Clause 6.—(GENERAL PROVISIONS ABOUT MERGERS.) (Hansard, 28 June 1965)

§ Mr. John Hall
I beg to move Amendment No. 36, in page 9, line 37, to leave out "either".

Mr. Deputy-Speaker
Mr. Speaker proposed that we take with this Amendment,

§ Mr. Hall
The purpose of these Amendments is to delete subsection (1,b,ii) and take out of the Bill the power to refer to the Commission proposed mergers which involve taking over assets exceeding £5 million. When these Amendments were debated in Committee there was strong support for them from the Government side and the several speeches included those by the hon. Member for Ashton-under-Lyne (Mr. Sheldon) and the hon. Member for Heywood and Royton (Mr. Barnett). The speeches impressed the Government. The Minister without Portfolio admitted that the figure of £5 million was purely arbitrary and he agreed that there would be considerable difficulty under the Bill as drafted in arriving at the value of the assets. He said that he would consider with the President of the Board of Trade whether the reference should be deleted or the provisions modified.
To quote his words: 208 I am bound to say that I appreciate, as I think everybody does, the profound difficulties about attempting to explain whether the £5 million figure should be judged on the basis of book values or any other values. Admittedly the figure of £5 million is a completely arbitrary one. Having chosen an arbitrary figure, one appreciates the difficulty of arriving at any scientific basis for determining whether the assets are there or not. I would like to suggest that if the hon. Member for Wycombe would withdraw the Amendment my hon. Friend and I will consider with the President of the Board of Trade, in the light of everything that has been said this morning, what course we ought to propose, either by deleting it or substituting something else or modifying the provisions."—[OFFICIAL REPORT, Standing Committee E, 13th May, 1965; c. 422.] Unfortunately, nothing seems to have come out of these deliberations. This is extremely regrettable, but I am not entirely surprised.
In the circumstances, perhaps one ought to rehearse some of the arguments again. The inclusion of £5 million seems to argue that in some way monopoly is associated with size and size with monopoly. This tends to create the impression that bigness means badness. I am sure that that is not the impression which the Government intended to convey. It would be quite wrong to create that impression.
One of the anomalies which can be created by this provision can be illustrated quite simply. A £6 million company which decided to take over a company with £4 million or £4½ million assets would not be affected and subject to possible reference under the Clause. If however, and this is quite a possibility, a live energetic company with a capital of £4 million or less took over a larger company with assets of £6 million it could be referred under the conditions of the Clause although the resulting assets would be precisely the same in each case.
The definition of the assets is a difficult problem. If it is taken, as apparently it is, according to the definition in the Bill, as the nominal book value this will create a number of problems. Everybody knows that the book value of assets has very little relation to the real value. It might be that in some companies, anticipating the possible effects of the Finance Bill, the book value might have some relation to the actual value, but in many cases we know that book value does not hold any such relationship to the true value.
209 12.30 a.m.
There is also the danger of holding up desirable mergers because they might be referred on grounds of size. It has been said that it is not the Government's intention to discourage mergers which may well be desirable in the interests of the economy and the efficiency of industry, and some mergers the Government might even wish to encourage if they had the power so to do. But a company wishing to take over another one or more companies, with assets in excess of £5 million, might find its affairs referred by the Board of Trade, and this could have the effect of discouraging a possible merger. I should regard this as an undesirable consequence.
It emerged from the debate in Committee that one of the reasons behind the insertion of the reference to assets of £5 million was the desire to protect companies which might be unwilling parties which, like brides carried screaming to the altar, did not want to be absorbed by another company. One has had cases of this kind in this country in recent years, especially with bids coming from overseas, in which there has been considerable controversy and sometimes the necessity for the Government to intervene or lake an interest. If it is thought necessary to protect companies which may not be willing to be taken over, this is not the proper place for providing that protection. It would be much more appropriate in the Companies Act. We have had the Report of the Jenkins Committee, and I imagine that the Government will, if they can find time, introduce some amending companies legislation arising out of that Report. The Companies Act is a far better place for provisions designed to protect companies subject to take-over bids to which they object. This Bill is not the right place for it.
The Government used another argument. On Second Reading—his words are reported in column 1333 of HANSARD—the Minister of State said that the sheer power of the giant could give rise to a monopoly situation. Although a company, already a large one, perhaps, taking over another company with assets in excess of £5 million might not, even after that absorption, itself create a monopoly or be the subject of formal action under the Bill, it could nevertheless, by 210 the mere size of the concern, almost create a monopoly position. Examples were given to substantiate that argument. It was said that not only would the size tend to stifle competition but the empire created might be too large for the most efficient use of resources. This was another argument used in support of the idea of investigating the absorption of companies on the ground of size.
The argument that the empire created might be too large for the most efficient use of resources is a strange one to come from right hon. and hon. Members opposite who, by and large, were the creators of the nationalised industries. Are they saying that the creation of large empires of the size of the nationalised industries leads to the inefficient use of resources? If so, I might be tempted to agree, because we have had evidence showing that this is so in many cases. But to use that argument in support of the inclusion in the Bill of the figure of £5 million is to stretch the point a little too far.
There is no point in this provision. It has almost been admitted that there is little point in it. It is a figure snatched out of the air. In a pamphlet produced by certain distinguished colleagues on this side of the House a rather smaller figure was mentioned. I think that £1½ million was given as the possible figure which might be taken into account in the case of a proposed merger.
Of course, it is well to remember that this proposal was made against a quite different background; the background which envisaged the establishment of a Registrar, and, even so, I should not necessarily have agreed with the recommendation in that pamphlet, distinguished though the writers of it may have been. This is an arbitrarily chosen figure and mere size has no relation in practice to a position of monopoly at all.
I do not want to deploy these arguments at any great length, because I am certain that the President of the Board of Trade has heard of them. I am sure he has read of the debates upstairs and knows all the arguments and, having been seized of them upstairs, and the Minister of State having gone so far as to say that he will endeavour to get round the point we are making, will he, although there is at present no Amendment meeting our point, say that he will 211 consider introducing a suitable Amendment to the Bill in another place?

§ Mr. Patrick Jenkin
I will be very brief and should not have intervened at all were I not so bitterly disappointed that the Government insist on sticking to this stupid criterion as a basis for bringing a merger under scrutiny. That the mere matter of size should prompt an investigation, when no question of market domination comes into the issue at all, is something one cannot understand. This is totally wrong and wholly irrelevant to any of the problems with which we are faced today. It has nothing at all to do with modernisation, or efficiency, or making this country more progressive.
It is just old-fashioned suspicion of business—commercial enterprise—in all its forms in general, and of big business in particular. It is very sad to see a Government which professes to be dedicated to the modernisation of the national economy clinging to such out-dated dogma. One can only describe the President in the words that Mr. Harold Wincott uses when he particularly dislikes someone, as "an elderly left-wing parrot".

§ Mr. Peter Hordern (Horsham)
It is a very sad moment when we come to consider as the criterion for the purpose under discussion a business which is said to be of great size because it has assets of £5 million. What on earth does the President of the Board of Trade mean by assets? Does he mean book value? Does he mean the market value of the assets as quoted on the Stock Exchange? Does he mean the real value of the assets? If that is what he means, then how will he calculate the real assets? Will it be before depreciation; after depreciation?
The whole of this Bill so far has had a very fair hearing both in the Committee and in the House and so far we have dealt with serious eventualities. Now, we are lost in the mists of sheer prejudice. I will not speak more than I can avoid of the prejudice which must be inherent in this proposal, but will try to show how utterly impracticable it is. We have already had a debate on the place of the nationalised industries in relation to the Bill, and whether they should be included in its provisions. During the Second Reading debate he said: 212 There could be cases where monopoly in this sense is not technically involved, but, nevertheless, the concentration of economic power would be such that the transaction should at least come within the field of public scrutiny."—[OFFICIAL REPORT, 29th March, 1965; Vol. 709, c. 1213.] This is the kind of ludicrous defence which the right hon. Gentleman was anxious to make.
If that is so, how can the nationalised industries be excluded from the purview of the Clause? The right hon. Gentleman's memory has already been refreshed by the words of the present Prime Minister on 22nd April, 1948, when he said that if, for instance, the National Coal Board were to make mining machinery, it would be possible to have such activities brought before the Commission.

