Clause 75 - Market power determinations
Communications Bill
6:00 pm

Mr Andrew Robathan (Blaby, Conservative)

I beg to move amendment No. 80, in

clause 75, page 72, line 36, leave out 'due' and insert 'utmost'.

Mr Peter Atkinson (Hexham, Conservative)

With this we may discuss the following amendments: No. 81, in

clause 75, page 72, line 42, leave out 'due' and insert 'utmost'.

No. 82, in

clause 79, page 75, line 41, after 'identification', insert ', taking utmost account of all applicable guidelines,'.

Mr Andrew Robathan (Blaby, Conservative)

These small amendments would replace the word ''due'' in clause 75 with ''utmost''. The reason for that is straightforward. Article 15(3) of the framework directive states:

''National regulatory authorities shall, taking the utmost account of the recommendation and the guidelines, define relevant markets''.

£Why have the Government toned that down? They might give Ofcom more power than the directive intended and so give less protection to those in the market. The directive would apply particularly when national regulatory authorities were carrying out market analysis for SMP purposes.

The clause refers to ''due account'', which may not be adequate in respect of implementation, as it gives Ofcom too much discretion to ignore the Commission's guidelines on market analysis and recommendations on the relevant markets to be analysed. The amendments would simply bring the clause into line with the requirements of the directive.

Mr Andrew Lansley (South Cambridgeshire, Conservative)

There is a risk of anticipating later clauses, but as it is a general question about how the significant market power conditions will work, it might be better to raise it now. The Minister may recall that one of the objectives of the scrutiny Committee was to align the process of market analysis and market power determination in the Bill more accurately with those in the directive. In their response, the Government did that for some of the later clauses more accurately in relation to things such as the periodic nature of reviews.

One of the things that they have not done—I suspect that that is because of the different structures

of the legislation and the directive—is to reflect the precise process by which the directive sees SMP conditions being arrived at. If I render it correctly, the commission defines the market and sets guidelines; Ofcom conducts an analysis; and it then decides whether or not a market is effectively competitive. If the market is not effectively competitive, Ofcom then goes on to identify the person or persons who have significant market power and to whom conditions might be applied.

The Government, in what appears a straightforward way—it seems to be almost a simplification—have cut out the middle bit and are going straight from determining the market power to identifying those with significant market power and applying the conditions to those. Logically, the absence of anyone with significant market power implies that the market is effectively competitive. That is how I understand the structure, but the process of determining whether the market is effectively competitive has a benefit in relation to the directive.

Article 16(3) provides that when the regulatory authority concludes that a market is effectively competitive, it not only means that that national regulatory authority cannot then apply significant market power conditions, but that:

''In cases where sector specific regulatory obligations already exist, it shall withdraw such obligations placed on undertakings in that relevant market''.

£That is apposite to the initial market analysis rather than the review, and I do not find that provision in the legislation. I cannot find the process that says that we should determine whether the market is effectively competitive and, if it is, that we should remove all those obligations.

In a nutshell, and having bored the Committee about how I arrived at it, my question is where is the provision in the Bill that provides that having established that a market is effectively competitive and that there is no case for applying SMP conditions, it is also an obligation on Ofcom to remove sector-specific obligations that may have pre-existed in relation to undertakings in that market. I cannot find it.

Mr Stephen Timms (Minister of State (e-Commerce & Competitiveness), Department of Trade and Industry; East Ham, Labour)

Let me comment on the specific terms of the amendment moved by the hon. Member for Blaby (Mr. Robathan). First, however, I apologise to you, Mr. Atkinson, and to the Committee for my late arrival. I am pleased to find you looking after the Committee.

There are a number of examples, rather like the one given by the hon. Gentleman, of the words in a Bill being not quite the same as those in a directive. That is because the conventions and the principles of interpretation of UK law are not the same as those for European Community law. It is not always possible to use the literal words of the directives in order to obtain the intended effect. I put it to the hon. Member for Blaby and the Committee that it is not sensible simply to copy the text of directives into UK

legislation. The term ''utmost account'', which the amendments would add to the Bill, is not used in UK legislation. We have done the right thing by using a term that is more conventional in UK law than the term in the directives.

