Clause 93 - Amount of penalty under s. 92
Communications Bill
11:00 am
Mr Andrew Lansley (South Cambridgeshire, Conservative)
I do not intend to delay the Committee for long, but this is an important point. I understand perfectly why the figure of 10 per cent. was chosen. It is to have a parallel penalty available to Ofcom in relation to the contravention of conditions in the Competition Act 1998. I am grateful that the Government agreed with the Joint Committee that there should be alignment, rather than misalignment in the sense that Ofcom would have the power to vary the 10 per cent. limit.
The amendment moved by my hon. Friend the Member for Maldon and East Chelmsford helpfully probes the basis on which the penalty will be applied. I do not want to change the 10 per cent. to 5 per cent. In practice, the maximum penalty needs to be closely aligned in case there is a small risk that the level of the penalty available would cause Ofcom to choose one particular route over another.
The calculation of the penalty is important none the less. As the Minister rightly said in an earlier debate, the structure of regulation when using sector-specific powers is different. Just as it is true that in sector-specific regulation one would be unlikely to come across inadvertent breaches of the rules—because the conditions that are applied are specific to given persons and specific as to what needs to be done—in the same way, it is debatable whether the structure of penalties needs to carry across to the rest of the industry or need to be specific to the contravention and person concerned. The conditions are specific.
In the Competition Act, there are general regulations and obligations that apply to all businesses. In sector-specific regulations, there are conditions that apply to specific businesses and every business in that particular sector should be aware of the nature of those conditions and the penalties that would flow.
When the 10 per cent. penalty is applied in the Competition Act, it is applied in a way that includes—this list may not be exhaustive, because I am working from memory—a penalty in relation to the contravention of the offence itself that is designed to reflect and penalise a firm in relation to any benefit accrued over the period of the contravention. That can be mitigated to the extent that the business had sought to limit the damaging or anti-competitive effects or remedy them when notified. The penalty also has a deterrent effect not only in relation to that business, but other businesses generally. Judging from what the Minister said, he thinks that that is true in this situation, too, but is it necessary? The deterrent element in the Competition Act powers is an important part of the penalty. Members of the Committee think that I am an anorak for the Bill, but they ought to try me on Napp Pharmaceuticals v. the director general of fair trading.
Does the Minister maintain the assertion that deterrents will be a part of the judgment of the penalty that is to be applied under clause 93? If not, it would be useful if he said so. There is a good case for saying that that is not necessary and that the penalty should be appropriate and specific to the contravention, and make it clear that businesses cannot benefit by behaving in a way that is contrary to the conditions.
If it were the Government's intention that a deterrent effect should be applied, where is such a provision in the clause? The Committee knows how little I like the word ''appropriate''. What does it mean? Does it mean the inclusion of a deterrent effect? We need to know whether it does, because it will make an enormous difference to the manner in which Ofcom applies penalties.
As for the application of Competition Act powers, although the Competition Commission upheld the director general's decision in the case of Napp Pharmaceuticals v. the director general of fair trading, it varied the penalty. One reason for doing that was the extent to which the penalty was required to have a deterrent effect and how that should be measured. Whether that applies in respect of the Bill will be an important aspect of the extent to which businesses factor in the risk associated with such penalties.