parliament and securing parliamentary approval; they will not make a reference after 24 weeks, and disregard any public interest consideration that has not been finalised. By contrast, the Secretary of State can make a reference before the 24 weeks have elapsed when there is a substantial lessening of competition. A loophole has therefore been created. Curiously, before the expiry of the 24-week period, there is nothing to stop the Secretary of State from making a reference to the Competition Commission on the ground that public interest considerations have not been finalised, and when there is no substantial lessening of competition.

One of the most undesirable circumstances in which a reference could be made is as follows. The Secretary of State has devised a public interest consideration, published an intervention notice, failed to come to the House to secure its approval to finalise the public interest, yet goes ahead and makes a reference to the Competition Commission. That loophole should be closed.

In addition, in clause 45, for reasons that escape me, the Government say that when making a reference during or after the 24-week period the Secretary of State should specify

"the public consideration or considerations . . . in the intervention notice concerned which the Secretary of State is not under a duty to disregard".

Government amendment No. 234 deals with the same issue. However, if a reference is made before the end of the 24-week period and before a consideration is finalised, as outlined in clause 44(2) and (4), the Secretary of State is not required to disregard the public interest consideration; for completeness, clause 44(3) should also be specified. It is astonishing that the Minister has gone down that route.