Clause 41 — Intervention by Secretary of State in certain public interest cases

Orders of the Day — Enterprise Bill — [1st Allotted Day] – in the House of Commons at 6:11 pm on 13th June 2002.

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Photo of Nigel Waterson Nigel Waterson Conservative, Eastbourne 6:11 pm, 13th June 2002

I beg to move amendment No. 63, in page 26, line 28, leave out from "57" to end of line 29.

Photo of Sylvia Heal Sylvia Heal Deputy Speaker

With this it will be convenient to discuss the following: Government amendment No. 229.

Amendment No. 142, in clause 45, page 31, line 36, at end insert—

'(5A) The Secretary of State shall not make a reference under section 44(3) or (5) when a relevant public interest consideration which is mentioned in the intervention notice has not been finalised.'.

Government amendment No. 234.

Amendment No. 304, in clause 57, page 40, line 15, after "of" insert "(a)'

Amendment No. 305, in page 40, line 15, after "security" insert—

'(b) maintaining and promoting the balanced distribution of industry and employment in the United Kingdom;

(c) maintaining and promoting competitive activity in markets outside the United Kingdom on the part of producers of goods, and of suppliers of goods and services, in the United Kingdom.'.

Amendment No. 197, in page 40, line 15, at end insert—

'(1A) The interests of plurality in newspaper ownership are specified in this section.'.

Amendment No. 198, in page 40, line 18, at end insert—

'(2A) In subsection (1A) "newspaper" shall have the same meaning as in section 57(1)(a) of the 1973 Act; and in this subsection "plurality" means a diversity of ownership that is sufficient to ensure that the public have access to the accurate presentation of news and free expression of opinion.

(2B) In applying the interests specified in subsection (1A) no account should be taken of plurality in newspaper ownership if the relevant merger situation concerns the transfer of a newspaper or newspaper assets to a newspaper proprietor whose newspapers have an average circulation per day of publication amounting, together with that of the newspaper concerned in the transfer, of fewer than 500,000 copies.

(2C) In subsection (2B), "newspaper proprietor" shall have the same meaning as section 57(1)(b) of the 1973 Act; and the calculation of circulation per day shall be by such means as the OFT or (as the case may be) the Commission shall determine.'.

Amendment No. 143, in page 40, line 19, leave out subsections (3) and (4).

Government amendments Nos. 243 to 245.

Photo of Nigel Waterson Nigel Waterson Conservative, Eastbourne

As this may be the last group of amendments that we can deal with before 7 pm under the guillotine procedure, it may be helpful if I point out that we intend to press amendment No. 63 to a Division, as we feel strongly about it. The group deals with public interest and mergers, but there will be some echoes from topics that we discussed in the debate on the previous group.

At present, the only definition of public interest appears in clause 57. The clause defines public security in the terms set out in the European merger regulations. We had a significant number of debates on these matters in Committee. Our starting point is that the provision is crucial, so it is right that it should be firmly stated in the Bill. Our approach is rather different from that of Mr. Barnes, and our concern is that it should not be open to the Government to add a new ground of public interest when they feel like it.

When we pressed the issue in Committee, the Minister was wedded to the power to extend the definition, but she was wholly unable to say—in fairness, she said the same this afternoon—what possible category she might have in mind to add to the definition in the Bill. Nevertheless, the Government's position seems to be that it is imperative to include the power.

The effect of amendment No. 63 would be to remove the Secretary of State's ability to consider public interest considerations not listed in the legislation. We debated a similar amendment in Committee. As the Bill stands, the Secretary of State could simply add a new public interest consideration, or more than one such consideration, in response to a specific merger or proposed merger, as it arose.

Apart from anything else, that could involve enormous uncertainty for those in the business sector. When embarking on a merger, they would not know whether the goalposts would be moved in due course by the addition of a new public interest ground because the Secretary of State had decided to change the rules. That is another good reason why any other public interest consideration—whether media plurality, which we shall come to in a moment, prudential rules or anything of that sort—should be identified in the primary legislation.

If it is not possible to identify those considerations now and they arise later, it should be possible to add them to the Act, as it will then be, by primary legislation. If something arose that was so important and so unforeseeable that no one can even imagine what it would be, any Government ought to be able, possibly with cross-party agreement and—who knows?—possibly even with the agreement of their Back Benchers, to put through the House the necessary primary legislation, and quite quickly, if needs must.

There is also a side issue. If we leave open this great loophole, it merely returns us to what I am sure the Minister would regard as the bad old days of political involvement in such matters.

