asked Her Majesty's Government:

My Lords, the Countryside Commission is currently reviewing the funding and management of areas of outstanding natural beauty (AONBs) generally, and the arrangements for the South Downs in particular through two separate consultations. The commission proposes to bring together the results of that work next spring. The report to Ministers will include advice on the funding implications for AONBs and will be considered carefully before decisions are taken.

My Lords, I thank the Minister for that reply, and declare an interest as the new chairman of the Sussex Downs Conservation Board. May I remind the Minister—

Ask!

My Lords, does the Minister know—I assumed that she did—that most of the countryside proposals which we are now studying pre-suppose a large element of central government funding? Will she assure us that at the end of the day somedegree of central government funding will be available? Otherwise I fear that we face two years of discussion, inquiry, sound and fury and, in the end, no central government money.

My Lords, I cannot, as the noble Lord will understand, anticipate the results of the review. Obviously the reviews are looking into the funding issues. Recommendations will be made about them. Those recommendations will have to be considered in the light of general public expenditure plans at the time.

My Lords, is my noble friend prepared to consider the views and information—I have valid information—of the local authorities involved? They could be of great assistance. Is she prepared to accept that?

My Lords, I am prepared to hear the views of the local authorities involved, both on the general consultation which is already under way, and on the specific consultation about the South Downs AONB, which is to be launched at a conference on 26th November.

My Lords, as a system of national parks has never existed in Scotland, and conservation, amenity and recreational opportunities have been provided by othermeans, and as there has been a lively, continuing debate in Scotland on possible changes—long before a Scottish parliament could get around to considering that—have the Government any proposals on this subject for Scotland?

My Lords, I defer to the noble Lord and his knowledge of Scottish concerns surrounding AONBs, although I recognise that they are not designated in the same way in Scotland. I hope that he will forgive me if I undertake to write to him on the issue.

My Lords, will my noble friend encourage her colleagues in government to promote adequate co-operation between the Countryside Commission and local authorities with a view to protecting areas which are attractive but vulnerable, and which have been imperilled, largely because of the inadequate arrangements for local authority funding which have affected many parts of the country?

My Lords, those are the types of concerns that have given rise to the Countryside Commission's investigations, and which will be considered when we have the results of those consultations next spring.

My Lords, we welcome the news that the Countryside Commission is looking into this matter, and that a report will be sent to the Minister. Will she tell us when the report will become publicly available so that we can all know what advice has been given? Secondly, will she confirm that while we all recognise the importance of AONBs being funded, there will be no question of attacking the funding of national parks which are already under pressure?

My Lords, we will be receiving the advice from the Countryside Commission next spring. Then we can look at how we take forward ministerial decisions on that advice, and what will be the most effective and appropriate solutions, both in terms of designation and ways of future funding.

My Lords, does the Minister agree that since those excellent reforms of the Attlee government which introduced AONBs and national parks, pressures on those areas have grown immeasurably? There is a real danger now of them deteriorating to a wholly unacceptable extent. Something will need to be done fairly urgently. They need not necessarily be national parks.The Norfolk Broads is an excellent example of a tailor-made authority which solved a real problem.

My Lords, I agree with the noble Lord that a range of solutions might be appropriate in differing areas. One particular solution may not necessarily be appropriate for all the areas that we need to protect and conserve.

My Lords, the Minister referred to the South Downs, not to the Sussex Downs which is at the moment a separately administered area from the Hampshire Downs. Does she anticipate amalgamation of the two bodies?

My Lords, I am sure that that is one of the issues that will be addressed during the consultation, and upon which people on both sides of the question, I know, have strong views.

My Lords, will my noble friend assure the House that the present funding of national parks, which is poor—she may not know, for example, that the Lake District now receives £100,000 less than it did four years ago—will be at least maintained, and, if possible, enhanced?

My Lords, as I said earlier, I cannot at the moment give assurances about public expenditure while the comprehensive spending reviews are going on. However, I can give the assurance that the value and importance of those areas of outstanding natural beauty that we need to protect are well understood in the department.

asked Her Majesty's Government:

My Lords, as your Lordships would expect, we are looking at all aspects of provision for sick and disabled people as part of our wider review of social security. Naturally, this also means that we are reviewing the appropriateness of the all work test as we develop our welfare to work programmes.

My Lords, I thank the Minister for that Answer. While I understand that, like her noble friend, she cannot anticipate the results of a review, is she aware that there is considerable scepticism about the possibility of medical diagnosis by filling in a form? Would she agree that asking people to answer "yes" or "no" when they suffer from a fluctuating condition causes considerable problems if the only honest answer is "sometimes"?

My Lords, yes. I take on board the point made by the noble Earl. It is one of the reasons for reconsidering the all work test. As part of our welfare to work strategy, we wish to focus on what disabled people have the capacity to do and not on their incapacities. A test which scores for lifting a bag of potatoes or putting a hat on yourhead is not the best indicator of whether you can work at a word processor. As the noble Earl and I argued when the Bill was going through your Lordships' House, the test defines what people cannot do rather than what they can.

The all work test was reconsidered in the spring in order to take greater account of fluctuating conditions. We need to assess whether it is fully appropriate in the situation described by the noble Earl and we would welcome feedback on its use and appropriateness. Therefore,I am happy to assure the noble Earl that the all work test will be reviewed.

My Lords, does my noble friend know of a single disabled person who regards the test as fair, because I do not? However, I do know some decent disabled people who are anxious to work but feel guilty about applying for benefits because of the test. Is she aware that the test may be working well as a cost-cutting exercise at the expense of disabled people. but that it is not working well as a fair and equitable test?

My Lords, I share my noble friend's anxiety. Approximately 80 per cent. of all disabled people who take the test go on to receive incapacity benefit. Of the 20 per cent. who fail the test, if I may use that expression, and do not receive incapacity benefit about half appeal and of those about half succeed. One of the more worrying aspects is that of the people who go on to receive the jobseeker's allowance, having lost incapacity benefit, only about 7,000 ever find a job. That is why the Government are determined to press ahead with the welfare to work strategy, as disabled people wish.

My Lords, can the Minister tell us why we no longer have a Minister for disabled people specifically to look after their interests? In relation to the review, does she recall the Government's response to the report of the Social Security Advisory Committee on the disabled, which stated that there were too few to bother about and the issue was too complicated? What is the position of a lone parent receiving incapacity benefit who fails to meetthe all work test?

My Lords, there are Ministers for disabled people in the Department for Education and Employment. However, the Government are determined that there should be a Minister within the Department of Social Security who has the responsibility for disability benefits. That happens to be me, and I am privileged to be asked to do so. Therefore, at the core of two important departments are Ministers working together in order to ensure that the rights, opportunities and benefits of disabled people are properly regarded.

As regards the position of lone parents receiving disability benefit, if I have understood the noble Lord's question correctly, we estimate that only 15 per cent. of lone parents sufferfrom a disability and they are entitled to income support with a disability premium if they soqualify.

My Lords, will the Minister confirm that any new test will be driven by individual needs and not by overall spending constraints? Only if individual needs are the primary concern will many of the problems that have been pointed out today be overcome.

My Lords, the problem with the all work test was not that it was designed to cut spending. Indeed, 80 per cent. of people went on to receive incapacity benefit. My belief—and it has been reinforced by all the research that I have seen since crossing the Floor—is that the problem with the test was that it defined people by what they could not do in terms of manual dexterity and functional ability and not in terms of their capacity to enter the labour market and be employed. In today's world, disabled people tell us that they want help to enter the world of work, part-time or full-time, and we are determined to be able to offer them that.

My Lords, does the Minister agree that it is difficult to devise a substitute all work test since there is not a single activity known as work?

My Lords, I am confident that the noble Earl would be one of the first to submit feedback on how he would define work, including unwaged work in this House.

asked Her Majesty's Government:

My Lords, the Government believe that schools with a religious character are an essential part of our education system, enriching its diversity and quality. We are therefore committed tosafeguarding the character of these schools. We recently announced developments to the new school framework which will strengthen these safeguards. The Churches have welcomed these developments.

My Lords, I thank the Minister for that Answer. Is she aware that the important document dealing with the framework for the organisation of schools has not been available in the Printed Paper Office and certainly was not available today? Those of us who try to follow these matters depend on such documents for our information. What arrangements have been agreed with the Churchesas regards the critical question of the number of foundation governors in aided schools? That is one of many issues which causes concern to such schools which have had a long tradition in our education system and which are highly regarded by parents for their excellent results.

My Lords, I did not know that the foundation document was not in the Printed Paper Office. I apologise and will ensure that it is there as soon as possible. As regards the number of governors in aided schools, on 27th October my right honourable friend the Secretary of State for Education and Employment announced that the majority of foundation governors on the governing bodies of aided schools will be increased to two at primary schools and three at larger secondary schools, reflecting the current position at voluntary aided schools. The commitment to strengthening representation for parents on governing bodies will bemet by ensuring that the additional foundation governors are parents.

My Lords, does the Minister remember the conversation that we had two days ago when I reminded her that the document was not available in the Printed Paper Office? It still was not available this morning.

My Lords, I regret to say that in the past two days, as a result of being busy with a number of other issues, I failed to take up the matter. I apologise to the noble Lord and will do so immediately.

My Lords, I am grateful for what the Minister said about the Government's commitment to the place of voluntary schools within the maintained sector. I should welcome a categorical assurance that it is the Government's policy that Churches should continue to have an effective and decisive majority on the governing bodies of Church schools. Do the Government accept that if it is right that within the voluntary sector there should be provision for the Roman Catholic Church, the Church of England and the Jewish community to have schools for their children it is, in principle, a matter of justice that there should also be the provision for schools of other faith communities? That is an acute question in particular for Moslems.

My Lords, as regards the right reverend Prelate's first question, I repeat what I said in answer to the noble Baroness, Lady Young. The Government are absolutely committed to having a majority of Church governors in voluntary-aided schools.

As regards his second question about the establishment of state-funded schools for other religions, it will continue to be the case that there will be opportunities for voluntary bodiesor groups of persons of any religious persuasion to seek to establish state-funded schools. The Secretary of State currently makes decisions on those proposals. In future we propose that decisions will be taken at local level.

There have been five applications for voluntary-aided or grant-maintained schools from the Moslem community. Two were rejected by previous Secretaries of State and one was withdrawn. Two applications for Moslem grant-maintained schools are currently under consideration. Of course, each must be considered on its merits and the right reverend Prelate will understand that it would be wrong for me to comment on individual cases.

My Lords, in view of the dangerous result of single-religion schools in Ireland and the attempts to mix children up at an early age, is it not rather dangerous to encourage too many single-religion schools?

My Lords, the current situation is that if people wish to promote state-funded schools, they are able to put forward proposals. But they must meet certain criteria, including that they are able to offer the national curriculum. It is not a matter of encouragement, but of enabling people who wish to make the case for such schools to be able to do so.

My Lords, is the standard of education in Church schools equal to that in state schools?

My Lords, the standards of education in Church schools are veryoften extremely high but Church schools will vary just as schools maintained by local education authorities vary.

My Lords, will the noble Baroness accept not only that the document was not in the Printed Paper Office during the course of this week but that throughout the consultation period it has not been available to Members of this House or shadow Members at all? In fact, I received my copy this morning, which I passed on to my noble friend Lord Pilkington, with the results of the consultation. I find that very disturbing. In future, we should like to be able to obtain copies. Not only was it not in the Printed Paper Office but that office was not aware of the document itself. Although I knew the document existed, it took five telephone calls to the DfEE before I received confirmation that it did exist and that I would be receiving a copy.

Secondly, what are the distinguishing features, under the new arrangements, between a Church school and a foundation school, which will be the option for grant-maintained schools?

My Lords, once again, I should say that I was not aware that the document was not in the Printed Paper Office until the day before yesterday. I shall take up that matter with the Department for Education and Employment and its officials. It is important that we should ensure that such documents are available not only to Members of the Opposition but to all Members of your Lordships' House.

As regards the noble Baroness's second question, the Secretary of State for Education and Employment announced at the end of October that there will be three categories of school: a community category; a voluntary category, which will consist of the existing voluntary-aided schools and any voluntary-controlled schools which wish to be members of that category; and foundation schools which will be most of the existing grant-maintained schools which choose to be members of that category, and any voluntary-controlled schools which wish to be members of that category.

asked Her Majesty's Government:

My Lords, there never have been any guidelines other than those in the Ministerial Code which reminds Ministers of the Government's commitment to conduct all their business in a way that upholds the highest standards of propriety and stresses that they should always be alert to avoid any actual or perceived conflict of interest. My right honourable friend the Prime Minister has also asked the committee on Standards in Public Life, chaired by Sir Patrick Neill, to undertake a wide-ranging review of party funding.

My Lords, I thank the Minister for that reply. Does he not agree that the Government obviously started with the best of intentions and have made a terrible mess of implementing those intentions? Is it not now time for the Labour Party to set an example to all political parties by opening its books so that the public and Parliament can be fully assured that there is no linkage between large political donations, access to Ministers, influence on policy or, indeed, on patronage?

My Lords, that is exactly the reason for the reference given to Sir Patrick Neill and his committee and why it is in such broad terms. As the Prime Minister confirmed yesterday, Sir Patrick has been asked to cover all aspects of party funding, including all the matters to which the noble Lord refers. Both the Labour Party and the Government will respond to Sir Patrick's recommendations when they arrive. They will do that as a government by incorporating any recommendations in legislation proposed by the Home Office.

My Lords, will the noble Lord confirm that minutes were kept of the meeting which took place between Mr. Ecclestone, Mr. Max Mosley and the Prime Minister? In view of accusations about special treatment being given to the motor racing industry, expressed particularly by other sports which in the past have benefited from the sponsorship of tobacco companies, would it not be reassuring if the Prime Minister were able to make available those minutes to Sir Patrick Neill's committee in order that they should facilitate his examination of the question?

My Lords, as regards the minutes, it was not a ministerial meeting. The Prime Minister was the only Minister present at the meeting and my understanding is that it is not the normal custom for minutes of such a non-ministerial meeting to be made public.

On the issue of whether it is right for the Prime Minister to provide access to those who have particular points to make, I remind the noble Viscount the Leader of the Opposition that a wide range of his Back-Benchers and a Front Bench spokesman only on 21st October were urging me very forcibly to take account of the concerns of the motor sport industry and to ensure that Ministers gave proper consideration to those concerns.

My Lords, would it not be a good idea, as a beginning, if all political parties were to publish in their annual reports a list, by name, of all those who have donated sums over £5,000. That is done already by the Labour Party and the list is published at its annual conference. At least one would know who those donors were. The next step might be to send the list to the Cabinet Office so that it was aware of the people who had given those sums of money. However, as I say, the list is available; it was available in Brighton recently.

My Lords, I can confirm to my noble friend that the established practice of the Labour Party already is to make an announcement of the names of those who have donated more than £5,000. The Labour Party and the Government are determined that the issue of how far that should be extended shall be pursued. The Prime Minister said yesterday that he could confirm that we are asking Sir Patrick to consider the whole area of party funding: whether donors should be disclosed; whether the size of a donation should be disclosed; whether there should be a limit on individual donations; whether there should be a limit on overall spending; and whether there should be different arrangements altogether, such as increased state funding. I must ask the Opposition whether they agree with those increased terms of reference and whether they agree that there should be the further disclosure for which my noble friend rightly asks.

My Lords, does the noble Lord agree that it would be rather surprising if the Conservative Party were to be in favour of the inquiry by Sir Patrick Neill and his colleagues, given the fact that the Conservatives voted against just such a proposition on 5th February this year? Indeed, in his speech, the noble Viscount, Lord Cranborne, specifically declined to support a Motion tabled in the name of my noble friend Lord Jenkins of Hillhead. I welcome the fact that the contribution which has received so much publicity in the past few days has been repaid. Does the noble Lord agree that it would be an extremely good idea if the noble Viscount and his friends were now to agree to repay the £365,000 of stolen money from Polly Peck International, as the administrators specifically asked Conservative Central Office to do? Would that not be very desirable, given the interest of the Opposition in this matter?

My Lords, I am not in a position to answer on behalf of the Conservative Party; nor am I in a position to arrange for circumstances in which such an answer might be given. The Conservative Party is strangely reticent about all such matters. Conservatives have not expressed any views, other than critical views about other people, as to what they think the right thing should be. However, as the noble Lord said, I can certainly confirm not only that the Conservative Party has resisted—and, indeed, did so on 5th February—any suggestion that there should be further disclosure of party political funding, but also that it resisted any suggestion that it should support the ban on tobacco advertising as proposed by the European Commission.

My Lords, does my noble friend agree that the real problem is that far too many millions are being spent on national campaigning and that, as a result, our general elections are being fought on the basis of a sort of presidential contest? Therefore, is it not time to impose a very strong restriction on the total amount of money spent on electioneering? Is it not also time that electioneering should be returned to the constituencies so that ordinary people can be involved in the election, with their candidates, and not be dependent upon television and radio broadcasts?

My Lords, as I believe I just said, the issues raised by my noble friend are those which we specifically asked Sir Patrick Neill to address. I have some personal sympathy with what my noble friend says about constituency and national funding. However, those are matters for Sir Patrick in the first instance. The Government will take account of that fact.

Although there may have been some confusion in the past week, I take a very upbeat view of what is happening. I believe that the result of the events of the past week or so have encouraged—and, indeed, made essential—a proper review of party funding. That will be taken by an independent organisation. I hope that we shall make real progress as a result of that review.

My Lords, I beg to move the Motion standing in my name on the Order Paper.

With your Lordships' permission I shall move all the amendments together. They raise no matters of substance and result chiefly from changes in the designation of a number of government departments and agencies.

My Lords, I beg to move that the House do now resolve itself into Committee on this Bill.

moved Amendment No. 1:

Page 2, line 21, at end insert—

("( ) Subsection (1) applies only if the agreement, decision or practice has, or is likely to have, a significant effect on competition within the United Kingdom.").