Mr. Deputy-Speaker
Order. I hope that the hon. Gentleman will not repeat a debate on which we have already taken a decision.

§ Mr. Hordern
I move quickly to my next point, Mr. Deputy-Speaker.
At the very time when we are encountering more and more opposition in other countries, particularly Common Market countries, when we are seeing the French positively encouraging mergers, we have this absurd provision. Last week the Americans announced the results of a competition to join the "Billionaire Club", something which I would have thought was very dear to the heart of the hon. Member for Buckingham (Mr. Maxwell). They produced evidence that there are now 69 members of the New York Stock Exchange "Billionaire Club"—companies with annual sales or revenues of 1,000 million dollars or more. Such companies in the United States are pleased to be big. What is wrong with size anyway? Why should we be so pathetic about it? It is time the other side of the House grew up and realised that we are living in a big world. This is not the age of the cottage industry. What does the right hon. Gentleman want to do? Why does he not fragment industry into tiny parts or bring us back into the world—

§ Mr. Robert Maxwell (Buckingham)
Is the hon. Gentleman aware that the requirement of the Bill in respect of large businesses with assets worth £5 million 213 or more does not imply that the Board of Trade would refuse such a merger? All it means is that the Board of Trade will have an opportunity to make sure that such a merger takes place in the national interest. Also, whereas in the past people used to get knighted for the kind of things for which the Americans send their businessmen to gaol—I do not think that our Bill has gone quite that far—has not the time come for our businessmen to realise that there is such a thing as the national interest on the question of mergers?

§ Mr. Hordern
On the second point, I do not know to which aspect the hon. Gentleman is directing himself—gaol or knighthood. But he has not made any point of substance.
The right hon. Gentleman and all hon. Members opposite must grow up and realise that we are in a world of increasing competition and increasing size of concerns. I am very glad to see the hon. Member for Heywood and Royton (Mr. Barnett) entering the Chamber. I know his views on this subject, and I very much hope that he will voice them during this debate.
This is a lamentable procedure. It means ultimately that the President of the Board of Trade wants us to return to a sort of Jean Jacques Rousseau existence, a cottage industry existence, with La Nouvelle Heloise in person sitting on the Government Front Bench. That is the kind of thing that we are faced with. The President of the Board of Trade and, no doubt, the Minister of Public Building and Works will be constructing "Le petit Hameau" again in this country to make little cottage industries.

§ Mr. Maxwell
On a point of order. Mr. Deputy-Speaker. Is it in order for an hon. Member to use a foreign language in this debate?

Mr. Deputy-Speaker
I was almost inclined to intervene to translate what the hon. Member for Horsham (Mr. Hordern) was saying. He has, however, so far merely mentioned the titles of one or two French books and the name of part of Versailles. So far he is in order.

§ Mr. Hordern
I am obliged, Mr. Deputy-Speaker, and I am about to conclude. 214 I am flattered that you should recognise my expressions and place them so accurately.
I am in despair in trying to allude to something reasonable and sensible in these late 1960s. We are in a competitive world and it is high time that the Government woke up to realise what an absurd notion they are trying to put into what is otherwise a very respectable and important Bill.

§ Mr. Hall-Davis
Like my hon. Friends, I feel strongly on this matter, but unlike them I make no apology for speaking at length. I would have no qualms about speaking at great length on the subject. The President of the Board of Trade has been kind enough to say that we look alert, vigorous and fresh. I would expend every ounce of vigour and alertness on the discussion of the Clause and I hope that the right hon. Gentleman will take as much time as he wishes in expounding the arguments in support of the Government's proposal to keep the figure of £5 million in the Bill.
This is one of the most important provisions of the Bill. It is perhaps unfortunate that we are taking it at this hour but as we are let us deal with it with the emphasis its importance demands. It is one of the new departures in the Bill compared with the principal Act. It is a departure with which I have not a great deal of sympathy. Because the Government's arguments in support of it have been sketchy and because I dislike it so much. I have endeavoured to examine carefully and in detail just what has been said by hon. Members opposite in support of the proposal.
On Second Reading, the right hon. Gentleman dealt with this in the most general terms. In answer to a query from my right hon. Friend the Member for Bexley (Mr. Heath) he said that it applied to foreign firms with the same provisions, in effect, that it would to firms in this country. But in Committee I think that it was denied that this was the underlying reason for the figure.
Perhaps a case could be made out for this if it were to give control or some sort of supervision over take overs by foreign firms but apparently that is not the main underlying reason. It is therefore only incidental that the proposal applies to this kind of take over. The 215 right hon. Gentleman, on Second Reading, referred to the "size of assets" concept. I have looked in vain for any development of this concept of the danger, presumably, of the size of assets. We must adjust our minds to changing values. Not only are units getting bigger but, regrettably, money values are changing. The figure of £5 million these days is comparatively small.
There is another point which cannot commend this proposal to us—the use of the word "arbitrary". My hon. Friend the Member for Wycombe (Mr. John Hall) has referred to its use in Committee by the Minister without Portfolio. It was also used by the Minister of State on Second Reading in replying to the debate. I would like to quote what he said in full but, in order to reassure you, Mr. Deputy Speaker, after my early remarks, comparatively briefly. The hon. Gentleman said: The figure of £5 million is arbitrary; we accept that. We went through the list of mergers over the last five years and did a little separating of the sheep from the goats. It seemed that £5 million was a very satisfactory figure where the merger did not lead to a monopoly situation."—[OFFICIAL REPORT, 29th March, 1965; Vol. 709, c. 1333.] I emphasise that last sentence. May I ask the President of the Board of Trade, if he is going to reply, a very satisfactory figure in relation to what? This is what puzzles us on this side of the House. What is it that this figure is as satisfactory in relation to? It can only be that it is at this sort of figure that inhibitions against size begin to operate on the other side of the House. If this is the case, then I certainly am waiting to be persuaded on this. But this has not been advanced in explicit terms, despite the fact that it is one of the major new provisions in the monopoly legislation in the Bill.
We come again to the reply of the Minister without Portfolio in Committee, to which I would draw the attention of the President of the Board of Trade. This was one of the major debates in Committee and it was given one of the briefest replies from the Government Front Bench of almost any discussion that took place. The Minister without Portfolio wound up by saying: … the Minister of State and I feel we should have an opportunity before attempting 216 to answer this debate, to consult the President of the Board of Trade on everything that has been said this morning, to see whether any other course ought to be taken to deal with this subject."—[OFFICIAL REPORT, Standing Committee E, 13th May, 1965; c. 421.] I want to convince the House that I am not laying undue emphasis upon this point. I would draw the attention of the President of the Board of Trade to the fact that his own side expressed the most direct doubts about giving support to this Clause. The comments of the hon. Gentleman the Member for Ashton-under-Lyne (Mr. Sheldon) in Committee have just been referred to. I was looking for the arguments in support of this proposal and I happened by chance to read the speech of the hon. Gentleman the Member for Ashton-under-Lyne on Second Reading. I felt able, after reading it, to say that should we reach Third Reading tonight I might be able to condense some of my remarks by referring to what he said then. He spoke most explicitly on this and so did other hon. Members on his side.
I would, therefore, ask the President of the Board of Trade to give us a full explanation in support of this Clause in the Bill which, up to now, the House have been denied. I assure him we shall not grudge him one moment of the time and we shall listen with very great interest to what he says. Unless some arguments are produced which are clearer and stronger than have been produced, I certainly will feel that this Clause will do far more damage than good and that this figure is so arbitrary as almost to have been plucked from the air because someone felt that somewhere there should be reference to size, otherwise a lot of dearly-held shibboleths were going to be abandoned, and this would cause grief in certain quarters.

