The Chairman: With that we may discuss amendment No. 255, in clause 49, page 34, line 27, at end insert—
Mr. Waterson: As members of the Committee will appreciate, clause 37 introduces a fixed time limit of 24
Column Number: 337weeks for the Competition Commission to prepare and publish its report on a merger reference. Subsection (3) allows it to extend that timetable by up to eight additional weeks.
The CBI has expressed its concern that any such extension should take place only with the consent of both parties to a merger. The Competition Commission may not be able to reach an agreement on an extension with both parties to a merger. One can envisage a hostile bid going ahead, and an agreement not being allowed because of the damaging effect of a protracted investigation on the potential victim company. If one of the parties were not prepared to agree, the period for the second stage investigation should remain at the maximum stipulated in clause 37 of 24 weeks.
This is perhaps presumptuous, but it might the assist the Under-Secretary in giving her answer to the Committee if she were to deal with where the 24-week figure came from in the first place, because I am sure that there is an internal logic to it. An even greater onus will be placed on those who want to create the situation in subsection (3), whereby one or both parties can be forced against their wishes to extend that period.
The CBI should also like to pass on that it would have preferred the adoption of the maximum 16-working-week time limit, which would mirror the European Commission merger regulation phase two timetable. To stray slightly outside the terms of the amendments, which might obviate the need for a stand part debate, it would be helpful if the Under-Secretary, in describing the logic behind the 24-week provision, could tell us why the 16-week time limit was discarded at an early stage, when it would otherwise have neatly mirrored the ECMR timetable. That is the reason for the amendments. The subsection is clearly causing concern in the business community, so I shall be interested to hear its justification.
Miss Johnson: First, I shall deal with the hon. Gentleman's points on the 24-week period, although I think that the amendment principally relates to the eight-week extension. We consulted on options that related to several issues—such as time, transparency and thoroughness—and they all had trade-offs. The hon. Gentleman will be aware from his familiarity with the Fair Trading Act 1973 that it states 26 weeks; the Bill reduces the period slightly. We did not feel it appropriate to use the ECMR figure having considered the practicalities.
The period is extendable by up to a further eight weeks if the Competition Commission thinks that there are special reasons for extension. I understand to some degree the sentiment that underlies the amendments because, in general, it is right that parties have certainty about the timetables that apply to a merger. However, the Competition Commission should have discretion over when to make an extension for special reasons. One reason for which an extension might be required is illness of members of the reporting groups which might seriously impede the Competition Commission's work. Reasonable parties
Column Number: 338would probably consult on an extension in such circumstances, but that cannot be relied on, so it seems unwise to give the parties the final say over and above the Competition Commission.
I reassure the hon. Gentleman that the Competition Commission's decision to extend the timetable is not supposed to be an easy option. It must consider that there are special reasons why the 24-week period should be extended. Clause 103(4) requires it to publish its reasons for any such extension, and only one such extension is possible. For example, it cannot opt for a four-week extension and then decide that a further four weeks are needed.
The clause is intended to impose a discipline on the Competition Commission that is strong enough to ensure that the vast majority of cases are completed within the 24-week deadline. The flexibility of the Fair Trading Act regime means that the Secretary of State is currently able to grant an extension of up to three months for special reasons. Hon. Members will see that we have been much more rigorous in our approach.
I take comfort from the fact that the remarks of the CBI in response to the July competition White Paper suggest that it thinks that the approach that we have adopted is right. In response to the proposal that the Competition Commission should have a power to extend the maximum timetable by eight weeks in exceptional circumstances, the CBI said:
In light of my explanation, I hope that the hon. Gentleman withdraws his amendment.
Dr. Vincent Cable (Twickenham): Why did the Under-Secretary reject the European Union precedent? She said that the Department had considered and rejected it, but it is not entirely clear why. At first sight, cross-border merger and its implications in the European Union appear to present more complex problems and, in general, would mean dealing with larger mergers. It is not clear why that can be dealt with sooner. Many people would argue that the European Commission is not the world's most efficient institution. Why is it able to deal with such matters so much more quickly?
Miss Johnson: I agree with the hon. Gentleman in some regards. Under ECMR procedures, one single body carries out both stages. When the process reaches its second stage, it is already fully up to speed, so is more likely to hit the deck running than our two-stage UK process, where the OFT handles the first stage and the Competition Commission carries out the in-depth investigation. The measure gives the Competition Commission the opportunity to be a fresh pair of eyes—a feature strongly supported by business. We therefore felt that the four-month maximum timetable under the ECMR arrangements was not appropriate; we felt comfortable cutting back from the FTA timetable.
Mr. Waterson: I have expressed the concerns that the CBI expressed and heard the Minister's comments.
Column Number: 339I cannot take the matter further at this stage, so I beg to ask leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Clause 37 ordered to stand part of the Bill.
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