Clause 20 - Duty to make references in relation to completed mergers
Enterprise Bill
9:30 am
Mr Nigel Waterson (Eastbourne, Conservative)
We now take a spectacular backwards leap to clause 20 and, as the excitement mounts, move to mergers. We have a fair bit to say on the groups of amendments, and the clause could be heavily amended. It is one of the most important clauses, and many of the points raised in the amendments are later repeated. Therefore, if progress appears to be slow, it is in a good cause, and will save time later in the clause. I should also like to put down a marker—subject to your total discretion, Mr. Beard—that the clause merits a substantial stand part debate, after its amendments, which raise narrow issues, have been debated. The clause is key.
We have three amendments in the group; amendment No. 64 is an amendment to clause 31, but it echoes issues that arise in clause 10. They would give the Office of Fair Trading the discretion, rather than the obligation, to make a reference to the Competition Commission in relation to both completed and anticipated mergers, the provisions for which mirror one another.
There is no politics in the clause. The proposals have been widely consulted on, trailed and discussed. It is fair to say that the principles involved in changes to the mergers and competition regime are broadly supported by the whole gamut of organisations, and by Opposition Members. Points of detail about how the changes will work in practice have been raised by people such as the CBI, and it is our duty to bring them to the attention of the Committee and the Government. There should be more light than heat—famous last words, perhaps—on this part of the Bill.
Under the Fair Trading Act 1973, the Secretary of State has a discretion, acting on the advice of the Director General of Fair Trading, over whether to refer mergers. There is a general acceptance that the tripartite structure has been creaking in recent years and that it needs re-examining. Clause 20 proposes the requirement that a reference is to be made in the cases of completed and proposed mergers, except in certain circumstances, which we will debate later.
The balance will shift from a discretion to an obligation on the OFT to consider mergers. We, and the business organisations, say that that will lead, in effect, to obligatory pre-clearance for mergers. At the moment, it is a useful and helpful procedure for mergers to be pre-cleared because it saves much cost and anguish later, but it is at the discretion of the parties. We are puzzled as to the reason for the shift. The amendment is probing because we are keen to hear why the Government want to shift the balance.
This provision is all the more strange when contrasted with market investigations under clause 123, where a discretion is conferred. We think that, if clause 20 goes through unamended, it will impose extra burdens on industry and that companies will be much less willing to take a chance on a merger. They will, from an abundance of caution—to use a lawyer's phrase—refer mergers for pre-clearance as a matter of routine. That will have two effects. One, as I have said, will be the burdens placed on industry and the other will be the extra burdens on the OFT.
Although the OFT will be geared up in terms of resources and staffing, it will suddenly get a great tranche of exciting new powers, duties and, as we debated at some length, ''functions''; that seems to be some kind of interim expression. If it suddenly finds that every single anticipated or actual merger is crossing its desk as a matter of practice, I wonder whether it will be able to cope.
The amendments are designed to probe the thinking behind a significant move from the current situation. We think that that move will bring extra burdens to business and to the OFT. We would like the Under-Secretary to explain the reasoning behind it, which, for all we know, might be eminently sensible and well thought through.