With this it will be convenient to discuss amendment 87, in schedule 11, page 186, line 12, leave out from ‘exceeding’ to end of line 17 and insert—
(None) ‘10 per cent. of the company’s revenues for the previous year, or £30,000 whichever is the higher;
(b) in the case of any amount calculated by reference to a daily rate, an amount per day exceeding 10 per cent. of the company’s revenues for the previous year, or £15,000 whichever is the higher; and
(c) in the case of a fixed amount and an amount calculated by reference to a daily rate, a fixed amount exceeding £30,000 or 10 per cent. of the company’s revenues for the previous year whichever is the higher, and an amount per day exceeding £15,000 or 10 per cent. of the company’s revenues for the previous year whichever is the higher.’.
Thank you, Mr Brady, it is a great pleasure to see you in your place and to serve under you again.
We come to a narrow and somewhat technical measure, which is none the less important for all that, because it seeks to address one of the few failings in the current regime. We are keen to probe the Government’s thinking. As discussed, our merger regime is highly regarded throughout the world. The Office of Fair Trading estimates that the merger regime saved the UK customer £127 million—
One hundred and twenty-seven million pounds in 2010-11.
The Minister is also right, however, to say that we must not be complacent and that the merger regime can be improved. The regime might be underused at the moment, given the number of references made to the Competition Commission. To date, 11 market investigation references have been made, for in-depth inquiries, fewer than the four references per year initially anticipated.
Among the criticisms of the current merger regime is that it does not give sufficient weight to the public interest, examples of which we covered in a lively debate this morning—in particular the Kraft takeover of Cadbury. Other criticisms concern the ability of the regulator to prevent mergers going ahead, or to take remedial action when a merger happens—we will discuss that under a future amendment—and the speed of the merger regime. We have discussed the proposal of mandatory time lines, but there are also concerns with regard to information gathering. The Bill sets out to streamline information-gathering powers throughout the different phases. So far, so good—we would support that.
The Bill also repeals section 175 of the Enterprise Act 2002, so that failure to comply with an information request from what will be the Competition and Markets Authority will no longer be a criminal offence. Instead, the CMA will have new, civil powers to fine companies that do not comply with its requests. There is, however, no explanation or justification given for the amounts chosen as a maximum fine: for a fixed amount, an amount not exceeding £30,000; and, for an amount calculated by reference to a daily rate, an amount per day not exceeding £15,000. Can the Minister set out his thinking on the fines? Will the Minister explain the amounts chosen? They do not seem a significant threat or deterrent for a financial services company with an annual turnover in the billions of pounds.
When the accountancy firm Arthur Andersen was found guilty of obstructing justice, when it destroyed Enron documents when on notice of a federal investigation, it faced five years’ probation and a fine of $500,000. That was a criminal rather than a merger investigation, but will the Minister justify the limits in the Bill? I understand that the EU increased its maximum fines in 2004, from €50,000—close to the amount proposed by the Minister—to 1% of the aggregate turnover of the companies concerned, while the daily fine was increased to 5% of the aggregate daily turnover. I am sure the Minister has reviewed all relevant examples from across the world and can now set out his thinking for us. Our proposal of a cap of 10% of revenues is, we agree, at the high end in order to concentrate the mind. I look forward to the Minister’s explanation.
It is again a pleasure to serve under you, Mr Brady. I hope you were not too flustered coming from wherever you have been. It is good to see you.
I will first clarify that amendments 86 and 87 apply only to the markets regime. The shadow Minister referred to mergers, but the information-gathering powers and enforcement will in effect be the same across both mergers and markets. The principles apply equally. I thank hon. Members for their suggested amendments. It is important that the CMA has access to relevant information so that it can do its job properly within new statutory time limits.
Clause 28 and schedule 11, which are related, apply information-gathering powers across the end-to-end markets process. Schedule 11 makes provision for enforcement of those information-gathering powers in market studies and investigations. That mirrors the existing civil enforcement information-gathering powers in phase 2 of the markets regime. Those powers enable the CMA to impose civil penalties on any person who, without excuse, does not provide information when requested. The powers also make it a criminal offence purposefully to alter, suppress or destroy information, which reflects the relative seriousness of such actions.
The proposed amendments seek to strengthen considerably the enforcement powers. Amendment 86 would provide that if a person had failed to comply with an information request under section 174 of the Enterprise Act 2002, and had been found intentionally to alter, suppress or destroy information, that person could be subject to both a financial penalty and criminal proceedings. Currently, when a penalty has already been imposed, the criminal offence does not apply. The amendment would appear to strengthen the deterrent against non-compliance with information requests, and against the more serious activity of purposefully altering, suppressing or destroying information. However, I question the need to strengthen the enforcement powers, which would potentially increase burdens on business. There is always the question of getting the balance right, particularly as the proposal would extend a criminal offence.