I am sorry to interrupt the noble and learned Lord, but I have to say that I am absolutely astonished to find him speaking from the Dispatch Box today. Am I not right in assuming that the noble and learned Lord has, in the past few days, been appointed non-executive chairman of an oil company? For a party that made so much so-called "capital" out of the shareholding in BP of my noble friend Lord Simon, I wonder whether the noble and learned Lord is entitled, first, not to declare an interest and, secondly, to speak from the Front Bench.

I certainly will be declaring that interest. As I understand it. there is nothing in the rules of the House which restricts me from speaking from this position. If the noble Lord wishes to make a further point, I shall allow him to do so. However, I certainly did not understand that there was any such restriction. As the noble Lord indicated, I have been invited to become a non-executive chairman of an oil company. I should make it absolutely clear now, as I was intending to do in the register—which, I believe, is to be republished before the end of the month—that I shall certainly not be speaking on any matters relating to energy policy or, indeed, any matters relating to energy affairs.

As I was seeking to say, if the requirement of significance were attached to the wording, it would be of value to business and also to the OFT in that it would help to ensure that unnecessary notifications are not made. Those who are familiar with the problems that the European Union has encountered will be aware that, because of the wide interpretation that has been given to Article 85. a vast number of unnecessary notifications have been made. In those circumstances, the Commission has been unable to cope. We would not wish to see such an experience repeated within the United Kingdom. I should also point out that this matter is of concern not only to business broadly; there are legal interests who have brought the same point to our attention. I beg to move.

Amendment No. 4 in my name has been grouped with the amendment just moved by the noble and learned Lord. I wish to reinforce what the noble and learned Lord, Lord Fraser, had to say. It seems to me—this arises from points made by several noble Lords in the Second Reading debate—that we need, as far as possible, while accepting the general purpose of this Bill, to limit the amount of uncertainty and to limit the number of unnecessary notifications. I should have thought that the inclusion of the single word "significant" in the amendments standing in the names of the noble and learned Lord, Lord Fraser, and myself would help in that direction. I very much hope, therefore, that the Government will find it possible to introduce that word which was in the original draft Bill which accompanied the Green Paper on this subject.

I thought I should raise an issue which is not only relevant to this amendment but also to others which I have noticed have been tabled in the name of the noble and learned Lord, Lord Fraser of Carmyllie. Under the present jurisprudence of the European Union, as I understand it, Article 85 applies only where the effect on competition is appreciable. If the word "appreciable" and the word "significant" are more or less the same, is the amendment that is proposed otiose?

I also have a more general point to make. The noble and learned Lord, Lord Fraser, suggested that it was desirable to incorporate into our UK legislation the point at which European jurisprudence has reached in terms of the prohibition applying only if there is an appreciable effect on competition. That point can, of course, be applied to many, many matters in this Bill. I wonder whether the amendment is also unnecessary because, as I understand Clause 58 of the Bill, it incorporates into this UK legislation the current state of European jurisprudence, at any rate most clearly at the level of the European Court of Justice.

If we are to accept the point that is being made by the noble and learned Lord, Lord Fraser, and the noble Lord, Lord Ezra, I wonder whether we shall set a train in motion where we shall want to amend all sorts of clauses in order to ensure that we are brought up to date with European law. I know that will save lawyers from having to check their reference books as to what the state of European law is, but I do not think that is particularly the job of this Chamber or indeed the other Chamber.

As the noble Lord has said, this measure represents the perceived jurisprudence of the Commission and the Court of Justice today. However, that was not the case originally. In the very early days—I know this as I used to appear in these cases before the Commission and the court—before the jurisprudence developed, one had to register in order to obtain block exemption or exemption. No one really quite knew in those days where they were. I can see every advantage in this. This is not the thin edge of incorporating the jurisprudence of the court and the Commission into this Bill. This is an essential, practical and precautionary measure so that right at the outset everyone understands that, put another way, a de minimis situation is simply not relevant. What is the objection to that kind of clarity? One can put in a de minimis provision. That is the way we would draft it. That is the way our restrictive practices court looks at the matter. However, the Commission and the Court of Justice look at it in the terms of this amendment, so why not use it? Why not clarify the position?

Before the Minister replies, I wish to ask a question. I was interested to note that Amendment No. 1 standing in the name of my noble and learned friend Lord Fraser states,

"Subsection (1) applies only if the agreement …has, or is likely to have, a significant effect on competition within the United Kingdom".

Almost exactly the same words appear in Amendment No. 4 which contains the words,

"has, or is likely to have".

Clause 2(3) of the Bill states,

"Subsection (I) applies only if the agreement, decision or practice is, or is intended to be, implemented in the United Kingdom".

I wonder whether this should be "was" or "was intended to be" because I cannot see how the Government can take action over something that has not yet been decided. This may be a technical point but I think it is worth raising. I was interested in the difference in sense as regards the amendments which have been tabled.

I, too, think this is an important amendment. I note the points that have been made by my noble friend which I believe are apposite. Those points illustrate perfectly that throughout the whole of this Committee stage we must not forget that after the passage of this Bill there will be an entirely new playing field with goalposts in some cases having been moved radically in relation to some of the monopoly legislation that we already have, and particularly with regard to definitions. What will the new definitions be? How will we be responsible for implementing them? Are they better, or likely to be better than the ones we already have?

I agree with the noble and learned Lord, Lord Fraser, and the noble Lord, Lord Ezra, that the competition regime should concern itself only with a situation where the anti-competitive effects of an agreement are significant or appreciable. That is the intention of the Bill as drafted. I accept that it will have the effect of reducing administrative overload if those points are clear. However, as the noble Lord, Lord Borrie, said, EC jurisprudence states that Article 85 applies only where an agreement has an appreciable effect on trade and competition. "Appreciability" is already part of EC jurisprudence. We consider therefore that the chapter 1 prohibition will apply only if an agreement has an appreciable effect on competition.

On that basis an explicit significance test written into this clause is unnecessary, and, moreover, we believe could be harmful in indicating a departure from the established European principles where this is not the intention. An explicit appreciability test does not fit well with our approach of reliance on European case law except in areas where it is clear a different approach is required. Worse, there is a risk that in apparently departing from established European principles, we might inadvertently create so high a threshold for action that we could impede the effective tackling of anti-competitive agreements.

As we stated at Second Reading, the reason for bringing in the changes is that, as we all agreed, the current system is not working well as an approach to competition. I believe, therefore, that it is better to stick with the established principles in the jurisprudence in this area.

I will nevertheless reflect most carefully on the points made by the noble Lord, Lord Ezra, and the noble and learned Lord, Lord Fraser. I hope that at this stage they are prepared to withdraw the amendment.

I can immediately tell the noble Lord that I intend to withdraw this amendment. I am grateful for the approach that he took, and in particular his remarks about the intent on the part of the Government in promoting this legislation, that it is only those arrangements that have either appreciable or significant effect that will be caught.

The noble Lord, Lord Borrie, referred to Clause 58. It is a very important provision. We shall need to examine it very carefully—not today, I regret to say, but perhaps in a week or two when we reach it.

I am grateful to the noble Lord, Lord Simon, for his recognition that there is a risk of administrative overload if business is uncertain whether or not the arrangement into which it has entered is of such a nature that it needs to be notified. I am sure the noble Lord will acknowledge through that recognition that that is a problem which has confronted the Commission in the past. The inclusion of the word "significant" would at least provide business with a clear appreciation as to what is required of it and seems desirable. The noble Lord indicated that he would reflect on the amendment, and I am grateful for that. We may return to the matter at a later stage. However, I beg leave to withdraw the amendment.

moved Amendment No. 2:

Page 2, line 23, leave out ("implemented") and insert ("acted upon").

I support the third amendment—with respect to my noble and learned friend, the second is neither here nor there. The third, if it goes to jurisdiction, could avoid certain disputes, certain difficult administrative problems and arguments over jurisdiction. It is a good safeguard and a useful amendment. I hope that the noble Lord will keep an open mind before rejecting it out of hand.

I thank the Committee again for the way in which the debate is being conducted at this stage. Questions of administrative overload, to which we referred previously, are matters for discussion as the Bill proceeds. It is well understood, and the point is well taken. That theme will continue through our discussions.

Turning to Amendments Nos. 2 and 3, it is perhaps best if I refer to the third and then comment on the drafting implication of the second. It may be helpful to set out the Government's thinking behind the territorial limitation provision in Clause 2(3). The prohibition is cast in terms of effects. Therefore, its territorial scope is extremely wide-ranging, even with the limitation that the effects on trade and competition actually be in the UK. It does not follow that we should depart from the normal UK policy of territoriality and follow the so-called "effects doctrine", where jurisdiction is claimed on the basis of the economic effects felt within a state resulting from behaviour outside that state, however indirect that link might be. I am advised that that could be the result of the second amendment tabled by the noble and learned Lord, Lord Fraser. The Government believe that to be too wide a basis for jurisdiction for the prohibition.

However, it is recognised that the place where an agreement having an anti-competitive effect is made is not always a determinate factor. We would not want to create a loophole whereby parties could avoid the prohibition by simply executing their agreements outside the UK.

We therefore decided that the best approach was to follow the current jurisprudence of the European Court of Justice based on the term "implementation" as set out in the case known as Woodpulp. That test requires that the agreement be implemented in the EC for the prohibition to apply. Similarly, the UK prohibition will apply only if the agreement is implemented in the UK.

Following the test set out in the Woodpulp case, there is also the advantage of allowing business to tap into European jurisprudence on the meaning of the term. I am advised that adopting the first amendment of the noble and learned Lord, Lord Fraser, would lead to uncertainty as to its meaning and therefore create an additional doubt in the mind of business.

By, in effect, copying out the test in Woodpulp on the face of the Bill, we are also ensuring that in the event that EC jurisprudence develops and creates a pure effects-based doctrine, the application of the UK prohibitions will not follow suit. I therefore ask the noble and learned Lord if he is prepared to withdraw his amendment, given the implications of the word "implementation" and the existing jurisprudence.

Before the noble Lord sits down, perhaps I may ask a question on the point about extra-territorial jurisdiction to which the noble Lord referred. I am fully conversant with the nature of our concept of claim and the American concept of such claim. But with the greatest respect to the noble Lord, that is not quite what is involved in this amendment. We are not claiming extra-territorial jurisdiction:

"a party …is located within the United Kingdom".

The concept of this dispute as to territorial claim is very interesting but, with the greatest respect, as far as I can see, it is not relevant as an objection to the amendment. The noble Lord may wholly disagree with me but perhaps he will consider that point?

The point I am trying to make is that we want to be absolutely clear of the relationship between the European jurisprudence and our own. The linkage with the United Kingdom as the location for the effect in this instance is the most important issue. We do not wish to put ourselves into a position where we have linkage in the extra-territorial effect and thus throw doubts into the mind of the business concerned. That may be a drafting point to which we shall wish to return. I am clear in my own mind as to what we are trying to achieve; but, if we need to discuss the matter further, so be it.

Once again, I shall withdraw the amendments. As I indicated, they are drafting points. There was a recognition that Amendment No. 2 would have the effect of marginally widening the scope of the prohibition. I shall read carefully what the noble Lord said but I am surprised that the view is taken that it introduces an unacceptable degree of extra-territoriality. In speaking to the amendment I hope I indicated that it was important, as we too recognise, that it had to be in relation to an agreement which had an effect on competition within the United Kingdom. The only extension—if that is the right way to describe it—is that the agreement to achieve that effect might be implemented beyond our shores. I shall withdraw the amendment but we might return to it, together with the following amendment, at a later stage.

I am relieved to say that I shall not be batting on the next few groups of amendments. However, perhaps I may take this opportunity to signal a point in relation to Amendments Nos. 17, 19, 20, 21, 22, 23, 24 and 28. I should like to have a broad debate on predatory pricing. I understand that within that group of amendments a number of noble Lords wish to address the issue of predatory pricing in relation to the newspaper industry in particular. Before we reach that point perhaps we might reflect on whether it would be desirable to separate the two debates. It is of no great consequence to me but such a separation might be helpful for a more coherent debate. In the meantime, I beg leave to withdraw the amendment.

moved Amendment No. 5:

Page 2, line 23, at end insert—

("(3A) An agreement, decision or practice to which subsection (1) applies shall not, for the purposes of this Part, be within the scope of—

(a) section 18(1);

(b) the Fair Trading Act 1973; or

(c) the provisions of, or any licence granted under,—

(i) the Telecommunications Act 1984;

(ii) the Gas Act 1986;

(iii) the Electricity Act 1989;

(iv) the Water Industry Act 1991;

(v) the Electricity (Northern Ireland) Order 1992; or

(vi) the Gas (Northern Ireland) Order 1996,

and any question whether such an agreement, decision or practice is to be prohibited on competition grounds shall be determined in accordance with this Chapter and not in accordance with the conditions of any such licence irrespective of whether such conditions are expressed in similar terms to subsection (I).").

For the benefit of those—of whom I am one—who do not know quite what the noble Lord is getting at, would it not be appropriate for him to say just a few more sentences?

I have already moved the amendment.

The noble Lord has moved the amendment. The point raised is the relationship between two prohibitions, the Fair Trading Act and the legislation regulating the utility sectors. It may be helpful if I explain how the Bill is intended to operate in this respect. I shall deal with each of the relationships in turn.

The two prohibitions introduced by the Bill will operate hand in hand. Essentially they will have the same relationship to one another as do Articles 85 and 86 of the treaty. That relationship is well established and works satisfactorily in practice. Accordingly, for example, in considering whether to give an individual exemption for the Chapter I prohibition, the Director General of Fair Trading will have to take account of the Chapter II prohibition. He should not grant an exemption if in doing so he would be exempting under that prohibition something that appears to him to be prohibited under the Chapter II prohibition.

These matters must necessarily be considered in tandem as an agreement may constitute an abuse of the dominant position. Similarly, it would be wrong for a firm to be allowed to abuse a dominant position because an agreement benefited from a block exemption. Enjoyment of the benefit of a block exemption under the Chapter I prohibition should not bring immunity from action under the Chapter II prohibition. The inter-relationship between the two prohibitions ensures that that will not be the case.

More generally, a jurisdictional dividing line between the two prohibitions would conflict with the Government's desire to see the prohibitions applied consistently with Articles 85 and 86. As the noble and learned Lord, Lord Fraser, noted, and as I have already said, consistency in interpretation will bring significant administrative benefits to business.

The relationship between prohibitions and the Fair Trading Act monopoly provisions is the subject of a separate amendment which we shall debate in due course. However, the Fair Trading Act provisions enable wider market investigations than are possible under the prohibitions. Essentially they enable investigations where competition issues arise fundamentally from structure of the market rather than from restrictive agreements or the specific abuses which we discussed with regard to the alignment of Articles 85 and 86. We do not think it right or practical to circumscribe the monopoly references and investigations under the Fair Trading Act. That may be a point to which we shall return. We do not believe that a strict jurisdictional separation would work well.

It is important to say that, before framing a reference, the director general might have to examine every aspect of the behaviour of, and relationships between, the players in a market in order to decide what could be examined by the competition commission on a reference; or the competition commission would have to determine what fell within the prohibition regime in order to exclude it from its considerations. The prohibitions will be the primary tools for dealing with anti-competitive behaviour in the market place. The Fair Trading Act provisions will be reserve powers to deal with certain limited market circumstances.

As regards the relationship between the prohibitions and the Fair Trading Act merger provisions, Schedule I to the Bill provides for a clear demarcation between the two. We can debate that demarcation when we reach the relevant parts of the Bill.

I think that at this stage I am along the road to addressing the noble Lord's point.

Does the Minister feel that he has addressed the final part of the amendment with sufficient clarity and detail to respond to my own amendment?

Of course, the noble Lord spoke but briefly and his clarity was magnificent. I spoke at some length and I hope that I clarified the position.

I would like to thank the Minister for his extremely full reply to my brief question. As to the question of the Fair Trading Act, the Minister will recall from our exchanges at Second Reading that he can expect at some later stage in the proceedings an amendment proposing that the activities of the competition commission, in so far as they refer to complex monopolies and monopolies of scale, ought to be transferred to the Office of Fair Trading. I accept that this is not the moment to go into detail on that point.

As far as the individual public utility regimes are concerned, and considering that there is so little in the Bill so far to show how costs will be saved in respect of the application of these regimes and that certainty will be guaranteed, does he think that the maintenance of a dual regime will redound to the benefit of competitiveness in the United Kingdom? There is nothing on the face of the Bill to ensure that the operation of two separate regimes in relation to the single prohibition will not lead to lengthy procedures and problems of double jeopardy. I would like him to deal with that matter in a little more detail.

That fuller question deserves a fuller answer. Perhaps I can now turn to the relationship between the prohibitions and the utility legislation because that will be helpful and we can talk about the implications subsequently.

The two prohibitions introduced by the Bill are general prohibitions appropriate to the whole economy, and we believe that it is right that they should apply equally to the utility sector. Indeed, the amendments that we are discussing do not challenge that presumption.

It is important that competition is developing in the utility sectors. I believe that when we talked about it previously we talked of the dynamism of these particular market places being different from the general market place because we are creating markets in the utility sector. However, for that reason, there is still a strong case for retaining more detailed sector specific regulation of such matters as pricing, including the price caps. The access to networks is a crucial issue, as the dynamics of that marketplace develop, if we are talking about some of the energy sectors, the electricity sector and the gas sector.

We think it is right in the utility areas that the prohibitions apply and this seems to be part of the purpose behind the noble Lord's amendments. However, it is already the effect of the Bill. In other words, if one or other of the prohibitions is breached, action to be taken under the Bill would be possible, irrespective of the licence regime, so the general prohibition would apply. If the company is required to do something by law—and by this I include by a licence condition—then it is right that it should not be prohibited from complying with that requirement. The Bill achieves this result as well.

I hope in some way that much of what is sought in the amendments is achieved by the Bill. However, where the amendments seek to impose strict jurisdiction barriers, the changes, in my view, are unnecessary and probably undesirable. In practice, we believe that the Bill will ensure that the different regimes that we have discussed—the utility regime and the general regime—will apply in a complementary and common sense way.

The point in common-sense terms is the differing nature of the market places and the particular dynamism of the utility markets as they develop. Therefore, we need to see special capacities developed to understand those markets. Double-banking within the system would cause another kind of overload and would perhaps not be the best use of the valuable and scarce resources available for making the important judgments about the issues we have just discussed.

