Schedule 12 - Markets: time-limits
Enterprise and Regulatory Reform Bill
Hugh Bayley (York Central, Labour)
With this it will be convenient to discuss the following:
Amendment 65, in schedule 12, page 188, line 35, leave out ‘6’ and insert ‘12’.
Amendment 63, in schedule 12, page 189, line 32, leave out ‘6’ and insert ‘3’.
Amendment 66, in schedule 12, page 189, line 32, leave out ‘6’ and insert ‘12’.
Amendment 64, in schedule 12, page 189, line 41, leave out ‘6’ and insert ‘3’.
Amendment 67, in schedule 12, page 189, line 41, leave out ‘6’ and insert ‘12’.
Chi Onwurah (Newcastle upon Tyne Central, Labour)
We have made such rapid progress through so many of the clauses and schedules that I fear that amendment 62, being of a technical nature, may be a disappointment to some members of the Committee; but though technical, it is very important. We have passed through the general clauses of the Bill and we are now at the meat of the CMA’s activities. They include market studies involving examining markets, which may not be working well for consumers, and the CMA will have the power to impose remedies when an adverse effect on competition is found. The OFT’s “Positive Impact” report noted that market studies and market investigations saved consumers £479 million per year. It is an important area for consumers.
The Minister accepted that the UK has one of the best competition environments in the world, put in place by the previous Government, as I may have already mentioned. However, he also pointed out that it is one of the slowest, and I accept that. It is better to come slowly to the right decision than speedily to the wrong, but just as justice delayed is justice denied, a dysfunctional or anticompetitive market leaves consumers paying a price. For that reason, we support the Government in speeding up the process of market investigations and merger assessments. I share the Minister’s sentiment.
The means by which the Minister is proposing to speed up the process also has our support. He proposes to introduce a statutory time limit in a number of areas. Market investigations will now have tighter timetables and a statutory time limit of 12 months in phase 1 and 18 months in phase 2. A timetable of 40 working days for phase 1 of the mergers regime will also be placed on a statutory footing. We agree that statutory time limits should help speed up the investigation assessment procedure and give greater clarity and predictability to industry.
Statutory timelines should enable the CMA to work backwards to a known deadline and organise its resources effectively and efficiently to achieve the given end. The key question is: what are the right timelines? It is for that question that we have tabled probing amendments. As the amendments are probing, they seek both to double and halve one particular timeline. I am not so capricious as to believe that the CMA or the Minister can do both at the same time, but I am keen to probe the reasoning behind the particular choice of timelines for the merger and the market investigation activities.
We hope that six months was chosen not because it is half a year or two quarters. The market investigation process can certainly be sped up.
Andrew Bingham (High Peak, Conservative)
I was puzzled by the amendments, but the hon. Lady has explained them. If we were minded to support an amendment, which one would she prefer? One is shorter and one is longer.
Chi Onwurah (Newcastle upon Tyne Central, Labour)
I thank the hon. Gentleman for that helpful intervention—helpful inasmuch as it enables me to clarify again that the amendments are probing. We look to the Minister to make it so clear that he has chosen those time periods for the right reasons based on evidence rather than anecdote that I will have no alternative but to see his excellent logic.
The impact assessment said that in practice, market studies that have not been referred to the Competition Commission have taken between three and 21 months, an average of 10.4 months. Most market studies that have been referred have taken between four and 10 months. The assessment also said:
“Given that referrals to phase 2 are generally being made more quickly by the OFT…we do not envisage huge time savings with this option over and above a non-statutory route.”
That left me pretty confused as to the evidence base for a six-month statutory timeline, extendable by six months for the study, and the 18-month timeline for the investigation. Does the Minister believe that the timelines could be halved if we doubled the resource? What international examples has he considered in coming to his conclusions? What will the remedies be if the time limits are not met? I hope the Minister will enlighten us in relation to not only these timelines but the others in the Bill.
We have been told that the main purpose is to reduce the time scales for investigations and decisions, an issue which has been identified as the greatest defect of the current system. Deadlines give certainty to all parties, but they must be accompanied by the appropriate resource, and the Minister has offered us no evidence for that or for the particular choice of timelines.
Norman Lamb (North Norfolk, Liberal Democrat)
I am tempted to respond to the shadow Minister’s questions simply with the comment made by my hon. Friend the Member for High Peak that we have chosen six months because that is midway between the Opposition’s two suggestions. I could just sit down at this point, but perhaps I should take them more seriously and explain my thinking. I thank the hon. Lady for her suggested amendments.
The overarching vision behind the creation of the CMA is to streamline the UK’s competition regime. Schedule 12 is central to that vision, in that it will speed up market investigation processes. It provides statutory time limits for all stages of market inquiries that do not currently have them, and will reduce the time limit for phase 2 market investigations. Those time limits are expected to reduce the end-to-end market process by up to a year in some cases.