I would also make the point to the hon. Member for Blaby that the wording is a little different from the wording in the draft Bill, which follows from comments that were made by the Joint Committee. The draft Bill contained the phrase ''have regard'', and we have gone further. The Joint Committee made a fair point that we needed to change the form of words in order to reflect the directive in the Bill. The form of words on the face of the Bill achieves that and it would not be sensible to use the precise words of the directive.

Mr Andrew Robathan (Blaby, Conservative)

I will not necessarily argue the toss with the Minister over this, but will he reassure me on a point? I am not a lawyer, although we received fairly expensive legal advice on these points—luckily, we were not paying. Will he assure me that, in legal terms, ''due account'' means the same as ''utmost account'' for these purposes? To a layman, the word ''utmost'' is obviously much more emphatic than the word ''due''.

Mr Stephen Timms (Minister of State (e-Commerce & Competitiveness), Department of Trade and Industry; East Ham, Labour)

In terms of how a UK court will interpret the Bill, the phrase ''due account'' does the job. The phrase ''utmost account'' would not do the job because it is not familiar in UK law. The answer to the hon. Gentleman's question is yes, but I wanted to phrase my answer slightly more carefully.

The question asked by the hon. Member for South Cambridgeshire is more general and does not arise specifically from the amendment, although it relates to significant market power conditions. As he said, we have interpreted ''not effectively competitive'' as meaning a market in which somebody has significant market power. He referred to that as a simplification, but we used that interpretation when drafting UK legislation. If Ofcom concludes that nobody has significant market power, clause 80(4) provides that it must withdraw all previous significant market power services obligations that have been imposed.

Mr Andrew Lansley (South Cambridgeshire, Conservative)

I had noted that, but I understood that that was in relation to reviews, which is why I raised the point. That is distinct from the original market analysis and determination.

Mr Stephen Timms (Minister of State (e-Commerce & Competitiveness), Department of Trade and Industry; East Ham, Labour)

I think that clause 80(4) does the job that the hon. Gentleman wants. Of course, Ofcom will carry out analyses. We might need to explore the matter further when we reach clause 80, but his point that there is a simplification compared with what is in the directive is fair.

Mr Andrew Lansley (South Cambridgeshire, Conservative)

I am sorry to interrupt the Minister again. Although we can discuss the matter again when we reach clause 80, I did not think that there was a problem under that clause because it relates specifically to subsequent reviews of market power, market analysis and market power determinations, and to the removal of pre-existing SMP conditions. The directive is about not only SMP conditions, but all pre-existing sector-specific obligations. Although this can happen within months, the question is what will happen toward the latter part of next year when Ofcom undertakes initial determinations and examines pre-existing obligations.

Mr Stephen Timms (Minister of State (e-Commerce & Competitiveness), Department of Trade and Industry; East Ham, Labour)

If, following the market review, nobody has significant market power, it will not be permissible to impose significant market power services conditions at all. That is set out in clause 42. In clause 80, we deal with when there are subsequent reviews. The Bill achieves what is set out in the directive.

Mr Andrew Robathan (Blaby, Conservative)

As the Minister has said, this is not the only place in which ''utmost'' has been replaced by ''due''. As a non-lawyer, I cannot argue with him on the use of those words; however, I remain concerned that the emphasis of ''utmost'', as provided for in the framework directive, has been weakened by the use of ''due''. I hope that that will not give Ofcom powers that it could abuse—although I suspect that it would not abuse them—to the detriment of people in the market. The framework directive did not intend that.

I am sure that the Minister's assurances have been given with the full weight of his legal team behind him, so I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 75 ordered to stand part of the Bill.

Clauses 76 and 77 ordered to stand part of the Bill.