If that was a full enough answer to the second, rather fuller question, I ask whether the noble Lords is prepared to withdraw the amendment.

Before the noble Lord, Lord Kingsland, answers that point, perhaps I can say that I am a little confused because it seems to me that that section of the amendment dealing with the privatised utilities legislation does provide the opportunity for the enterprises to act under licenses under the law. I would have thought that it was perfectly straightforward to say that so far as they do so they would not be subject to the impact of the prohibitions under this Bill. I am not absolutely clear why the Government seem to have any doubts about that.

As I tried to say in answer to the previous line of questioning, I think that that is the intention where a licence applies. Complying with the licence would, in general terms, not be outside the law. However, as I mentioned when we discussed a particular detail of a price cap which might be implicit in a licence arrangement, you could have a position where someone cut prices significantly in a price cap regime and, in fact, undercut the market to such an extent that they would be in an abusive position in terms of their market dominance in the relevant market. Therefore, what we are saying is that the overlap with the general prohibition, the two prohibitions, must stay in place despite the regime of licence being in general terms appropriate for the definition of good behaviour, if I can so put it, for a utility. There will be occasions when the prohibition will enter into effect; I have just mentioned one. I do not believe therefore that we can be absolute in drawing, if that is the appropriate phrase, the jurisdictional boundary.

Before the noble Lord sits down, as he originally said that there is now increased competition among the utilities, I wonder if he will acknowledge that it is no thanks to the party opposite that this position has occurred and that its claim to be a great supporter of competition has a few legs to grow before it can be taken seriously.

Can the noble Lord, on this important matter, tell the Committee whether he was referring to the possibility of discriminatory discounting practices, which are not at present subject to regulation in this country, except possibly under competition legislation, or was he speaking of different types of price cutting?

First, may I assure the noble Baroness that, as one whose title in my new career is half based on competitiveness, I can only applaud any progress made under any government to increase the competitiveness of our industry and of our people to do the things we know that we must do to create value in the world. I acknowledge that whoever has achieved that has served us proud.

As to the issue of pricing, it is important to note, as the noble Baroness rightly said, that discriminatory pricing is something which can be caught under the existing practice, but equally it is caught under both the prohibitions in the EC law. At the moment it can apply in both. When we discuss later, as I am sure we shall, the issue of pricing, we shall find that it is already covered in the general instance by the EC provisions. We have a separate law on that, as the Committee will be aware as we are about to discuss the impact of the Resale Prices Act, which applies to one sector currently but is generally being repealed. The answer is yes, I was talking about discriminatory pricing and it is currently covered by both regimes.

The Minister will not be surprised to hear that we do not intend to press the amendment at this time. However, I hope he will accept that there is more to be said about it. In particular, we have taken note of his remarks about how sector specific these prohibitions are. If we are to accept that remark, perhaps we ought to be looking at this problem from the standpoint of the noble Lord, Lord Ezra, which is to leave the prohibitions in place in the individual sectors but to remove the prohibition from the Bill. At this stage, I beg leave to withdraw the amendment.

moved Amendment No. 6:

Page 2, line 24, after ("any") insert ("provision of an").

I agree with my noble friend Lady Nicol that the application of the prohibition to a contract should not always lead to the entire contract being void. I am advised that the best way to avoid such a possibility is to mirror the language of Article 85(2) of the European treaty, which deals with the consequences of an agreement being caught by the EC prohibition. That is what we have done in Clause 2(4).

The European Court of Justice has held that it is only those elements of an agreement which are prohibited under Article 85 that are void. This principle of European Community law will apply to the interpretation of the Chapter I prohibition as a result of Clause 58 of the Bill, the clause relating the treaties to our own law base. Whether those elements are severable from the agreement as a whole is a matter for the normal rules of national law. Indeed, we consulted on the basis of the language set out in the amendment and we received comments from legal practitioners that it would displace normal UK rules of severance and prevent the possibility of severing offending parts of whole provisions. Moreover, it would risk divergence from EC law and therefore would create more burdens on business.

Advice has been taken. If my noble friend understands the legal construct we are putting—from her question it was clear that she did—I would ask her to withdraw the amendment.

I declare an interest as secretary of the all party group, an interest properly registered in Part 3 of the Declaration of Interests. Is the Minister saying that the case made out by my noble friend is already covered and that, despite what we consider to be a blunderbuss or scattergun approach, the advice that has been given is to the effect that what we have proposed is not only undesirable but not possible? If what we have here is a sledge-hammer to crack a nut, which sometimes can be used to avoid obligations, and can lead to the calamity of the whole contract being declared null and void, that is not acceptable.

I note that the Minister relies heavily on Article 85(2) of the European treaty in this respect. However, given the circumstances pointed out by my noble friend Lady Nicol, where it is possible to make a clean break between an offending part and the whole, I wonder whether the Minister would care to look again at this point. If the wording we are using is not quite right perhaps the Minister can come up with another form of words to take care of the points that have been made.

I thank my noble friend Lord Graham for giving me the opportunity to comment again. The way in which the Bill has been redrafted, following the consultation process and the August document, has the effect that the noble Lord wishes. The reason for the change was to meet the circumstances which the noble Lord was saying might cause a large number of problems.

I am grateful to my noble friend Lord Graham for adding to the arguments. I was convinced by the Minister's first answer and I certainly do not intend to press the amendment. However, I should like to read carefully what he said and to take advice on it. I beg leave to withdraw the amendment.

moved Amendment No. 9:

I rise to support the noble Lord, Lord Graham of Edmonton, in what he so ably said about the advantages of competition and the loss to the consumer of our independent pharmacists. Perhaps I may mention one matter which the noble Lord did not. Medicines should not be thought of in the same way as the products which consumers ordinarily buy. They should not be bought in bulk, stored, discounted and sold as loss leaders. Medicines are very important items. From my previous experience as a chairman of an FHSA, I believe that the best way to purchase medicines, whether over the counter or with a prescription, is by visiting a pharmacist.

Perhaps I may add another point for the benefit of the Minister. I very much hope that he will take this on board. When I was chairman of the Barnet FHSA, in line with the previous government's philosophy—I believe that it is also the philosophy of the present Government—we regarded as paramount the concept of bringing health care out into the community. We began an experiment in Barnet, known as "high street health". The idea was to enhance the benefits which independent pharmacists can bring to consumers by giving them extra training and by encouraging consumers who were suffering from, say, a cold or a sore throat to visit their pharmacist rather than blocking up their GP's surgery. That happened in the past when people used to visit their local chemist rather than rush immediately to the GP. That system in Barnet worked so well that it was used as a model by FHSAs across the country. In the areas where that system was adopted independent pharmacists became people of real value, not only to consumers but also to GPs. I stress that pharmacists in Barnet and elsewhere where the scheme was adopted worked in harmony with, and with the support of, their local GPs.

I grieve for the fact that if the Bill's provisions remain unamended we shall lose so many independent pharmacists that the benefits of competition, as we now know it, will be lost in this important area. I urge the Minister to look carefully at his noble friend's amendment.

I support the amendment proposed by my noble friend Lord Graham. The Minister and most of your Lordships may not be particularly well acquainted with the little country town of Llandysul, which nestles in a very agreeable part of west Wales. Your Lordships would not be out of kilter with many other citizens of both Wales and England in not being able to recognise Llandysul because it is a very small place and is not easily found either on a map or on the ground.

I mention Llandysul because last week I received a very closely argued, very detailed and very carefully researched plea from the pharmacist—the only one—in Llandysul pointing out in great detail the dangers which attended upon his particular business, which has been there for many years, if something like this amendment is not accepted by this Committee. In that area it is not easy for people to exercise any sort of choice. The area will support the work of only one pharmacist. May I therefore ask my noble friend the Minister when he goes home tonight to spare a moment or so to look on a map for the town of Llandysul and, before he goes to bed, to consider the very real problems which affect people in that area? I hope that the result will be that my noble friend's amendment will be accepted.

I rise to speak against the amendment moved by the noble Lord, Lord Graham. In doing so, I should mention that I know Llandysul very well, but I am not sure whether it is the same Llandysul because I did not recognise it from what the noble Lord said. Llandysul certainly has a pharmacy, but the people I know in Llandysul have as their objective catching the free bus down to the local Tesco where they can buy their pharmaceutical products. I can discuss this matter with the noble Lord, Lord Morris, because I happen to know Llandysul.

I heard from both the noble Lord, Lord Graham, and from my noble friend Lady Miller about the benefits of competition. Of course, it is lovely to have five pharmacists in one street in a small town, but the real benefit of competition is the fact that prices can come down. I have in my hand a list of comparative prices for the ordinary medicines that we all buy. You do not need to go to your local GP to get a prescription if you want aspirin or Nurofen—at least, I believe that that is the case.

A 24-pack of soluble aspirin costs 39 pence in a supermarket while a 24-pack of Disprin—exactly the same product—costs £1.50 in a pharmacy. There is a big difference between 39 pence and £1.50. In a pharmacy 24 Nurofen tablets cost £4.69 while in a supermarket they cost £.1.99.

I should declare an interest. Most Members of this Committee realise that I am a non-executive director of Tesco—

Keep taking the tablets!

I am sorry; I had been intending to declare that interest when we reached my amendments. I have it properly registered, according to the noble Lord, Lord Graham, in Section 3 of the Register of Interests. I have done that all along, but I repeat it for the benefit of the newer Members of your Lordships' House who may not know. Those who were here during our arguments on Sunday trading know perfectly well where I stand on this.

We must recognise that all governments in this country have wanted to battle non-stop for low inflation. The mark-ups on some ordinary products are significant. Although such high mark-ups support the local pharmacies—I do not disagree with that strong point—it is the self-same people who use those local pharmacies who are the least able to pay those extremely high mark-ups on highly priced goods. I am afraid that by restricting supply and maintaining the retail price mechanism on such products we are not doing what the Bill sets out to do, which is to lower the cost of living for a lot of people.

I am extremely sympathetic about the concerns which have motivated the amendment because I can appreciate the conflict between achieving lower prices through competition and the maintenance of essential local services, particularly (although not exclusively) in rural areas. In the very metropolitan area from which I come, the London Borough of Islington—the Minister is not unfamiliar with it—our local pharmacies are relied on particularly by those who are not mobile. As I said, although I am sympathetic to the motivation behind the amendment, I can see difficulties with the maintenance of the retail price mechanism on this basis.

Can the Minister assure us that he and his department will look carefully at other ways in which small shops can be helped either through the planning mechanism or the uniform business rate? The powers of local authorities are extremely limited in this regard. Even in urban areas we face ongoing problems in trying to maintain essential local shops. Can the Minister give us such an assurance, even if he cannot accept the amendment?

I rise to speak briefly and apologise to the noble Lord, Lord Graham, for not being present when he moved the amendment. My noble friend Lady O'Cathain has provoked me—

Good!

Obviously, I respect my noble friend's knowledge of these matters given that she is a non-executive director on the board of Tesco, but I was a non-executive director on the board of Boots for 1 1 years and I must express this caution to my noble friend. She says that exactly the same aspirins are sold in different places. Many cut-price drugs have been manufactured in the third world where quality control is nowhere near as good as that which is applied to more reputable brands. Whereas in some cases the mark-ups may be exceedingly high—probably too high—I believe that to go for cheapness is not the greatest economy.

I rise to support the amendment moved by the noble Lord, Lord Graham. I very much look forward to hearing the response of the Minister. If I have one disappointment about the Government Front Bench it is that for a debate as potentially important as this on the first day of the Committee stage there is no Minister from the Department of Health. There is here a risk of conflict between clear Government policies. As I understand it, the health policy of the Government continues the policy of the previous government; namely, that general practitioners are to be at the forefront of the National Health Service but every effort should be made and every encouragement given to ensure that they do not have an unnecessary workload. Accordingly, the approach promoted by my noble friend Lady Miller when she, among others, had responsibility for the National Health Service was that community pharmacies should be a valuable point at which people with a range of minor ailments could get the requisite advice. Therefore, instead of taking up the time of their GPs and wasting their own time sitting for hours in waiting rooms, they would be able to go along to a pharmacy and see whether their ailments could be quickly dealt with by over-the-counter drugs. Alternatively, if the chemist felt that there was a worry about the individual's health he would be properly referred to his GP. That seems to me to be a good policy. If it remains the policy that we on this side pursued when in government we warmly support it and will give every encouragement to its achievement.

A specific question was asked about this issue at Second Reading. The noble Baroness, Lady Jay, indicated then that the Department of Health was neutral on the point. Frankly, I found that astonishing. In moving this amendment the noble Lord referred to research which indicated that approximately 37 per cent. of those who currently went to pharmacies would go to Asda, Safeway and so on.

The figure I gave was 36 per cent.

I am grateful to the noble Lord for that precision. The effect of such a shift in buying patterns means that the economic viability of up to about 3,000 pharmacies throughout the length and breadth of the country will be affected. If those 3,000 pharmacies disappear it follows as night follows day that the policy of this Government on the vital matter of health will suffer serious detriment. If that is the policy—it should be the policy—we should look very carefully at anything that affects the viability of these pharmacies. It is not simply a case of special pleading for one sector; there is a sound public policy reason for maintaining their independent position.

It is of interest to note that prior to the last general election Labour Members of Parliament in another place were extremely supportive of RPM on over-the-counter medicines. Indeed, the consumer affairs spokesman, Mr. Nigel Griffiths, now the Minister, who is a colleague of the noble Lords, Lord Simon and Lord Haskel, in the Department of Trade and Industry, organised a petition in support of RPM on over-the-counter medicines. He urged his fellow election candidates and Members of Parliament to support it. While I know that Mr. Griffiths has signed just about every petition that there has ever been, this one was a soundly-based petition. It is regrettable that there should be even a hint of inconsistency over a matter of such important public policy.

Sometimes the counter-argument is advanced that these pharmacies should not be dealt with by the device of maintaining RPM in respect of over-the-counter medicines; instead, there should be support through public funding under the essential small pharmacies scheme. There is some support provided in that way, but that is in respect of pharmacies which, even with the existence of RPM on over-the-counter drugs, are in such a perilous position that they need to be supported. They are pharmacies located perhaps in the more remote parts of Wales and Scotland. They simply could not exist if they did not receive some kind of payment. But the fact of the matter is that it is not a particularly effective subsidy and it barely covers the annual costs of a single pharmacist, let alone other overhead costs.

There is a very strong case to be advanced in support of these pharmacies. We wish to ensure that as this Bill proceeds nothing is done to damage their interests. I hope that the Minister will be able to provide me with some comfort that in the Government's view, if regard is had to Clauses 6 to 11 which provide block exemptions, the criteria in Clause 9 to allow for individual or block exemptions are sufficient to enable this group of pharmacies to be brought within the exemption.

I believe that I understand the argument advanced, but I am not wholly persuaded that it is as explicitly set out as it might be. If the noble Lord could provide us with some comfort on that matter we would be very pleased to hear it. That would enable us to consider constructively how at later stages of this Bill we can take forward the campaign on behalf of pharmacists to ensure that their position is protected. I should be grateful to receive any indication that the noble Lord is able to give at this stage that that is the Government's approach in seeking to protect these pharmacies.

There are other provisions in the Bill which affect these pharmacies and need to be addressed. The position is slightly complicated. My understanding is that at the moment the Office of Fair Trading is looking at the exemption which was provided as long ago as 1970. It has been considering the matter for about a year. A preliminary indication is that the matter may be taken back to the courts with a view to securing the removal of that exemption. My understanding is that there must be a first step taken to secure an indication that prima face there has been a material change in circumstances which means that the exemption should no longer remain in place. I do not believe that any such first step has yet been taken, notwithstanding the fact that this matter has been considered for at least a year without any clear outcome.

I invite the noble Lord to look carefully at one matter as a matter of procedure, not just drafting. I believe that it is unsatisfactory. The transitional arrangements which would affect the continuation of this RPM arrangement are to be found in Part III of Schedule 13. It could not be found in a more remote part of the Bill. Paragraph 8 provides:

"(I) The Chapter 1 prohibition does not apply to an agreement, decision or practice—

"(a) at any time when it is the subject of continuing proceedings".

Can the noble Lord hazard a guess as to when the Bill will receive Royal Assent and when it will commence to operate? It is far from obvious when or if the requisite proceedings will begin.

It is extremely important, if we cannot resolve this in the way I hope it can be resolved by securing an exemption under the provisions to which I have referred, that we in any event have clearly set out what exactly will be the transitional arrangements for these pharmacies. We would at least wish to see the five year period maintained for it. More importantly, we would like to see in principle a continuing exemption provided for pharmacies.

I have spelt out in a constructive fashion the line that we would like to take forward, and we will listen carefully to what the Minister has to say. It is an issue that is causing real concern in the country and I am grateful for the contributions from all sides of the House.

I seldom part company with my noble friend Lady O'Cathain but I regret I very much do so on this occasion. We do believe that medicines are different. I will give one example of one respect in which medicines are different from other products. In the past two weeks the Department of Health has required that paracetamol be sold in small quantities. The reason behind that requirement is, in our view, a sound one. Regrettably, far too many people—young people in particular—take overdoses of paracetamol. Even if they have repented or relented of it subsequently, such has been the damage to them that their position is irrecoverable. That is a perfectly sound reason for the Government to make that requirement.

That is an example that we could find across a broad range and indicates that the sale of medicines—even if they are over-the-counter drugs such as paracetamol—is not in quite the same category as many other products which are now sold in supermarkets.

I hope that the Minister will give as clear an indication as possible of the way forward on this vexed issue.

I have an interest to declare. I live in the village of Comrie in Perthshire in Scotland. In the village there is a pharmacy; the pharmacist is my daughter. I am the non-executive chairman of the company which owns the business. Having declared that, I will take no further part in the proceedings on this Bill, on any amendments—either voting for it or against it; I will abstain—but I think I have some information which will be useful.

I am the non-executive chairman but, because it is a family concern, I know a great deal of what goes on. I know the extent to which the chemist in a village plays a very important part in the life of the community. The village of Comrie is a very pleasant place in which to live. There are many people who retire to it and it has a very much larger proportion of elderly people than other villages. I am quite sure there are a number of villages up and down the country, both north and south of the border, which are in the same position.