§ Sir John Eden (Bournemouth, West)
Before I make a few remarks on this series of Amendments I have an interest to declare in that I am associated with a company which exists to promote and encourage mergers in industry. I view with some concern, the same degree of concern already expressed by my hon. Friends, the limitation likely to arise in a number of cases during the course of any one year as a result of the inclusion of this figure. I take the point made in an intervention by the hon. Member for Buckingham (Mr. Maxwell) a moment 217 ago, that this gives power to the President of the Board of Trade to refer such a merger involving the take-over of assets of £5 million or over, to the Commission. It does not necessarily follow that such a reference will be made.
The trouble which is apparent throughout this part of the Bill is the mixing up of mergers and monopolies, the idea that at some stage, almost automatically, a merger becomes a monopoly and the idea, following on from that, that almost automatically a monopoly is something harmful. I cannot believe that that is what the Government intend. I do not think that it is what they have in mind.
I was extremely surprised that the Government did not put down their own Amendments along these lines for this stage of the Bill. Anybody who has studied the proceedings in Committee must be astonished, in the light of the undertaking, to which my hon. Friend has just referred, given by the Minister without Portfolio, that no Amendment has been put forward on Report by the President of the Board of Trade to delete the figure of £5 million. What was in the mind of the Government when they persuaded my hon. Friend the Member for Wycombe (Mr. John Hall) to withdraw his Amendment if it were not to look again at their original proposals and to come forward at this stage with an Amendment to meet the objections of both sides of the House?
One further point is that even though, as the right hon. Gentleman has said, there were in 1964 about 17 instances involving mergers when assets of £5 million or more were taken over, in the context in which it was said this may be considered to be a comparatively small number when one takes into account the total number of mergers throughout industry year in and year out. What I object to, and what, I am sure, all my hon. Friends object to, is that by fixing the figure arbitrarily at such a low level as £5 million and by placing an upper limit at too low a level, the Government are guilty of reversing the trend and are generally discouraging the process towards the creation in British industry of larger units.
Because, as I believe, that is not what the Government want to happen, either they must be prepared to accept our Amendments or they must have much 218 better reasons for imposing the £5 million limit than those advanced in Committee, when their arguments were weak and were indicative that this was a purely arbitrary figure without basic justification.
I hope, therefore, that the President of the Board of Trade will accept our Amendments. I hope that, in accepting them, he will take the opportunity to emphasise that in doing so he is seeking to give every positive encouragement that he can to worthwhile, sensible, logical mergers in industry to ensure the increasing strength of our manufacturing units to make certain that Britain, through the strengthening of her economy, can become more competitive than she now is. This, I am sure, is the intention of the President of the Board of Trade. His ambition would be greatly strengthened if he accepted our Amendments.

§ Mr. Higgins
It is quite clear from the strength of the opposition aroused on this side of the House that this Amendment is concerned with the major point of principle in this Bill. Throughout our monopolies legislation it has been recognised that the criterion of a monopoly is whether it controls the supply of a good or service sufficiently to act against the public interest through price rises, and so on. It is because this Clause is a major precedent in our monopolies legislation that we on this side feel it should be examined with the greatest interest and care. It is true that we went into this question in Committee, and I think we examined it in such a way that no reasonable person could feel other than that he should support this Amendment. As we have not had an opportunity of hearing the President of the Board of Trade on this matter we look forward to the benefit of cogent argument by him about why he feels that this extremely unfortunate Clause should remain in the Bill.
There are really three possible cases where control of supply is a relevant and, indeed, an important consideration. The first of these is where we get a horizontal monoply with a particular firm occupying more than one-third of the market in the supply of goods at a particular level of production. I think everyone would agree that in this case the one-third share criterion is a reasonable one. 219 The second one is where we have vertical integration, a firm integrating backwards to the sources of raw materials and forwards to the resources of retail outlets. Here it became clear that there is no danger to the public interest unless at some stage of production the firm were to occupy more than one-third of the market and able to control supply so as to act against the public interest.
There was, however, one final case which was discussed in some detail by the hon. Member for Birkenhead (Mr. Dell), who suggested that there might be a case of an existing monopolist in the sense of having a one-third share of the market who began to diversify into some other market. He suggested that unless we accepted the £5 million criterion he would not be caught. However, I think it will be agreed that Clause 6 (1,b) covers this sort of case, either as it stands, or by the Government's later Amendment, if we agree to it, by which that one-third share of the market could be written in in place of subsection (1,b). It is true that, because this covers supply of any goods, if we have a monopolist, in the normal sense, diversifying into some activity in which he is not a monopolist, in the sense of having a one-third share of the market, he will still be caught by the Bill.
Therefore, we must ask the President of the Board of Trade to explain why the Government insist on maintaining this dogmatic approach to the definition of monoply when a merger is likely to be investigated. We suggest to him as strongly as we are able that the basis on which he has put forward the valuation in this Clause is quite absurd. My hon. Friends put forward, with great cogency, the argument that the book value of the assets, which, we understand, is to be used in this case, is completely arbitrary. Arbitrary? Indeed, meaningless. Because the value of the money with which the assets were purchased at different dates has changed from one date to another.
Therefore, what the Government are really saying in this Bill is that one adds up the value of the assets which were purchased perhaps in 1890, when the £ was worth a certain amount, then one adds up the value of the assets purchased in 1900, when the £ was worth something different, one then does the same for 220 assets purchased in the 'twenties and the 'thirties, up to the present day, and finally one says that the total is a given sum. However, the amounts which are added up are all expressed in terms of £5 million which represent totally different values in terms of real assets, and the figure at the end is a complete nonsense. It is not only a nonsense, but it is an arbitrary nonsense, because, under the criteria laid down by the Board of Trade, the Bill as it stands means that the older firms which bought assets long ago, even though they may have repaired them from time to time and invested large sums of money by way of repairs, will be less open to investigation than the newer firms. One may disagree with the Government's attitude towards the elderly and perhaps the old-age non-pensioners, but to introduce legislation which favours the older firm in this way is not only a nonsense, but an arbitrary nonsense.
There is another important point to be made here. We appear to be suffering from government by schizophrenics, because the argument advanced by the Treasury Bench last week when discussing Clause 78 of the Finance Bill, which was concerned with forestalling, was that book values were impossible to compute and therefore we must rely on share value. Tonight, on this Bill, we are told that book values are a reasonable measure of capital employed. There is a complete inconsistency between the attitude adopted by the Government one week and that adopted by them the next.
The fortunate thing is that there is one link between the Front Bench finance group of last week and the Government this evening, namely, the Minister without Porfolio. One cannot help feeling that it is unfortunate that he does not have a portfolio of definitions to carry from one Ministry to the other, because we cannot sensibly debate this kind of Measure, nor can we sensibly debate the Report stage of the Finance Bill, unless we have a clear and categoric answer from the Government about whether they think that book values are a reasonable measure of capital employed, and I hope that we shall get a clear answer to that today.
If, as was suggested by the Chief Secretary to the Treasury, they are not a clear indication, then the Government 221 should accept the Amendments. If they are, then surely they should amend Clause 78 of the Finance Bill. I hope that in replying to this debate the right hon. Gentleman will not only concern himself with the important point of principle that we have raised, but will give a clear and categoric answer about whether they think that book values mean anything or not.

§ Mr. Jay
I agree that this is a legitimate issue to raise in the discussion on this Bill, and that it is an important point. On the other hand, I think that the hon. Member for High Wycombe—

§ Mr. John Hall
Wycombe.

§ Mr. Jay
I think that the hon. Member for Wycombe (Mr. John Hall) is a little hard to please. Earlier today, when I was pointing out in another instance that previous Governments had done what we were doing, he said that we ought not to give any weight to that because we ought to be doing something different from what was done on previous occasions. Here we are doing something new, and therefore, on his argument, he ought to approve of it on that ground alone.

