Standing Committee G
Tuesday 16 June 1998
(Afternoon)
[Mr. John Maxton in the Chair]
Clause 36
Interim measures
4.30 pm
Mr. Andrew Lansley (South Cambridgeshire): I beg to move amendment No. 173, in page 18, line 25, leave out `or' and insert `and'.
The Chairman: With this we may take the following amendments: No. 171, in page 18, line 25, leave out from `person' to end of line 27 and insert
`and
(b) protecting competition
he may give such directions as are required for the purpose.
(2A) In determining whether to give directions in accordance with subsection (2) the Director shall have regard to
(a) the seriousness of the alleged infringement;
(b) the likelihood that the infringement will be established at the completion of his investigation;
(c) whether the imposition of a fine under this Act or an award of damages would provide an adequate remedy for that alleged infringement; and
(d) the balance of convenience in giving or not giving such a direction.'.
No. 174, in page 18, line 26, leave out `the public interest' and insert `competition'.
Mr. Lansley: If amendment No. 171 were moved and accepted, amendments Nos. 173 and 174 would fall. All the amendments relate to clause 36(2), under which the director general, if he has a reasonable suspicion relating to either of the two prohibitions, can, if necessary and as a matter of urgency, propose interim measures. Under what circumstances should the director general take such measures?
The amendment would circumscribe or perhaps amplify the circumstances in which the director general could impose interim measures. The current provision is reasonable up to a point. Thus, subsection (2)(a)
"of preventing serious, irreparable damage to a particular person or category of person"
is a necessary test, but should we go beyond that and apply further conditions?
The test that I want to apply derives from guidelines set in courts. I may be stretching myself since I am not a lawyer, but it is clear from guidelines laid down by the House of Lords in the case of American Cyanamid v. Ethicon Ltd. that a range of tests needs to be applied when interim measures are sought. Amendment No. 171 would set them out in proposed new subsection (2A).
Dr. Phyllis Starkey (Milton Keynes, South-West): Is the hon. Gentleman proposing that the director general should intervene only if both conditions preventing irreparable damage to a person and protecting competition are applicable, or is only one or the other condition sufficient for the director general to intervene?
The Chairman: Mr. Lansley preferably standing up.
Mr. Lansley: Yes, indeed, Mr. Maxton, I was not proposing to speak without standing.
If the hon. Lady looks carefully at the amendment I am doing so to ensure that I do not mislead her or the Committee she will find that I am not proposing to change the test other than by the insertion of "and". It is implicit in the first test of preventing irreparable damage to a particular person that such damage would itself damage competition
Dr. Starkey: rose
Mr. Lansley: Will the hon. Lady forgive me? Let me explain the point she sought clarification. The danger lies in the "or" of paragraph (a) or (b) in subsection (2): protecting the public interest could not be justified by reference to particular damage caused to a person or category of person or even to damage to competition.
Dr. Starkey: I seek clarification. I understand that the hon. Gentleman proposes that the director general should not be able to act simply to prevent serious, irreparable damage to a person unless that also protected the public interest. That is my understanding of the difference between "or" and "and".
Mr. Lansley: The hon. Lady would be right if we were dealing with two sets, one of which comprises the other. Therefore,
"preventing serious, or irreparable damage to a particular person or category of person".
relates in this context to competition. The damage that would occur would essentially be through the anti-competitive activity, agreement or undertaking that has occurred, or by reference to an abuse of a dominant position. The Bill is intended to prevent distortions to competition. In so far as damage arises, it does so from that distortion.
The reason for having a second limb is that, in some circumstances, the director general may have a reasonable suspicion that there has been an infringement of either of the prohibitions; interim measures may be needed to prevent not serious or irreparable damage but further damage to competition, and hence to protect competition in the marketplace. That is why the amendment is designed to take out the words "the public interest" and substitute "competition". It is reasonable to assume that the damage that would occur under subsection 2(a) is damage arising from the distortion of competition. It is within the context of the Bill.
As the hon. Lady says, it is important to have some clarification of the drafting. She has taken me off into the second part of what I was going to say. It is important to recognise that in this context, and consistent with the rest of the Bill, we are aiming to pass legislation that is designed to protect competition. I am concerned not to intrude at various points public interest tests that may be quite separate from the tests of distortion and damage to competition. In that context, the reference to competition specifically seems to be a much more appropriate test of whether interim measures should be used.
Proposed new subsection (2A) is useful. When the director general seeks to impose interim measures, he ought to apply the tests that courts would apply if they were granting injunctions or other forms of interim relief. The principle at stake is that giving power to investigative bodies rather than the courts ought to be subject to the safeguards. The four tests are designed to reflect those safeguards. They derive from a case in the House of Lords, American Cyanamid v. Ethicon Ltd., which laid guidelines in 1975.
I hope that the four tests are reasonably straightforward. The first is that there must be a serious question to be tried, which in this context means that there must be a test of seriousness of the infringement that justifies the imposition of interim measures. Secondly, there must be a reasonable likelihood that the infringement will be established; otherwise, the imposition of interim measures would be disproportionate to the likely outcome of the investigation. Thirdly, there is an adequacy test that is akin to the adequacy of damages test that a court would apply: that the imposition of penalties or an award of damages arising from the proving of an infringement would give rise to an appropriate remedy. Finally, not solely on a financial basis but on a broader balanced test, the balance of convenience must be that it would be best to give such a direction.
This is not intended to circumscribe the director general's powers to an extent that he would find excessive. A director general operating under those circumstances may conclude that he would apply such tests. If he fails to do that he might, in any case, find that he would subject to challenge in the courts.
However, I think that the Bill should reflect the tests that the director general should apply; they should not be determined at a later stage. I hope that the Government will regard the amendment as valuable for its focus on competition and for setting out in detail the tests that the director general should apply.
Dr. Starkey: I have one or two brief comments to make. I remind the Committee that clause 36 is meant to protect businesses from serious or irreparable damage by actions that the director general reasonably suspects of being anti-competitive. The amendments tabled by the hon. Member for South Cambridgeshire (Mr. Lansley) seem to water that provision down to an unacceptable degree.
I was not convinced by the discussion about the difference between "and" and "or", which seemed to go round in circles. If I understand the hon. Gentleman correctly, if amendment No. 171 were accepted, clause 36(2)(a) would be wrapped up in clause 36(2)(b). So
"serious, irreparable damage to a particular person"
would satisfy the condition of protecting competition.
That seems ridiculous to me and would make subsection 2(b) unnecessary. If that is not so, the hon. Gentleman is putting himself in a position
Mr. Lansley: Will the hon. Lady give way?
Dr. Starkey: I will give way when I finish my sentence. The hon. Gentleman is putting himself in a position where an action may cause "serious, irreparable damage" to a person or to a business, but does not, according to him, protect competition. Such an action would not give the director general reason to believe that it was anti-competitive.
The amendment goes round in circles and contains redundancies, so I cannot accept it.
Mr. Lansley: I am sorry to have interrupted the hon. Lady I was not sure when she was going to finish her sentence.
It is not the case that if subsection 2(a) is satisfied, subsection 2(b) has no purpose. On the contrary, if paragraph (a) is satisfied, paragraph (b) is likely to be satisfied as well. However, in certain circumstances the director general should act to protect competition, even though he may not be in a position to demonstrate "serious, irreparable damage" to a person or to a class of persons. That may be because he is unable to attribute damage to a person to give rise to interim measures.
Set terms are at stake. It is essential that the director general should be able to assess whether he needs to act to protect competition. He needs to examine whether particular damage gives rise to interim measures.
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