I shall touch briefly on amendments Nos. 142, 197 and 198 tabled by my hon. Friend Mr. Lansley, who will develop the arguments in detail. Amendment No. 142 relates to the Secretary of State's power to make merger references arising from a public interest intervention notice. My hon. Friend will develop the reasons for the amendment. Amendments Nos. 197 and 198 deal with the plurality of newspaper ownership. The effect of amendment No. 143 echoes that of amendment No. 63.

It is impossible to consider what the Government have in mind in changing the law on mergers and takeovers without considering how those matters have been dealt with up till now.

We argued in Committee—with some justification, I think—that all we are doing in the Bill is regularising what has been practice for a considerable time. Under the so-called Tebbit guidelines, there has been a kind of self-denying ordinance among successive Secretaries of State of both parties that they would look narrowly at competition issues when reaching their decisions. It is fair to say that there is an element of cross-party consensus that seeming political involvement brings the system into disrepute. The average member of the public finds it difficult to distinguish between a politician making a decision on non-political grounds and one making a decision on political grounds.

Fast-forwarding from the Tebbit doctrine, we come to 26 October 2000, when the then Secretary of State, Mr. Byers—a familiar name in the House—announced that Ministers would accept the advice of the Director General of Fair Trading on takeover matters, save in exceptional circumstances.

Enter stage left the figure of Mr. Richard Desmond, whose Northern and Shell media group on 22 November of that year paid £125 million for Express Newspapers Group. Mr. Desmond had a busy week, because only four days later, on 26 November, he had a half-hour chat at No. 10 with the Prime Minister.

Mr. Desmond has forced himself into the consciousness of many of us recently through the titles of some of the magazines that he publishes, as well as through his newspaper activities. The list of publications is very long; I was going to say that it is impressive, but it is long. There are titles such as Weird Sex Special[Interruption.] That is obviously familiar to Mr. Purchase.

Titles include Horny Housewives, Mega Boobs, and for the real enthusiast, The Very Best of Mega Boobs. There is also a magazine called Mothers-in-Law. I could go on; I probably will. Asian Babes is another title that is not unfamiliar. In fairness, Mr. Desmond also publishes magazines such as Worldwide Golf, which as far as I can tell has nothing to it other than an interest in the game of golf.

In any event, the issue arose whether the then Secretary of State would refer the takeover of Express Newspapers. Events had moved on by that stage. During the new year celebrations of 2001, Mr. Desmond had told senior Labour figures that he was willing to offer them free advertising in the run-up to the election.

January was a busy month; Mr. Desmond's editor at The Express resigned, and on 7 February, the then Secretary of State announced that he would not refer the takeover of The Express to the Competition Commission. Only eight days later, on 15 February, it is understood that the Labour party banked Mr. Desmond's cheque for £100,000. To show that relations were particularly cordial and fraternal, Mr. Alastair Campbell attended Mr. Desmond's 50th birthday party in December.

Photo of Mr Tony McWalter Mr Tony McWalter Labour/Co-operative, Hemel Hempstead 6:30 pm, 13th June 2002

Does the hon. Gentleman accept that his remarks seem to be rather tenuously linked to any arguments that might encourage us to support amendment No. 63?

Photo of Nigel Waterson Nigel Waterson Conservative, Eastbourne

That is more a matter for the Chair, although I do not accept the proposition for a moment. We are discussing public interest in mergers. The hon. Member for North-East Derbyshire, who has strong views about almost everything, although he puts his arguments with a certain charm, has strong views about whether Ministers of the Crown should be able to intervene in employment matters. He made a powerful case on that in the previous debate. However, some people and certainly some members of the Labour party have similar views about the activities of the party's donors, such as Mr. Desmond.

Photo of Ken Purchase Ken Purchase Labour/Co-operative, Wolverhampton North East

Does the hon. Gentleman accept that many Labour Members believe that Mr. Desmond's activities, so long as they are legal, are a matter for him and his shareholders? However, many of us would not take a penny-piece from a man who is nothing but a pornographer.

Photo of Nigel Waterson Nigel Waterson Conservative, Eastbourne

I am not sure what the hon. Gentleman's point is. That is his description of the gentleman involved, not mine. However, the Labour party has taken £100,000 in penny-pieces.

It is interesting that when the Prime Minister was interviewed by Jeremy Paxman, who also reeled off a list of names of magazines, the Prime Minister seemed to invert the issue—

Photo of Sylvia Heal Sylvia Heal Deputy Speaker

Order. I hope that the hon. Gentleman will be a little more concise and address his remarks to the amendment.

