by Michael Burke-Gaffney QC
The recent Green Paper Review of Restrictive Trade Practices Policy has been represented by many commentators as an attack on the professions. Speaking purely for myself, I do not believe that that view is supported by the paper’s contents. The proposals are obviously intended to have a broader effect than that and in two fundamental respects I think they are dangerously unconstitutional.
These proposals undoubtedly have the aim of reforming radically the present restrictive practices legislation. The main theme of the Green Paper is developed around the proposal to change from the present system, under which an agreement is caught by the restrictive practices net by reason of its technical form, to a new system under which the form of an agreement is less important than its anti-competitive effects.
This main proposal for a change seems to me to be sensible. The present restrictive practices legislation has been in many ways very successful. However, it is now widely seen as being out of date, ponderous and lacking in flexibility. Too many innocuous agreements are at present brought within the registration provisions of the Restrictive Trade Practices Act 1976 (RTPA 1976): on the other hand some highly anti-competitive agreements get away with not registering under the RTPA 1976 at all, for technical reasons of form.
Exemptions
The present list of exemptions from the provisions of the RTPA 1976 is long (47 exemptions to date, even counting as one the 17 professional exemptions listed in Schedule 1 to the Act). I do not see it as discriminating against the professions that the wide range of exemptions will, under the Green Paper proposals, be examined afresh. (See Chapter 5 of the Green Paper and, in particular, para 5.18.)
Aims of the proposals
Nevertheless, in pursuance of the laudable aim of reform, the Green Paper proposals, in my view go too far in the direction of streamlining the present system. Underlying the proposals — although not spelt out in them — is a real danger, not just to the professions, but to the system of justice in the United Kingdom. This, so far as it is concerned with restrictive practices, the proposals seek to move away from the province of the law as laid down by Parliament, to the province of administration carrying out the policy of the government of the day.
Let me first set the context. The underlying aims of the Green Paper are two. The first is to provide for the prohibition of all agreements “with anti-competitive effects or purposes”. Exemptions would, in appropriate cases, be granted by a new “Competition Authority”. This aim, if achieved, would have the effect of switching the area of the restrictive practices net in the UK so as to catch “effects-based” agreements rather than “form-based” agreements. The second underlying aim of the proposals is that the new UK domestic law of competition should, so far as possible, be aligned with the competition law of the European Community. It is not these aims, but the means by which the Green Paper proposes to implement them that are disturbing. Let me compare the present system with the proposals.
The present structure
Within the present restrictive practices legislation Parliament has declared how the public interest is to be judged, and by whom.
Every restriction made in pursuance of an agreement to which the RTPA 1976 applies is presumed, for the purpose of any proceedings brought before the Restrictive Practices Court (“RPC”) to be contrary to the public interest, unless and until the RPC is satisfied as to one or more of a series of specified circumstances (“the gateways”); and is further satisfied that the restriction is not unreasonable on a balance between those circumstances and any detriment to the public (sections 10 and 19 RTPA 1976). The RPC has power to make declarations and to grant other relief (section 2 RTPA 1976).
Agreements important to the national economy are dealt with separately (section 29 RTPA 1976), by the Secretary of State. Again, though, the criteria are carefully specified, and although the RPC is not involved at any stage, the Secretary of State must, by laying a copy of any order made by him before each of the Houses of Parliament, report to Parliament any decision he has made approving exemption of an agreement from the RTPA 1976 on the ground of importance to the national economy.
The present structure of responsibility for judging where the balance lies, according to the public interest, between advantage and detriment in the matter of restrictive trade practices, is thus both clear and traditionally British. Parliament, answerable to the electorate, has deemed how the public interest shall be judged, and has designated the RPC, responsible only to its judicial conscience, as the forum in which evidence is heard and by which judgments are to be made.
The proposals
The Competition Authority
The Green Paper proposes that all decisions as to whether or not an agreement is prohibited; as to whether or not to grant an exemption (be it an individual exemption or a block exemption); or indeed as to whether to withdraw an exemption, once granted, are to lie at first instance with the new “Competition Authority”.
It is this authority which will be given a wide discretion to make judgments and give orders about the above matters (paragraph 5.6 of the Green Paper). The authority will also have the power to levy fines for breach of the general prohibition against agreements with anti-competitive purpose or effects. The amount of the fine will be in the discretion of the authority and could be heavy, up to a maximum of 10% of total turnover (paragraph 7.6 of the Green Paper).
To take an example, suppose that the position of the members of the RICS is re-examined by the Competition Authority under the Green Paper proposals (if they are brought into effect). Suppose that the Competition Authority follows the ruling of the RPC in In re RICS’s Application (1985 ICR 330), and decides that a multi-lateral arrangement exists between the institution and its members; and further decides that the arrangement is prohibited as having anti-competitive effects and should not be exempted.