I know the extent to which my daughter plays a part in the life of the village. She is not just the pharmacist; she is called on for many things. She is involved in organisations, where people rely on the sort of advice that she can give them. As has been stated, the Government's policy now is to switch work from the doctor to the chemist—although there is no indication that the chemists are going to get any more money for doing it—and it would be a pity if they lost the important over-the-counter part of the business. Having said that, I hope that I will not be accused of seeking to influence the debate, but it is of interest that I am able to speak about this part of the life of a village.

Incidentally, when the register of interests was raised in this House, I informed the clerk who was dealing with it, Mr. Vallance White, and he informed me that I did not need to declare that as an interest. So if anybody looks, my name is not on the register.

I rise, briefly, in support of what my noble and learned friend Lord Fraser and others have said regarding the amendment tabled by the noble Lord, Lord Graham, on this important matter.

The noble Lord, Lord Graham, set out with great clarity and persuasiveness the threat that this Bill poses to community pharmacies. There is a critical difference between, for example, the village shop and the village pharmacy because of the heavy reliance that is placed on local pharmacies by those who are in real need—by virtue of illness, infirmity or whatever—and who are dependent on quick and easy access to medicaments and advice. That has been emphasised by a number of noble Lords. The situation is exactly the same regarding their dependency on community healthcare services of other kinds.

At the very least I hope the Government understand that there is an issue here and that the Minister will acknowledge its importance to very many people. The public interest takes many forms, but I put it to the Minister that there are one or two areas of our national life where the public interest is not necessarily served by unfettered competition—and access to the community pharmacy is surely one of those.

I was enjoined a while ago by my noble friend Lord Graham to listen—and indeed I have. I have learned something rather important: that Llandysnl is a place that more than one person knows well in this House. I am also sure of another thing: whilst now knowing of it, I cannot spell it.

The discussion that we were all privileged to hear on the difficulties of balancing competition and value and service to the community at a cost—which is the real nub of this question—were excellently debated from both sides on the other side of the Committee. That of course makes the position a little more complex for me but it is interesting in terms of balance of advice. I do not wish to open a debate on our views on health policy when I am debating the Competition Bill, I could forebear perhaps to make a glancing reference to the point that the noble and learned Lord, Lord Fraser, made about one of my colleagues taking a neutral position. Perhaps "neutral" was used in the sense of "balance".

I will not go further on health policy but I will take the opportunity of welcoming him to the fraternity of the oilers. I miss that. I wish him great good fortune and as much happiness as I had in my brief period in the business—brief to the extent of 36 long years.

I came to the crucial question of the balance that we are thinking of very carefully and trying to strike. First—and I do not mean this in any way as a pun—I have to issue a health warning. The noble and learned Lord, Lord Fraser, mentioned and made clear that the Director General has announced his intention to refer retail price maintenance of over-the-counter medicines back to the restrictive practices court.

I am sure the Committee is aware that the Government have no role in decisions of the court or in the Director General's decision to refer. However, despite the intention to refer, we have thought it right that agreements which have been approved by the court should gain, on a transitional basis, exclusion from the relevant provisions of the Bill. That would be achieved by the cross referencing that the noble and learned Lord, Lord Fraser, mentioned, in Schedule 13. That would avoid repeating the scrutiny at too early a stage.

The period would start from the time the prohibition came into force, or, in the case of continuing proceedings, when the proceedings come to an end. The Bill sets that transitional period at five years. I refer here to the issue which the noble and learned Lord raised with me, which is the time issue relative to a reference. I hope that I have given you a clear answer on how that would follow. Members of the Committee will no doubt note that I have the extraordinary weakness of saying "you" on occasions. It is, I am afraid, my version of "urn", as I think, but is in no way meant to show disrespect.

Similarly, decisions under the Bill will be a matter for the Director General, subject to appeal to the new competition commission and, on points of law and the amount of penalties imposed, to the courts. I am now taking us back to the relationship under the new agreements. I am sure that the Committee will understand that it is not right for Ministers to comment upon the position under the Bill of any particular agreement on an arrangement such as resale price maintenance for medicines.

My noble friend Lord Graham's amendment, and his speech to which I listened carefully, raised important issues as to how the framework set down in the Bill—and, in particular, the criteria for exemption which the noble and learned Lord, Lord Fraser, mentioned—will operate generally. That is a matter which should properly concern us and which we need to get right.

By virtue of Clause 58 the interpretation of the exemption criteria by the Director General is to be along the same lines as the interpretation made by the EC Commission. Although the exemption criteria may seem narrow, the Bill requires them to be interpreted in the light of the general principles (Clause 58). I shall mention that clause frequently. It is the linking clause between EC law and our own in our new prohibition in the Bill.

In practice—this is important—the Commission has taken into account a wide range of countervailing benefits when making decisions under Article 85. In particular, the Commission has taken into account the public health benefits of agreements when reaching decisions. However, the issue goes wider, as we have discussed, than public health. The Commission has, for example, taken into account environmental benefits of agreements. Many have spoken of the environmental importance, in the broadest sense of the words, of the chemist's shop.

It is clear that under the Bill the Director General and competition commission can be expected to do likewise: to form the same judgments against the body of law that I have mentioned which have existed in the interpretation by the Commission under Article 85. Because we recognise that that is an important issue the department has commissioned a study on the case law of the ECJ and the Court of First Instance, and the practice of the European Commission in respect of Article 85(3). That was carried out by Professor Whish of King's College, London, who is a distinguished authority on competition law, and it confirms the analysis which I have given the Committee. I shall send a copy to my noble friend and will place a copy in the Libraries of this House and another place.

With regard to the point made by the noble and learned Lord, Lord Fraser, in his preamble on the exemption and how it would be seen. in the light of that, if an assessment is to be made by the Director General of the case for an exemption in respect of agreements for resale price maintenance in over-the-counter medicines, I would expect any public health benefits, the ready availability of over-the-counter medicines to consumers, and the benefits of local distribution, to feature in the assessment. I therefore believe that the Bill will provide the right, balanced framework for the Director General and the competition commission to deal properly with the complex issue that we have been discussing.

In those circumstances, I hope that my noble friend will accept that special provisions for over-the-counter medicines would be neither necessary in special terms nor desirable, given the legal framework that I have outlined. I hope, therefore, that he will feel able to withdraw his amendment.

I do not see how the nuances of interpretation avail the Minister when Clause 9, which is the governing one on exclusions, provides—if I may paraphrase it—that the clause applies to any agreement which does not,

"afford the undertakings concerned the possibility of eliminating competition in respect of substantial part of the products in question".

In the case about which we are talking that clause is clearly breached. Therefore there can be no exemption under the Bill, whatever nuance of interpretation is applied.

This is a swift interpretation and I take note of it. My case rests as it is; that we believe that the legal framework here allows us to strike a correct balance. If we need to discuss this matter further perhaps we can do so at a later stage.

I am grateful to my noble friend the Minister because he has clearly listened. He has put up a good defence to show that the fears and worries of those whom I seek to represent are misplaced. That may or may not be the case. We shall have to wait to see. I am also grateful to the noble and learned Lord, Lord Fraser, for having linked what might be the defence, the outcome. or the manner in which those whom I seek to represent might have their fears allayed. That remains to be seen.

I had seen on a piece of paper the various points made by the noble and learned Lord. The Committee is indebted to him for putting the matter carefully and cogently. I understood what he said much better than what I read. That is an advantage in a debate such as this.

I welcome the noble Baroness, Lady Ludford, on the Liberal Benches to a debate like this. It is refreshing to have a new face and a new voice. The case she was making was that she did not like special exemptions. If the only way to protect a business or a sector of the community is to give a special exemption, I am all for it. It may not be necessary in this case. For the past 30 years the public have believed it to be necessary and we want the present position to continue.

The noble Baroness, Lady O'Cathain, said, in summary, that the criterion was price, price, price—not location, location, location!

I thank the noble Lord for giving way. Of course it is not the overwhelming criterion. I merely said that it should be brought into the equation. We were talking about location, location, location, but there is another element. We must strike a balance between the high mark-ups and availability. I genuinely worry about those who are less able to pay high prices for over-the-counter drugs and I simply wished to add another spoke, so to speak.

I agree that we are talking about the people who, on the one hand, say "I want to be able to shop in a smaller shop, even though the price may be higher", and the 36 per cent. of people who say, "Even though the distance is further, if the price is cheaper I am prepared to go there". I know that this is not an empirical study and that interpretations must be made.

I was most taken with the case made by the noble and learned Lord, Lord Fraser, that when the Minister and. more importantly, those outside the House look at the explanation they may well take the view that there is no need to proceed down this route.

I wish to draw one issue to the Minister's attention and to follow on from what was said about it by Labour Party spokesmen before the election. Nigel Griffiths, who is a good friend of mine, spoke honestly and sincerely in repeating what had been said by Chris Smith, now a Minister. Chris Smith said:

"the question of RPM on non-prescriptive medicines is important and Labour believes that RPM plays a valuable role in safeguarding the position of local pharmacies.".

If that is not the road down which we are going I shall be happy to withdraw the amendment. But we need assurances from others, the Minister having served us well at this stage. I advise him to keep taking the tablets, but in the meantime I beg leave to withdraw the amendment.

moved Amendment No. 10:

The noble Baroness, Lady O'Cathain, has made a very plausible case. Indeed, it is more than plausible. It is extremely accurate in relation to many types of selective distribution agreements and goods because they have involved what one might call covert retail price practices. They have involved the refusal to supply those retailers who are known to reduce margins, perhaps through their efficiency, so enabling customers to buy goods at a cheaper price than elsewhere. However, the noble Baroness's speech was just a little one-sided. It was as if all goods must be supplied to Tesco, or all branded goods made available to the mass distributor without restraint.

The noble Baroness mentioned some products. I am perhaps more familiar with champagne and perfume than I am with Levi 501s. However, there is evidence that the success of some goods—of many perfumes, I am sure—is due in part at least to the fact that they are available only in a particular kind of environment or shop. There is mutual benefit to the manufacturer, the retailer and of course to the consumer who feels that he has something special. Let us take the gift shop at the House of Lords. If those chocolates and other items with the appropriate brand markings upon them were available freely in Tesco, it might be that there would be some diminution of value, excitement and enjoyment to the customers.

However, I have a more serious point to make. There are a number of distribution agreements which are beneficial to manufacturer, retailer and customer because particular kinds of retail outlet are freely chosen by the manufacturer on the basis that they offer a certain kind of service or repair service; or they have certain kinds of skilled employees; or they wish to promote those goods through marketing arrangements which involve the retailer's agreement to take certain steps in relation to, for example, product display and so on. Those retailers would not be prepared to do that if the goods were available freely everywhere because they would be incurring a great deal of expense in marketing those goods and would achieve very little return because the goods would be available in all sorts of other places.

I am saying to the noble Baroness, Lady O'Cathain, and the Committee that you can make generalisations but there is merit in those cases being dealt with on a case-by-case basis. After all, that is fundamental to this Bill which enables the director general and the competition commission on appeal to determine whether agreements which appear to be prohibited should be specially exempted or not. I should not like to see a generalised provision of the kind which the noble Baroness suggests.

My noble friend Lord Borne has approached the problem, in a sense, from the end of the jeans back to the general. I should like to stay with the general in trying to respond to the noble Baroness's amendments.

I put this matter in the context of what is the scope of the prohibition. I emphasise that the Government's intention in reforming competition law is to set up an effective framework for investigating anti-competitive practices; for assessing in individual cases whether a practice is anti-competitive; and to take action to stop anti-competitive practices where identified. The Bill is not designed to deal explicitly with every conceivable anti-competitive practice. We could not do that.

Very shortly we shall be debating specific amendments in relation to the exclusion of vertical agreements from the Chapter I prohibition, which will be relevant in general terms. If introduced, any such exclusion must of course allow anti-competitive practices to be tackled. A refusal by a dominant supplier to supply certain outlets, a problem sometimes associated with selective distribution agreements, would, if found to be abusive, remain subject to the Chapter II prohibition. Equally, I am advised that there is EC jurisprudence that differential pricing by dominant firms which is abusive may be tackled under Article 86. Therefore, both those approaches exist. As I shall continue to say because it is such a pivotal point, such jurisprudence will apply in the interpretation of a Chapter II prohibition as a result of Clause 58. Therefore, we are covered in general terms for the particular set of circumstances which the noble Baroness put before the Committee.

Finally, the safety net, as it were, is that anti-competitive practices resulting from networks of vertical agreements will remain subject to an examination under the Fair Trading Act. Therefore, with those three statements of the way in which we can generally approach the particular problem that the noble Baroness put, I am confident that we have a regime which will work, and work effectively, in tackling anti-competitive behaviour however it expresses itself and in particular in the sense explained by the noble Baroness explained. Therefore, I ask the noble Baroness to withdraw the amendment.

I should be grateful, if not now then later, if the Minister will enlighten me as to how this Bill works in with copyright law. A similar difficulty to that raised by the noble Baroness exists in relation to buying US books in this country. People set much higher prices for the same book in the UK than would be paid in the US, even counting the cost of postage. I should be grateful for the noble Lord's advice as to whether this Bill overrules that sort of practice under copyright law.

I take note of that question. It sounds to me as though we are into extraterritoriality, which was a word that I knew if I tried to say it twice, I would get wrong. I take note of the question raised by the noble Lord, Lord Lucas, and I shall return to it if necessary.

I am grateful to the Minister for his comments on my amendment. I was slightly concerned when he referred to the fact that the Bill would set up an effective framework against anti-competitive actions, assessing whether the actions are anti-competitive and taking action against those anti-competitive actions. All of that made me return quickly to the Official Report and the Second Reading where I registered one major concern at col. 1166 about the hidden costs of the Bill. I hope that by having a three-pronged attack or approach to the problem, we are not building in huge costs. I have thought long and hard about my amendment and it seemed to me an easy way to tackle the problem. However, I shall read most carefully what the Minister said. I shall think again on the matter. I shall go back to Article 86 and its jurisprudence, and do my homework. If I am not satisfied, I shall return to the matter at later stages of the Bill. In the meantime, I beg leave to withdraw the amendment.

moved Amendment No. 12:

Page 2. leave out line 42.

I rise to express my support for the noble Baroness in her amendments. For the convenience of the Committee, perhaps I may speak to Amendments Nos. 51 and 52 which are tabled in my name. I should, first, declare an interest as a member of the Institution of Civil Engineers. I believe that we shall find ourselves in a situation where we shall be talking about sheep and goats—that is to say, those who are included and those who are not.

My view on this particular aspect of the Bill is that, if we support the principles of the legislation, we have to consider any exclusion extremely carefully. This Chamber has a right to hear the reasons which the Government may put forward regarding any exclusions which are to remain in the Bill. The noble Baroness gave us a clear explanation of why she believes that Schedule 4 should be excluded. My amendments were tabled with a view to something which is perhaps a little easier to accept; in other words, leaving the exclusions in if there are proper legal reasons for them but, nevertheless, excluding anything which affects competition between members of that profession. I do not believe that I have drafted them particularly well, but perhaps I may explain the reasons behind my amendments. That will at least enable the Minister to consider them.

I have taken on board what my noble friend the Minister said about the role of the director general and of the competition commission and the powers that they will have to consider exemptions and exclusions. One has to ask why we should exclude them specifically now. I cannot speak about Schedules 1 and 3, but Schedule 4 has the effect of excluding only Chapter I prohibitions and not those under Chapter II, though I suppose we should be grateful for that fact. But why are the professions any different?

I can only speak for engineers, but we have a long list in Schedule 4. One engineering company that I know well is a big firm of civil engineering consultants. It is owned by a company which used to be called Welsh Water and is now called Hyder. I believe that it is now a publicly-quoted company and, indeed, there are many others like it. Why is that company any different from estate agents or window cleaners? Why are accountants included along with lawyers? I am sure that there are very good reasons for that, but surely they have a duty to compete among themselves and with others in the same way as any other company or organisation in this country is required to compete for services. Surely they should be prohibited from engaging in restrictive practices which are obviously against public interests.

I am not convinced about this long list of,

"civil engineering: mechanical, aeronautical … agronomy … metallurgy, chemistry".

and

"(f) any other form of engineering or technology analogous to those mentioned in sub-paragraphs (a) to (e)".

There must have been a reason for that incredible drafting. Perhaps it is to be found in the reasons for which these organisations were set up in the previous century; namely, to protect the interests of their members. We could debate whether they do protect the interests of their members now. However, I strongly believe that this whole schedule, or certainly the anti-competitive element, has no part in this Bill. I shall be pleased to hear what my noble friend the Minister has to say on this matter.

I speak briefly but with the credentials of someone who was created in effigy by architects so that they could stick pins into me as a result of the dealings which I had with them—as the noble Lord, Lord Borrie, will recall—in trying to dragoon them into at least adopting a posture where their restrictive practices were not pursued. I do not think I was as successful as I would have liked. I believe the noble Lord, Lord Borrie, will also recall that at one time he wanted me to attack veterinarians. I told him that I could not possibly do that as they were folk heroes and under no circumstances was I about to incur their wrath. On a serious note, it seems that in an age when everyone, including the party opposite, has now accepted the value of competition with the bottom line being the consumer and what he or she obtains in terms of value, or safety in many cases, there should not be the kind of exemptions from this Bill which have existed in the past which have not benefited consumers.

As older Members of the Committee will know, I have a long-standing connection with the construction industry and with consulting engineers and architects. I would never dream of putting a pin in the noble Baroness who has just spoken—although I may in a moment!

I oppose these amendments on the ground that professions are not the same as businesses. I shall not discuss estate agents and people of that kind; I shall stick to those I know; namely, consulting engineers and architects. The noble Baroness, Lady Wilcox, quoted a well known maxim of Bernard Shaw, a man whom I greatly admire. However, she quoted one of his more foolish remarks. If she wishes to understand the difference between professions and businesses she should read the debates that took place in the previous Parliament on compulsory competitive tendering for local authority professional services. That whole matter was discussed at great length by myself and others. I shall not speak of that at great length tonight. The noble Baroness should also turn her mind to a well known philosophical work on the acquisitive society by R.H. Tawney. In that work the difference between professional services and businesses is clearly explained. I admit that the situation now is not as clear as it was in Tawney's day. My noble friend Lord Berkeley has referred to Welsh Water in this connection.

