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Lord McIntosh of Haringey moved Amendment No. 9:



"SUPPLEMENTARY PROVISION IN RELATION TO ANTICIPATED MERGERS
(1) The Secretary of State may by order make such provision as he considers appropriate about the operation of sections 26 and 28 in relation to—
(a) references under this Part which relate to arrangements which are in progress or in contemplation; or
(b) notices under section 41(2), 58(2) or 66(2) which relate to such arrangements.
(2) An order under subsection (1) may, in particular—
(a) provide for sections 26(5) to (8) and 28 to apply with modifications in relation to such references or notices or in relation to particular descriptions of such references or notices;
(b) enable particular descriptions of events, arrangements or transactions which have already occurred—
(i) to be taken into account for the purposes of deciding whether to make such references or such references of a particular description or whether to give such notices or such notices of a particular description;
(ii) to be dealt with under such references or such references of a particular description or under such notices or such notices of a particular description."

On Question, amendment agreed to.

Clause 41 [Intervention by Secretary of State in certain public interest cases]:

Lord McIntosh of Haringey moved Amendments Nos. 10 and 11:


    Page 28, line 20, after "decision" insert "made by virtue of subsection (2)(b) of section 32 or a decision"


    Page 29, line 44, leave out "and 33"

On Question, amendments agreed to.

28 Oct 2002 : Column 46

Clause 58 [Intervention by Secretary of State in special public interest cases]:

Lord McIntosh of Haringey moved Amendment No. 12:


    Page 45, line 30, leave out "and 33"

On Question, amendment agreed to.

Clause 66 [Intervention to protect legitimate interests]:

Lord McIntosh of Haringey moved Amendment No. 13:


    Page 52, line 21, leave out "and 33"

On Question, amendment agreed to.

Clause 67 [Scheme for protecting legitimate interests]:

Lord McIntosh of Haringey moved Amendment No. 14:


    Page 53, line 1, leave out "(read together with section 33)"

On Question, amendment agreed to.

Clause 69 [Water mergers]:

Lord McIntosh of Haringey moved Amendments Nos. 15 and 16:


    Page 54, line 37, at end insert—


"(5A) Regulations under subsection (4) above may, in particular, make provision enabling the Secretary of State or the OFT to determine matters of a description specified in the regulations (including any of the matters mentioned in paragraphs (a) and (b) of subsection (5) above)."
Page 55, line 19, after "Act" insert "and any provision made under section 33 of that Act"

On Question, amendments agreed to.

Clause 106 [Further publicity requirements]:

Lord McIntosh of Haringey moved Amendment No. 17:


    Page 80, line 29, at end insert "(other than a decision made by virtue of subsection (2)(b) of section 32)"

On Question, amendment agreed to.

Clause 119 [Review of decisions under Part 3]:

[Amendment No. 18 not moved.]

Lord Kingsland moved Amendment No. 19:


    Page 90, line 23, leave out subsection (4) and insert—


"(4) The Tribunal may confirm or set aside the decision which is the subject of the appeal and may—
(a) remit the matter to the OFT, the Secretary of State or the Commission as the case may be (the "original decision maker");
(b) cancel or vary any conditions or obligations imposed by the original decision maker;
(c) give any directions or take such steps as the original decision maker could have made; or
(d) make any other decision which the original decision maker could have made."

28 Oct 2002 : Column 47

The noble Lord said: My Lords, I am rather puzzled by the way that Amendments Nos. 19 and 20 have appeared in the Marshalled List. Looking back to Committee stage, I believe that one of these two amendments was tabled by the noble Lord, Lord Razzall, in a group of Liberal amendments, and the other by Her Majesty's loyal Opposition. In my submission, although they refer to slightly different parts of the page in the Bill, the effect of them is similar. Therefore, I shall speak to Amendments Nos. 19 or 20, as the Minister wishes.

As your Lordships are well aware by now, in contrast with appeals under the Competition Act, this Bill provides only for a form of judicial review for decisions taken on mergers. Given that the Competition Commission is to take decisions about mergers, and where it thinks necessary impose conditions, we believe that its decisions should be capable of substantive review.

In Committee, the noble Lord, Lord Sainsbury of Turville, stated that in relation to merger investigations the Government continue to believe that a review based on judicial review is the right means for challenging a decision. That type of review by the court would ensure that the procedures followed by the authorities are fair and that the parties are given the opportunity to put their case. Such a review would allow the court to re-examine any decision taken by the authorities to determine whether it was reasonable.

Our view is that the Government are creating a Byzantine structure for competition issues, with some appeals going to the Competition Appeal Tribunal and others going to the High Court; the Competition Appeal Tribunal having jurisdiction over complex regulatory appeals but not mergers.

