Amendments made: 31, in clause 27, page 21, line 24, after ‘where’, insert ‘—
Amendment 32, in clause 27, page 21, line 25, at end insert ‘; or
(b) the CMA has begun the process of consultation under section 169 in respect of a decision of the kind mentioned in subsection (6)(a)(i) of that section.’.
Amendment 33, in clause 27, page 21, line 30, after ‘permitted period’, insert—
‘, in a case to which this section applies by virtue of paragraph (a) of subsection (A1),’.
Amendment 34, in clause 27, page 21, line 42, after ‘period.’ insert—
‘(1B) For the purposes of subsection (1), the permitted period, in a case to which this section applies by virtue of paragraph (b) of subsection (A1), is the period beginning with the date on which the CMA begins the process of consultation concerned and ending with—
(a) the acceptance by the CMA of an undertaking under section 154 instead of the making of a reference under section 131 in relation to the matter concerned;
(b) the publication of notice of the fact that the CMA has otherwise decided not to make such a reference in relation to the matter; or
(c) the making of such a reference in relation to the matter.’.
Amendment 35, in clause 27, page 22, line 28, leave out ‘In subsection (1A)(a), the’ and insert ‘In this section, a’.
Amendment 36, in clause 27, page 22, line 33, leave out ‘subsection (1A)(a)’ and insert ‘this section’.
Amendment 37, in clause 27, page 22, line 44, at end insert—
‘(1A) This section also applies where—
(a) the CMA has conducted a consultation under section 169 in respect of a decision of the kind mentioned in subsection (6)(a)(i) of that section;
(b) the CMA has decided that it should make an ordinary reference or a cross-market reference in relation to the matter concerned under section 131; and
(c) an intervention notice under section 139(1) is in force in relation to the matter at the time when the CMA makes that decision.’.
Amendment 38, in clause 27, page 23, leave out lines 3 to 6 and insert—
‘(b) in a case falling within subsection (1), shall not publish the market study report under section 131B(4) and shall instead, within the period mentioned in section 131B(4), give the report to the Secretary of State; and
(c) in a case falling within subsection (1A), shall give to the Secretary of State a document containing—
(i) its decision and the reasons for its decision; and
(ii) such information as the CMA considers appropriate for facilitating a proper understanding of the reasons for its decision.’.
Amendment 39, in clause 27, page 23, line 13, leave out—
‘contained in the market study report concerned’.
Amendment 40, in clause 27, page 23, line 20, leave out ‘section 131B’ and insert ‘this Part’.
Amendment 41, in clause 27, page 23, line 23, leave out—
‘contained in the market study report’.
Amendment 42, in clause 27, page 23, line 37, leave out—
‘market study report concerned contains the decision of the CMA’
‘decision of the CMA was’.
Amendment 43, in clause 27, page 23, line 40, leave out—
‘report contains the decision of the CMA’
‘decision of the CMA was’.
Amendment 44, in clause 27, page 23, line 43, at beginning insert—
‘In a case falling within subsection (1),’.
Amendment 45, in clause 27, page 23, line 45, at end insert—
‘( ) In a case falling within subsection (1A), the Secretary of State shall publish the document given to the Secretary of State by the CMA under subsection (2)(c), at the same time as the Secretary of State makes a reference under this section.’.—(Norman Lamb.)
Clause 27 refers to public interest interventions in markets investigations. The thrust of the clause is to give the CMA powers to report on public interest issues. Currently, the Secretary of State has the power to call in market inquiries that affect defined public interests. The Competition Commission reports to the Secretary of State on competition matters, which is its area of expertise, and the Secretary of State considers public interest matters, where he or she, being an elected representative and in touch with his or her constituents, supposedly has the expertise. The Secretary of State must accept the CC’s competition ruling, but makes his or her own mind up about possible public interest remedies. The Opposition believe that is entirely right, but of course it was the Labour Government who put those highly regarded rules in place.
The Government’s response to the consultation said:
“Opinion on proposals to enable the CMA to provide independent reports to Government on public interest issues” alongside competition issues “was divided.”
I have not read every response, but I have had a good look through a lot of the ones relating to this particular issue, and I suggest that that statement is slightly disingenuous. Few of the responses welcoming the proposed idea argued much in favour of it, whereas those opposed expressed a number of concerns that have not been addressed by the Government at all.
The idea behind the change seems to be to bring it into line with the merger regime. Given the Secretary of State’s experience with the public interest test in the merger regime during the proposed BSkyB takeover, I am surprised that he wants to emulate it with market investigations. However, mergers and market investigations are different. There is a reason why Labour left the public interest test with the Secretary of State when we designed the regime. As one consultation response put it, in a merger case,
“as a matter of necessity, competition and public interest issues need to be considered at the same time and having regard to the same facts. In a market context, the justification for joint consideration of public interest issues and competition issues is much less and the risks greater.”