Each member of the institution could in those circumstances be held to have been operating a prohibited agreement, and could be fined, not by a court of law, but by an administrative authority, up to 10% of total turnover (not profits).
The powers of investigation of the new Competition Authority will also be sweeping. They are all set out in Chapter 2 of the Green Paper. For example (para 7.4):
upon reasonable suspicion of a breach of the prohibition….the authority will, once duly authorised, be able to enter, without advance warning, any relevant business premises, land and vehicles and will be able to examine the books or other business records, take copies or extracts of these, and ask for oral explanations on the spot.
The Green Paper does not spell out from whom such due authorisation is to be obtained. In the light of the general trend of the proposals one may be forgiven for wondering whether the authority to search and enter is to be obtained from a court of law or from a Government minister.
The structure of the new Competition Authority is thus clear. It is to be investigator, prosecutor and (at first instance) judge and jury. As to the composition of the new authority the Green Paper is not very forthcoming except (para 6.18) that it will be based on the present Office of Fair Trading, and is thus likely to consist, from top to bottom, of various grades of civil servant.
Some of my best friends are civil servants, but if I were to be accused of operating a prohibited agreement I must say I would, if I had a reasonable defence or reasonable mitigation, prefer to be tried by a properly constituted court of Law.
The RPC under the proposed structure
The position of the RPC under the proposed new structure for dealing with restrictive practices cases is that it will be removed from a court of first instance to the status of an appellate court (paras 6.20-6.23). However, its powers will be restricted. The Government’s clear intention is to confine the issues for the RPC to points of law (including the question whether the decision was justified by the particular evidence), and not to permit a full rehearing of the case. There will be an appeal to the RPC against the level of a fine imposed by the competition authority.
The criteria under the proposals
Here lies the most serious issue of all, in my view. Whereas the present system (see sections 10 and 19 of the RTPA 1976) spells out clearly how the RPC is to judge the balance of advantage and detriment according to the public interest, it seems that the only statutory principles under the proposed new system will be the four, very broad, criteria of Article 85 (3) of the Treaty of Rome (para 5.5 of the Green Paper).
There will, it seems, be no other statutory criteria for judging whether or not an agreement has anti-competitive effects, or whether it should be exempted.
How then is the RPC (or, come to that, the new Competition Authority) to operate? To what specific public interest factors (within the statutory principles) will regard be paid? The Green Paper recognises that the change to an effects-based system will give rise to uncertainty (para 3.5) but proposes to reduce the level of that uncertainty through the publication of guidelines.
But what status are these guidelines to have? Presumably they will do no more than spell out the current policy, not of Parliament, but of the government of the day, on the lines of the present system of government circulars to local authorities on, for example, town planning matters. But government guidelines cannot represent the law.
Conclusions
It is a pity, I think, that the Green Paper’s admirable aim of reform is spoilt by a failure to maintain two important principles which are found within the present restrictive practices legislation. The first is the principle that the public interest, and the criteria by which it is to be judged, should be spelt out in the new legislation itself. Every one upon whom, and upon whose agreements, the law may have an effect, ought to be able to look, in order to understand the law by which he or she is supposed to operate, primarily at legislation enacted by Parliament. This principle applies at least as much to the professions as to every one else. And extra-statutory guidelines published by the government of the day are not good enough.
The second principle is that the law, once clearly enacted, ought to be judged and enforced at first instance by a court of law. Any legislative scheme which fastens (as does the restrictive practices legislation both existing and proposed), upon binding agreements freely reached between responsible parties; under which such agreements may be declared prohibited; and under which exemptions may be made, or even revoked (thus returning the relevant agreement to the status of prohibited agreement) “if the circumstances or market conditions surrounding the agreement are materially changed”; is clearly going to interfere with what would otherwise be regarded as established rights, without compensation.
While investigations, negotiations with offending parties, and decisions as to whether or not to take enforcement proceedings, are the proper province of an administrative authority such as the proposed new competition authority; judgments between opposing views of fact and law, legal interference with established rights, and the making of orders to enforce the law and to impose penalties, are surely the traditional province, in the United Kindom, of a properly constituted court of law.
In short, guidelines and administrative bodies are all very well when the objective is the taking of administrative decisions (eg the granting of planning permission, by a local planning authority, in the light of guidance issued in circulars by the DOE or the Welsh or Scottish Office). An administrative authority should not usurp the judicial functions of the RPC, or any court of law. Neither can guidelines take the place of statutory criteria, defined with the authority of Parliament, and clearly stated.
Such statutory criteria will become even more important after 1992, when the European Community is due to open up into a truly free market. What will the public interest be then? Will it be good enough, when ascertaining and enforcing the law, to rely upon guidelines issued on behalf, not of Parliament (which along with the courts of law in my view is the true guardian of the public interest) but of the government of the day — or even the European Commission of the day?
Comments on the Green Paper are invited by the General Policy Division of the Department of Trade and Industry by September 30 1988.