Clause 20 - Duty to make references in
Enterprise Bill
4:30 pm
Miss Melanie Johnson (Parliamentary Under-Secretary, Department of Trade and Industry; Welwyn Hatfield, Labour)
I am sure that the hon. Member for Eastbourne (Mr. Waterson) has read the useful pieces of paper that I have sent to him and other hon. Members and will know that many of the amendments are of a minor, technical and consequential nature. That has been clearly explained.
At the close of debate on Thursday afternoon, I was dealing with the question of national champions. I shall be brief in my summary, as today's debate, after guidance from the Chairman on Thursday, will be on the principles that relate to clause 20 because many of the detailed matters have been discussed already at length.
Evidence from Professor Michael Porter and other distinguished academics shows that vigorous domestic rivalry is crucial for equipping firms to compete internationally. Arguments suggest that the solution is to nurture one or two firms to become flag carriers for a certain industry, which makes them of sufficient size to challenge foreign rivals. We reject that approach. It is not the way ahead.
I shall turn to the key features of the regime, which are included in the clause and were covered in a previous debate. The Office of Fair Trading will refer cases that it believes are completed mergers, which could result in a substantial lessening of competition. The narrower competition-based test will replace the broader public interests test that is applied by Ministers under the Fair Trading Act 1973. That change reflects our view that it is important to ensure that the OFT takes reference decisions on competition grounds.
We have provided flexibility to ensure that the system operates effectively. In particular, we want the OFT to be able to choose not to refer a merger where it believes that the market concerned is not of sufficient importance to merit a full stage two inquiry, or where it believes that customer benefits flow from the merger that outweigh the disbenefits of a substantial lessening of competition. The clause also provides for no reference to be made where the case is being dealt with in another way. Examples include cases that fall to be considered under separate regimes, such as newspaper mergers or mergers that qualify as concentrations under the European merger regulation. The OFT is prevented from making a reference under the clause if it is considering whether to accept undertakings in lieu of reference from the parties, or if the case is the subject of an intervention notice because it raises public interest considerations beyond competition. Those provisions will ensure that cases that cannot be dealt with effectively at stage one will be referred to the Competition Commission for a thorough investigation.
The key features of the regime will be that mergers will be assessed against competition tests, that decisions will be taken by independent competition authorities rather than by Ministers, that there will be changes to the criteria under which mergers will qualify for investigation, that there will be a statutory right of appeal against certain decisions, that Ministers will be involved only in exceptional cases in which national security issues arise and, as I mentioned last week, that that follows the best practice from countries such as the United States of America, Canada, New Zealand and Australia.
The key benefits to business will be a clear, consistent and predictable merger-control regime. There will be greater transparency because authorities will be required to publish reasons for their decisions. The Competition Commission's provisional conclusions procedure means that there will be open discussion of how to deal with competition problems and the statutory maximum timetables for merger investigations will create a certain time frame.
The new turnover criterion will be more focused on competition concerns than the previous test. That figure has been supported by a number of bodies such as the Institute of Directors, the City of London Law Society, Slaughter and May, Freshfields and Richards Butler. We are moving to a more transparent, clearer and more timetabled regime from which political considerations will be left out.