To put it another way, public interest issues are relatively simpler to spot and investigate in a merger investigation than in a market investigation. The public interest considerations in a market investigation are numerous and varied. The Government should not simply copy something that works well in one area of competition law and apply it somewhere else.
The Competition Commission is a highly regarded institution. I never miss an opportunity to remind the Government which party designed the current regime.
I believe it was the Labour Government. The regime is internationally recognised, and our international competitors seek to emulate it. One reason is the unrelenting focus on promoting competition for the benefit of consumers. The Opposition are not convinced that the Competition Commission has the expertise to take public interest decisions into account during market investigations.
We discussed at some length concerns that the new CMA might not be properly resourced or skilled to carry out its functions. The Minister has sought repeatedly to assure us that that will indeed be the case. However, had the proposed arrangements been in place in 2010, it is likely that the Independent Commission on Banking would have been put in place by the CMA. Although I accept that such investigations are relatively rare, would the CMA really have had the same resources to devote, and would it have attracted the same level of public interest?
Will the Minister explain how the CMA will absorb or attract the necessary expertise to deal with all the additional considerations to which the public interest requirements will give rise, or will it outsource all those requirements to new members? What additional costs will be associated if the CMA rather than the Secretary of State takes public interest considerations?
I am sure that the Minister will be able to offer assurances, but even if he can, I wonder whether he should. The CMA will, I hope, retain the OFT and CC focus on competition. We have yet to be convinced that broadening the focus will not compromise the CMA’s primary function of promoting competition in the interest of the consumer. Of course, there will be occasions when there will be overriding public interest concerns, but surely that is a matter for the Secretary of State. Has he become so out of touch with the public that he feels the need to give away public interest powers to a regulator—a process-focused competition regulator with no experience of public interest tests in market investigations? That brings me to my next point.
The CMA will be tightly focused on competition. We have established that it will focus on enforcing the well-written UK competition laws, but as the Minister made clear in an earlier debate, public interest is a rather vague term, and introducing it in this area is likely to cloud a process we are trying to streamline. He emphasised in an earlier debate the need to focus on competition and competition law, but is the clause not introducing a new, complex and broad area of public interest? We are told that one of the main objectives of this part of the Bill is to speed up the timetable of a highly regarded system. How will adding this test affect that? If we are trying to speed up the market investigation process, we should ensure that the CMA’s sole priority is competition, and let the Secretary of State worry about the public interest.
That point was made forcefully by the CBI in our evidence sessions. Katja Hall said:
“Our concern is about the risk of blurring the responsibility of the new Competition and Markets Authority. What is the benefit of giving the CMA the right to look at wider public interest issues rather than just leaving those with the Secretary of State? That would be our concern: why is that change necessary and is there a risk that it would blur the duties of the CMA?”––[Official Report, Enterprise and Regulatory Reform Public Bill Committee, 19 June 2012; c. 7, Q12.]
The CBI made a wider point in its written submission to the Committee when it said that it was clear that the CMA should have
“a clear focus on competition”.
There is also concern that introducing the fuzzy public interest test in market investigations could undermine confidence in our competition laws. As the CBI said:
“The UK has one of the most highly regarded competition regimes in the world, being robust and free from political interference. Outcomes based on clearly-drafted competition law are more predictable than subjective tests and underpin business confidence and investment. The CBI supports the objective of eliminating duplication and overlap between the”
OFT and the CC
“by establishing the CMA: speedier and more efficient processes will reduce costs to business. However, the Bill proposes that in certain cases the CMA will be able to consider the public interest in addition to effects on competition, which could blur what should be the CMA’s clear focus on competition. Business will be concerned that this does not mark a retrograde step and believes public interest tests should remain a decision for the Secretary of State.”
The phrase “retrograde step” was echoed by the in-house Competition Law Association. We know from earlier sittings that Government Members seem to have developed a dislike of lawyers, or at least they limit the company they keep with lawyers.
There are plenty of dissenting views on the matter. In its evidence on the consultation, British Airways said succinctly:
“Public interest issues should be for Ministers who are accountable to Parliament, rather than the CMA which is intended to be a competition law centre of excellence.”
At the very least, the situations in which the CMA should report on public interest issues should be tightly limited. Will the Minister make it clear what the limitations are with regard to the proposals for the CMA to report on the public interest?
A further point is that, without political accountability, businesses may not accept the legitimacy of a CMA public interest market ruling, especially if concerns about resources and expertise are not properly addressed. We all accept the need for a balance between public accountability, and expertise and stability. The worry is that the Government may step too far towards establishing a technocracy, which might be less efficient. Establishing what is and is not in the public interest is basically a policy decision, as I hope the Minister agrees. Should we hand over policy decisions to an unelected body? With a debate on Lords reform raging as we speak, it is rather odd that a Liberal Democrat Minister is proposing to remove wide-ranging policy-making decisions from the Secretary of State.
