Select Committee on European Communities Eleventh Report



Letter from the Rt Hon Margaret Beckett MP, President of the Board of Trade to Lord Tordoff, Chairman of the Committee

  I am writing to inform the Committee that I intend to lift the United Kingdom's scrutiny reserve on this proposal to allow this measure to be agreed as an A" point at a Council later this month. My predecessor, Ian Lang, negotiated a package of measures at the 24 April Industry Council with which I am content.

  The matter has been considered in depth by both Scrutiny Committees. A debate in the House of Commons European Standing Committe B on 15 October 1996 completed scrutiny of the Commission's proposals as set out in EC document 9961/96 (COM(96)313). The House of Lords Select Committee on the European Communities took evidence from officials and published a report (4th report, 1996-97). The previous administration responded to that report in a letter of 22 January 1997 and the House of Lords subsequently completed scrutiny.

  The Industry Council on 24 April 1997 gave unanimous political agreement to a package of changes to the ECMR. The components of this package are shown at Annex A. All components except the first two were previously considered by the Committees. Two earlier proposed amendments were dropped: a general reduction of turnover thresholds; and a power to charge merger fees. The first two components at Annex A are essentially similar to proposals previously considered by the Committees but differ somewhat in the detail.

  First, there is a new threshold mechanism which is designed to operate alongside the existing general" turnover thresholds. Its purpose is to catch selected large multiple notifications" ie merger cases which fall below the current general" thresholds but which would be likely to require notification in three or more Member States. The Committees considered an earlier proposal which depended on the triggering of national qualifying criteria. The new mechanism establishes objective turnover criteria for a minimum size of merger and companies involved in three or more Member States. The new mechanism should therefore catch transnational mergers but avoid the handicaps of the earlier proposal (eg different national qualifying criteria; criteria not explicit on the face of the ECMR). Our best estimate is that the new mechanism may catch around 20-30 extra cases/year, including around 8-10 cases involving UK companies ie around 5 per cent of cases currently falling to the Fair Trading Act merger provisions. Details are in Annex B.

  Second, the Council agreed that a qualified majority would be sufficient to change the new threshold mechanism, in the light of experience. However, in future unanimity will be required to change the existing general" turnover thresholds. The thresholds and criteria must be reviewed within three years.

  In addition, the United Kingdom entered a formal minutes statement in relation to the measure extending the ECMR to all full-function" cooperative joint ventures (item 3 in Annex A). One effect of this measure will be to bring within the Commission's jurisdiction, under the ECMR, large airline joint ventures involving air transport services outside the EU. The Council had not hitherto given the Commission the power to apply any EC competition rules to air transport services outside the EU; and any further extension outside the relatively narrow context of merger control remains subject to debate with the Commission and other Member States. The minutes statement therefore formally reserves the United Kingdom's future negotiating position on the extension of Community competence more generally in this area.

  The amending Regulation with the whole package of measures will now go forward as an A" point for adoption without further debate, probably before the end of June. The amending Regulation is expected to enter into force on 1 March 1998.

16 June 1997

Annex A

Council Amending Regulation: Changes to the EC Merger Regulation (ECMR)


  1. Introduce a new mechanism to transfer to the ECMR additional large multiple notification" cases (ie mergers likely to fall to jurisdiction of three or more Member States) - details in Annex B.

  2. Provide for a review of the thresholds after three years; amendments by unanimity (existing thresholds) and qualified majority (new mechanism).

  3. Incorporate all full-function" cooperative joint ventures in the ECMR.

  4. Simplify the rules permitting Member States to repatriate" an EC merger.

  5. Allow greater flexibility for Member States to refer national" cases jointly to the Commission.


  6. Provide legal basis for the Commission to accept undertakings from business as an alternative to detailed investigation.

  7. Change the basis for calculating banking turnover from assets to gross income.

  8. Make express provision for revocation of a clearance decision in exceptional circumstances.

  9. Provide express legal basis for accepting ancillary restrictions (conditions attaching to a merger agreement) in clearance at preliminary stage.

  10. Extend merger suspension period during preliminary state and increase flexibility to waive suspension.

  11. Make express provision to stop-the-clock" during the preliminary investigation.

Letter from Lord Tordoff, Chairman of the Committee, to the Rt Hon Margaret Beckett MP, President of the Board of Trade

  Thank you for your letter of 16 June informing the Committee of developments in this matter. I note that agreement has been reached on extending the Regulation to deal with multiple filings" cases and all full-function" joint ventures, both of which were changes to which Sub-Committee E had given support. The criteria established for the new notifications mechanism seem preferable to those in the earlier version of the proposal for the reasons you give. They are complex at first sight but should be workable in practice and should extend the benefits of the one-stop shop" under the Regulation.

  In view of the nature and extent of the changes from the earlier version of the proposal a further Explanatory Memorandum should have been promptly furnished dealing with all the amendments. But in view of the detail given and the circumstances described in your letter I am prepared to clear the proposal from scrutiny on the basis of your letter. This should not, however, be taken as a precedent and I hope that the proper procedures will be followed in future.

19 June 1997

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