Clause 92 - Penalties for contravention of conditions
Communications Bill
11:00 am
Mr Andrew Robathan (Blaby, Conservative)
We are discussing powers in relation to penalties for contraventions, so we must consider the Competition Act 1998. I am concerned about clause 92, which provides Ofcom with a power to impose a penalty, following notification, if an operator contravenes its general conditions. As we already know, the fine could be up to 10 per cent. of turnover, as set out in clause 93. Those are special new powers in the communications sector and I would be grateful if the Minister could clarify why they are necessary. At the meeting of the scrutiny Committee on 8 July, the Secretary of State for Culture, Media and Sport said:
''The existing policy of all of our economic regulators in the various sectors is . . . to keep their markets under review and to withdraw from sector-specific regulation as soon as those markets become competitive.''
She went on to say that Ofcom would have a duty
''to review the markets and withdraw from sector regulation when competition is operative''
and to say that that was ''quite clear''.
The Government have said that the Communications Bill is a deregulatory bill. They have made clear their intention that Ofcom should rely more on a competition law-based approach than on sector-specific regulation, especially in highly competitive markets. In addition to Ofcom having the power to fine under the Communications Bill, the Competition Act 1998—which my hon. Friend the Member for South Cambridgeshire mentioned—allows Ofcom and the Office of Fair Trading to impose a penalty of up to 10 per cent. if an operator infringes competition law. Will the Minister explain the supplementary powers? I cannot find them in the directive.
If Ofcom is to be given such powers, does the Minister believe that the fining mechanism available to Ofcom when there is a breach of conditions by SMP operators is, in fact, too weak? I am asking not about the amount, but whether the mechanism is correct. The Bill provides that fines may be imposed only once the provider has failed to comply with the notification given by Ofcom. That notification would describe the breach and would require compliance within a month of the date of the notification. In cases in which a fine is merited—which are likely to be serious breaches—would it not be a more effective deterrent to have available an immediate threat of fines, rather than having a delay of a month?
This drafting has been produced by some high-priced lawyers. However, as it stands, the Bill is unlikely to have a deterrent effect any greater than that of the weak provisions in the Telecommunications Act 1984, which operates a ''two strikes and you're out'' policy, rather than offering the possibility of an immediate penalty. Furthermore, given the potentially serious effects on competition of the failure of an SMP operator to comply with the conditions imposed on it, the fining mechanism seems out of line with the provisions of the Competition Act, under which fines are available immediately upon a decision by the regulator that the prohibition of the abuse of a dominant position has been breached. I would like the Minister to tell us why he is giving Ofcom those special powers. Are the powers justified? Why do we need the clause at all?