The final concern that I want the Minister to address is how the changes will work with concurrent regulators that already have public interest powers for market investigations. For example, Ofcom has a duty to report on the fulfilment of the public service remit by public sector broadcasters. Will the CMA have a role in that? I look forward to the Minister’s assurances.
As I have previously observed, the Government seem to have an obsession with top-down reorganisations—moving responsibilities around like deckchairs on the Titanic. [Interruption.] I look forward to the Minister’s response. In this case, we must stop and think about what the Government are for and what their purposes are. How does outsourcing the public interest to the CMA send the right message about the responsibility and accountability of the Government? This Government seem rather like those companies that have been invaded by management consultants telling them to focus on their core purpose. They decide to outsource their call centres to one company, their sales fleet to another, their cleaning to a third and their security to a fourth, so that they can focus on what they do best, which is their core purpose. But if looking after the public interest is not the core purpose of the Government, what is their core purpose? How does the Minister justify removing the public interest power from the Government and putting it in an unelected body?
I thank the shadow Minister for that philosophical contribution to our discussion. I thought that talking about an obsession with top-down reorganisations was a wonderful example of the pot calling the kettle black after 13 years spent doing exactly that.
I completely share the hon. Lady’s view that the primary function of the CMA is the promotion of competition in the interests of the consumer, but let me deal with some of the issues that she raised. As I said, the CMA will be the principal competition authority, with the primary duty to promote competition for the benefit of consumers. It is important to make the point that public interest cases are extremely rare. To date, there has never been a public interest markets case and, in themselves, the changes are unlikely to lead to any increase. We should remember that in markets the only public interest that is identified is national security. The CMA’s focus will therefore remain overwhelmingly on its competition responsibilities, so let us keep this debate in proportion.
If a public interest issue were present in relation to national security, it would make sense to look at it, holistically, as part of one process. The Secretary of State already has powers to intervene in certain market investigations on public interest grounds. That power exists now, and it will not be changed by the clause, which simply gives the Secretary of State the option to ask the CMA to examine public interest issues alongside competition ones in a phase 2 market investigation.
On the hon. Lady’s point about the Independent Commission on Banking, there is no reason why that could not be established in the future any more than was the case in the past. That has a number of benefits, not least a more consistent approach to public interest matters across the mergers and markets regime. It will enable a much more holistic consideration of competition and public interest issues, resulting in better informed and more comprehensive recommendations on such cases.
Although such cases are extremely rare, they are, by their nature, of particular significance to the United Kingdom. It is therefore vital that the Secretary of State has access to the best possible expert advice when taking decisions on such cases. For example, as Malcolm Nicholson highlighted in his evidence to the Committee,
“the skill set of an independent regulator of the sort that we have should mean that it is quite well placed to consider public interest issues alongside competition issues. I could certainly conceive of a competition inquiry looking at competition in wholesale and retail energy markets while having regard to security-of-supply considerations…I think there is scope here for doing something quite useful.”––[Official Report, Enterprise and Regulatory Reform Public Bill Committee, 21 June 2012; c. 111, Q252.]
The introduction of the powers would also mean that there is an option to use the CMA, the premier competition authority, as an alternative to a stand-alone independent inquiry, such as the Independent Commission on Banking that we have already debated. That is an alternative option, not a replacement of that way forward. It should streamline the processes as well as provide a more straightforward route for fixing competition problems, as measures can be implemented by the CMA itself where necessary, which would not be possible for a stand-alone inquiry group.
I want to clear up a couple of issues that I think have caused confusion. First, the powers will not make it any easier for Ministers to intervene on public interest grounds in the first place. The Secretary of State can make a public interest intervention only where the CMA has already begun a market study, or where it is consulting on making a reference, which is where the CMA already suspects that there may be a competition issue. Currently, the Secretary of State can intervene only where they are issues of national security. We are not changing that, so we do not agree that the changes will lead to any increase in public interest cases.
Secondly, it will not be for the CMA to decide where the balance is between competition and public interest issues. That will remain, as it should be a decision for Ministers, who are accountable to Parliament; that directly addresses the hon. Lady’s point. Some people have said that that risks politicising the CMA—I think there was a hint of that in the shadow Minister’s contribution—but I disagree. The changes will not affect the independence of the CMA. As I have said, the Secretary of State can make a public interest intervention only where the CMA already suspects that there may be a competition issue. The Secretary of State must accept the findings of the CMA on competition issues. Its independence is absolutely guaranteed. If the CMA finds no competition issue, the matter cannot be referred for further examination. Those principles are not changing either.