§ Mr. John Hall
We welcome the Government doing something new which is positive and useful. We do not welcome them doing things which are wrong.

§ Mr. Jay
I am glad the hon. Gentleman agrees that we should decide the matter on its merits, because that underlines the point that he put before us earlier today.
Let us examine the merits of the case. The first point is that all that this size of asset test is being used for in this Bill is as a qualifying test to bring mergers within the field of scrutiny. Of course, if it were a test which was going to result in automatic condemnation of the merger, then this would not be a justifiable test to use. What hon. Members opposite are asking is that we should exclude a merger on grounds of the size of assets altogether even from scrutiny under the Bill. If they do not realise that, they do not really understand the Bill they are discussing, and that is what I thought led at least one hon. Member below the Gangway to talk a certain amount of rubbish just now.
We are not arguing that all mergers are bad any more than that all are good. 222 Nor are we arguing that size in itself is bad. But hon. Members appear to be arguing that size in itself is good. If the hon. Member is arguing that size is good he is taking an extreme point of view. I believe the sensible, intelligent and realistic assumption here is that size is sometimes good and size is sometimes bad. If that is true then at least it ought to be brought within that field of scrutiny, which we are doing.

§ Mr. Hordern
The right hon. Gentleman cannot say that the argument is that size should necessarily be either good or bad. If he is saying that size in itself is bad, surely his argument must be that smallness of itself is rather good. That is the argument he is deploying.

§ Mr. Jay
What I am arguing is that size may be sometimes good and sometimes bad, and therefore it should be brought within the field of scrutiny. The hon. Member believes in the monopoly test for scrutinising a merger. He does not believe that monopolies are always good or always bad. If, therefore, he thinks that because they are sometimes good and sometimes bad they should come within the field of scrutiny, it follows that if he agrees that size is sometimes good and sometimes bad, then size should come within the field of scrutiny also, otherwise there is no logic in the hon. Member's argument.

§ Mr. Higgins
I think we agree that size is sometimes good and sometimes bad. What we are saying on this side is that whether it is good or bad depends on what share of the relevant market it happens to have. This is the right and proper criterion for deciding whether or not it needs to be scrutinised.

§ Mr. Jay
I am coming to that point, but I am glad we have made some progress and that hon. Members, even those below the Gangway, agree with me that size is sometimes good and sometimes bad and therefore should come within the field of scrutiny.

§ Mr. Patrick Jenkin
rose—

§ Mr. Jay
I think I had better finish my argument and then hon. Members may be able to reflect upon it.
The next question that arises, therefore, is—how should we calculate size or 223 domination of the market in order to bring these mergers within the field of scrutiny? There are two strong reasons for adding this size of assets test to the share of the market about which we are all agreed. The first is that this certainly does give us some control, which we have not at present, over foreign takeover bids of British companies. That in itself is not the sole reason, but I think it is one important reason for at least giving us the powers to act in a case of this kind.
We have in recent years in the House discussed, for instance, the take-over bid of some Trinidad Oil assets. We also discussed a take-over bid by Chrysler for Rootes only within the past year. I am not saying that either of these take-overs was undesirable or that they were desirable. We ought to have the power to act in such a case.
1.15 a.m.
I am not one of those who deplore all foreign investment in this country. We need foreign investment in this country, particularly when it takes the form of the creation of new productive assets such as the building of factories in the under-employed areas. But foreign investment which takes the form of the acquisition under foreign control of assets already existing here is quite a different issue. If it takes place beyond a certain size and brings under control industrial assets of great importance in this country, then at least it should come under scrutiny and the British Government should have power to examine it.
Some hon. Members may think that we already possess this power through the operation of the Exchange Control Act. We have examined that legislation, and the fact is that we do not possess the power to interfere with foreign take-over bids under that legislation because it could be done only on foreign exchange control grounds. We are, therefore, justified in introducing this test if only on the argument of possible take-overs of companies in this country. But there is also the argument on the ground of a takeover by one United Kingdom company of another. An evil could certainly arise from too great a domination of the market by one enterprise.
There is also such a thing as excessive concentration of economic power in the 224 hands of one private group. If hon. Members opposite do not realise that, then I am afraid that there is a direct disagreement between us. There could be a company which held a considerable share of the market—not quite qualifying under the one-third rule—in a number of separate commodities or services. It could build up a further empire without at any point going quite over the line in a single commodity. An empire not merely of great size but of great power could be created in that way. We ought to have power to decide whether this is in the public interest.
Let us not forget all the way through that all we are doing is to give the Board of Trade power to refer these cases to the Commission. It is possible for the Board of Trade not to refer them if it sees no reason for doing so, and even if they are referred it is possible for the Commission to come to the conclusion that they are justified.

§ Mr. Maxwell
We need to look at the question of monopoly anew. A company in the United Kingdom may well be on the way to becoming very large for the market, but in relation to the foreign competition which it faces abroad it will be very small. We on this side of the House are satisfied that the powers which the Government are seeking are right, necessary and justified, but I—and industry, too—would very much like an assurance that when examining these cases the Board of Trade will take into consideration the competitiveness of the enterprise vis-à-vis its foreign competitors. The President of the Board of Trade does not require me to stress that exporting is very important to us. Would he give Ian assurance on that point?

§ Mr. Jay
I assure my hon. Friend that not only should we take that into account but I have taken it into account in the past six months. The Board of Trade, in deciding whether to refer a case, and the Commission, in examining a case which had been referred to it, would have that as one of the major factors in mind.
Hon. Members opposite talked about shibboleths and used other similar emotional language, but they seem to have forgotten the case of I.C.I. and Courtaulds, and the controversial debate which we had on that subject in the House. I would remind them that in that debate quite a number of hon. Members 225 of their own party took the view that if it were possible it would have been right, had it not happened of its own accord, for the Government to step in and prevent that proposed merger going through—

§ Mr. Patrick Jenkin
rose—

§ Mr. Jay
I must finish this argument—even though in that case a technical monopoly under the 1948 Act legislation might not have been created. If hon. Gentlemen do not realise this, they have not studied that case very carefully. Most hon. Members on both sides of the House who were critical of that merger were critical not because it created a technical 30 per cent. monopoly of any particular commodity but because it gave too great an economic power over a wide area of industry to one concern. Therefore, when hon. Members use expressions like "shibboleths" they should reflect upon that case.

§ Mr. Patrick Jenkin
I am grateful to the right hon. Gentleman for giving way. He recognises, of course, that Courtaulds has now been referred to the Monopolies Commission under the old legislation? There is no question of size or anything of that sort coming into it.

§ Mr. Jay
I realise that perfectly well because I referred it myself. The hon. Member would do well to listen to the argument before jumping up so often. I did not say that it was technically impossible to refer that merger under the old legislation. I said that most people who were critical of it would have thought it ought to have been referred even if it had not been possible under the old legislation. That proves the case that we are making, that economic power and domination of this kind should at least come within the field of scrutiny as well as the technical old-fashioned monopoly definition.
The other point which has been raised, and rightly so, is the question of book values. The Bill as it stands and as we intend it to stand certainly makes book values the criterion in this case. Of course, I agree that book values are not a true or accurate measure of existing market values. Again, if this is to be made the criterion of some automatic condemnation of a merger, book values would be a very unsatisfactory test to take. But they are not being so used. 226 They are merely being used as a criterion for bringing the merger, as I say, within the field of examination. For this purpose it is not necessary to have a perfect and accurate measure. It is necessary to have a measure which can be quickly ascertained so that there is not a long delay in deciding whether to go ahead with a reference or not.
The merit of book values for this purpose is that there is here a figure which is quickly, easily and indisputably ascertainable. For this purpose I think this is the most satisfactory measure, and if there were any more satisfactory one, presumably hon. Members opposite, who have been so critical of this Clause, and of the measure, would have found it out after three months and would have put forward an Amendment. For this purpose I think this is a legitimate measure and I think the case is overwhelmingly for retaining the Bill in its present form.

