Clause 20 - Duty to make references in relation to completed mergers
Enterprise Bill
9:30 am
Dr Vincent Cable (Twickenham, Liberal Democrat)
I would like to say a few words about the amendment, to which I attached my name. Like the hon. Member for Eastbourne (Mr. Waterson), I was simply curious about why that language had been used. The Government's intentions here may well be very sensible, but it is important to be clear about them. Given that the whole purpose of the legislation is to give the OFT and the competition authorities greater independence and discretion in making their judgments, it seemed odd to circumscribe them in that way.
I have intervened to pursue the Government a little further on their intentions on merger activity in general. A discussion on Second Reading puzzled me a little. I had spoken to compliment Ministers for having introduced legislation that seemed, on the face of it—certainly in the language of this clause and some others—to have the general effect of slowing down merger activity. That seemed basically right. Much business and economic literature suggests that mergers are often unproductive and damaging, are unhelpful to the shareholders of the firms making the takeover and often have widespread negative economic consequences.
It seemed to me that if the effect of legislation was to throw sand at merger activity, it might be desirable
and that the only people to be upset by it would be those in the City who earn fee income from merger and takeover activity and executives with stock options who can currently take advantage of big fluctuations in share prices. I felt that if the legislation were to slow down merger activity, or make companies think twice about it, that would be desirable.
The Under-Secretary, however, in her reply to me, specifically made a point of giving reassurance—not to me, but perhaps to others—that the legislation would not have any effect on the amount of mergers taking place. I was puzzled by that and by why the Under-Secretary felt it necessary to decline the compliment that I had paid her through her legislation.
The hon. Member for Eastbourne has done a useful service in teasing out from the outset the purpose of the language. Is it intended, as I hope, to introduce a more cautionary note before companies embark on merger activity, or is there some other reason? As the hon. Gentleman said, it is purely a probing amendment. We are interested in knowing from what direction the Government are coming at the problem.