Others have said that the CMA lacks the expertise to advise on public interest issues, or that the issues dilute its focus on competition. Again, with respect, I disagree. The Competition Commission is already able to consider public interest issues in the merger regime. The CMA will be the principal competition authority and will have a primary duty to promote competition both within and outside the UK for the benefit of consumers. In cases where there are both competition and public interest aspects, it makes sense to consider the issues in the round, particularly what the most appropriate remedies might be, taking all the issues into account.
The CMA, like the Competition Commission, will have panel members with a wide range of expertise and experience in different industries and markets. If the CMA does not have enough in-depth expertise on a specific public interest matter in question, the clause makes provision for the appointment of a public interest expert or experts, who would work alongside the CMA teams. Whether they work as part of a CMA investigation or independently, it seems that the costs will be the same. The fact that they are part of a holistic exercise, as is intended by the clause, does not cost any more. The changes seek to bring the public interest markets regime into line with the public interest mergers regime, and provide holistic expert recommendations to the Secretary of State on those important cases.
I thank the Minister for his comments. I am glad and relieved to find that we agree on some of the underlying philosophical points and principles, although I am still uncertain about what the Government are trying to achieve. On the one hand he says that such occurrences would be rare, that only one public interest—national security—has been identified, and that he expects such cases to arise infrequently. In that case, however, is it really worth while sending a message about public interest not being with the Secretary of State, and making those changes? On the other hand, he says that it is important that the CMA has the ability to consider the public interest in the round. I found the Minister’s example of national security particularly worrying. Some would argue that the Government’s first responsibility is to ensure the security of its citizens.
I want to make the point that it is not inconsistent, because although such cases are likely to be rare, when they occur they may be quite significant. It therefore makes sense to look at such issues in the round as part of a recommendation to the Secretary of State, who retains political responsibility.
I thank the Minister for that clarification. If I have understood him correctly, the Government argue that such cases will be rare, but that they could be important, but if that is the case, it is also important that the elected Government and the Secretary of State are accountable and take the necessary decisions. In the case of national security, I would consider it even more important for such decisions to be taken by the Government of the day.
I want to reiterate the fact that recommendation to the Secretary of the State will take place following consideration of the matter. It remains the Secretary of State’s decision and that is not changing in any way.
I thank the Minister for that clarification. The CMA will investigate the public interest but it remains the decision of the Secretary of State. Why is the CMA being asked to investigate the public interest around something like national security, simply because it has expertise in competition? I do not believe that that is a consistent approach. We are keen to support the Government in ensuring that the CMA is highly skilled and has some of the best competition minds in the world, as well as the expertise necessary to deal with, consider and assess competition issues, but we believe that the skills concerning issues of public interest should be found within the Government or perhaps the civil service.
The example of energy provided by the Minister is particularly interesting. Energy is a complex market in competition terms, and Ofgem has many experts, both in technical matters and on energy competition. Should they consider issues of national security? Surely, national security issues to do with the energy markets—security of supply—should be a matter for the Government of the day, as they control the regulation of those markets and relevant policy issues. I am not reassured by the Minister’s description, distinguishing between the public interest as the CMA will assess it and the public interest, which is the responsibility of all hon. Members as parliamentarians and for which we should be held accountable.
The final point that the Minister made about rolling over a successful approach for mergers to markets does not recognise the essential difference between the two. The CMA responds to a merger, which is a time-limited affair in comparison with the review of markets. I urge him to consider whether it is appropriate to make such a change for the limited benefits that he has described. If not, we must put the issue to the vote.
I am grateful to the shadow Minister for her comments. She talks about the distinction between mergers and markets, but the fact is that the Competition and Markets Authority would be dealing with and looking at public interest issues to do with mergers, which she suggested would be inappropriate. If it can do that in respect of mergers, it seems not to be too great a leap for it to consider competition issues in an investigation into markets.
Her primary concern seemed to be political accountability for public interest issues. However, I have sought to reassure her that political accountability remains, exactly as it is now, with the Secretary of State after receiving a recommendation. It makes sense for competition issues relating to or impacting on public interest to be considered holistically, rather than as two separate processes. That is an option, not an obligation, but in many cases it may make sense for it to be done holistically.
The Secretary of State has to accept the recommendation of the CMA, so far as competition is concerned, but the responsibility for political accountability for public interest remains with the Secretary of State. I hope that, after my responding clearly to the hon. Lady’s legitimate concerns, she will see that the proper safeguard is in place to ensure that the matters that she has raised will not arise.
I thank the Minister for his further clarification. I am reassured that he does not think that the clause will result in a change in accountability or a movement of responsibility for the public interest away from the Government. However, I do not agree with his assessment of the effect of the clause. Although the decision-making power remains with the Secretary of State, if the responsibility for assessing the public interest case of markets, which as I have said are different from mergers, is to rest with the Competition and Markets Authority we should put the issue and principle of public interest to the Committee in a vote.