§ Mr. John Hall
During the debates in Standing Committee I often had occasion, when rising after the Minister had spoken, to say that I was disappointed with his reply. I find myself in precisely the same position tonight. It was a disappointing reply.
Perhaps I could put one matter right because I am sure that what was said on the point was said inadvertently. We are not critical of the Measure if by "Measure" the President of the Board of Trade meant the Bill. We have throughout supported the Bill. All that we have done is to try to improve it and I think these efforts have been recognised.
The President of the Board of Trade in beginning his speech addressed me as the "hon. Member for High Wycombe". I would point out that the word "High" is as unnecessary and unwanted, as an addition to the word "Wycombe", which is the division that I represent, as these words are unwanted and unnecessary in the Bill.
The right hon. Gentleman deployed the usual arguments that we have heard before. The strongest one was the point he made that the Government wanted to have some control over take-over bids, whether they were foreign or domestic. He quoted the case of I.C.I./Courtaulds, in which the figure was considerably in excess of the figure in the Bill. He did not address himself to the suggestion I 227 made during the course of my own remarks, that the protection given in cases of this kind to companies that might be subject to takeover bids might be better given under an amended Companies Act, which no doubt will follow in due course, rather than in this Bill.
The other point the President of the Board of Trade made was that one has to be careful of excessive concentration of power. Why are we frightened of size in this country? My hon. Friend the Member for Horsham (Mr. Hordern) made this point. We are being rapidly overtaken by concentrations of industrial power in Europe, and there are places where there is a far greater concentration of power than we can command. Why should we be afraid of companies growing larger and larger and being able to compete successfully with some of our competitors and some of the overseas industrial empires? The hon. Member for Buckingham (Mr. Maxwell) seemed to support me on this point of view. He was referring to difficulties that might arise in the export market when up against large concentrations of industrial power.

§ Mr. Jay
One of the arguments that was put some years ago for doing away with that nationalised Iron and Steel Corporation was that it had been growing to an excessive size and that was supposed to be leading to inefficiency.

§ Mr. Hall
All I am really asking is why the President should be frightened by size. This Bill is concerned with monopolies and with a sharing of a market that is known to exist, what is regarded as the right share of that market and whether the situation could lead to a monopoly. What we are concerned with is not the question of size. Even if size were the subject concerning us, and we really did have to take it into account, the figure of £5 million is not the figure to write into the Bill. It is far too low. It may have been right in prewar days but not now.
I should think that if one wanted to put a figure into the Bill it ought to be at least twice that amount. We know that the figure of £5 million has just been plucked out of the air. It could have been £1 million, £8 million or £10 million, but someone said let us compromise 228 and take the halfway house figure of £5 million. This is no way to arrive at a figure in a Clause that is to be written into a Bill. Much more attention should be given to the figure.
During the Committee stage, as the President knows, his hon. Friends were critical of this provision in the Bill. I quote just two examples in speeches which were made by hon. Members whose names I have already mentioned during the course of this debate.
The hon. Member for Ashton-under-Lyne (Mr. Sheldon) said in col. 415: Everything is changing."— he is right there— What we are trying to do is to legislate for the past, and despite everything that has been said about competition, there are grave limits to it because sooner or later in a very small country we shall find that the size of these units will come up against the monopoly regulations that we are pinning down on them, and sooner or later there will be a tussle between the advantages of large-scale industry, which I have tried to show are very much greater than anybody has previously imagined, and the very great disadvantages of competition for which there is the possibility of hope that there may be some alternative in the future. The hon. Member went on to say: If we look at this Clause, the value of it is so small that I would urge my hon. Friend to look at it again and see if he can meet some of our objections. The other hon. Member I wish to quote is the hon. Member for Heywood and Royton (Mr. Barnett), whose contributions to our debates in Committee were valuable and based on professional experience. He said: Taking up the point of the definition of £5 million, I am far from happy with it."—[OFFICIAL REPORT, Standing Committee E, 13th May, 1965; c. 415–8.] Neither were we. That was the understatement of the morning. We are still very unhappy with it. Nevertheless, it seems we cannot persuade the Minister at this stage to change this. One has to accept it until such time as we get a change in companies legislation that will enable him to use a kind of control over foreign and domestic bids. We do not propose to press this to a Division. I cannot hide from the right hon. Gentleman our discontent and disquiet at his refusal to accept the Amendment on this occasion.

§ Mr. Jay
I beg to move Amendment No. 37, in page 9, to leave out from "result" to "prevail" in line 39 and to insert "the following conditions".
I think that we are taking with it Amendments Nos. 39, 42 and 43.

§ Mr. John Hall
On a point of order. Do I understand now that we are taking other Amendments with this one? I had not realised that we were taking other Amendments with it.

§ Mr. Deputy-Speaker (Sir Samuel Storey)
No other Amendment has been selected for discussion with this Amendment. Amendment No. 37 is the only one selected for discussion at present.

§ Mr. Jay
Very well, I will deal with this Amendment. It is intended to remove an anomaly in the Bill as drafted. It refers to the definition of what is a separate undertaking for the purpose of deciding what is a merger which should be referred to the Commission. Under the Bill as drafted, and after the decision which the House has just taken, it is possible to refer a merger to the Commission on one of two criteria—either on the ground of the existence of a monopoly by the 1948 definition or alternatively on the ground of the size of the assets, as we have just decided.
As the Bill stands, however, a different definition of what constitutes separate enterprises for this purpose would be adopted according to whether the size of assets test or the monopoly test was being adopted. If the size of assets test was adopted the definition of an enterprise would be not just that of being an interconnected body corporate as laid down in the Companies Act but would involve the wider question of de facto control introduced by the Bill. If, on the other hand, the monopoly test was adopted there would be the narrower definition of the inter-connected bodies corporate as defined in the Companies Act.
There is no good or logical reason for using different definitions in these cases and therefore we propose by the Amendment to bring the second definition into line with the first, that is to say we should apply the criterion of de facto control both for the size of assets test and the monopoly test. This seems to me more 230 logical and reasonable and to give us a more satisfactory Clause.

§ Mr. Higgins
On a point of order, Mr. Deputy-Speaker. My hon. Friends and I are in some confusion. Am I right in thinking that we are concerned here only with Amendment No. 37?

§ Mr. Deputy-Speaker
Amendment No. 37 is the only one selected at this point. If it is for the convenience of the House, and the House agrees, it would be in order to discuss the other Amendments at the same time.

§ Mr. Jay
All the other Amendments concerned are Government Amendments, Mr. Deputy Speaker. Therefore, if I may presume so far upon your selection, I take it that they are all selected, and, for the purposes of rational debate, I think that they go together. Indeed, I could not help referring to them in my own argument. I gather that hon. Members opposite agree that it is really necessary to take Amendments Nos. 39, 42 and 43 with Amendment No. 37 which I have moved.

§ Mr. Maxwell
Further to that point of order, Mr. Deputy-Speaker. Can you tell me, a new Member, why the debate on this Bill, which has been agreed by both sides of the House, as far as I know, is being carried on all over again and why so many Amendments have been chosen?

§ Mr. Deputy-Speaker
That is not a point of order.

§ Mr. John Hall
If it would not be out of order, I could reply at some length to the hon. Member for Buckingham (Mr. Maxwell) and explain why there are so many Amendments down on Report. Briefly, the reason is that hon. and right hon. Members opposite and we have co-operated in finding methods of improving the Bill, and this has made it necessary to put down a number of Amendments at this stage.
It is a little difficult to follow the purpose of Amendment No. 37 without looking at the other Amendments to which the President of the Board of Trade referred. When I first looked at it I thought I understood what it meant. After I heard the right hon. Gentleman's explanation, I decided that I did not know at all. Nevertheless, on the basis that, in fact, it means what I originally 231 thought it meant, I should not, despite the explanation, wish to oppose Amendment No. 37.
I am not sure, Mr. Deputy-Speaker, whether we are taking Amendments No. 39, 42 and 43 at the same time.

