Peers defy Blair to take on Murdoch

REBEL Labour peers last night joined forces with the Opposition to defeat the Government, and defend newspapers like The Independent from Rupert Murdoch's predatory pricing tactics on the Times.

Ignoring a Government plea, the Lords carried an amendment to the Competition Bill which would outlaw any "abuse of dominant position... if it may reduce the diversity of the national newspaper press in the United Kingdom by reducing, retarding, injuring or eliminating competition".

The Government was defeated by 121 votes to 93 and the difficult question now facing Tony Blair is whether he should attempt to order his MPs to overturn the Lords decision - and risk certain large-scale Labour revolt in the Commons.

The amendment proposed by Lord McNally, a Liberal Democrat, was targeted at stopping Mr Murdoch's predatory cut-price offers on the Times threatening vulnerable rivals.

Opening the debate, Lord McNally said: "If freedom of the press can be imperilled by restrictive laws, so it also can be threatened by restrictive ownership. This amendment has one intent and one intent only, and that is to promote the framework for fair and transparent competition in our newspaper industry."

He said: "The present policy of the Times does not make sense unless it is to clear the field of two major competitors - the Telegraph and The Independent... what is good business for Mr Rupert Murdoch is not necessarily good sense for a healthy democracy or a diverse and healthy press."

Opposing the amendment, Lord Harris of High Cross, an independent director of Times Newspapers, said that the broadsheet newspaper market had been expanded by price cuts and special offers, and he assured peers that not one penny piece had been made available in cross-subsidies to the Times from Sky TV.

"This amendment is the equivalent to writing in a clause that says, 'Competition is fine, but don't be beastly to The Independent'," he said.

Winding up a debate in which the threat posed by Mr Murdoch was the central issue, Lord Simon of Highbury, minister for trade and competitiveness in Europe, refused to indulge in speculation as to whether Mr Murdoch's cut-price tactics would be banned; he would not trespass on the judgement of the Director General of Fair Trading and the Competition Commission.

"I believe we would be going off course," he told the House, "if we started down the path of prohibiting conduct where there is no dominance, or having a different prohibition for one particular sector."

In the event, peers were not reassured - not least because of doubts about the definition of "dominant position", and fears that the director general would yet again rule that there was no abuse of market power by Mr Murdoch.

After his victory Lord McNally told The Independent: "This has immeasurably strengthened the Bill, and the Government should now accept the amendment and take it to the Commons in its strengthened form. If they do not, then there will be a similar vigorous attempt in the Commons to insert this clause."

The Independent has been told by a senior Government source that No 10 has issued a "hands-off" instruction to Ministers at the Department of Trade and Industry, warning it against any statutory intervention that would directly harm the interests of any newspaper proprietor.