We opposed competition at the design stage—I emphasise I am talking about design here—because a cheap design is not necessarily the design that you want. This is the weakness of CCT. A good design, whether of architecture or structural engineering, is a design in which the life cost of the commodity, be it a building or a structure, is the cheapest. We all know that a cheap initial cost leads to increased maintenance costs later, making the long life cost of the structure dearer than it might otherwise have been. That is the difference between buying and selling things across a counter—that is, business—and the buying and selling of what is essentially intellectual property. That is a different matter entirely. To confuse the two is merely to become a fanatic of competition. I have no doubt that competition has some merits here and there, but they should be closely examined.

I noted that the noble Baroness, Lady Oppenheim-Barnes, indicated earlier in the debate on pharmaceuticals how a distinction could be made in competition terms. I draw her attention and the attention of my noble friend the Minister to a distinction which should be made here. 1 now have to do something extremely uncivil in that I must apologise to the Minister because I must leave the Chamber almost immediately for what we normally describe as a pressing engagement. I apologise as I know that is rude. If I miss my noble friend's reply, I shall certainly read what he has said.

Before the Minister replies and the noble Lord, Lord Berkeley, rises to speak, I have two questions which have been prompted by this short debate. I understand that we are also discussing Schedule 4 in this grouping of amendments. Given that my noble friend Lady Wilcox said that the legal restrictions on multi-disciplinary practices were removed for solicitors by the Courts and Legal Services Act 1990, one wonders why solicitors are mentioned in line 8 of page 50 of the Bill in Schedule 4. Is it not legal tautology to refer to solicitors in both places?

The other question which sprang to my mind while I was listening to this short debate was that under Clause 3 the excluded agreements mentioned in Schedules 1, 2 and 3 are grouped together in that the Secretary of State can add to or subtract from them, by order, at any point—I believe those are the words used in the Bill—whereas in Schedule 4 he has no such permission. Again, one is bound to wonder why. For example, chiropracting is gradually being accepted in this country. Indeed there is a register these days of chiropractors and another one of osteopaths. As many of the professional services listed in Schedule 4 are medical services, one wonders whether at some stage the Secretary of State might well want to include either of those professions in such a list, or at another point remove something else so that, for example, nurses and midwives come together. That may well happen in the fairly near future. Surely there should be a way to add to or subtract from Schedule 4 not using primary legislation.

I, too, wish to support my noble friend Lady Wilcox. I am delighted to see that the noble Lord, Lord Howie of Troon, is present. I remember the debates we had in the course of the housing and construction Bill on a particularly daft definition clause. The noble Lord, Lord Howie, demolished that at great length and in the end managed to make considerable changes to it. I think we have a similar situation here. I am a chartered accountant and speaking of my own profession I can understand why auditing might have some special part in the Bill. Auditing is governed by statute and the Government may wish to exercise greater control than normal over the way in which the rules that are applied to associations of auditors are established. The way in which this Bill allows changes to be made by the Minister rather than by the Director General of Fair Trading seems to me to be reasonable. But why govern accounting? Anyone can do accounts. There is absolutely no reason why rules governing accounting should be subject to special pleading. It is a perfectly ordinary activity.

Anyone can do any number of the things that are mentioned in this list. I myself have been a midwife, although I have not offered professional services in that regard. There are some services in the list that seem to have a special place; but there are any number of others which are just ordinary trades, trading in information rather than goods, and should be in the Bill along with everything else. I hope that the Government will very seriously reconsider this part of the Bill, especially Part II of Schedule 4.

Will the Minister dealing with the Bill consider the pilotage functions of pilots taking ships in and out of ports and around this coast? Recently their circumstances were changed quite dramatically. If this list is to be part of the Bill, pilots working around the coast should be considered.

I must declare an interest as a practising barrister—which I believe is still a profession! Without going into the detail of the professions listed or seeking to interfere with the desires of those who abandon unprofessional accountancy and take up equally unprofessional midwifery, surely the whole concept of a profession is that it restricts competition. The concept of a profession is that certain activities shall be limited to those who have acquired certain qualifications and who behave in the ways laid down by their professions. That is the distinction between a profession and a business. A profession which has no rules and is wholly open to competition is not a profession. If anybody could appear in court and address an argument to the court on behalf of a client whether or not he has passed an exam, behaved appallingly or whatever it may be, it would no longer be a profession. To talk about professions without restrictive rules regulating the degree of competition and degrees of behaviour is to abolish professions.

In responding to the noble Baroness, I find myself in a certain confusion. I am never quite clear as to whether it is a problem or a benefit if one is on the list. That is my quandary at the start-point. I shall return to the question of who might be on the list at the end of a statement I wish to make as to why there is a list and to what extent it offers differential treatment from a list that might start with candlestick-makers or whatever that wonderful rhyme might be.

In looking at what special treatment, if any, should be afforded to the professions under the Bill, it is helpful to begin by recalling what their present treatment is under competition law. In the past it has been accepted that competition law should not be applied to them willy-nilly, and we need to consider the arguments.

At present, agreements in respect of the provision of many professional services are excluded from the Restrictive Trade Practices Act by virtue of Schedule 1 to the Act. That means that not only are professional rules excluded, but also other agreements that members of professions might enter into, including agreements they may reach to fix prices or share markets. So those agreements do exist. No doubt that was of some comfort to members of the professions concerned, including some Members of this House.

The Government do not consider that replicating an exclusion as wide as that contained in the Restrictive Trade Practices Act would be justified. We see no reason why the normal run of agreements between members of a profession in the carrying out of their professional services should not be subject to competition law just like those of any other business. Despite what I said earlier about members of the professions, I am sure that that view is widely supported.

I do not, however, accept that professional rules are necessarily the same as the normal run of agreements into which businesses may enter, as my noble friend pointed out. Their purpose is to protect the public. They have attached to them disciplinary arrangements which often involve some judicial process and under which penalties can be severe. Enforcement of them may be reviewed judicially. They are often subject to approval by Ministers or members of the judiciary. In those ways they are a form of quasi-public law. Indeed, many professional rules have the force of statute and would not, anyway, be covered by the Chapter 1 provision. So there seems no good reason to have markedly different arrangements for members of different, even if related, professions—for example, solicitors and barristers—depending on the arrangements by which their rules are made. For those reasons, we believe it would be sensible if the Chapter 1 prohibition did not cut across the existing arrangements for making and enforcing professional rules.

Noble Lords have commented that it is all well and good but have not professional rules in the past served the purpose of protecting members of the profession and not the public? That is the point of the amendment tabled by my noble friend Lord Berkeley. I wholly accept that professional rules can give rise to competition concerns. The question then is whether we can enable professional bodies to draw up rules and regulate the professions as they do now, while at the same time enabling competition considerations to be brought to bear where necessary in a focused and targeted way.

I submit that that is what the Bill does, for it requires the Director General of Fair Trading to keep the list of designated professional rules under review and to report to the Secretary of State if he considers that any of them should no longer be designated and hence be excluded from the list. The Committee will note that I said "requires". The Bill places duties upon the director to do those things.

The Secretary of State will then wish to consult—and indeed under the Bill must consult—any other Minister who has functions in relation to the profession. It is to be hoped that a professional body will have regard to any criticisms that the director may make and consider whether its rules should be amended. But it is clear that, as well as being targeted on professional rules which may give rise to competition concerns, the Bill must provide a way of enforcing proper competition scrutiny. The Bill therefore enables, subject to affirmative resolution by your Lordships and in another place, the designation of a professional rule to be revoked and subjected to the Chapter 1 prohibition.

I stated at the start the need to bear in mind the present position of the professions under competition law and to consider the arguments for any special treatment. The Government do not accept that there should be a blanket exclusion from the Chapter 1 prohibition for the professions. The Government believe that, viewed as a whole, it would be unwarranted to apply prohibitions designed primarily for the private sector business to the quasi-public law processes of drawing up and enforcing professional rules. The Government accept that there needs to be appropriate competition scrutiny to prevent consumers being damaged by any anti-competitive professional rules, and believe that that needs to be done in a targeted way.

I said that in responding to the questions raised by the noble Baroness, Lady Wilcox, I would come back to the list. I am not sure whether this is the answer she wants. Non-mention of licensed conveyancers, osteopaths and other people on the list means that they are subject to the ordinary rules of competition. The prohibition therefore applies to all anti-competitive agreements, and the director general is free to look at them. Members have asked about the nature of the list. It is a fixed list and reflects the position under the Restrictive Trade Practices Act, though adjustment to the list would be a function for those carrying out the tasks allotted to them in drawing up the new framework and applying the prohibitions.

I hope that on reflection Members of the Committee will agree that the Bill now strikes an appropriate balance between protecting the consumer by appropriate frameworks for people working in professions in order to guarantee standards and allowing the prohibitions to take their effect in those areas where we wish to see competition apply. I hope that in the light of that explanation the noble Baroness, Lady Wilcox, will withdraw her amendment and not press her opposition to Schedule 4 and that my noble friend Lord Berkeley will not move his amendment.

The Minister has given us a full explanation and proved that I was wrong—or half-wrong—in what I asserted earlier. My attention has been drawn to sub-paragraphs (3) and (4) of paragraph 6 of Schedule 4 on page 49, particularly to the end of sub-paragraph (3). That shows quite clearly that I was wrong and that the Secretary of State may by order revoke the designation if certain acts have taken place. However, the Minister has still not explained whether the Bill contains a procedure for adding to the list should that be necessary in the future. Surely one does not want primary legislation?

I think the appropriate answer is that one must always have the list under review. The appropriate balance will have to be struck between what is required within a designated profession to protect the consumer and the requirement for competition to ensure that the marketplace is protected and not abused. There is currently no procedure for adding to the list. The issue is whether we should review it. I think that we can consider and review procedure.

Before the noble Baroness, Lady Wilcox, rises to speak to her amendment, perhaps I could say that I very much welcome the Minister's comments on these amendments, which I shall read very carefully. I believe that we should restrict our comments to the restrictive practices, if any, between members of the same profession. This is not about other, unqualified people joining the profession but about whether there is opportunity for fair competition between members of the profession. be they public limited companies, professionals or whatever. We should consider carefully whether the professions can and do regulate themselves in the interests of consumers.

I thank Members of the Committee for the debate. I am sorry that the noble Lord, Lord Borrie, felt unable to take part. I have great respect for him and the work that he did at the Office of Fair Trading. Perhaps it was sufficient for me to refer to his achievements.

I am very grateful for the points that have been made, some of which I had missed. When I made enquiries to find out why there was a problem I was given all sorts of fudges, such as that under European law there is no ruling that professional rules constitute an agreement and that professional rules are part of public law or quasi public law. It was all pretty unsatisfactory and it does not sound much better now.

I will admit to an interest. I am the mother of a barrister, so I understand what the noble Viscount, Lord Bledisloe, said. However, I find it odd that people who make rules for themselves would be admonished by someone else and would then consider whether they should change their rules. In the meantime, a member of the general public who has been hurt, maimed, done-badly-to, has to sit back while the professionals consult themselves on their own rules. It is like putting children in a sweet shop and telling them to make up the rules as to how many sweets they should eat. I do not accept that argument.

I hope I am right in believing that the Minister said that he would consider the procedure following the request of my noble friend Lord Skelmersdale. I welcome that. I was pleased to see the amount of work being done in the corner following my questions. It was gratifying to see civil servants, and indeed some Ministers, on their hands and knees with bits of paper. I can only assume that some of the questions were interesting and exciting, though some of the answers that I received were not very satisfactory.

I do not understand why we cannot keep professional rules within the Chapter 1 prohibition so that the OFT has power to investigate and take action over rules that are anti-competitive. I do not understand why the Government, who are so keen on being in Europe, which is very much against any form of self-regulation, intend to continue with the rules as they are now. I hope that the Minister will give further consideration to this point. I am prepared to withdraw the amendment at this time but reserve the right to speak again on the subject.

moved Amendment No. 13:

Page 2, line 42, at end insert ("or)

(e) Schedule (Exclusion for vertical agreements)").

Perhaps I may speak briefly to Amendment No. 14 which is along the same lines, but drafted differently to incorporate my concerns that, first, the Government should be able to draw in general classes of these agreements which are seen at the time to be anti-competitive and, secondly, that the director general should have that power with regard to specific agreements when they are brought to his attention, but, if so, that there should be no retrospection in the penalty which he imposes.

I have one particular concern which I suspect arises from the drafting of Amendment No. 53, where the concept of "connected" is introduced. Perhaps it goes back to a lack of understanding of the definition of "undertaking". Is "undertaking" defined in this Bill in such a way that it is necessary to introduce this concept of connection? I cannot find a definition, so perhaps the Minister could elucidate on that.

Generally, I support the proposition that vertical agreements are largely benign.

I have one particular concern which I suspect arises from the drafting of Amendment No. 53, where the concept of "connected" is introduced. Perhaps it goes back to a lack of understanding of the definition of "undertaking". Is "undertaking" defined in this Bill in such a way that it is necessary to introduce this concept of connection? I cannot find a definition, so perhaps the Minister could elucidate on that.

Generally, I support the proposition that vertical agreements are largely benign.

I have one particular concern which I suspect arises from the drafting of Amendment No. 53, where the concept of "connected" is introduced. Perhaps it goes back to a lack of understanding of the definition of "undertaking". Is "undertaking" defined in this Bill in such a way that it is necessary to introduce this concept of connection? I cannot find a definition, so perhaps the Minister could elucidate on that.

Generally, I support the proposition that vertical agreements are largely benign. Amendment No. 53 is grouped with Amendments Nos. 13 and 14 and I am worried because Amendment No. 53 excludes all vertical agreements other than price fixing, and price fixing is not always transparent. A lot of people know exactly what is going on and this came out at Second Reading of the Bill.

Some vertical agreements can act against the interests of the consumer. I would draw my noble friend's attention to the fact that, as I read it, a blanket exclusion would prevent the Director General of the Office of Fair Trading from investigating cases where there are clear abuses.

I should like to see some amendment whereby the effect of this exclusion of vertical agreements could be judged by the Director General of the Office of Fair Trading; in other words, to give him some power to make an economic assessment, to investigate the real effect of the exclusion of vertical agreements, rather than looking at these vertical agreements themselves. I hope I have made myself clear.

I have some sympathy with what the noble Baroness, Lady O'Cathain, has just said. We did have a consensus around the Chamber earlier on and the noble Lord the Minister, if I do not understate what he said, indicated that the prohibition in Chapter I of this Bill is a prohibition of agreements which have meaningful and appreciable adverse effect on competition. If that is so, and if there are vertical agreements apart from price fixing agreements that might have an appreciable adverse affect on competition, then why should they not be within the prohibition? For reasons similar to those of the noble Baroness I am not keen on a blanket exclusion.

The other point which I should like to make is that if at some point in the near future there is a greater definition given by the European authorities to what vertical agreements should be exempt, then it seems rather odd if we devise or agree in this Bill to have a definition of vertical agreements, which are excluded from the prohibition, which may be out of line with that forthcoming exemption that the European authorities may devise.

At this stage, I feel it may be unwise to agree an exemption of this sort.

A great deal has been said in this debate with which I can agree. I accept that if we can adequately exclude vertical agreements, the new competition regime will operate with more certainty, and the administrative burden on the Office of Fair Trading, caused by people seeking clearance of their agreements for safety's sake, is going to be reduced. We have all agreed that that is devoutly to be desired.

It will enable the director general to concentrate his resources on the kinds of agreements and conduct which are a real source of competition concern. We all know, and it has been mentioned, that many vertical agreements are benign and only become a source of concern when the party has market power, in which case they can be dealt with under the Fair Trading Act or under Chapter II prohibition. So that follows.

That being said, it would be as well not to overstate, as I fear some noble Lords may be at risk of doing, the impact of the Bill on vertical agreements, such as an agreement between an undertaking and its customer or supplier. Many such agreements are in no sense anti-competitive and a Chapter I prohibition in the Bill, therefore, would not apply to them.

Furthermore, many of those agreements that may have an effect on competition should be perfectly capable of individual or block exemption. Indeed, many will, without further ado, be exempted under the Bill since they will have been exempted under Article 85 and provisions in Clause 10 on parallel exemptions. That will ensure that they are automatically exempt from the Chapter I prohibition.

As many noble Lords will know, the treatment of vertical agreements under Article 85 is currently under review in Europe. The noble Lord, Lord Kingsland, mentioned that fact. If, for example, the Commission were to provide for wider exemptions for vertical agreements, agreements to which those exemptions applied likewise should automatically be exempt from Chapter I prohibition under the terms of the Bill.

Nevertheless, as I have said, I can see that there would certainly be an advantage in excluding vertical agreements from Chapter I prohibition. That is why the Bill provides the power to make exclusions from the Chapter I prohibition, in certain circumstances, by order. The Bill also provides for an exclusion, once made, to be varied. This is to help ensure that any exclusion remains appropriate in the light of developing experience.

The difficulty is, of course, how to frame a definition which is of real practical benefit in giving comfort to businesses that their agreements are not at risk from the prohibition, without at the same time allowing seriously anti-competitive agreements to avoid the application of the Chapter I prohibition. We cannot claim to have cracked the conundrum yet although the noble Lord, Lord Kingsland, encouraged me to crack it as fast as I could. I do regret that. However, we have made progress in discussions with business in identifying the considerations that will need to be taken into account in the drafting. In accordance with our approach of close and detailed consultation in order to bring forward this Bill, we shall be continuing the dialogue so that we draw up a suitable definition.

I will certainly reflect carefully on the points which have been made by the noble Lords. Unfortunately, the process of consultation will necessarily take time. I believe that it is right that it should because we know the difficulty of what we are attempting here. I would hope that noble Lords will feel able to withdraw the amendment to allow that process to continue. In summary, I would say that as an ex-businessman, and after listening to noble Lords' arguments, I attach considerable importance to finding a solution and a suitable definition regarding this problem.

