Enterprise Bill

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Mr. Waterson: I am almost overwhelmed by the size of my task, but it is not as bad as it looks. I have no responsibility for amendments Nos. 123, 126 and 128, which were tabled by the hard left of the Labour party, and I distance myself from them. In the tradition of the Committee, half of the Liberal Democrats may support them, with the other half vigorously opposing them.

The proposal is about domination; that has perked up members on the Government Benches. The Government want to introduce a new test for determining whether a merger should be referred to the Competition Commission. The Fair Trading Act 1973 contained the public interest test, which has not stood the test of time. However, the changes in the Bill are more formal than real, in the sense that some parts of the public interest test have long since fallen into disuse. Lest I appear churlish—the last thing that I want to do—I should say that we welcome the change, as does almost everyone I have come across. It is time that the matter was formally put right and, as the CBI says, it should increase clarity, consistency and predictability in the mergers regime.

The competition test as such has, de facto, been applied for some time, based on the so-called Tebbit guidelines, with which my hon. Friend the Member for South Cambridgeshire is thoroughly familiar. He will probably speak about the matter at length in the stand part debate. It makes sense to enshrine the test in statute.

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We are in more murky waters about the precise test to be applied. We have touched on the SLC test, which sounds a bit like a sandwich; it is, however, the substantial lessening of the competition standard, which is the test applied in the United States, Canada and Australia, and possibly in other places. We tabled these probing amendments to argue the case for the dominance test, which is more favoured by the CBI than the SLC test, because it is the standard for assessing mergers under the EC merger regulation. The SLC test would impose a more stringent standard for assessing the potential effects of mergers than exists at European Union level.

The question of principle is whether businesses operating in this country should face a stiffer test domestically than they would face under the European regime. We have discussed the matter in the context of cartels; that is another example of whether, by decision or simply by negligence, the Government are allowing the regime to drift apart from that in the EU. I have never been accused of being excessively communautaire in these matters, but if there is a regime in Europe that potentially applies to British companies and a regime in this country, where there is an overlap they should follow the same pattern.

Mr. Lansley: My hon. Friend may recall an issue that I raised on Second Reading. I do not know whether to dwell on my experiences in the mid–1980s, or on my experiences of serving on the Committee that considered the Competition Bill, which may be more immediately relevant. On many occasions in that Committee, Ministers not a million miles from the Department that the Under-Secretary represents here today said that we had to deliver the Bill precisely as it was drafted. They said that they could not even accept amendments intended to clarify the Bill, because the competition regime—in this case on the abuse of a dominant position, and anti-competitive practices—was expressed in the terms used by the Commission and in the European Community's competition regime.

Even where the Commission had not determined what its regime should look like—for example, in relation to vertical agreements—we were not allowed to take a view, because we would have to fall in line with the European Community's competition regime in due course. My hon. Friend may share my confusion as to why Ministers now seek a different solution from the one applied by the European Commission.

Mr. Waterson: I am grateful for my hon. Friend's comment, which is based on significant experience, not least of serving on the Committee that considered the Competition Bill. I am sure that my hon. Friend has taken the opportunity to read the Hansard reports for the Committee's previous debates. There is a philosophical leap from what the Government were saying with regard to the 1998 Act and what they are saying now, particularly on cartels. At that time, the belief was that whatever we did, we should not be able to slide even a sheet of paper between the position on procedures in this country and those in the European Union. I hope that as we wear the Under-Secretary

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down, we will be able to tease out of her the philosophical background to the regime.

For whatever reason, the Government seem to be taking a more relaxed view. We missed my hon. Friend's contributions on the criminalisation of cartels. However, he will see from Hansard that the Government seem impervious to the fact that the regime in this country and the regime in the European Union were going to move sharply apart, so much so that even officials, unnamed, in Brussels are expressing concerns that there will be less co-operation and exchange of information on cartels between the regimes. They are doing so because of their concerns about the possibility of people being subject to criminal sanctions in this country.