Photo of Nigel Waterson Nigel Waterson Conservative, Eastbourne

Let me bring events forward to the present day and to the revelations that appeared in The Sunday Telegraph last Sunday. It reported:

"The Department of Trade and Industry conceded yesterday that there had been no scrutiny of Mr. Desmond's on-line services which allowed paying customers to ask models to perform live sex acts."

I shall not go into any more detail than that, Madam Deputy Speaker, because I am sure that you would not wish me to. However, the criteria to be applied in the case of a major takeover—for example, of a newspaper—are extremely interesting and are relevant to the competition provisions in the Bill.

We are told that the Bill will put into legislation what has become the practice and that, under the Tebbit doctrine and the position as stated most recently by the then Secretary of State in 2000, the broader issues will not be taken into account. It is important to consider what has been happening and whether the provision is necessary.

When these issues came into the public domain, the attitude of the former Secretary of State was that he had merely followed the advice of officials. I assume that that is what will happen by law if we pass these provisions in the Bill. However, when the report of the Director General of Fair Trading saw the light of day, a different picture emerged. The director general had advised the Secretary of State that, on the competition issues, he could see no reason to refer the bid, but he pointed out that what he described as the non-competition issues were a matter for the Secretary of State. That is a subtle and rather important difference from what the former Secretary of State had told us earlier.

It emerges that the Home Office had been asked to advise, as had the Department for Culture, Media and Sport, about Mr. Desmond and his activities. The Home Office tetchily concluded that, as he was not breaking the law, it had no further comment to make. However, as The Sunday Telegraph has now revealed, neither it nor anyone else was asked to consider the websites operated by the companies controlled by Mr. Desmond.

It is important to quote Chris McCafferty, who is reported as saying:

"I am astonished. It takes my breath away that the Government failed to examine the very worst side of Desmond's empire. There should have been a thorough investigation at the time. The Government should make amends by launching a thorough investigation now."

Other Labour Members expressed similar concerns.

We must examine how the matter was dealt with, as there are major questions about how the DTI chose to conduct its investigation into the takeover of Express Newspapers. It would be, at the very least, surprising if Mr. Desmond's colourful websites were not taken into account. We need to be told the precise criteria on which the former Secretary of State based his ultimate decision not to refer the bid, especially as the decision was followed only a few days later by a large donation to the Labour party.

Photo of Miss Melanie Johnson Miss Melanie Johnson Parliamentary Under-Secretary, Department of Trade and Industry

The hon. Gentleman is inviting me to comment on what happened. It is hard to understand the relevance of his case to amendments Nos. 197 and 198—[Interruption.] I am seeking Madam Deputy Speaker's guidance. In light of the hon. Gentleman's concerns about pressures on time, it is hard to understand how his argument relates to the amendments.

Photo of Sylvia Heal Sylvia Heal Deputy Speaker

I have drawn the hon. Gentleman's attention to the fact that he must speak more directly to the amendments, and I do so once again.

Photo of Nigel Waterson Nigel Waterson Conservative, Eastbourne

I have made my points on that issue. I was not aware when I gave way to the hon. Lady that she wanted to make a point of order.

It is necessary to give the provisions careful consideration. Some of the amendments are new, in particular those that relate to newspapers, on which my hon. Friend the Member for South Cambridgeshire may wish to comment. Others are familiar from our deliberations in Committee.

We are worried that the Secretary of State will reserve not only powers to act in the public interest, but the power to add to the criteria as they relate to the public interest. We do not know what the Government have in mind, which is understandable because they do not know what they have in mind. We feel strongly about the matter and intend to press the amendment to a Division. If the Government have nothing in mind, and I am sure that they are being open and honest with the House, they should leave the public interest definition as it is, without the power to add to it by regulation.

Photo of Andrew Lansley Andrew Lansley Conservative, South Cambridgeshire

Before I comment on the amendments, I want to explain why Mr. Desmond and the handling of his case by the then Secretary of State is relevant.

As Mr. Desmond was not a newspaper proprietor, his acquisition was not considered under the special newspaper transfer regime, as set up by the Fair Trading Act 1973. Instead, he was considered under the normal merger regime. As my hon. Friend Mr. Waterson made clear, the possible threat to the public interest by the acquisition of Express Newspapers by Northern and Shell could have been considered by the OFT. However, because it put competition as a primary duty, it chose to have no view and referred the problem to the Secretary of State who, although recognising that he had a responsibility, chose not to exercise it. My hon. Friend took us through the conjecture and speculation on why he chose not to consider the wider issues of public interest. We should not count out the fact that they exist, however.

