Clause 27 - Public interest interventions in markets investigations

Part of Enterprise and Regulatory Reform Bill – in a Public Bill Committee at 4:30 pm on 10 July 2012.

Alert me about debates like this

Photo of Norman Lamb Norman Lamb The Parliamentary Under-Secretary of State for Business, Innovation and Skills 4:30, 10 July 2012

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.