A merger will be referred to the Competition Commission if the OFT "believes" that it might lead to a substantial lessening of competition. The full analysis will be carried out by the Competition Commission, including such matters as market definition. In these circumstances, the only detailed review will be carried out by one body, in contrast to competition cases where there will be a review carried out by two separate bodies.

It is, in our submission, not sufficient for the court merely to decide if the Competition Commission has acted reasonably—in the sense that the word "reasonably" is used in judicial review proceedings. In our view, the appeal tribunal should satisfy itself that the parties, including the OFT and the Competition Commission, have correctly analysed relevant material. It may be said that, in mergers, time may not permit a full appeal; but that surely is for the parties to decide. Time considerations have not stopped significant appeals being heard by the European Courts which have shown themselves willing to hear more evidence than would normally be the case in judicial reviews.

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Some experiences of the recent Airtours case show how important it is to have an in-depth examination by an appeal body. I refer by way of example to paragraphs 125 to 130 of the court of first instance's judgment of 6th June 2002, case T-342/1999 Airtours. In particular, the European Commission relied on what it called,


    "a recent study for a major tour operator",

to show that demand growth had been low and was still to fall to zero. That statement is to be found at paragraph 125. The court of first instance found on analysis that the commission had not seen the full study, but had quoted from a one-page extract submitted by a respondent to a request for information. That emerges from paragraph 128. Moreover, the extract did not support the commission's interpretation—paragraph 29—and referred to,


    "a massive increase in foreign holiday sales",

over the past 20 years. In the outcome the court of first instance held:


    "It follows that the Commission construed that document without having regard to its actual wording and its overall purpose".

That conclusion is to be found in paragraph 130.

This amendment was discussed on Report. Since the decision in Airtours, the court of first instance has annulled a second EC Commission decision blocking a merger. That is case T-310/01 Schneider Electric SA. Here the court criticised the Commission's standard assessment, including its market analysis and its analysis of the so-called "portfolio power" of the proposed merged firm's brands. The court cited specific mistakes in relation to the Commission's analysis of the Danish and Italian markets.

In addition, the court criticised the Commission for a number of procedural errors. In those circumstances, we do not believe it is sufficient for the Government simply to say that the parties are entitled to a judicial review and not a form of appeal which allows a review of the substance of the decision. Time will of course be a factor; but the Competition Appeal Tribunal could adopt, as the court of first instance has done, a fast-track procedure which might be suitable for certain merger appeals. It should be noted that, although, technically, an appeal to the court of first instance is a form of judicial review, as noted above, the European courts have shown themselves willing to hear more evidence than would normally be the case in judicial reviews.

I apologise for speaking to this amendment at such length at this stage, but there have been important legal developments in recent weeks. I think your Lordships should have an opportunity to consider those. I beg to move.

5.15 p.m.

Lord Borrie: My Lords, I oppose Amendment No. 19 or Amendment No. 20, whichever it is we are discussing. One of the great merits of the merger provisions of this Enterprise Bill, and one with which Her Majesty's Loyal Opposition fully agree, is that as

28 Oct 2002 : Column 49

a general rule the competition authorities—the Office of Fair Trading and the Competition Commission—will make the appropriate decisions without ministerial involvement. They will do so on the merits and, in particular, on the question of whether the merger is likely substantially to lessen competition in the appropriate market. Such a decision—first by the Office of Fair Trading and then, if it is so referred, by the Competition Commission—will require a large element of judgment and discretion. It is inappropriate for such a decision on the merits of allowing a merger to proceed or not to be made on the basis of law or precise judicial precedents.

Judicial review by the courts, for which the Bill provides, is important to ensure that bodies such as the Office of Fair Trading and the Competition Commission are accountable, that they remain within the law and the rules of procedure laid down for them—including that the Competition Commission must give reasons—that they comply with the rules of natural justice and that everyone has had a fair opportunity to state his case. It is not appropriate to replace ministerial involvement—which we all agree should be discarded—with judicial involvement on the merits of the case. It is inappropriate for a judicial body—admittedly, as has been said, a specialised judicial body—such as the Competition Appeal Tribunal to substitute its judgment and discretion for that of the Office of Fair Trading and the Competition Commission.

Although I am as interested as is the noble Lord, Lord Kingsland, in recent developments across the water in Brussels and Luxembourg, neither previous governments nor this one have sought to move to a fully judicial system to determine whether mergers are allowed in the interests of competition. I therefore shall not go down the same road as the noble Lord of discussing the position there. The Commission may have the same name as our Competition Commission but, in Brussels, the Commission determines the matter initially and makes the decision at first instance. In this country, two bodies have, as it were, a separate go at it—at any rate, if the Office of Fair Trading considers that there is sufficient case to go to the Competition Commission. That is not analogous with the position in Brussels and Luxembourg.

It is highly appropriate that the Government should provide that the Competition Appeal Tribunal must ensure that those bodies act according to law, proper procedure and so on, but that the merits should be left to the Competition Commission.


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