The amendments deal specifically with the time period within which the CMA should complete the initial phase of its market study and publish its proposed decision whether to refer the market for a phase 2 investigation. The Bill states that the time limit should be six months. It is of course possible for the CMA to publish that decision before the six-month point, if it is ready to do so, and it should work to publish its decisions as soon as it can. The hon. Lady’s amendments question whether that time limit should be a shorter one of three months or a longer one of up to 12 months.
One of the Government’s key considerations in choosing the time limits introduced by the Bill was to balance the desire to speed up and streamline the regime with maintaining the robustness of the decision-making process, which is a strength of the UK’s competition framework. We believe that it is reasonable to give the CMA six months to complete its initial market study, at which point it should publish its proposed decision whether to make a reference to phase 2.
To date, most market studies that have been referred to the Competition Commission have taken between four and 10 months, so an initial decision point after six months will speed things up, while still allowing good time for a full and proper consideration of the market. Three months would not allow for sufficient consideration of the issues, and I suspect that the hon. Lady would probably concede that. Extending the period to 12 months would go well beyond what is needed in such cases. Given that the current time period tends to be between four and 10 months, to suggest that we need to go beyond that, to 12 months, seems illogical. The objective must surely be to increase the speed of the slowest investigations as well as to be realistic, and therefore to find a time period for the initial phase that is within the current range of such periods.
The CMA will have a further six-month period in which it will be required to consult on its decision on whether to refer a market to phase 2 and to prepare its final market study report. Where a reference is the most appropriate course of action, the CMA should make the reference promptly after the close of the consultation. However, the market study may lead to outcomes other than or additional to making a reference. Those may take more time, for example, in instances where it wants to agree improvements with industry participants or it accepts undertakings in lieu of making a reference. These cases may need a longer period of consideration, which is why there is an additional six months before the CMA is required to make its final decision. We expect that the new phase 1 time limit will have a more significant impact on those cases that are not referred to phase 2.
Of the 35 market studies conducted by the OFT between 2004 and 2011 that were not referred on, 12 took more than 12 months to complete, and the average was 15 months. That is a long period of time and we would be shaving at least three months off these types of cases, which is a material benefit for all concerned. Based on the past experience of the OFT, and following the Department’s consultations with the OFT—we have talked to the body that undertakes the work now—the Government believe that six months is an appropriate time period for the initial market study phase.
The UK’s market investigation process is at the forefront of competition law internationally. It is one of two countries that can implement structural change or legally binding behavioural remedies as a result of an investigation. Israel is the other one and it has replicated the UK model. On the basis of my explanation and that we have worked with the OFT to come up with this proposal, I hope that the hon. Lady will be prepared to withdraw her amendment.
Norman Lamb (North Norfolk, Liberal Democrat)
I so appreciate the spirit of good will and, in the absence of cheering on my side, I am grateful to the hon. Member for Edinburgh South.
I will try to deal with these amendments in the three minutes that we have available before lunch. These amendments make three technical changes to schedule 12 to ensure that it is internally consistent and works in the way it was intended. Amendment 26 makes a minor and technical change to make clear that the undertakings referred to in paragraph 12 of schedule 12 are undertakings that have been accepted under section 154 of the Enterprise Act 2002, in lieu of a market investigation reference. The provisions in the Bill are not particularly clear on that, so the amendment provides greater clarity and certainty.
Amendment 27 makes a minor and technical change to the CMA’s publication requirements. It will provide greater transparency for stakeholders and affected parties. Under current and new legislation the CMA is required to publish many of its decisions, so that interested parties have information about them. The amendment adds a provision to ensure that where the CMA has consulted on making a market investigation reference, and subsequently decides not to make that reference, it must publish that decision. The amendment will ensure consistency with other publication requirements.
Amendment 28 makes a minor change to preserve the existing situation for appeals on decisions on whether to launch a market study. Currently, a decision by the OFT to launch a market study is expected to be subject to appeal to the High Court on grounds of judicial review. Changes in the Bill on time limits mean that under the current drafting, parties may have more reason to believe that such decisions would be now subject to judicial review by the Competition Appeal Tribunal, not the High Court. The amendment preserves the High Court as the appeal destination for those types of decisions, as it was not intended that the Bill change that. I have finished with one minute to go, and I hope that the Committee will support the amendments.
Amendments made: 27, in schedule 12, page 193, line 33, at end insert—
‘( ) In subsection (1), after paragraph (a) insert—
“(aa) any decision not to make a reference under section 131 following a consultation in relation to the matter concerned under section 169;”’.
Amendment 28, in schedule 12, page 194, line 3, at end insert—
In section 179 (review of decisions under Part 4), in subsection (2), before paragraph (a) insert—
“(za) does not include a decision whether to carry out functions under section 5 in a case where the CMA is, or would have been, required to publish a market study notice (see section 130A(1));”.’.—(Norman Lamb.)