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Standing Committee B
Tuesday 30 April 2002
[Mr. Conway in the Chair]
Duty to make references in
relation to completed mergers
Question proposed [25 April], That the clause, as amended, stand part of the Bill.
Question again proposed.
The Chairman: Order. Before I call the Minister to resume the debate, I remind the Committee that when we meet tomorrow—unusually instead of Thursday—it will be at 10.30 am and at 4.30 pm and not at the normal Thursday times. Not every hon. Member was aware of that.
Mr. Nigel Waterson (Eastbourne): On a point of order, Mr. Conway. I am grateful for the welter of letters from the Under-Secretary, some of which are extremely useful, on matters of guidance, draft regulations, and the failing firm issue that was raised last week, but we are entering the territory of a substantial and growing number of Government amendments. When I predicted that there would be many Government amendments, looks of practised scepticism came from those on the Government Benches, but the last tranche was around 40. It would be helpful to know from the Minister how many more Government amendments we should expect, and from you, Mr. Conway, whether, if the number reaches three figures, we would need another meeting of the Programming Sub-Committee. Given the inadequate time that we already have for debate, we may want further to extend the time for dealing with Government amendments.
The Chairman: Order. Those are not matters for the Chair. The Government must table amendments and new clauses as they see fit and the House will consider them when the Committee reports. The Under-Secretary will have heard the hon. Gentleman's comments. If she wants to respond, I shall call her. Otherwise, we shall continue with the clause stand part debate.
The Parliamentary Under-Secretary of State for Trade and Industry (Miss Melanie Johnson): I am sure that the hon. Member for Eastbourne (Mr. Waterson) has read the useful pieces of paper that I have sent to him and other hon. Members and will know that many of the amendments are of a minor, technical and consequential nature. That has been clearly explained.
At the close of debate on Thursday afternoon, I was dealing with the question of national champions. I shall be brief in my summary, as today's debate, after guidance from the Chairman on Thursday, will be on the principles that relate to clause 20 because many of the detailed matters have been discussed already at length.
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Evidence from Professor Michael Porter and other distinguished academics shows that vigorous domestic rivalry is crucial for equipping firms to compete internationally. Arguments suggest that the solution is to nurture one or two firms to become flag carriers for a certain industry, which makes them of sufficient size to challenge foreign rivals. We reject that approach. It is not the way ahead.
I shall turn to the key features of the regime, which are included in the clause and were covered in a previous debate. The Office of Fair Trading will refer cases that it believes are completed mergers, which could result in a substantial lessening of competition. The narrower competition-based test will replace the broader public interests test that is applied by Ministers under the Fair Trading Act 1973. That change reflects our view that it is important to ensure that the OFT takes reference decisions on competition grounds.
We have provided flexibility to ensure that the system operates effectively. In particular, we want the OFT to be able to choose not to refer a merger where it believes that the market concerned is not of sufficient importance to merit a full stage two inquiry, or where it believes that customer benefits flow from the merger that outweigh the disbenefits of a substantial lessening of competition. The clause also provides for no reference to be made where the case is being dealt with in another way. Examples include cases that fall to be considered under separate regimes, such as newspaper mergers or mergers that qualify as concentrations under the European merger regulation. The OFT is prevented from making a reference under the clause if it is considering whether to accept undertakings in lieu of reference from the parties, or if the case is the subject of an intervention notice because it raises public interest considerations beyond competition. Those provisions will ensure that cases that cannot be dealt with effectively at stage one will be referred to the Competition Commission for a thorough investigation.
The key features of the regime will be that mergers will be assessed against competition tests, that decisions will be taken by independent competition authorities rather than by Ministers, that there will be changes to the criteria under which mergers will qualify for investigation, that there will be a statutory right of appeal against certain decisions, that Ministers will be involved only in exceptional cases in which national security issues arise and, as I mentioned last week, that that follows the best practice from countries such as the United States of America, Canada, New Zealand and Australia.
The key benefits to business will be a clear, consistent and predictable merger-control regime. There will be greater transparency because authorities will be required to publish reasons for their decisions. The Competition Commission's provisional conclusions procedure means that there will be open discussion of how to deal with competition problems and the statutory maximum timetables for merger investigations will create a certain time frame.
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The new turnover criterion will be more focused on competition concerns than the previous test. That figure has been supported by a number of bodies such as the Institute of Directors, the City of London Law Society, Slaughter and May, Freshfields and Richards Butler. We are moving to a more transparent, clearer and more timetabled regime from which political considerations will be left out.
Mr. Andrew Lansley (South Cambridgeshire): I admire the Under-Secretary's desire to be brief. Having had an opportunity to read last week's debates on clause 20 stand part, she will know that I raised two issues. The first was how the new regime will address who are fit and proper persons as part of a competition test as distinct from the previous public interest test. The second was the treatment of overseas acquisitions, particularly by state-owned enterprises from other countries. The Under-Secretary has chosen not to deal with those points and has treated them as if they were of no importance. On past precedent, however, such cases have been important and have attracted a great deal of public attention.
Miss Johnson: I am surprised that the hon. Gentleman has further raised those points. I am happy to write to him about them because that will be the most productive way to take them forward.
Mr. Lansley: I am grateful to the Under-Secretary and no doubt I will be much informed by her letters in due course. I doubt whether that will be to the Committee's convenience, however. The point of having the Committee is for issues raised in debate to be responded to in debate rather than separately. It appears likely that we will have to take up the time of the House on Report to deal with such issues when we should have been able to clear more of them away in Committee to concentrate on a few essentials later.
Question put and agreed to.
Clause 20, as amended, ordered to stand part of the Bill.
Relevant merger situations
Mr. Jonathan Djanogly (Huntingdon): I beg to move amendment No. 215, in page 11, line 46, leave out '45' and insert '70'.
The concept of a de minimis threshold is, of course, vital to the process of the competition regime to avoid clogging up the workings of the OFT, stopping small businesses doing what they have to do and submitting such businesses to unnecessary regulations. Those provisions are not in place to stop businesses competing against one another. Indeed, it is quite the opposite: they are here to ensure that competition is encouraged in such a way that consumers and other businesses are not hurt.
How did the Government arrive at the figure of £45 million to be used as a de minimis? I would also be grateful if the Under-Secretary would give comparisons with other countries, as those are relevant to what happens in this country. We should
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also appreciate that the regime under discussion is already being used in other countries. The £45 million figure seems very low, particularly when one considers the 25 per cent. market test in the Bill. In large markets where many competitors do not come within the 25 per cent. market share, mergers could nevertheless be dragged into the regime in circumstances where it was not a relevant issue.
The CBI has suggested that the figure be raised from £45 million to £70 million. I do not know how scientific that figure is, although it does come from an organisation that has a lot of experience because its members are subject to the competition regime, and is therefore worthy of proper consideration. I would finally note that clause 26 provides for the Government to change the figure if necessary.
It is important that we have a figure at the outset that is acceptable to business, as well as appropriate to the regime, in order that the system is fair and transparent.
Miss Johnson: When we devised the turnover test, our intention was that it should catch roughly the same number of merger cases as the asset test does at present. In fact, research carried out by the Department of Trade and Industry suggested that the figure of £45 million roughly equates to £70 million in assets, hence the figure that we have chosen. We do not propose to change the figure, although obviously we have the opportunity to see how it works out in practice. Opposition Members have my assurance that we are not looking to catch any more than the present regime does.