§ Mr. Deputy-Speaker
I think we agreed that we would discuss all four Amendments together.

§ Mr. Hall
If that is so, Mr. Deputy-Speaker, I echo what I said earlier. Having looked at these Amendments as best I could, and having tried to follow the right hon. Gentleman's explanation, there is nothing I wish to add. As far as I can see, they are not objectionable, although I cannot see that they are particularly advantageous.

§ Mr. Jay
They are very good indeed.

§ Mr. Hall
"Very good indeed" says the President of the Board of Trade. As I always accept everything he tells the House, and as I am ready to accept his guarantee that the Amendments are designed to improve the Bill—one of the few occasions on which Government Amendments have that effect—I am prepared to accept them as they stand.

§ Mr. Patrick Jenkin
I wish to raise a point of substance which has been brought to my attention by Clause 68 of the Finance Bill. Two companies could form a partnership which could have the same effect as a merger, but a company partnership seems, rather strangely, not to be covered by the Bill as originally drafted or as now to be amended.
Clause 6, (1,b) refers to the conditions to which the principal Act applies, and Section 3(2) of that Act refers to Where two or more persons conduct their affairs in such a way … and so on. As I understand it, the effect of Amendment No. 39 is not to alter that position at all. That is to say, each enterprise, as I understand it, must have … at least one-third of the goods of that description which are supplied in the United Kingdom … etc. In those circumstances, if two companies decided not to merge and become one enterprise but instead, remained two separate undertakings and engaged 232 in a partnership, then it would be a matter of doubt if the Board of Trade would have any power at all.
If this be the case, then no doubt the Government would wish to introduce a suitable Amendment in another place. At the same time it is strange that we should be adopting the damaging test of the £5 millions take-over but leaving out of account mergers between really enormous concerns which may result in market domination and which should have been brought within the scrutiny of the Bill.

§ Sir J. Eden
Might I ask for guidance on what may be a matter of drafting because as things are they may lead to confusion? Amendment No. 38, I understand, is not called, but to my somewhat sluggish brain at this hour of the morning, if it is not called, Amendments Nos. 37 and 39 do not make sense because there would be left in line 39 on page 9 the words or do so to a greater extent". Is that the intention of the Government? As I understand it, if Amendment No. 37 is accepted it will have the effect of leaving out the words from "result" in line 38 to "prevail" in the next line, with the insertion of the words, "the following conditions". So the result would be that the Bill would read, as a result the following conditions or do so to a greater extent … Is that not so? [Interruption.] I still do not follow it. What would be the amended sentence without the inclusion of Amendment No. 38, which is not being called?

§ Mr. Jay
The answer to the second intervention is broadly this; Amendments Nos. 37, 39, 42 and 43 are Government Amendments. Amendment No. 38 is not a Government Amendment and, in any case, does not hang with the other four. It is not necessary, therefore, that it should be moved or approved in order to make sense of those four. Amendments Nos. 37, 39, 42 and 43 do hang together and have the substantive effect which I tried to explain to the House in my first contribution to the debate. If the hon. Member for Wanstead and Woodford (Mr. Patrick Jenkin) looks at Clause 9 (3, c) he will find the words, persons carrying on partnership and the husband or wife and relatives of any of them; 233 I am advised that this covers his point and does not leave partnerships unaccounted for.

§ Mr. Patrick Jenkin
This is covering persons associated with one another, but that does not come into Clause 6. So far as I see it, that does not come in at all. Where persons are associated it is right that they should be dealt with as such, but here we are dealing with two or more enterprises which can cease to be distinct enterprises.

§ Mr. Deputy-Speaker
The hon. Gentleman has exhausted his right to speak. He cannot make a second speech. He can make an intervention, but not speak a second time.

§ Mr. Jenkin
I will try to be as brief as possible, Mr. Deputy-Speaker.

Mr. J. T. Price
On a point of debate. Mr. Deputy-Speaker—I draw the line at a point of order—as we are not in Committee, is it competent for the House to go on discussing and wrangling about marginal points when hon. Gentlemen appointed by Her Majesty's Opposition have already notified the House of their acceptance of the Government Amendments on the Notice Paper?

§ Mr. Deputy-Speaker
I do not know what the hon. Gentleman means by "a point of debate".

§ Mr. Jenkin
Can the right hon. Gentleman deal with the point whether "two distinct enterprises" would cover two companies in partnership?

§ Mr. Jay
If I may give an answer and not make a speech, the answer is that I am advised that the words that I read out from Clause 9(3) are relevant to Clause 6. I would refer the hon. Gentleman to Clause 9(1), which I think will make this apparent, but since he has raised the point I will check to confirm that what I am saying is correct.

§ Mr. Peter Emery
I am sorry to have to rise again. I had prepared a long speech on Amendment No. 39, but in the circumstances I shall curtail it. However, there are one or two things which are not very clear. I had hoped that we might have had something further about the ex-territorial aspects of the matter, but it appears that that is not covered by these Amendments. Will the President 234 say whether the long and quite definite points made during the Committee stage are intended to be covered by any of the Government Amendments? It appears that they are not. I thought that the Government had said that they would try to deal with them.
My hon. Friend the Member for Southend, West (Mr. Channon) was to have dealt with Amendment No. 42, and I will ask a question to which he desired an answer. There are references to different forms of supply and to supply taken separately. Is this necessary or relevant? Why does it matter whether a supply is taken separately or not? My hon. Friend was not clear about that, and when it is put to me quickly, I am not clear about it.
In the same way, why in order to cover the whole of these Amendments is the inclusion of "20(3)" necessary? It seems that this adds nothing. I cannot see why it is necessary. But we will not prolong the debate. I am sorry that the hon. Member for Buckingham (Mr. Maxwell) has left the Chamber after one of his—

Mr. J. T. Price
I am still here.

§ Mr. Deputy-Speaker
Order.

Mr. Price
I will raise a point of order, Mr. Deputy-Speaker—a valid point of order, I think. Can the debate be continued when the Opposition Front Bench speaker, the hon. Member for Wycombe (Mr. John Hall), has already indicated to my right hon. Friend that he accepts the Government Amendments on the Notice Paper? The debate has continued and we are speaking with discordant voices on the same matters which are still under discussion.

§ Mr. Deputy-Speaker
There is no reason why the hon. Member for Reading (Mr. Peter Emery) should not exercise his right to speak. He has not spoken before on this Amendment.

§ Mr. Emery
I was saying that I was sorry that the hon. Member for Buckingham had paid one of his lightning incursions into the Chamber, interjected and gone out again—a habit for which he is becoming famous—because this point illustrates the matter he raised.
We make no pretence that this is a simple matter. The hon. Member for 235 Westhoughton (Mr. J. T. Price) knows that it is complex. He served on the Standing Committee and he knows that the point was not properly covered there. We had believed that these Amendments would be taken differently. My hon. Friend the Member for Wycombe (Mr. John Hall) dealt particularly with Amendment No. 37. I have been asked to deal with Amendment No. 39.

Mr. J. T. Price
rose—

§ Mr. Emery
Let us press on. This is important. At this hour I am not going to get factious. I am posing three questions to the President of the Board of Trade. If he can answer me perhaps we can proceed to the next Amendment.

§ Sir Eric Fletcher
My right hon. Friend the President of the Board of Trade having exhausted his right to speak—

§ Mr. Deputy-Speaker
Order. The Minister in charge of the Bill has not exhausted his right to speak if he wishes to do so.