Mr. Purchase and others, including the Prime Minister, seem to suggest that what is legal is by definition okay, and what is done legally must therefore be in the public interest. There is no mention of a subset of activities in relation to the ownership of newspapers under existing legislation that are legal but could adversely affect the public interest. I am afraid that the evidence points to the opposite.

In 1990, the Monopolies and Mergers Commission made a report on Mr. David Sullivan and his acquisition of the Bristol Evening Post. I will not quote at great length, but paragraph 6.13 of the report says:

"Were someone of Mr. Sullivan's business background and interests"— it may be recalled that Mr. Sullivan owned the Sunday Sport and other related newspapers—

"seen to have a significant influence in their affairs", that is, the affairs of the Bristol Evening Post and Western Daily Press,

"their reputation could well be seen as compromised, particularly where the reporting of events with sexual aspects was involved. Were he to have acquired effective management control these effects could be expected to be more pronounced."

Essentially, the Monopolies and Mergers Commission was applying a test in relation to the accurate presentation of news and free expression of opinion.

The issue, therefore, is this. If at that time the consent to a transfer of a newspaper title was refused under the special newspaper transfer regime by reference to that test of the public interest—interestingly, we understand that the Government intend at some point to introduce a test of the public interest in relation to the plurality of newspaper ownership—surely the two things are related. The question whether the Government believe that there is a public interest in the ownership of newspapers and the consequences that flow from that for the accurate presentation of news or for free expression of opinion must be of the essence in relation to the amendments. I hope that I have demonstrated why the handling of Mr. Desmond's case is relevant to their consideration.

I shall deal first with amendments Nos. 197 and 198, which relate specifically to newspapers. On a number of occasions—interestingly, she even managed to do it earlier this afternoon—the Minister has asserted to the Committee and to the House that the Government have no intention of adding additional public interest, to be specified under clause 57. However, in paragraph 9.7.4 of the document published as a policy narrative to accompany the draft Communications Bill, the Government express their future intention in relation to that Bill, and, on newspaper ownership, state:

"the Secretary of State will retain the power to refer transfers for wider investigation by the Competition Commission by an extension of the provisions in the Enterprise Bill dealing with 'exceptional public interest' . . . cases."

Therefore, unless the Minister tells me something to the contrary, it is clearly the Government's intention, subject to consultation and scrutiny of the Bill, to bring newspaper ownership under clause 57 by way of an additional specification of national interest, but apparently we are not to debate that at this stage.

Before the Minister intervenes to say that amendments Nos. 197 and 198 do not do all that is required, I understand that subsequently clause 66 would need to be deleted and schedule 26 concerning repeals of the 1973 Act amended. One would have to remove the existing special newspaper transfer regime, but it is important, if we are legislating for what is to be in the Bill, that we do it now and have a clear indication of the circumstances in which Ministers would wish to specify an additional public interest. Plurality of newspaper ownership is one that has been suggested.

Two sets of amendments seek to do slightly different things. That is why they are slightly testing the Minister. Amendment No. 143 would remove from the Secretary of State the ability to specify additional public interest considerations. My personal inclination is that relying on the general merger regime and competition considerations should be sufficient. I accept the argument that national security and what flows from it is an exception, but that should be the only exception. If I were pressed, I would say that amendment No. 143 should be pursued. I would similarly support amendment No. 63. It is likewise designed to remove from the Secretary of State what might otherwise become a politically motivated opportunity to inject additional public interest considerations that are not transparent in advance and not transparent to the marketplace for those who are contemplating or executing mergers.

If we are to have any additional forms of public interest, we should be told what they will be. My purpose in tabling amendments Nos. 197 and 198 is to ensure that we can know precisely, by way of the Government's response in due course—there might be one—what kind of newspaper ownership regime is contemplated. If, until now, a special newspaper transfer regime has operated on the basis of confining itself particularly to the accurate presentation of news and the protection of free expression of opinion, I believe that that is a sufficient basis upon which to undertake an examination of plurality of newspaper ownership. Those can be the factors for which we look. Is the diversity of newspaper ownership sufficient to deliver that?

To whom should that test be applied? Clearly, the merger regime has its own test in terms of market share and turnover. However, we have discovered over years past that where newspapers are concerned—I quote from the Government's "Consultation on Media Ownership Rules"—

"This regime has imposed significant costs on the industry and yet, out of 172 cases considered by the Secretary of State since 1980, only three have been refused and five given approval subject to conditions."

