MPs urge competition reforms

Complete reform of competition policy along European Commission lines and a merger of the Monopolies Commission and the Office of Fair Trading were recommended yesterday by the all-party Commons trade and industry select committee.

In a report taking on board many criticisms made by Sir Bryan Carsberg, who quit last week as director general of fair trading, the committee said there was no confidence or credibility in current policy.

But Richard Caborn, Labour chairman of the committee, said the report was "in no way a reworked text according to Sir Bryan's evidence" and the committee had come up with its own ideas to suit British conditions.

The report recommends a move towards a "prohibition" approach towards abuse of market power and restrictive trade practices, but with stronger emphasis on consumer protection.

Under a prohibition approach, anti-competitive actions are illegal and breaches of the law can lead to large fines from the competition authority.

Under the present UK system, there have to be investigations followed by specific orders banning the behaviour concerned, and only if there is then a repeat offence can fines be levied.

Mr Caborn said a prohibition system would give greater deterrence and consistency and "reduce the effect of personalities on the system".

However, the MPs did not accept Sir Bryan's view that the new methods should be used alongside the existing Fair Trading Act, which would "blur the procedures and only increase the uncertainty".

Defenders of the Fair Trading Act point to its effectiveness for investigating markets where there are complex monopolies.

The committee instead recommended giving this power to investigate whole market sectors directly to the new merged competition authority as part of the prohibition system.

The body should be headed by full-time commissioners who would decide on cases presented to them by their officials. With procedural safeguards, this would lead to a much fairer and more transparent system, the committee believed.

Mr Caborn said there should be a right of appeal to the courts on procedural questions and points of law, but not on the merits of decisions themselves.

The committee said its proposals would not bog companies down in litigation. A key ingredient of the committee's plan is to keep an important role for government ministers, who would continue to make final decisions if the competition authority decided to recommend structural change in an industry.