§ Sir Eric Fletcher
Whether he has exhausted his right to speak or not, Mr. Deputy-Speaker, perhaps, having started, I may try to satisfy, indirectly through the hon. Member for Reading (Mr. Emery), the hon. Member for Southend, West (Mr. Channon) who also has not, I believe, exhausted his right. Indeed, he has not spoken at all but nevertheless tried to raise a point vicariously.
The question was as to why it is necessary to incorporate under this Amendment the provisions of Section 3(3) of the 1948 Act. The explanation is simple. As hon. Members are interested, perhaps I should try to spell it out for their convenience. The Act went to the trouble of analysing the conditions in which supply of goods takes place in order to make sure that there was complete coverage. Section 3(3) says: Where goods of any description are the subject of different forms of supply, the references in the preceding provisions of this section to the supply of the goods … shall be construed as references to any of those forms of supply taken separately, to all those forms of supply taken together, or to any of those forms of supply taken in groups, according as the Board of Trade or the Commission, as the case may be, think proper in all the circumstances;". 236 That was to ensure that there should be proper coverage of the supply of goods.
In this Bill we are extending the operation of the monopolies complex both to services and to mergers. It is, therefore, necessary in order to ensure conformity with the provisions of the 1948 Act, that there should be an Amendment to extend the provisions of Section 3(3), to all services affected by Clause 2(5)(b), and in order to avoid any possible ambiguity it is desirable that that should be made absolutely explicit. I hope that explanation will satisfy the hon. Gentleman.

§ Mr. Peter Emery
I beg to move, Amendment No. 44, in page 11, line 2, to leave out "to make their report" and insert:

(a) to make a preliminary report on the matter referred within two months of its being referred stating whether (subject to subsection (3) above) subsection 1 (a) and (b) above are satisfied and if the Commission find they are satisfied, whether there is prima facie evidence warranting further investigation that the fact of the enterprises having ceased, in the circumstances of the case, to be distinct enterprises, operates or may be expected to operate against the public interest; and

(b) if the Commission find that there is prima facie evidence, to make their final report.

§ Mr. Deputy-Speaker
It will be convenient to discuss with this Amendment No. 50, in page 12, line 12, after "may", insert: at any time before the Commission makes its preliminary report on the reference under subsection (5) (a) above". 237 and Amendment No. 51, in page 12, line 22, leave out "report is laid before Parliament" and insert: preliminary report is made under subsection (5) (a) above".

§ Mr. Emery
The hon. Member for Westhoughton (Mr. J. T. Price) will be delighted to know that we come to what is an entirely new and different concept, or principle, in the operation of the Bill. I hope we shall now be able to have his opinion whether he thinks it is an advantage or not because quite honestly we in the Committee, and I think that means many people on both sides of the House, were concerned to ensure that reports emanating from the Monopolies Commission should be produced as quickly as possible.
The stage for these next three Amendments is set very much by what the Federation of British Industries said when this Bill was published. On the question of speed they said: If mergers are to be examined before they are completed the examination must be made very quickly indeed if it is not to make the merger impossible. This is really the whole basis of this Amendment, to try to ensure that the right sort of mergers which can bring greater efficiency to British industry are possible and can be brought about without delay. It will be seen that what we are suggesting is that we should insert into the Bill the possibility that a preliminary report on the matter referred to should be made within two months of it being referred, stating whether the Commission are satisfied there is prima facie evidence warranting further investigation or whether they can give a view within two months.
I believe that in most mergers it ought to be quite possible for the Commission to report within eight weeks. As a parallel I use the references to the Prices and Incomes Board which are completed in under eight weeks. These mergers are possibly just as important and it really must be in the interests of the Government to try to ensure that we can get evidence and obtain a view, I do not say verdict, about the merger, preferably within the two-month period. Rather than tie the Commission to saying absolutely within two months, this Amendment allows the Board to be able to give 238 a prima facie judgment and say there is need for greater evidence and for further investigation. This would allow the Commission to take the extra period to make its final report.
2.0 a.m.
It is important to understand the reason for this necessity. In certain instances where firms are about to merge, where the level of production and consumption combined would be above one-third or where the financial limit of £5 million would be exceeded, the smaller firm, perhaps with a production of only 5 per cent. and a capital of only £½ million, might well be open to bid, take-over or merger with another company and the joint enterprise might not fall within the scope of a reference to the Monopolies Commission.
There might be a merger between firms A and B which requires reference to the Commission, but, while the acceptability of the merger is being considered, firm Z might make a bid for firm B because those two would not fall within the scope of reference to the Commission; the President of the Board of Trade would not have power to make the reference in this kind of merger. We are giving rise to the possibility that where larger firms might wish to merge with small firms, if they believe that there will be a long delay in the making of a decision they might well not bother to go ahead with the unification of parts of the industry with which they are concerned. It is, therefore, of the greatest importance to obtain speed.
Secondly, it is obvious that if we ensure speed, there will be little necessity for unscrambling. If speed is achieved, we will obviate this much more difficult problem. In some of our debates, there is reference after reference by the Minister of State to the importance of being able to stop mergers rather than having to unscramble them. From this viewpoint alone, the Amendment should commend itself to the Treasury Bench, because we are obviously attempting to meet part of the Government's view.
Rather than give further examples, I have, I hope, explained concisely the aim of the Amendment. The other Amendments which we are taking with it are consequential. I hope that the Government may be able to surprise us all by 239 accepting the Amendment. Although it was drafted by one of my legal colleagues, the Government might not agree with its precise terms. If there were some minor alteration the Government wanted to make to the Amendment, then provided they accepted the principle of the Corn-mission, where necessary, having to report within two months or make a prima facie report, we would be more than happy to withdraw the Amendment and allow the Government to introduce another in another place to cope with the matter.

§ Mr. Jay
I am entirely at one with the hon. Gentleman's purpose in this case; we all want to make the procedure as speedy as possible, and not to leave firms in a state of uncertainty; but I am afraid that, having examined these three Amendments, it seems clear to us that they would have the opposite effect of that which he intends. What he is proposing, substantially, is that the Commission should be required to make a preliminary report within two months of a reference. It would be required to do this, not just permitted to do it. What, in effect, the preliminary report would do would be to state whether there was a prima facie case for supposing that the merger would be contrary to the public interest. That, of course, is precisely what the Board of Trade would do in deciding whether to refer or not to refer the merger in the first place. If there were not, in the view of the Board of Trade, a prima facie case, it would not refer that case. If the Commission were then to spend two months in considering whether there was a prima facie case it would merely be repeating the process which the Board of Trade had already gone through. The net effect, therefore, would be to insert three stages instead of two stages in the whole operation.
The Board considers whether there is a prima facie case. If there is it refers it to the Commission. The Commission, within a six months' period normally, makes up its mind. Under the hon. Gentleman's proposal, the Board of Trade has to decide whether there is a prima facie case; then within two months the Commission has to decide again whether there is a prima facie case, and, if it thinks there is, it will have to proceed to its substantive examination.
240 There is nothing in the Bill to prevent the Commission from coming to a conclusion within six weeks or eight weeks that there is, after all, no prima facie case, and forthwith informing the Board of Trade of that view. Therefore, by this Amendment I think we should be inserting a third and unnecessary stage into the procedure.

§ Mr. Peter Emery
I find it somewhat hard to follow the logic of the President of the Board of Trade.

§ Mr. Darling
Impossible! It was perfect.

§ Mr. Emery
It was not perfect logic. We are not inserting an extra stage, because we are not withdrawing the power of the Commission to make a final report within eight weeks. We are not taking away the power of the Commission to finalise its report within eight weeks.

§ Mr. Jay
The hon. Gentleman will agree that he is requiring the Commission to make a preliminary report? Therefore, though he is not taking away the existing powers, he is imposing a further duty upon it.