In turning to definitions—this may not encourage the noble Lord as much—I should like to respond to the query of the noble Lord, Lord Lucas, about the definition of an undertaking. The definition of an undertaking is the definition standing in Articles 85 and 86 of the Treaty of Rome. I understand that an undertaking is an undertaking.

Perhaps the noble Lord will undertake to crack this conundrum before the Report stage of the Bill. It would make such a difference to business if there were real certainty in this area. It is not so much the fear that if there is not an exclusion a great many firms will be caught by the rules—I do not think they will—but the uncertainty that will continue if there is not an exclusion, which will lead to compliance costs being needlessly expended by those firms. However, in the spirit of the Minister's answer, I am happy to beg leave to withdraw the amendment.

moved Amendment No. 15:

Page 3. line 6. leave out ("or removing").

The powers in Clauses 3 and 19 of the Bill are important and extensive. Their broad purpose is to ensure that the prohibitions remain targeted efficiently and effectively on areas of real concern in the light of changing economic circumstances and practical experience of the operation of the prohibitions.

In the case of the exclusions provided in respect of Schedule 1, their more specific purpose is to ensure that the exclusion for certain mergers and concentrations dealt with elsewhere under the competition law, which, as we shall doubtless see in our discussion on a later group of amendments, is a very difficult line to draw, can be refined if their operation shows that there are gaps or overlaps.

The ability to amend or remove a case in Schedule 1 with respect to the Chapter I prohibition at present extends only to new cases added under the power in Clause 3 and to the planning obligations case. This is because that is the only specific exclusion of particular agreements as opposed to exclusions based on general propositions or on powers to exclude which the rest of Schedule 3 provides. If, during the course of our deliberations, we were to add further specific exclusions to the schedule—and, as I shall explain in the debate on a later group of amendments, I am continuing to receive representations for them—the Government may propose that the Clause 3 power to amend or remove should apply to them.

The Government have no proposals in mind to exercise the powers to remove exclusion cases, but we believe that the ability to refine the exclusion for the purposes I have mentioned must include the ability to remove a case. As the noble Lord will be aware, your Lordships' Select Committee on the Scrutiny of Delegated Powers has specifically reported that these powers are acceptable. If the Secretary of State were, however, to propose to remove a case under Clauses 3 or 19, or otherwise exercise her powers under those clauses, the Bill contains a significant safeguard. By virtue of Clause 67, the order cannot be made unless a draft of it has been laid before Parliament and approved by a resolution of each House. Your Lordships would therefore have the opportunity to debate, and if necessary divide, should noble Lords be concerned about the exercise of the power to remove an exclusion case which we are incorporating in the Bill.

In the light of that safeguard, I hope the noble Lord is able to see the case for the withdrawal of the amendment.

I am grateful to the Minister for that extensive explanation. It satisfies my every desire and indeed goes further in confirming the right of this House to divide on affirmative resolutions. I am delighted to withdraw the amendment.

moved Amendment No. 16:

Page 10, line 16. after ("practices)") insert ("and those sections of the Fair Trading Act 1973 relating to monopoly investigations").

I should like quite strongly to oppose the amendment. I have wrestled with my conscience in case this was in part due to some long-standing affection for parts of the Fair Trading Act which, as Director General of Fair Trading, I, from time to time, employed in asking the Monopolies and Mergers Commission to make studies of particular industries under the scale monopoly or complex monopoly provisions of the Fair Trading Act. But I do not think it is just that view, which might be personal to myself.

The Chapter I prohibition, as stated several times when we were dealing with that part of the Bill, concerns agreements and concerted practices. Agreements have to be established in order to suggest that they should be prohibited. I suggest that there has to be evidence of concerted practices before one can say that there are such between two or more firms. Sometimes there is similarity of conduct of a fairly remarkable kind between firms in the same industry but no evidence of agreement, of meetings in hotel back rooms, or of anything to show that they have concerted deliberately in the activity of, let us say, keeping up prices. Nevertheless there is a parallel activity between the companies concerned which inhibits competition and is damaging to customers. At the present time and, indeed, for the past 40 years, it has been possible for that kind of parallel conduct between firms to be examined by the Monopolies and Mergers Commission on a reference of complex monopoly provisions from the Director General of the Office of Fair Trading.

It would be a pity to get rid of those provisions when there is a gap between what can be proved as an agreement or concerted practice under Chapter I and what can be regarded as an abuse of a dominant position of a single company under Chapter II.That is my case for suggesting that we should retain the possibility of complex monopoly references being made to the Monopolies and Mergers Commission which in future will be called the competition commission.

As regards scale monopolies, the case is less strong: nonetheless I make it because if one examines the remedies in the Bill where an abuse of a dominant position is established and proved one does not find among those remedies the possibility of a structural remedy such as a demerger or the separation of certain activities of one firm from another in order to create a more competitive situation. While being a remedy which, in this and other countries, has been very rare indeed, it is one which is available in our law at the moment. It would be a pity if it were lost in order to deal with the more extreme kind of abuse of monopoly power. What is wanted is not the simple imposition of a penalty for conduct but a much more sophisticated structural remedy imposed by the competition authority.

My final point is that this is a new Bill. I know that we are following the method of dealing with anti-competitive practices in the European Community. There is a great deal of experience there from the European authorities. But this is a new Bill for the United Kingdom. It seems to me undesirable that we should throw overboard the possibility of references under the Fair Trading Act in order to rely solely on what is for United Kingdom law something entirely new; namely, the prohibitions and their particular wording in Chapters I and H.

I am grateful to the noble Lord, Lord Borrie, for the voice of experience in what is quite a complicated and important part of the debate, as we recognised at Second Reading. There is no doubt that the new prohibition will be the principal weapon against abuse of dominance. It is also clear that the current regime under the Fair Trading Act and the Competition Act, as the noble Lord, Lord Borrie, has pointed out, based on his experience, has very significant failings and badly needs strengthening. I do not believe that we would wish to throw out the baby with the bathwater.

As the noble Lord, Lord Borrie, says, this is a new Bill and at this stage we believe there is a very strong case for retaining the Fair Trading Act monopoly provisions to enable investigations to be conducted into markets in cases where competition issues arise from the structure of the market rather than from anti-competitive agreements or specific abuses by a dominant company. The current regime under the Fair Trading Act enables wide-ranging and impartial investigation of such situations by the Monopolies and Mergers Commission. It also provides scope for a wide range of remedies—and that is important—to be imposed if matters are found to be contrary to the public interest. With that sort of approach it is right that the imposition of remedies should be subject to parliamentary scrutiny and that the responsibility should rest with Ministers.

I believe that it is widely recognised that the complex monopoly provisions fill a gap between the two prohibitions. The Chapter I prohibition will deal very effectively with anti-competitive agreements and the Chapter II prohibition with abuses by single dominant companies. But the complex monopoly provisions will continue to be a more effective tool for dealing with anti-competitive parallel behaviour by companies where there is no agreement between them.

We also believe that the scale monopoly provisions will continue to have value although we do not intend that their use should be limited with the introduction of the new prohibitions. In future we do not expect references to be made of scale monopolies except in circumstances where there has already been proven abuse under the prohibition and where the DGFT believes that there is a real prospect of future abuses by the same firm. In these circumstances the structural remedies available under the Fair Trading Act may provide a more effective means of preventing further abuses.

The final point I need to make to the Committee is that it should be aware that the use of the scale monopoly provisions as regards the regulated utility sectors is the subject of separate consideration in the context of the current utility review. As Members of the Committee will know, that is due for report and consultation at the beginning of the new year so we need to take into account the timetable for that review in considering the progress of our discussions on this Bill.

In summary, the monopoly provisions of the Fair Trading Act will essentially become reserve powers to deal with situations where the problem is market structure rather than abuse. It is for that reason that 1 mention to the Committee the issue of the utility review and the issues which surround it specifically in terms of those scale provisions. We believe that the provisions will continue to have value in such limited circumstances. I have listened very carefully to the noble and learned Lord, Lord Fraser—

I shall respond more fully to what the noble Lord has said, but there is one matter I am interested in in relation to the utility review. When does he anticipate the reporting? Is it likely that that will happen before the Report stage of the Bill? Is there a prospect of seeing it before then?

I think it is unlikely, but I shall confirm that point later. I am glad that the noble and learned Lord has noted our thought processes with regard to the issue of scale monopolies. I have tried to explain why I believe that it would be unwise of the Committee to throw out the baby with the bath water at this stage. I have listened carefully to the arguments that have been made and shall certainly reflect on them, but for the present I ask the noble and learned Lord to withdraw his amendment.

I am grateful to the Minister for his response, which reveals a rather surprising lack of confidence in the efficacy of the two prohibitions which are at the core of the Bill. The noble Lord, Lord Borrie, seemed to be promoting not so much a belt-and-braces approach to the problems, but rather an approach based on handcuffs, manacles, shackles and leg-irons.

Although I listened to what the Minister said and we certainly do not intend to press the amendment this evening, we remain to be convinced that there is anything like the gap or the risk at which both the noble Lord, Lord Borrie, with his great experience, and the Minister hinted. If I understood the noble Lord, Lord Borrie, correctly, he was getting pretty close to conceding that, at least as far as scale monopolies are concerned, it is more difficult for him to advance any particularly obvious gap. If that is the case, we shall want to consider this more carefully. It will be unfortunate if we do not have the utilities review by the time that we return to this amendment at a later stage. We shall certainly want to examine whether there are any gaps to be filled, because if there are any gaps we want them to be filled.

For the sake of UK business we should not have unnecessarily heavy regulations and any duplication must be kept to the bare minimum. In our view, it is probably highly unnecessary to retain this set of complicated legislative provisions at the same time as introducing the two prohibitions. We shall want to return to this but, for this evening, I beg leave to withdraw the amendment.

I have to inform your Lordships that if Amendment No. 17 is agreed to, 1 cannot call Amendments Nos. 18 and 24.

moved Amendment No. 17:

Page 10, line 18, leave out subsections (1) and (2) and insert—

("(1) Predatory pricing or price discrimination by a dominant firm, which is carried out with the intention and has the effect of eliminating a competitor or of substantially lessening competition in the relevant market, shall be prohibited.").

Perhaps I may weigh in on these issues. What guides me is the underlying principle of there being a social duty to pay a fair value for a product and so, by extension, a general duty to prevent producers or providers of services going bankrupt or facing undue financial hardship through any particular buying or anti-competition strategy.

I have two principal areas of concern. I deal with one of them in a substantive way and touch on the other, not least to register a potential problem area. My first point stems from a circumstance that arose in 1995 with Asda supermarkets. I mention Asda simply to give relevance to my short case study. One of Asda's operations totally undermined the political efforts of the government of the day to defend the European Union banana import regime which honoured the Lome commitment to provide an accessible and viable market for traditional ACP producers. That policy has been confirmed by both the Lord Privy Seal and the noble Lord, Lord Whitty, on a number of occasions when I have raised this issue in your Lordships' House.

Asda took a marketing decision to offer certain heavily discounted merchandise to draw customers into their stores. Its rationale in taking that policy decision was to use bananas as a loss leader in an attempt to improve overall store revenues. My involvement arose when it became clear that Caribbean banana growers were suffering acutely as that policy placed immense downward pressure on retail and wholesale prices, and ultimately on the returns to those producers; in other words, ultimately the growers paid for this marketing strategy. I believe that Asda could have been charged with manipulating the banana market in a cavalier fashion without due regard to the consequences. I recall that the noble Lord, Lord Carter, while in opposition, put the matter in the following way in a Question to the noble Baroness, Lady Chalker, asking if the Minister was aware,

"that the situation involves apparent predatory pricing by powerful supermarkets?".—[0fficial Report, 2/11/95: col. 1501.]

The previous Administration felt that it would be difficult for them formally to intervene as technically Asda was not operating outside the rules. A suggestion had been made that the Office of Fair Trading's rules on predatory pricing had been broken either by a breach of the Fair Trading Act 1973 or the Competition Act 1980. To test that would have meant taking initiating action in the courts similar to that initiated by the leading manufacturers of over-the-counter drugs. All of those major multinational pharmaceutical companies were able to secure an injunction which prevented Asda from selling over-the-counter drugs at reduced prices. It was with regret that the high cost of litigation dissuaded the Caribbean interested parties. I should like to be assured that that does not happen again. I should be grateful if the Government—and indeed the noble and learned Lord, Lord Fraser, if he were able—could assure me that my concerns will be appropriately addressed.

From a recent editorial it has come to the attention of many that British Airways is considering setting up its own low-cost carrier, with the fear that it is prepared to lose money to eliminate small competitors. Once they have been eliminated fares will be raised again. The European Commission has stated that it wishes to operate an open skies policy with free and fair competition within Europe. Article 86 of the Treaty of Rome already outlaws predatory pricing, with the effect that a dominant player in a market may not sell its products below cost price with the intention of eliminating a smaller competitor.

I thank the noble Viscount for giving way. I should declare an interest as a director of British Airways. I do not believe that the noble Viscount is fair in his comment about British Airways giving consideration to setting up a low-cost no-frills airline. I assure the noble Viscount that the last thing British Airways would do is to set up a no-frills low-cost airline with the absolute certainty that it would lose money in order to maintain its competitive position. That is certainly no part of the thinking of British Airways, and I believe that it is quite wrong for the noble Viscount to make that comment.

I thank the noble Baroness for her remarks. I hope in turn that British Airways will not set up a low-cost airline that will have the effect of preventing other low-cost carriers from offering low prices within the European Union.

I thank the noble Viscount for again giving way. In no way can the noble Viscount say that British Airways should not set up a low-cost no-frills airline. British Airways is not necessarily going to set it up, but it is thinking about it, and that is generally agreed. Why should British Airways be prevented from setting up a low-cost no-frills airline if it will lose money? It is in an open and competitive business. Certainly, it will not set up such a business necessarily to put someone else out of business, but it is an open market. The purpose of this Bill is to make sure that in the end the customer has greater choice and is not penalised by agreements.

This has been a useful exchange. I look forward to seeing tomorrow in greater detail the comments of the noble Baroness. I should draw to her attention that such issues are covered by Article 86. Let us see how the whole gameplan unfolds. The Minister may wish to comment on a number of the points that the noble Baroness has made in relation to British Airways.

I have some difficulty in understanding the extreme width of Amendment No. 17 moved by the noble and learned Lord, Lord Fraser. If I understand it correctly, the amendment would remove altogether the Chapter II prohibition on the abuse of a dominant position. Among all of the abuses of monopoly power that can exist, including forcing people to take goods that they do not want in order to get goods that they do want, the noble and learned Lord has inserted merely one kind of abuse which is predatory pricing and given it a definition. If I am correct in what I say, I wonder about the definition of predatory pricing in Amendment No. 17. The noble and learned Lord will recall that the Chapter I prohibition concerns agreements which have the intention or effect of restricting competition. In the amendment the definition of predatory pricing or price discrimination by a dominant firm is that it must be both with that intention and effect. It appears to me that that is a much more difficult proposition to establish and that it removes a great deal of the mischief with which the Chapter II prohibition is intended to deal.

I believe that we are considering Amendments Nos. 17 and 24. It is not for me to enter into the argument between the noble Baroness and the noble Viscount. However, I believe that both should welcome the Bill since it sets up a mechanism for settling their dispute. I hope that those are words of comfort.

Clause 18 prohibits the use of dominant market position. That prohibition is closely modelled on Article 86 of the Treaty of Rome. By virtue of Clause 58 of the Bill the prohibition will be applied so as to avoid inconsistency with the interpretation of Article 86. As a result, the principles applied in interpreting what may constitute an abuse of a dominant position under European law will be applied in the same way under the domestic prohibition. This is of crucial importance because it will ensure that business can look to European Community jurisprudence as a guide to the interpretation of abuse under the domestic prohibition and that business will not have to deal with differing prohibitions at European and domestic level. I hope that that deals with the concerns of the noble and learned Lord, Lord Fraser.

For that reason the illustrative list in Clause 18(2) is drawn directly from Article 86. It would be wrong to tinker with the list. To have a different list would seriously risk creating a divergence between the domestic and European prohibitions. For the reasons I have explained, that would be highly undesirable. As to the specific changes proposed they add nothing in practice to the prohibition.

Turning to Amendment No. 17, this removes the general prohibition from the Bill and replaces it with a narrow prohibition directed solely at predatory pricing and price discrimination, as my noble friend Lord Borrie said. This undermines the objective of the Bill to introduce a general prohibition of abuse of dominance in line with European jurisprudence.

Amendment No. 24 relates to abuses based on economic strength in another market. Again, EC case law shows that in certain circumstances Article 86 may apply where an undertaking that is dominant in one market commits an abuse in a different, neighbouring market.

The list in Clause 18(2), like the one in Article 86, is illustrative and not exhaustive. Depending on the circumstances, different types of behaviour might constitute an abuse. However, behaviour of the type set out in the list would not necessarily be an abuse because each case will turn on the structure of the market and the effect of the conduct in question. This will deal with the noble Viscount's question regarding the bananas, about which he was so obviously concerned. It is, after all, the effect that is important to customers and to other firms.

In short, the prohibition introduced by Clause 18 fulfils the Government's commitment to bringing forward stronger legislation to prohibit abuse of dominance in the economy as a whole. In view of this explanation, I ask the noble and learned Lord to withdraw his amendment.

It will be clear that at this time of night on a Thursday we do not intend to press amendments to a Division. But the night is still young. Certainly, just before dinner, I do not propose to press this amendment to a Division.

This amendment seeks to achieve a clear separation or distinction between the Article 86 provisions in the treaty and what is in this Bill. It may be that it could be expanded to cover another set of clearly identified types of abuse, but what it is intended to do is to highlight two matters; one of which is, as I said at Second Reading, that there is a clear concern expressed by British industry that the effect may be to have a chilling effect on innovation in the market place. I am sure that the noble Lord agrees that such a consequence would be undesirable.

We are disappointed that there seems to be little acknowledgement from the Government that any such risk might exist. If it does exist, I hope that there will not be a shrug of indifferent shoulders from the Government on such an important matter.