As I noted, the information-gathering and enforcement powers are already available to the Competition Commission. They are not used in all inquiries, but are used as necessary. However, it should be noted that the Competition Commission has never imposed penalties for non-compliance with an information request. The penalties have served as a proportionate and robust deterrent to ensure that parties provide the information needed. The Commission’s experience has been that, with the potential to impose the civil penalty in the background, parties have complied with information requests.
Amendment 87 would increase the maximum penalty that could be applied in cases where a person has failed to comply with an information request. The Bill provides that the Secretary of State may, by order, set out the maximum penalties that the CMA can impose when an information request has not been complied with. They are as follows: in the case of a fixed amount, the amount cannot exceed £30,000; in the case of a daily rate, the daily amount cannot exceed £15,000; and in the case of a fixed amount and a daily rate, the fixed amount cannot exceed £30,000 and the daily rate cannot exceed £15,000 per day.
The amendment would increase those limits. In the case of the first two instances, the maximum penalty could be up to 10% of the company’s revenues for the previous year if that amount is higher, in a particular case, than the amounts listed in legislation. I think the hon. Lady made reference to the EU increasing its penalty to 1%. The Opposition would go 10 times higher than that level to 10%. I strongly urge Opposition Members to reconsider their amendment.
The penalty of 10% of turnover would be an extremely onerous fine for any business. Penalties of that sort should reflect the amount of harm and detriment that a breach might cause. Hon. Members might wish to note that breaches carrying a fine of 10% of turnover include breaches of antitrust—including the most serious infringements of competition law, such as price fixing—and here it would be imposed for failing to comply with information-gathering powers. The harm that those infringements can cause is potentially very large, and therefore the size of the fine is justified. Conversely, I do not think that the mischief we are seeking to avoid here, which is not complying with an information request in a market investigation, warrants this level of potential penalty. It would be highly disproportionate. Moreover, given that the Competition Commission has never used its existing enforcement powers, because the existing level of penalties operates as an effective deterrent, I do not believe that it is in any way necessary. Where is the mischief that we are seeking to cure?
The Government do not believe in enforcement for the sake of enforcement. It is right that measures are proportionate and used only as appropriate. The amendments tabled by Opposition Members would be disproportionate and place unnecessary burdens on business. I therefore hope that they will see that they have gone a wee bit over the top in this particular case, and will be prepared to withdraw amendments 86 and 87.
I thank the Minister for that response, and for clarifying some points with regard to the purposes of the other fines and the frequency with which they are used. I remain of the view that a maximum fine of £30,000 seems insignificant compared with the costs of doing business for many of the companies and organisations that the CMA will be dealing with, but I accept the Minister’s assurances that it has proved an adequate deterrent in the past. I accept entirely that a fine of 10% of revenues may be somewhat disproportionate. On that basis, I beg to ask leave to withdraw the amendment.
This group of amendments has been tabled to close a loophole that has inadvertently arisen as a result of changes the Bill is making. Under existing legislation, the Secretary of State can intervene at certain points in market inquiries on limited public interest grounds set out in legislation. The policy intention has never been to remove that power, which ensures that issues of particular national significance are considered in a transparent way by Ministers who are accountable to Parliament. However, as a result of a number of changes the Bill is making, an unintentional gap has arisen, which means that in cases where the CMA has not published a market study notice, the Secretary of State would be unable to intervene on public interest grounds when he or she could do so in the current regime. For example, the CMA could have a particular market under review and decide that it had sufficient information to refer that market for a more detailed phase 2 investigation, without having first to undertake a market study. In that case, under the Bill, even if there were relevant public interest considerations—around national security, for example—the Secretary of State would have no power to intervene on those grounds and the CMA would have no power to consider the public interest.
The amendments simply maintain the status quo and close the loophole so that there remains an opportunity for the Secretary of State to intervene in such cases. They do that by making additional provision for the Secretary of State to intervene on public interest grounds in cases where the CMA has not published a market study notice, but is consulting on making a reference. The CMA is obliged to consult on any reference it proposes to make. That should therefore close the gap I described. Unfortunately, given the complexity of the Enterprise Act 2002, that minor change requires consequential amendments, but they are drafted such that whichever route has been taken for a public interest intervention, the procedures that follow should be the same as far as possible.
Neither the amendments nor the Bill will widen the opportunity for Ministers to intervene in market investigations on public interest grounds. Currently, Ministers can intervene only where there are national security considerations—that is not changing. The Secretary of State can intervene only where the CMA is already looking at a potential competition issue in the market—that is not changing. The Secretary of State must accept the findings of the CMA on any competition issues—that is not changing. The amendments will merely preserve the existing power for Ministers to intervene in limited circumstances of significant national importance.