§ Mr. Emery
I think there is a misunderstanding about this, because I do not think it is logical, if the Commission is able to make its final report within two weeks, to suggest that there is anything in the Amendment which makes it, before producing its final report, produce a previous—a prima facie—one.
There is nothing in the Amendment which requires that. It requires that if there has not been a final report within eight weeks, a prima facie statement must be made by the Commission. I do not want to pursue this argument too far, but that is our intention. I do not want to bring in the complications to which the right hon. Gentleman referred, and that is why I said that I did not think his statement was logical. I cannot see why, as long as the end product is achieved within eight weeks, we have to have a prima facie report. It is only if the end-product is not achieved within that time that there must be a prima facie report from the Commission.
I ask the right hon. Gentleman to look at this matter again, because we both wish 241 to obtain the same result. There will be an extra stage only if there has not been a finalised report within eight weeks, and that extra stage will of course help the firm to know where it stands. This is not a matter of politics. It is a matter of easing the Commission's operations. Even if the right hon. Gentleman argues, which I do not think he can, that the Amendment does not do what I intend it to do, he knows what I am trying to do, and I should like his comments on that.

§ Sir J. Eden
In practice, I think that companies contemplating a merger will, if they think that it is likely to be the subject of reference, take the precaution of having discussions with the Board of Trade before things get very far advanced. I should have thought that it was at that stage of the discussions that as it were a prima facie case would be made out, but I agree with my hon. Friend the Member for Reading (Mr. Peter Emery) that six months is clearly too long a period.
I take the point made by the right hon. Gentleman that this is a maximum figure, and that if the Commission's findings can be made known at any point earlier than six months that will be done, but I hope that it will not be necessary to take as much as six months to produce a report, because this would be subsequent to the point at which terms had been agreed between the interested parties, and there might well be a change in the circumstances under which the merger terms had been agreed. If the merging companies were required to hold up proceedings for as long as six months pending investigation by the Board of Trade, the chances are that they would say that there was no point in proceeding with the merger.
I do not think that the right hon. Gentleman wants that to happen, and there must, therefore, be some alteration to this proposal to allow the Commission six months in which to make its findings known. If the Amendment as drafted will not achieve what both sides want to achieve, I hope that the Government will take the opportunity of making an appropriate Amendment in another place to ensure that there is no undue delay between a reference being made and the publication of the Commission's report.

§ Mr. Jay
My belief is that what I said earlier is correct. I will examine the issue again to make certain and make any change should that prove necessary in such remaining stages as there are of the Bill. I believe that the position is as I have said.

§ Mr. Peter Emery
I thank the President of the Board of Trade for that. With that undertaking I beg to ask leave to withdraw the Amendment.

§ Mr. Higgins
Encouraged by the undertaking made by the President of the Board of Trade in the last debate, I beg to move Amendment No. 45, in page 11, line 3, leave out from "within" to "or" in line 4 and insert: such period, not exceeding six months, from the date on which the reference is made as may be specified by the Board of Trade in the reference".

§ The Speaker
It would be convenient if we also discussed Amendment No. 46, in page 11, line 6, leave out "six months" and insert "the period specified in the reference".

§ Mr. Higgins
The object of these two Amendments, as in the previous debate, is to speed up the procedure which is undertaken when a merger comes up for consideration. It was agreed in Committee that we should find in most cases that the proceedings could be carried out satisfactorily in less than six months, certainly in less than nine months, and that generally speaking the period of six or nine months would be the maximum period which would be required for the investigation.
Bearing in mind what was said in Committee, the object of these Amendments is to enable the Board of Trade to insert in place of the words "six months" a specific time in which it would hope to receive a report back from the Monopolies Commission. If it were found impossible for the Commission to report in the time specified by the Board of Trade, then clearly they would be allowed to apply for an extension. It seems to us on this side of the House and I would think on the other side as well that there is a grave danger that unless these investigations into proposed mergers are carried out with speed, mergers which 243 are in the public interest and which may lead to greater efficiency in the economy and greater competitiveness in export markets, may not take place simply because negotiations have broken down by the time they have been referred to the commission, considered and referred back.
For this reason I hope that the Minister of State will feel he can accept our Amendments.
I would also like to clarify a point made by the President of the Board of Trade in the previous debate which seems relevant to this debate as well. As I understand it, he is proposing that the Board of Trade shall carry out a prima facie investigation on the basis presumably of facts presented to him by the firms concerned, and he is then going to decide whether or not to refer it to the Commission. When replying, could the Minister of State make clear whether if the Board of Trade looks into the prima facie case and decides that they are not going to refer it to the Commission, whether this can effectively be taken as a negative clearance, provided no new facts become apparent subsequently, in which case, of course, the whole matter would fall to the ground and would have to be reconsidered? It would be reasonable for the firm to go ahead on that basis. I think that what the President was saying indicates that this was his intention, but as it is not written into the Bill in that form, I hope we will have that point clarified when the Minister of State replies.

§ Mr. Darling
The questions that the hon. Member for Worthing (Mr. Higgins) has put to me at the end are not strictly relevant to this Amendment, but I can assure him that after examination if the Board of Trade come to the conclusion that the merger is not going to be sent to the Monopolies Commission, everyone will know that the merger is not to be sent. What will happen in practice, as the hon. Member for Bournemouth, West (Sir J. Eden) said, is that the firms concerned will be in touch with the Board of Trade, the matter will be discussed within the Board of Trade and they will know what the situation is.
There are practical difficulties about the Amendments. I disagree with the 244 suggestion that the Amendments will speed up the work of the Commission. The practical difficulty is that when a reference is made the Board of Trade will not be able to say to a week or perhaps a month how long the investigation ought to take, because the investigation itself might throw up problems of great complexity. There might be intricate matters to be examined which were not thought of in detail when the reference was made, and time might be taken in assessing likely developments before making a reference which would, of course, prolong the total process.
It may be that firms under investigation, although not deliberately unco-operative, will be slow in bringing evidence forward. In most circumstances, as we see it, the Board of Trade would be compelled to play safe and to specify the six months maximum. But maybe it will not work like that, and I propose to shatter the House by accepting the Amendment.

§ Mr. Peter Emery
We are delighted to be shattered in that manner. The Minister of State says that he is compelled to play safe. His safest way is to accept Conservative Amendments, and we are delighted that he has done so.

§ Mr. Speaker
May I inquire whether the "shattering" process also extends to Amendment No. 46?

§ Mr. Darling
Yes, Sir.
Further Amendment made: In page 11, line 6, leave out "six months" and insert the period specified in the reference".—[Mr. Higgins.]

§ Mr. Darling
I beg to move Amendment No. 47, in page 11, line 26, at the end to insert: (7) In determining whether to refer a matter to the Commission under this section, the Board shall have regard, with a view to the prevention or removal of uncertainty, to the need for making a determination as soon as is reasonably practicable. The Amendment carries out an undertaking which we gave in Committee. It will require the Board of Trade to act with all due expedition in deciding whether to refer a merger to the Monopolies Commission. We agreed with views put forward in Committee about 245 the legitimate desire of firms and companies which may be involved in these processes to know as soon as possible where they stand, and the Amendment goes as far as I think it right to go to meet the views expressed in Committee.

§ Mr. Patrick Jenkin
I should like to ask the Minister of State a question. I must confess that I am not wholly sure that it arises out of the Amendment, but I hope that he will answer it. Is the Board of Trade, before the Bill reaches the Statue Book, prepared to entertain inquiries from industry about prospective mergers? If not, there is likely to be a gap after the Bill becomes an Act when inquiries are going on and before people will feel free to proceed with mergers which they have in mind.

§ Mr. Darling
For months the Board of Trade has been doing precisely this.

§ Mr. Emery
I should like to take up the cue of "all due expedition", which phrase was mentioned by the Minister of State. This meets the point on which he gave an undertaking to the Committee. By these Amendments we are making much more clear to the public and, indeed, to the Commission the need for speed, for all due expedition, and I shall do no more than welcome this Amendment and say that we are pleased to see it on the Order Paper.