The second matter is this. In my example I highlighted the case of Tetra Pak II. I hoped to tease out from the Government whether they had any concerns about the way the jurisprudence of the ECJ had developed; that it was going too far to say that if you are dominant in one market it has far greater significance on how you have to act in another market. That seems to be the consequence of Tetra Pak II and it is undesirable and going too far. What we and organisations such as the CBI wish to highlight is that that might have an effect on the innovation expected in the market place and introduce a greater degree of uncertainty than is desirable.

I am not going to press these amendments but before this Bill leaves this House we want to be satisfied that the concerns that I and organisations such as the CBI have expressed are unfounded. We also want to be satisfied that there is a clearer and greater confidence about the way that the jurisprudence of the ECJ is developing and that the Government believe, at this time and at this stage, that none of it is prejudicial or undesirable in the development of the United Kingdom market.

We shall undoubtedly return at a later stage in an attempt to obtain answers to those two issues. I beg leave to withdraw Amendment No. 17.

moved Amendment No. 18:

Page 10, line 19, after ("position") insert ("in a market").

moved Amendment No. 19:

Page 10, line 23, at end insert ("or deliberately accepting losses in order to reduce competition").

Amendment No. 23 is grouped with the amendment moved by the noble Lord, Lord McNally. My amendment has a similar purpose, but is slightly different. If I may describe it as such, it is the vertical approach rather than the horizontal one. With great respect to the noble Lord, my amendment may be preferable as it would clearly not reach other sectors of business. The horizontal approach could apply to other businesses, and so it could be argued that that could produce unacceptable curbs on price competition in other industries.

I do not believe that the law can prohibit the acceptance of losses, deliberate or otherwise. Market conditions can sometimes force all the participants in an industry into loss and give them no alternative but to accept the result. If a market is overcrowded, prices are likely to fall until the surplus is eliminated. In such conditions it will be hard to set prices that did not have the result of possible losses.

It could be argued that my approach is contrary to the statement made by the Secretary of State in her White Paper in August, that there was a good case for excluding most vertical agreements. It is important to stress the word "most" with regard to vertical agreements. I agree with the sentiments. That is why my amendment, unashamedly, signals that the press is different. I make no apologies for making an exception of it. It is different. Competition, plurality, and diversity in the press are even more important than they are in other industries. They are part of the fabric of democracy, and the Government should recognise that.

That is, of course, not a new concept. There is a precedent to accept that the press is a special case in competition legislation. The Fair Trading Act 1973 has different monopoly and merger conditions for the press and for other sectors of industry. Predatory pricing is accepted as an abuse, whether or not financed by cross-subsidy, but there are differing ideas of what it is. Dominance can be in one sector, and abuse can be in another. It is unlawful only if a company prices its goods below cost in the market in which it has dominance, not in other markets. That is the nub of the problem which is not addressed by the Bill.

If one is dominant in an industry there may be no need to embark on a predatory price war. Perhaps the only companies which do so wish to become dominant. I believe that in those cases such action should infer a presumption of dominance, whether in the same market or a separate one.

A recent editorial in the Evening Standard put the case well when it stated that newspapers, like other businesses, have competed by persuading the consumers that their product was better or better value for money. Bad competition is where those who distort the market while trying to eliminate competition entirely force their rivals to fight dirty to stay in the business, a problem that has recently been much in evidence in the press.

Interestingly, News International, despite having such a large share of the newspaper market, is reported to be sceptical that this type of amendment to the Bill, if it were accepted, would make any difference to its company's pricing policy. It denies that its pricing policy is predatory, but claims that it is market promotion and not a permanent feature. If that is its view it has nothing to fear from the amendment. However, I find its defence of its pricing policy difficult to accept. It is true that by lowering prices it has increased readership, but at a huge cost. This promotion looks pretty permanent to me!

I am not anti-Rupert Murdoch—I admire him. He sorted out the problems which afflicted Fleet Street when I worked in that industry 20 years ago. He created BSkyB, which is a huge success. News International is rightly exploiting a gap in the competition law. Murdoch likes to be successful and who can blame him? We all accept that plurality is beneficial to industry and to consumers. For this industry and for this country, it is vital.

I hesitate to bring a note of politics into the debate, but I ought to point out to Ministers opposite that Robin Cooke, when shadow Secretary of State for Trade and Industry, said in another place that Murdoch was able to cut prices only because of his profits from other interests and that we were now faced with blatant predatory pricing. That line was echoed by Mo Mowlem, when shadow Heritage spokeswoman, who said that unless action is taken Murdoch will weaken his British competitors to the point where he will dominate the market.

The noble Lord, Lord Simon, opening for the Government on Second Reading, said:

"The Bill shows our commitment to ensuring effective and fair competition. It would benefit both consumers and business".—[Official Report, 30/10/97; col. 1144.]

If the Minister really believes that, then he ought to be able to consider my amendment favourably, or will this be the case of another government U-turn?

In taking part in this debate I must declare an interest in that I am a non-executive director of Newspaper Publishing plc, which is the publisher of the Independent and the Independent on Sunday.

One of the most important areas of competition law which the Bill leaves untouched is the law relating to mergers between companies in general and newspapers in particular. As the noble Viscount, Lord Astor, rightly said, the Fair Trading Act 1973 makes special provision for newspaper mergers. Then the swallowing up of a major newspaper by another newspaper or newspaper group was properly considered to be of particular significance in a democratic society beyond mergers and takeovers in general because newspaper mergers could seriously reduce the availability of a diversity of opinion. Under the Fair Trading Act it is mandatory for reference to be made of a major newspaper merger. The Monopolies Commission is specifically required to take account,

"of the need for accurate presentation of news and free expression of opinion".

Over the years, the Monopolies Commission in a variety of reports on newspaper mergers has frequently emphasised the importance it attaches to choice of newspaper and diversity of views. All that is existing law, but I suggest that the continued availability of diverse organs of news and opinion can be ended not just by merger and takeover but by a persistent campaign of below-cost price cutting on the part of one newspaper group which is well able to cross-subsidise from other businesses to the detriment of certain newspaper groups.

The pricing policy of The Times newspaper, referred to by the noble Lord, Lord McNally, regularly to sell at 10p on Mondays, has repeatedly threatened the continued existence of the Independent. That distorts competition with the Daily Telegraph and other broadsheet newspapers and, I have no doubt, has a serious exclusionary effect because it is likely to deter those who might otherwise think of entering the market. Who today, I ask, would dare to start a new broadsheet newspaper, as was done by Mr. Andreas Whittam Smith and others when the Independent was started in 1986? It seems to me that such persistent conduct should be regarded as seriously damaging to the competitive process and as an abuse of dominant position. Therefore, I feel favourably disposed—and I hope that the Minister will feel favourably disposed—towards either or both of the amendments that have been proposed today.

I support everything said by the noble Lord. Lord Borrie. It must be a fundamental purpose behind Clause 18 that abuses of power should be prevented. What has been described seems to me to be a most blatant indication of power being abused. As has been stated, competition has been distorted and the diversity of opinion among the press is threatened. There is a threat to the very freedom and variety of expression. I should have thought that it would be remarkable if this Government were not prepared to see such a situation properly catered for. That is not the case as Clause 18 now stands.

The concern of the noble Lord, Lord McNally, for predatory pricing in the newspaper industry has been well documented and I have a great deal of sympathy. He has conducted the campaign well and with a great deal of ability. However, it would be quite wrong of me to comment on the specific complaints relating to the newspaper industry as discussed. The purpose of the Bill is to establish a legal framework under which the Director General of Fair Trading, the Competition Commission and the courts can assess whether individual agreements and conduct are anti-competitive. I shall therefore restrict my comments to the issues of principle raised by the amendments. Perhaps I may remind Members of the Committee that when Sir Bryan Carsberg was Director General of Fair Trading he rejected previous complaints, taking the view that the decision of The Times to reduce its prices was a reasonable commercial strategy.

The amendments relate to predatory pricing tactics; that is, price cutting designed to force competitors out of the market or to discourage new competitors from entering the market. However, it is perfectly clear that such practices carried out by a dominant undertaking may constitute an abuse under Article 86 of the treaty, depending on the particular circumstances of the case. This Bill introduces stronger legislation on abuse of dominance and that, depending on the circumstances, also covers predatory pricing.

As well as referring specifically to the newspaper industry, the noble Viscount spoke also about vertical agreements. That is proper territory for the Director General of Fair Trading, the tribunal and the courts. This amendment carries the same risk as other amendments which seek to depart from the illustrative list in Article 86. Over and above that, it would be especially undesirable to refer in the list to any particular sector of the economy. Clause 18 is a general prohibition on abuse of dominance modelled on Article 86 and it provides a clear legal framework against which to assess whether any particular conduct is abusive and likely to restrict competition.

In view of the fact that this Bill introduces stronger legislation on abuse of dominance and covers predatory pricing, I should have thought that the noble Lord would support the Bill as drafted and withdraw the amendment.

Will the noble Lord confirm that if a company is dominant in one market but the abuse is in an entirely different market, that will be covered by this Bill when in the past, it has slipped through the gap?

As I said on the previous amendment on abuse of economic strength in another market, EC case law shows that in certain circumstances Article 86 may apply where an undertaking that is dominant in one market commits an abuse in a different market.

I thank the Minister for his kind comments. I ask him to observe that in a fairly lightly attended Chamber, speeches of support have been made from Conservative, Labour, Liberal Democrat and Cross Bench Members of the Committee. Therefore, I hope that Ministers do not underestimate the strength of feeling on this issue. There is some disappointment that there has been such a spectacular U-turn from what the party spokesman was saying in opposition.

I shall not press the amendment this evening. However, I shall consult the noble Viscount, Lord Astor, to see which of us can come up with the best course for the next stage of the Bill. We shall probably seek the advice of the noble Lord, Lord Borrie, and even of the noble and learned Lord, Lord Ackner, if he is not too expensive.

There will be cut prices on this occasion only!

I am even more encouraged. However, I warn Ministers that we may well test the opinion of the House on this matter on Report. However, at present, I beg leave to withdraw the amendment.

I beg to move that the House be resumed. In moving this Motion, I suggest that the Committee stage begins again not before 8.40 p.m.

rose to move, That the scheme laid before the House on 5th August be approved [10th Report from the Joint Committee].

My Lords, I am sure that the noble Lord, Lord Carter, enjoys the sympathy of the House for the unpleasant task that he has just performed. After all, we know that he is no lover of the common fisheries policy because in the last Session of Parliament the noble Lord opined to the House that if there was one European policy more crazy than the common agricultural policy it was the common fisheries policy. Indeed, only a week ago, the noble Lord confirmed that view (in col. 1479 of Hansard) when he said:

"The CFP makes the CAP look like a beacon of sweet reason and light".

So I. for one, can understand the noble Lord's discomfort at having to perpetuate this evening one of the most damaging aspects of the common fisheries policy; that being the decommissioning of vessels.

Nor is the Minister alone in holding such beliefs within his party. In 1995, two years ago, Mr. Gavin Strang (who was then the Labour spokesman on agriculture and fisheries) put one of the problems rather well. He said:

"Surely the Secretary of State for Scotland and his ministerial colleagues understand that it is unacceptable that we should be decommissioning vessels to facilitate additional fishing opportunities in waters around the United Kingdom for the fishing industry of one of our European partners, in this case Spain".

The figures which Mr. Strang may have had in mind are that Spain is to receive some £721.32 million between 1994 and 1998, under Objectives 1 and 5a of the Financial Instrument for Fisheries Guidance. In addition, an unknown sum from the structural and cohesion funds may be finding its way towards the upgrading and upkeep of the Spanish fleet. The UK generally pays some 14 per cent. of these figures, so we are looking at at least £100.98 million of our money going to Spain under these headings.

Then there is the money which the EU pays for the right to fish in other countries' waters outside the EU. For the four years from 1996 a total of £637.89 million has been spent in this way, of which the UK's share again comes to 14 per cent., or about £90 million. Here again, Spain is the principal European beneficiary. Most of the recipients of that money from the EU are poor third world countries, whose boats cannot compete with the highly efficient EU fleets. So I suppose one can also be forgiven for wondering how much of this money actually gets through to the fishing communities in question.

All this leads me to put a question to the Minister, which I put fairly regularly to the previous government without the benefit of a clear reply. It is quite simply this: is the UK paying more money to Spain to build and maintain boats to come and take fish from what used to be our waters than we are paying to our own fishermen to destroy their boats and, I might say, their livelihoods?

Further, can the Minister say whether it is true that this scheme splits licences from track records? In other words, when we destroy a boat, is the quota of fish that it used to catch cancelled or is it shared out among the remaining boats, a large number of which will be Spanish and highly sophisticated and powerful? If this is so, does the Minister agree that fishermen go out of business but the stock of fish is unlikely to be conserved? I believe that the Minister said something about track records possibly being, under some pilot scheme, shared out in future. Can the noble Lord confirm that point in greater detail in his response?

I suppose the noble Lord may be tempted to answer my criticisms by saying that a Conservative Government under Sir Edward Heath took us into the common fisheries policy in 1972. That is of course quite true, and for one, make no excuse for such an act of treachery, nor have I ever attempted to do so. But we now have New Labour in power and, during the election campaign, we were promised that the CFP would be reformed if New Labour won the election, thanks to its new ingratiating stance in Brussels. Can the Minister tell us how the Government are progressing on this one? To be precise, what is the latest state of play in the voting system required to reform the CFP? Are we any nearer to adequate reform now than we were under the Conservative Government? Or is the only way to get what we want and need for our fishermen in fact to leave the Treaty of Rome, which in any case seems increasingly redundant nowadays? I look forward to the Government's reply, and apologise again if these questions cause the Minister any personal embarrassment.

My Lords, I am breaking new ground in speaking in the debate this evening. It is a long-held Liberal Democrat policy that the only people who are allowed to speak on fisheries policy are Cornishmen and Scotsmen. However, I make no apologies to my colleagues in the party for speaking on the matter. My experience of the fishing ports is not as great as that of some of my Cornish colleagues in particular, but having spent 20 years of my life regularly visiting the east Yorkshire ports of Bridlington, Scarborough and Whitby, I am only too well aware of the importance of the fishing fleet to those communities. I am also very well aware of the effect that that experience has had on my thinking about fisheries; namely, the greater importance that fisheries play in our national life than the simple figures of the number of fishermen employed or the number of fishing boats at sea imply.

Decommissioning is a necessary evil. There will be no long-term future for the fishing industry unless fishing stocks are given the chance to recover and. having recovered, the fish are then harvested at a sustainable level. No one who cares about the long-term future of the fishing stocks and of the fishing industry can, in my view, legitimately argue with the principle of the regulations. Indeed, despite the criticisms that might be made about the policy, one should be aware that in some areas at least fishing stocks are now increasing. Without a fishing policy and without a common fisheries policy, I suspect that that would not be the case.

My Lords, I wonder whether it is in order to ask the noble Lord a question. Is he aware of the examples of Norway and Namibia both of which have taken back control of their waters. and the fishing industries are doing very well as a result?

My Lords, I am aware of the example of Norway, but I cannot claim to be aware of the Namibian example. Anyone who believes that a common resource such as fish, any more than many other aspect of common resources of the environment, can be dealt with purely on a national basis will be mistaken in the long term.

I was about to say that the background to the issue is, in my view, the depressing failure of the previous government to grasp the nettle and introduce a decommissioning scheme at an earlier stage. That played a major part in the development of the abuse of quota-hopping and the sad spectacle, as the last election approached, of fishing Ministers going to Brussels making ever-more blood-curdling threats and coming away having achieved nothing. It is perhaps not surprising that, as a result, many fishermen found it difficult to support their traditional party.

I turn now to the details of the scheme. There are some aspects of the changes in the new scheme over those in previous schemes which we welcome. For example, we welcome the decision to allow vessel owners to secure the value of their track record. We also obviously welcome the fact that there will be more money available, although in doing so we note that the expenditure in this country is considerably less than that which has been made available over a number of years in some other member states.

However, some things in the scheme have not changed and we wish that they had. We know, for example, that there is still the policy of scrapping vessels as being virtually the only way of dealing with their decommissioning. In our view that is a classic case of a gold plated regulation and a more rigid application of it than applies elsewhere. I note that the only exemption from that rule is for fishing vessels that find their way to museums. I would love to know how many decommissioned fishing vessels have found their way to museums. I hope the Minister can tell me that. I suspect that is hardly an important aspect of the scheme.

If one looks more generally at the common fisheries policy, I think anyone must accept that there is one aspect which is simply not working. I suspect that the noble Lord, Lord Pearson, might agree with me on this point. I refer to the question of enforcement. If the fisheries policy is to achieve its goals it simply has to be enforced more rigorously than is the case at the moment. As we have a common fisheries policy this is obviously an EU matter. However, I wonder whether the Minister and his colleagues might consider whether, as part of their activities during our presidency of the EU, more impetus could be given to the whole question of enforcement of the common fisheries policy as this is one of those areas where failure tends to bring the whole policy into disrepute.

I cannot leave this issue without referring briefly to the wider problems of the fishing communities and the regions in which they are found. In the case of Cornwall, for example, even the most optimistic person on the future of the fishing industry does not believe that it will be capable of lifting the whole region out of high unemployment and low income levels. There is, therefore, a compelling case for a range of employment generating initiatives, of which in Cornwall the establishment of the university of Cornwall and the establishment of a regional development agency are probably the most important. We shall press for progress on both those initiatives during the course of this Parliament. However, whatever is done on these alternative methods of employment, it is difficult to imagine Cornwall, or indeed east Yorkshire, without a strong, viable and sustainable fishing industry. The scheme under discussion today will play a small part in making that possible.

My Lords, this is the first time I have talked about fishing in this House since I entered it. Part of the reason for that was that while I was a government Minister I never had responsibility for fishing, and another reason was that prior to joining the Government I was the chairman of the Sea Fish Industry Authority and I decided that I was precluded from discussing fishing matters, whether or not that was actually the case. Therefore this is my first opportunity to discuss fishing in this House. I could be tempted to make a far more wide-ranging speech than will be the case. I was almost tempted by my noble friend Lord Pearson and the noble Lord on the Liberal Democrat Benches to make a slightly more wide-ranging speech on general points about the common fisheries policy. However, I shall resist that temptation.