It is important that we structure a regime that is more deregulatory than that which went before it. We should not merely replicate the special newspaper transfer regime in new legislation.

It is interesting that the Government's consultation goes on to state:

"In no case has the Competition Commission found that the acquisition of purely local newspaper titles would be against the public interest on freedom of expression grounds."

Ministers and the Competition Commission have often found that quite high local concentrations of newspaper ownership are consistent with a continuing plurality of voice in the sense of free expression of opinion. To respond to customers in those areas, newspapers often find that they must be responsive in that way. The opportunities for concentration of local newspaper titles throughout the country, although that has happened in recent years, has not necessarily led to centralised editorial opinion imposed on local newspapers from the controlling interest.

One of the consequences that flow from that is that the newspaper ownership regime could be structured in a way that excluded local newspaper titles. For these purposes, as a proxy, I have adopted the threshold of a circulation of 500,000 newspapers a day. That is a limit above which transfers of newspaper titles could be considered.

Whether that approach should apply to existing newspaper proprietors or transfers of ownership in any circumstances is a difficult question. It is difficult to argue that maintaining plurality of newspaper ownership could mean that someone would be barred from the acquisition of a newspaper if he or she was not already a newspaper proprietor and there was no concentration of newspaper ownership.

The only circumstances in which that could be done would be if one were to reintroduce some test of whether someone acquiring a newspaper was a fit and proper person to do so. As the Minister said in Committee, and in her subsequent letter, it is difficult to envisage circumstances where someone could be excluded, on competition grounds, from owning a newspaper or acquiring an enterprise on the basis of whether he or she was a fit and proper person. That should be considered on the basis of disqualifications under the Companies Acts. However, with newspapers, a further question could arise about whether someone is seeking to limit the free expression of opinion or the accurate presentation of views by acquiring a newspaper. It is therefore important to find out more about what the Government are seeking to achieve by extending clause 57, contrary to their previously stated intention.

Amendment No. 143 would make competition the sole factor to be considered in the operation of merger policy, with the exception of national security. Amendment No. 142 is more technical; it will not be immediately obvious to people who are not as familiar with the Bill as Committee members that in clause 44, after the Secretary of State has given a public interest intervention notice and a reference back to him or her has been made by the Competition Commission, he or she has four options for subsequent decisions, two of which can be made in circumstances in which there is a finding of a substantial lessening of competition if a merger is completed or is being contemplated. The two remaining circumstances, given in clause 44(3) and (5), are ones in which there is no finding of a substantial lessening of competition, and the Secretary of State can take account only of public interest considerations.

Ministers have an obligation not to make a reference in or after the period of 24 weeks during which the Secretary of State is allowed to try to resolve the question of public interest by laying an order before Parliament and securing parliamentary approval; they will not make a reference after 24 weeks, and disregard any public interest consideration that has not been finalised. By contrast, the Secretary of State can make a reference before the 24 weeks have elapsed when there is a substantial lessening of competition. A loophole has therefore been created. Curiously, before the expiry of the 24-week period, there is nothing to stop the Secretary of State from making a reference to the Competition Commission on the ground that public interest considerations have not been finalised, and when there is no substantial lessening of competition.

One of the most undesirable circumstances in which a reference could be made is as follows. The Secretary of State has devised a public interest consideration, published an intervention notice, failed to come to the House to secure its approval to finalise the public interest, yet goes ahead and makes a reference to the Competition Commission. That loophole should be closed.

In addition, in clause 45, for reasons that escape me, the Government say that when making a reference during or after the 24-week period the Secretary of State should specify

"the public consideration or considerations . . . in the intervention notice concerned which the Secretary of State is not under a duty to disregard".

Government amendment No. 234 deals with the same issue. However, if a reference is made before the end of the 24-week period and before a consideration is finalised, as outlined in clause 44(2) and (4), the Secretary of State is not required to disregard the public interest consideration; for completeness, clause 44(3) should also be specified. It is astonishing that the Minister has gone down that route.

It being Seven o'clock, Madam Deputy Speaker, pursuant to Order [this day], put forthwith the Question already proposed from the Chair.

The House divided: Ayes 126, Noes 255.

Division number 274 Orders of the Day — Enterprise Bill — [1st Allotted Day] — Clause 41 — Intervention by Secretary of State in certain public interest cases

Aye: 126 MPs

No: 255 MPs

Ayes: A-Z by last name

Tellers

Nos: A-Z by last name

Tellers

Question accordingly negatived.

Remaining Government amendments agreed to.

Bill, as amended in the Standing Committee, to be further considered tomorrow.