Clause 20 - Duty to make references in relation to completed mergers
Enterprise Bill
11:00 am
Mr Andrew Lansley (South Cambridgeshire, Conservative)
I am slightly surprised by the hon. Gentleman's argument, because he seems to be interpreting the competition test as a market test. The test is not what unrestrained markets would deliver. Unrestrained markets may deliver concentration of industry, or oligopoly or monopoly. Our purpose is to deliver competition, which is not the automatic outcome of unrestrained markets.
Markets must operate within a highly pro-competitive legal framework. I am not qualified to debate the case of regional air services. However, on the basis of the case that the hon. Gentleman puts, a reduction in competition to the disadvantage of his constituents as a result of that hypothetical merger activity would be a perfectly valid reason to present it as a substantial lessening of competition without any compensating consumer benefits.
If we go down the path of reintroducing a public interest test, we create unpredictability. It is not just a
question of exports, spatial allocation of industry or employment prospects. As my hon. Friend the Member for Eastbourne suggested, if we were to discuss clause stand part later, we might get on to a whole range of issues that have previously bedevilled the application of competition policy, even where the primacy of competition has been asserted. All those things have been available and have often been cited as reasons to subvert what would actually be a pro-competitive decision.
I entirely take my hon. Friend's point, and that was why I offered my ha'p'orth on the Competition Act 1998. I found it interesting. It was true in relation to the cartel offence, and it is true in this instance. In 1998, the Government took the view that for reasons of predictability—again—and consistency, it was entirely desirable that the structure of UK law should wholly reflect the structure of European Community law. That has a range of benefits, not least that even though one might be reasonably confident that one's activity is regulated by UK competition authorities, UK competition authorities in making decisions must have regard to EC decisions. In the case against NAPP Pharmaceuticals, it is clear that the competition appeal tribunal carefully considered precedent and case law from the European Court of Justice in order to arrive at its decision on a UK case under the chapter II prohibition and the Competition Act.
The issue then becomes whether the dominance test is better because it is the same as the European Community's test and whether we should again pursue consistency. There are good arguments to say that we should. It is not simply that some mergers may not necessarily be UK or European Community mergers, but that there may be a degree of uncertainty about precisely where mergers are to be handled. If we have a different regime in this country from that which applies at EC level, there may be perverse incentives for companies to create merger situations that are dealt with by the Commission rather than by UK competition authorities, and that would not necessarily be in the UK interest.
If I recollect correctly—the Under-Secretary will, no doubt, correct me if I am wrong—the acquisition of London Electricity by Electricité de France was handled by the European Commission, under its competition and merger regime, and was not patriated to the United Kingdom, although such patriation was sought. There are reasons to suppose that we might have looked at that merger and, if not necessarily come to a different conclusion, applied tests that were not precisely the same.
There is a certain undesirability in a distinct regime that draws businesses to seek to be considered by the Commission even in mainly or substantially UK merger cases. It would be far better for us to go down the path of having a greater number of substantially UK merger cases considered by UK competition authorities. That is much more likely to happen if we operate directly under a regime that reflects the EC merger regime.
The Under-Secretary might tell us that the European Community's merger regime may change,
but I imagine that she does not know precisely how that will happen. There is a small argument for going for the stronger, more pro-competitive regime in the UK and hoping to draw the European Community with us so that, over time, the regimes might become consistent. Unfortunately, I do not think that the Under-Secretary is in a position to offer that at the moment, although I shall be delighted if she can.
My final argument is this: leaving aside the problems, the discontinuity and the fact that European Community decisions and interpretations that might be applied here might not directly mesh with UK law and so lead to some conflict, and leaving aside the fact that companies might be led to go to the European competition authorities more often than would otherwise be the case, should we go down the path of a substantial lessening of competition test here anyway, for the simple reason that it is a stronger test? Even though we are in a single market, if we, the UK, can find ways, compatible with our treaty obligations, of creating greater competitive intensity in the United Kingdom than that in other European jurisdictions, should we not do so?
The Under-Secretary might reach into the Department's collective memory and say that, although the Government have been inconsistent, I too argued from time to time in 1998 for a regime that was a little tougher, a little clearer and a little more suited to our circumstances. I did do that. On balance, I would probably say the same again, but before I conclude, I shall give way to my hon. Friend the Member for Cities of London and Westminster, who is manoeuvring in front of me.