This decommissioning package is part and only part of the policy on fishing, both the common fisheries policy and the policy on fishing of the British Government. It is difficult to talk about a specific part of decommissioning without discussing some other parts. Therefore I shall probably make a slightly more wide-ranging speech, but I shall try to resist the temptation to speak too widely.

The primary purpose of the scheme is of course to spend the £12 million which was budgeted for and which is the final tranche of the 1992 scheme. As the Minister rightly pointed out, the scheme will deal with the current unmet capacity reduction targets under the multi-annual guidance programme. As the Minister rightly pointed out, there are two differences between this scheme and the previous schemes. The first is the exclusion of Nephrops vessels from participation on the ground outlined by the Minister that this sector has fulfilled the capacity reductions laid down.

I do not think it is quite as simple as that. As the Minister will know, the Nephrops fishermen around the coast are not at all happy that they have been excluded from the decommissioning. My reasoning for thinking it is not entirely wise to exclude that section is that the sections of the fishing industry are not self-contained compartments because vessels and fishermen move from one sector to another. People change from fishing principally for white fish to fishing for Nephrops. More importantly, I think it is fair to say that older vessels tend to find their way into the Nephrops fleet. I suspect that is why the Nephrops fleet took up the decommissioning on offer. That will still be the case. Looking at the whole fleet, if Nephrops vessels wish to come out of the fleet, I suspect that will create openings in the Nephrops fleet for vessels in rather more heavily fished parts of the fleet. I underline the point that the Nephrops fleets in, for example, the west of Scotland and, I suspect, in Northern Ireland are not happy about the discrimination against them.

Further, there is the point about allowing fishermen to dispose of the track record separately so that the grant scheme will relate only to the value of the vessel and not to the value of the track record. I am not sure that I can join the noble Lord on the Liberal Democrat Benches in welcoming that, for two reasons. First, it suggests that the industry itself might be part funding this decommissioning; in other words, the boat being decommissioned will get some of its money from the scheme and some of its money from its track record—and that means from other parts of the industry. What is perhaps more worrying, I do not think there is anything to preclude these track records from passing into the hands of the flag ship operators. That will make the position on flag ships even worse.

The position on flag ships is relevant to decommissioning because the industry feels strongly that the two issues are linked. I shall not discuss the history of this. We tried hard as a government to find a legislative way to stop quota hopping. We thought we had done so as we had received some sound legal advice on the matter. Unfortunately, the European Court decided that we were wrong and that we could not do it because the common fisheries policy, which was designed not by Ted Heath but in the early '80s, was inconsistent with the Treaty of Rome. My view of that is that the European Court may have had logic on its side but it did not make a sound judgment. It ought to have considered the matter in the round. Undoubtedly the people who created the common fisheries policy thought they were working within the treaty and thought they were doing the right thing in tying quota to country. They did not envisage in any way that there would be any quota hopping. Therefore I believe that this is a linked problem.

The previous government had said very clearly that they would not go down any of the MAGP IV routes until this problem of quota hopping was addressed. The noble Lord on the Liberal Democrat Benches said that we were making belligerent noises. That was the case. However, all we have heard from the Government is that there is an exchange of letters between the Prime Minister and the President of the European Commission saying that something will happen. A few months have passed since June when the letters were exchanged and nothing seems to be happening. I wonder where we are on these issues.

If one limits effort, because that is what decommissioning is about, and one moves into a MAGP IV situation where there are limits to efforts, which means that vessels are forced to tie up for a certain number of days in the year, I wonder what the consequences of that will be. I can see a link between restriction of quota and restriction of days at sea. If one needs only to spend a couple of hundred days at sea to catch one's quota, perhaps it is easier to judge one's fishing effort in terms of days at sea. However, I know that the industry is not convinced about that. We would have to do much more work before we replaced quota with days at sea. I must tell the Minister—this has always been said by fishermen—with his knowledge of agriculture that fishing is an industry which receives little money from the taxpayer in comparison to agriculture.

If we go down the route of restricting the number of days fishermen go to sea that looks—dare I say?—not unlike agricultural setaside. To this Government, and to the previous government, many fishermen said: "Why can we not have the same kind of payments as the farming industry enjoys on setaside?" I always found my answers less than convincing; and I do not suppose that the Minister's answer will be much better than mine.

All these measures are designed to protect the stocks. When I read the results of the European Fisheries Council as announced by the noble Lord, Lord Donoughue, to the noble Lord, Lord Williams of Elvel, on 4th November, I was disappointed on a number of matters and approved of a number of matters—for example, gradual increase in the size of mesh provided it is still realistic. I was glad to see that the Government resisted an increase to 110mm in the North Sea, but there is an argument for a gradual increase in mesh size elsewhere around our coast from 80mm to 100mm. I was disappointed to see that the square mesh idea was not being adopted other than in the nephrops nets. The nephrops nets having square mesh panels is a considerable improvement; however, square mesh could be used rather more widely in fisheries. When I was chairman of the Sea Fish Industry Authority I advocated that change quite firmly. We were absolutely convinced by research done by the authority that it allowed for a better escapement of under-sized fish.

I did not fully understand the point about minimum landing sizes being changed in order to reduce discards. While it is not all that relevant, perhaps the Minister will write to me.

My final point relates to the interesting fact that the only other subject which the Minister in the Commons decided to take up with the Commission was progress on driftnets. I should like to have seen from the Statement that he had taken up the need to make progress on quota-hopping. However, if it has to be driftnets, it has to be driftnets. My question—and I am sure the noble Lord, Lord Williams of Elvel, will also be interested in the answer—is: does the definition of "driftnet" cover driftnet fishing off the Northumberland coast of England, which is an interceptory net to the salmon returning to the Scottish rivers?

My Lords, we have had a lively and interesting debate on issues which will be very material to the long-term survival of both the fishing industry and the stocks on which it depends. I am grateful to all noble Lords who took part.

Perhaps I may first make a general point, and then deal with questions in so far as I am able. Improving the balance between catching capacity and what stocks will bear is fundamental and, I hope, common ground between all concerned, be they politicians of whatever party, fishermen of any member state or the scientists and administrators who have the very difficult job of devising and implementing the policies required. The problem, which we all understand, is that the equation between capacity and fishing effort, or fishing effort and fishing mortality, is not straightforward and varies according to the circumstances involved. A broad brush approach may penalise legitimate fisheries of no conservation concern, but a finely targeted approach will inevitably be much more complex to administer. The MAGP process has discernibly shifted from broad brush to fine targeting over the past few years, bringing with it a legacy of outstanding issues.

I now turn to the many questions that were asked. I am pleased to see the noble Lord, Lord Pearson of Rannoch, in his usual place on the common fisheries policy. In relation to the remark I made about the CAP, I can only say that I should learn my lesson. You should never try to make a joke in this House, because it comes back to hit you. I congratulate the noble Lord on the assiduity with which he read Hansard.

To turn first to the noble Lord's question on decommissioning and facilitating quotas for other member states, he is not correct: the quotas of other member states are not affected by decommissioning, which concerns fleet size.

The noble Lord asked about the money for Spain. Spain has the largest fleet in the European Union. It is therefore not surprising that it receives a significant share of EU money.

Another question concerned money for building boats in Spain. That is true, because Spain has met its MAGP targets and does not compare directly with UK expenditure on decommissioning, which is still needed to meet the targets which the previous Administration failed to meet.

I was also asked about transfer and track records. We decided to detach track record from licences following requests from the industry and after full consultation, which showed strong support for greater flexibility in the use of track records. Moreover, as there is a financial value associated with track records, and mindful of the need to try to reduce the level of bids so that the taxpayer will receive better value for money from decommissioning, we decided to take account of that on a pilot basis to see whether that would have any effect on the value of bids. The noble Lord referred to the former Prime Minister, Sir Edward Heath, accusing him of treason. That was a little on the strong side, even for the noble Lord.

The system of voting on the common fisheries policy is by qualified majority, as required by the treaty. There are no plans for changing that.

I welcome the noble Lord, Lord Newby, who is speaking for the first time from the Front Bench. He has my sympathy since his first speech is on fishing. I assure the noble Lord that things will get better. I am extremely grateful for the support that he provided.

The noble Lord asked how many of the decommissioned boats are in museums. I understand that there were three last year. It is for owners of museums to make the necessary arrangements.

On the important regional question—the impact of decommissioning on vulnerable ports—my honourable friend the Parliamentary Secretary, Mr. Elliot Morley, has had a series of meetings with representatives of some of the ports that have been badly affected. We have considerable sympathy with those who are suffering as a result of the problem. However, if we consider the way in which the decommissioning scheme has been structured there is little control over where the bids come from and whether they come disproportionately from England or from any particular port. There is a socio-economic impact on those ports. At this stage all we can say is that we recognise that fact and are giving some thought as to whether there is any way in which the problem can be mitigated. I repeat that we have great sympathy with those who are suffering the impact of decommissioning.

I turn now to the points made by the noble Lord, Lord Mackay. I welcome him on the same side as the noble Lord, Lord Pearson of Rannoch, although obviously not agreeing with him. Turning first to the question of nephrops, this round of the scheme is designed to focus on those segments of the fleet which have not met their targets under MAGP III; since the nephrops segment overshot it target Ministers did not want to see that segment of the fleet run down further and were not able to justify the public expenditure that would have been involved in decommissioning capacity which would not contribute to our meeting the MAGP III targets.

The noble Lord asked about the separate disposal of the track record. We decided to detach track record from licences after requests from the industry and after full consultation, which showed strong support for greater flexibility in the use of track records. Moreover, as there is a financial value associated with track records, and mindful of the need to try to reduce the level of bids so that the taxpayer will receive better value for money from decommissioning, we decided to take account of that on a pilot basis to see whether it would have any effect on the value of the bids.

On quota-hopping, we are not able to discriminate on grounds of the nationality of the owner. As previously, the scheme is confined to fishing vessels registered and licensed in the UK. That will continue to apply. If quota-hoppers are decommissioned, that will contribute to our targets and increase the quota available to the rest of the fleet. It is clear that the Amsterdam deal will not get rid of all quota-hoppers. It is now open for the Government to lay down requirements to ensure that real economic links exist between the UK fishing fleet and our coastal communities which are dependent upon fisheries-related industries.

Treaty changes were never a realistic option. There was no support for them from any other member state. We have clear guidance from the Commission on measures that we can take to ensure that fishing vessels have genuine economic links with the UK and will continue to work up a package of measures based on that guidance and in consultation with the industry.

The noble Lord also asked about MAGP IV. The Commission has now formally consulted the member states through the Management Committee procedure and will proceed to approve the resulting proposals in the next few weeks. Rates of reduction vary considerably according to vessel type (segment) and stock fished. The calculations also differ according to the means of implementation. The calculations are made either by reducing capacity (decommissioning) or introducing limits on time spent at sea (effort control). It is therefore not possible to give a single figure for the whole fleet in terms of either capacity or effort. The highest weighted reductions, which apply to the pelagic segment, will be about 20 per cent. over the next four years, while vessels under 10 metres in length may face no reduction at all.

I refuse to be drawn on the comparison with the set-aside. No one likes the principle of set-aside in farming. So why repeat it in fishing?

I know that the noble Lord is concerned about the question of square mesh. I am sure he knows this, but it is as well to repeat that as from 1st January 2000 a 70mm square mesh panel will be required in nets in the range of 32mm to 54mm; an 80mm panel will be required in nets in the range of 70mm to 79mm. This is the first time that EC legislation has required such panels on a mandatory basis. Any other net may incorporate a square mesh panel of at least 80mm. The so-called Baltic panels, at the side of the net rather than on the top, can be used in any net of at least 100mm.

Finally, I believe the noble Lord made a point with regard to panels not being mandatory in all nets. It is true that we too were disappointed that it did not prove possible to secure the Community's agreement to the mandatory inclusion of panels in all nets. However, there is a requirement in the regulation for the Commission to give priority in the next three years to funding research projects concerned with the use of square mesh panels or other selective devices. The Council will then be better placed to make informed decisions about further improvements to selectivity in nets at a later stage. That is very welcome.

Drift nets on the Northumbrian coast are outside the terms of the scheme but I shall be pleased to write to the noble Lord with regard to that matter.

As I said, today's debate is about setting the record straight and going into MAGP IV committed to meeting our obligations and serving the best interests of the industry. Much work remains to be done, and there will no doubt be many opportunities for debate. Within the limited terms of the 1997 scheme, and without prejudice to the continuing consultation with the industry on the implementation of MAGP IV, I trust that I may count on the support of the House in approving the scheme.

My Lords, I beg to move that the House do now adjourn during pleasure until 8.40 p.m.

moved Amendment No. 20:

Page 10, line 30, after ("no") insert ("necessary").

The noble Lord has given me the defence which I am afraid I must plead. Subsection (2) of the clause sets out an illustrative list. It is based, as the noble Lord rightly suggests, exactly on the corresponding illustrative list in Article 86. While I can see that the noble Lord, Lord Lucas, may wish to change its emphasis, I believe that the right course is to follow Article 86 as closely as possible.

Although the noble Lord may think that it is Eurospeak, it has the advantage of being absolutely clear, and for that reason reduces the business burden. I emphasise that the list is illustrative and amendments would not affect the substantive effect, prohibition of the abuse, but that is a secondary issue. We are talking about the clarity of the statement and I am afraid, as the noble Lord observed, we believe that it is better to stay as closely attuned to the Article 86 text as possible for reasons of clarity and lack of doubt for business.

I hope, on that basis that the noble Lord is prepared to reconsider and to withdraw the amendment.

I expect to end up by withdrawing the amendment but I would hope that the noble Lord could address himself, if not to the technical aspects of the amendment, to the substance of it. I would appreciate confirmation of the sort of anti-commercial practices outlined by the noble Lord, Lord Borrie, previously. I took the noble Lord's name in vain because the noble Lord, before supper, gave, as an illustration of an abuse of a dominant position, being forced to take one good when you wanted to buy another. I hope the noble Lord the Minister can confirm that that is very much the sort of thing which the clause is aimed at and that it is his hope and expectation that the Director General of the Office of Fair Trading will come down hard on such abuses when he has the ability to do so.

I understand the point that the noble Lord is making. In no way was I intending to suggest that the drafting should give any doubt as to the severe penalties that will be available if abuses of this nature can be proved.

I shall have to be content with that. I beg leave to withdraw the amendment.

moved Amendment No. 27:

Page 10, line 33, leave out ("in the market").

moved Amendment No. 34:

Page 39, line 25, leave out (", or would if engaged in result,").

moved Amendment No. 35:

Page 39, line 27, at end insert—

("(I A) The exclusion provided by sub-paragraph (I) extends to any provision directly related and necessary to the implementation of the merger provisions.

(1B) In sub-paragraph (IA) "merger provisions" means the provisions of the agreement which cause, or if carried out would cause, the agreement to have the result mentioned in sub-paragraph (I).").

In Amendment No. 38 Members of the Committee seek to take away the ability of a director under certain circumstances to remove the benefit of the general mergers exclusion from an anti-competitive agreement. As I have already stated, we have listened very carefully to comments from legal practitioners and others that the draft Bill published in August should provide a wide exclusion of all mergers. We accepted that that point had force. However, there were concerns that in widening the exclusion there might be a risk of creating a loophole for anti-competitive agreements. The very width of what is to be regarded as a merger means that there is a risk that anti-competitive agreements might masquerade as mergers.

An approach was therefore developed, in consultation with the practitioners, in which the exclusion was widened, but with the provision for the director to be able, with notice, to claw back the benefit of the exclusion where he considers that it would infringe the prohibition and would not merit an unconditional exemption.

The claw-back is not to apply to certain categories of agreement. In the Bill as introduced these were to be prescribed by order. Government Amendments Nos. 39 and 40 will now set out these categories on the face of the Bill. I believe that it is right that where we can reasonably and properly widen exclusions we would and should do so. If it is necessary to provide safeguards in order to be able to widen such an exclusion, I believe that that is the right balance. I shall refer to a further example in relation to a later amendment where we hope to provide an exclusion, but with an appropriate safeguard provision.

However, if I were to accept the amendment we would lose all the safeguards. We would then have opened up a significant loophole in the prohibition as a result of the width of the exclusion. I believe that the better approach is to limit the claw-back powers to what is necessary and not to remove them altogether.

Amendment No. 35 would exclude ancillary provisions from Chapter II prohibitions as well as from Chapter I prohibitions, as the noble Lord mentioned. The purpose of the exclusion from mergers is to leave them to be dealt with as now under the merger regime of the Fair Trading Act to the extent that they fall within its jurisdiction, and not to subject them to new controls to the extent that they do not. Hitherto we have seen the risk of a merger being caught wrongly by the Chapter II prohibition as being a matter of the formation of the merger itself. We have viewed any ancillary restriction as being part of an agreement to which the Chapter I prohibition might apply, hence the exclusion from the Chapter I prohibition.

The noble Lord prompts the question whether we are quite sure that ancillary provisions which should properly be scrutinised as part of the merger regime can never fall foul of the Chapter II prohibition. That is a point on which I would like to reflect further. I am grateful to the noble Lord for drawing it to my attention.

Amendment No. 41 would delete the word "exclusive" in paragraph 5. The word is included in order to target the exclusion on EC concentrations to the extent that the Commission has exclusive jurisdiction. In so far as the UK may have competition jurisdiction because part of the concentration is referred back to it under the EC merger regulations, the exclusions in paragraphs 1 and 2 should apply. That is the effect of the paragraph as drafted.

We were talking about the level of a shareholding acquired and whether it will be defined as a merger or whether, if I can express myself in that way, it would be there for loophole purposes. The words in brackets in the new provision make agreements where a low level of control is acquired capable of being looked at as anti-competitive agreements. It does not affect their treatment under merger control. The issue is whether one can apply the anti-competitive agreement in order that one can test the loophole theory. The worry was that anybody taking small participations might claim merger and then avoid the competition clause. So it is effectively not to be looked at in the merger section but rather to be taken in the competitive section.

As I say, I would like to reflect further on the point made under Amendment No. 35. In the light of the points I have made, I hope that for the present the noble Lord will be prepared to withdraw the amendment while that particular point is considered.