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Deregulation (Fair Trading Act 1973)(Amendment) (Merger Reference Timelimits) Order 1995

Volume 569: debated on Thursday 8 February 1996

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6.9 p.m.

rose to move, That the draft order laid before the House on 20th November be approved [2nd Report from the Delegated Powers Scrutiny Committee].

The noble Lord said: My Lords, I propose to speak on each of the three draft orders in turn. Taken together, they form a package of measures for quicker and simpler procedures under competition law. All three proposals are concerned with easing the burdens imposed by time limits and procedures which affect businesses in connection with the functions of the competition authorities.

The proposals have completed the preliminary scrutiny procedures for deregulation orders under the Deregulation and Contracting Out Act 1994. The Select Committee on the Scrutiny of Delegated Powers of your Lordships' House and the deregulation committee of the other place have separately assessed and reported on each of the proposals.

The committees concentrated on three key matters set out in the Act: whether each proposed order would remove or reduce a burden; whether it allowed for necessary protection to be maintained; and whether there had been adequate consultation. After amendment of one of the orders to meet a procedural concern, both committees have indicated that they are content with all three draft orders as they stand. I shall explain briefly what each of these draft orders aims to do; and how each fits the key requirements set out under the Deregulation and Contracting Out Act.

First, the draft Deregulation (Fair Trading Act 1973)(Amendment)(Merger Reference Time Limits) Order 1996. The purpose of this order is to amend the Fair Trading Act in order to reduce the statutory deadline for referral of completed mergers to the Monopolies and Mergers Commission. It would reduce the period from the current six months, to four months after completion of the merger or, if later, after material facts about it have been made public or been notified to the Director-General of Fair Trading or the Secretary of State. The main effect of the measure is therefore to shorten the period of time during which a merger reference may he made. This should reduce commercial uncertainty and costs for business.

But it would not reduce necessary protection, since there would still be adequate time to consider the case. The Secretary of State would still have four months to decide whether to make an MMC reference, which is longer than the MMC normally has for its own merger investigation. Finally, the department consulted more than 150 bodies about all three draft orders. The majority of respondents welcomed this proposal. This is a modest and sensible measure which reduces a burden without removing necessary protection.

I turn now to the draft Deregulation (Restrictive Trade Practices Act 1976)(Amendment)(Time Limits) Order 1996. As its title suggests, this order is also to do with time limits; but with their simplification rather than reduction. Currently, restrictive agreements between businesses must be notified to the Director-General of Fair Trading for registration, according to two combined deadlines: they must be notified before the restrictions in them take effect; and they must also be notified within three months of the agreement being made. If this is not done, the restrictions in the agreement are void.

The order would remove the requirement to notify agreements before the restrictions in them take effect. This would leave a single notification deadline of three months after making the agreement. At the same time, the order would make it unlawful for businesses to operate the restrictions before they have been notified.

The current position imposes a procedural burden on businesses. They must commonly insert suspensory clauses in the agreements, to prevent restrictions taking effect until notified. This can be a very complex task and any accidental oversight leads to the excessive penalty of voidness. The proposal will reduce this burden by providing that restrictive agreements made without suspensory clauses will not become void, as long as they are notified to the director-general within three months. The proposal will not reduce necessary protection, because it will make it unlawful for businesses to operate the restrictions before the agreement has been notified. If businesses fail to notify the agreement within three months of making it, the restrictions will be void.

Most respondents to the consultation exercise on this measure broadly welcomed the proposal. This measure provides a useful procedural simplification.

Finally, I turn to the draft Deregulation (Restrictive Trade Practices Act 1976) (Amendment) (Variation of Exempt Agreements) Order 1996. This has been amended in the light of its initial consideration by the special committees of each House. Subsequently, each committee has endorsed the amendment made. This provides, in my view, a good example of the effectiveness of the new scrutiny procedures for deregulation orders.

The draft order would remove the requirement for variations of certain restrictive agreements to be approved in advance by the Secretary of State or the Minister of Agriculture. The agreements in question are those which have been specially exempted from the requirements of the Restrictive Trade Practices Act, because they fall into either of two categories: agreements of importance to the national economy; or agreements holding down prices.

The need to seek prior approval for variations of such agreements is a burden, especially if many small variations have to be made. Currently, if businesses fail to get prior approval, either the whole agreement must be registered or it must be cancelled and remade.

The draft order continues necessary protection by providing a system of scrutiny once the variation has been made. The variation must be notified to the Secretary of State within twenty-one days. He will have the power to revoke the exemption for the entire agreement, if he considers that necessary.

The two special committees were initially concerned that the scrutiny procedure as first proposed did not provide a cut-off point, with the result that businesses might be able to submit a series of variations simply in order to prolong the period for which they could operate the varied agreement.

The department recognised this concern. It proposed an amendment which closes this loophole by introducing a set time from which the Secretary of State can exercise his power to revoke, even if he is confronted with a series of overlapping variations. Both committees subsequently accepted this amendment as satisfactory.

We consulted on this proposed order and all respondents agreed that this change was sensible. I therefore commend the order to your Lordships.

Moved, That the draft order laid before the House on 20th November be approved [ 2nd Report from the Delegated Powers Scrutiny Committee].—( Lord Chesham.)

My Lords, I thank the noble Lord, Lord Chesham, for introducing these three orders. As noble Lords will recall, I opposed the Deregulation and Contracting Out Bill in 1994 as vigorously as I could on what I would call broadly constitutional grounds. In saying now that I approve of these moves, in no way do I backtrack in my view that the Deregulation and Contracting Out Act is not one that I can accept as a correct way to deal with these matters; but it is on the statute book and we must use it as best we can.

Perhaps I may remind noble Lords that my opposition to the Act was not connected with my view of deregulation, which I strongly support in all cases where regulations are precisely, as the Minister pointed out, unnecessarily complicated, where they give business uncertainty which it can do without and where they place a bureaucratic burden on business. Therefore, I have no difficulty whatever both in thanking the Minister for the clarity of his exposition and in saying that I approve of these measures—but within the context of my general attitude to these things. In all cases where we can have quicker and simpler procedures, and in all cases where deregulation will reduce business uncertainty, that must be to the benefit of the British economy.

My only slight problem, which is one I have mentioned to the Minister, is that on the Notices and Orders of the Day all three of the orders are referred to as orders of 1995. The three orders, as printed, say 1996. I know nothing about the law and never have. I am extremely puzzled to know whether we can agree orders with one date on them although the actual date is another date. I do not know whether that counts as a misprint or is no problem whatever. I raise this slightly to pull the noble Lord's leg, but it is surprising that I was prepared until a couple of hours ago for the orders 1995 and find I have to deal with the orders 1996. So I should like at least a word of assurance, having spent the whole day here waiting to do this most important piece of business, that we will not have to come back again in order to validate the date.

My Lords, the noble Lord, Lord Peston, was kind enough to mention his concern to me on this matter and I have taken advice. The reason why "1995" appears is because the orders were first laid down in November 1995. Now we are in 1996 they are 1996 orders. That is the answer to the noble Lord's question. I am assured that that is absolutely fine.

On Question, Motion agreed to.