Mr. Tony McWalter (Hemel Hempstead): I am aware that there are other complications in that sector. However, I am sure that the hon. Gentleman will agree that the increasing tendency in farming to create mega-farms at the expense of small family farms is retrograde and reprehensible. I would not want a test of merger to be that we would not do anything until one farm was in a completely dominant position in, say, Hertfordshire. There is much to be said for having a stronger regime than the EU regime in these matters.

Mr. Waterson: I am not sure that the clause is aimed at farming. The Government's other policies have laid waste to agriculture far more than the Bill is likely to do. [Interruption.] Labour Members may scoff.

Miss Johnson: Would the hon. Gentleman like to add BSE to his consideration of the impact on farming?

Mr. Waterson: I cannot see the point of the Under-Secretary's remark, unless she is suggesting that BSE was created and developed in 32 Smith Square. There are many clever people in central office, but their abilities do not extend that far.

Mr. Field: On the narrow point about BSE—

The Chairman: Order. BSE has nothing to do with the clause.

Mr. Waterson: I am relieved to hear your ruling, Mr. Beard. Thursdays seem to be more fractious than Tuesdays, perhaps because the weekend is beckoning.

Mr. McWalter: The hon. Gentleman has not addressed my point, which is that small businesses—I referred to farming business as only one example—might be much better protected by the SLC test than by the dominant market position test. Will the hon. Gentleman deal with that matter, as I feel that his party and mine should strongly agree on it?

10.15 am

Mr. Waterson: I am sorry if the hon. Gentleman feels that I did not do justice to his earlier intervention. We accept that the test will be less burdensome and the amendments reflect that. That is a point on behalf of business and industry. One could perhaps flip it around and say that it might protect small business less, but I do not accept that. Indeed, I doubt whether the position that the hon. Gentleman described could be tackled under the clause, even with a more

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restrictive wording. That is my honest opinion, but I shall reflect more on what he said. These are effectively probing amendments.

I return to the issue of aligning the regime with Europe. The problem is not as acute as when we debated cartels, when revealed a sharper difficulty. It is curious, given the supine attitude of the Government to most things European, that while other member states and even applicant states have been aligning their own merger control provisions to the current dominance test, we seem to have acted differently. It is highly likely that the Commission will retain the dominance test as the standard to be applied in its merger control regime. If the Under-Secretary knows better, she will doubtless say so.

Ever since these reforms were floated back in 1999, it has been disputed whether the same advantages for harmonisation that applied under the Competition Act 1998 arise here. Let me quote from the CBI:

    ''The demarcation line between domestic and EU mergers is sometimes not clear cut, particularly in more complex transactions. As a result it would be fairer and more sensible for companies operating across the European Union to have to comply with one standard as opposed to two differing ones.''

We accept that argument. Any well-run business, particularly at senior management levels, will not spend all its time worrying about the mergers regime. Good and bad reasons exist for mergers. The hon. Member for Twickenham spoke about that and doubtless will again. Mergers can be good for the companies, the marketplace and consumers, as another part of the Bill recognises.

Clearly, the Government do not want to discourage mergers and the Under-Secretary conceded that they do not envisage a different level of references from the current one. Whether that will be achieved is a different matter, but the proposals are neutral from the standpoint of the proportion of mergers that will be investigated through these procedures. Many mergers are desirable, so we cannot have business and industry put to so much extra expense and burden. The hon. Member for Wolverhampton, North-East (Mr. Purchase) referred to a specific case of a few years ago in which significant costs were involved. We should not expect business and industry to be up to speed and in parallel on two regimes that are diverging in similar ways to cartels regimes, so I return to the philosophical issue.

As my hon. Friend the Member for South Cambridgeshire pointed out, in responding to the amendments, the Under-Secretary must come clean about why the Government's philosophy has shifted since my hon. Friend was debating the then Competition Bill in Committee in 1998. Why are the Government apparently no longer concerned—indeed, they are very relaxed—about our regime differing from that in Europe? There must be a reason for that. At least, I hope that there is; it would be more worrying if there were not. We should like to know what that reason is.

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