§ Where not less than two years have elapsed since the date of a merger, a reference to the Commission may be made under this Act, but if the merger concerned has already been the subject of a reference under section 64 or section 74 of this Act, the reference shall not be made earlier than three years after the date on which the report of the Commission or the earlier reference was laid before Parliament.—[Mr. Millan.]
§ Brought up, and read the First time.
§ 7.30 p.m.
§ Mr. MillanI beg to move, That the clause be read a Second time.
The new clause would allow a reference to the Monopolies Commission of a merger that has already taken place, so that the commission could examine its results and compare them with the expectations and with the original claims made by the merging parties for the benefits that would accrue. This matter was discussed in Committee, when I quoted the hon. and learned Member for Darwen (Mr. Fletcher-Cooke). I am glad to see him here, and I hope that he will support the new clause.
One of the difficulties with monopolies, and particularly mergers, legislation is that little information is available about the results of mergers that have taken place and the benefits or otherwise that mergers bring to the economy and the public interest as a whole.
A certain amount of work has been published on the results of mergers, but most of it is fairly inconclusive. Much of it demonstrates that a good many of the claims made for mergers at the time of the mergers are falsified by subsequent events. The advantages claimed seldom occur—advantages such as increases in profitability and productivity and better opportunities for the workers, and so on. Many of these things do not happen in practice. There is, therefore, 1592 with the benefit of hindsight, a case for saying that it would have been far better in the public interest and for the efficiency of the economy if the merger had never taken place.
A report by the National Institute for Economic and Social Research on the increasing concentration in private industry is due for publication within the next few weeks. The Under-Secretary very kindly made available in the Library a printer's proof copy of that report. I have read it very quickly, without considering it in detail, as will be necessary if we are to draw the appropriate lessons from it. In the context of the new clause, the report confirms what I have said—that is, that there is a lack of information about the results of mergers and a good deal of justifiable scepticism whether the majority of mergers have had the favourable results that were claimed for them.
In those circumstances it would be salutary—indeed, it is necessary to our understanding of the whole merger situation and the development of a coherent, intelligible mergers policy—to have the opportunity available to the Monopolies and Mergers Commission in appropriate circumstances to investigate mergers which have already taken place. That is the purpose of the new clause.
It is not my intention that virtually any merger which had taken place should be investigated at some time after it had taken place, the Monopolies Commission having allowed it without investigation. It is certainly not my intention that this power should be used regularly or on a very extensive scale. But it is a very important power which ought to be available to the Government and the Monopolies and Mergers Commission where circumstances indicate that this kind of inquiry would be sensible.
The purpose of the inquiry would not only be to bring out the facts about the particular situation being investigated. It would also increase our knowledge of the effects of mergers generally so that we could adopt a more coherent mergers 1593 policy and have clear ideas about what that should be.
On Second Reading I said that we were facing a situation of increasing concentration in private manufacturing industry. I repeat what I said then, that the Government should adopt a much more rigorous and sceptical attitude towards mergers than has been adopted by any Government, including the previous Labour Government.
That is the standpoint which my hon. Friends and I have adopted in approaching the Bill. It is in line with this that we want these additional powers to be placed in the Bill. As we are now on Report, I shall not repeat many of the arguments about increasing concentration in private manufacturing industry. We had those arguments in Committee. We hold very strongly the views which were expressed then.
There are great dangers in the present situation of increasing concentration. Our mergers policy should be developed towards at least slowing down this increasing concentration in industry. Whether or not one takes that view, however, one of the essential things which we ought to have is a good deal more information about the results of mergers which have taken place so that we can develop policy more intelligently. It is the purpose of the new clause to give us that additional information.
§ Mr. Charles Fletcher-Cooke (Darwen)It was very kind of the hon. Member for Glasgow, Craigton (Mr. Millan) to refer to the fact that I have rejoined the column after many months of absence. It will come as no surprise to him that I agree with almost all that he has said, particularly in view of the short and attractive manner in which he put the point.
It is certainly true that the claims made for mergers, both before the Monopolies Commission and in many other ways, have frequently not been justified by the events two or three years later, and sometimes even later than that. Therefore, it is important that studies should be made, in so far as that is possible, of the results of mergers, to test to what extent the claims that were made are in the 1594 event justified. Whether they should be made as a matter of great but only academic interest by the Monopolies and Mergers Commissions is a question.
What would the Monopolies and Mergers Commission do in such circumstances? After experience of a merger, either a merger allowed by the commission or a merger which took place without a reference, if two or three years later, as the case may be, the commission decided that on the whole the claims made by those anxious to merge had not been fully justified, is the hon. Gentleman suggesting that there should be a "de-mergerisation"? That would be an extremely heavy hammer with which to crack the nut. It might be, for example, that the fulfilment of the claims by those in favour of the merger was delayed longer than was expected. It might be that another four or five years would prove that they were right. But if after two or three years they are found not to have reached the expectations but that, nevertheless, the organisation was treading water, it would be an extreme act to "de-merger" it because it had not satisfied all the hopes. The hon. Member is nodding in agreement with me to that extent.
It is only because I fear that this would be using the Monopolies and Mergers Commission more as a seminar or a research group—no doubt a very powerful group—rather than as an instrument of activity and action, that I doubt whether this power is justified. I am open-minded about it. I shall listen to what my hon. Friend the Minister says about it with the greatest interest. He must meet the basic philosophy of the hon. Member for Craigton, namely, that mergers have not, by and large, justified those who have advocated them, as far as we can see.
I have not had the opportunity of reading the draft report mentioned by the hon. Gentleman but I accept from him that this is its general message. That being so, we need some method of testing whether the merger policy is right. My only doubt is whether it is right to use the Monopolies and Mergers Commission for this purpose, bearing in mind that it is difficult to see what sort of action could result from the kind of report one might get, which 1595 may be "The claims have not been justified, but it would be unthinkable after two or three years to try to unscramble the omelette and restore the eggs in their shells".
That is my approach. I shall listen to what my hon. Friend the Minister has to say with great interest.
§ 7.45 p.m.
§ Mr. EmeryThe purpose of the amendment, as the hon. Member for Glasgow, Craigton (Mr. Millan) said, is to allow the Secretary of State to refer completed mergers to the commission after a lapse of two years and, in certain circumstances, three years if the merger had been subject to a reference. I must point out to the Opposition, in case they want to vote on the clause, that it is clearly technically defective, in that it is not stated whether the assets and monopoly tests in Clause 64 should be applied as at the date of the merger or the date of consideration for a reference after two or three years. If the clause were carried that factor would have to be made clear. Nor is it clear what sort of report is required from the commission, or—and this is the major point which was so ably sketched out by my hon. and learned Friend the Member for Darwen (Mr. Fletcher-Cooke)—what action, if any, should follow. I was glad to see that he gave up the term "demer-gerisation"—which seems to me a ghastly piece of English—for the more simple "unscrambling" of a merger. Those who are proposing this action have neglected to say how that would be done.
There are many things which it is right that I should make clear. We have undertaken to try to ensure that more information is made known about mergers and a number of learned individuals, not only right hon. and hon. Members but people outside, want to know more about what has been the outcome for companies once they have merged. The report of the National Institute for Economic and Social Research, which will soon be published and about which the hon. Member for Craigton commented a little, will go some way to providing information along those lines.
The Government wish to ensure that there is a full and proper rationalisation of industry for the benefit of the community as a whole, but they do not want bigness for its own sake, nor do they 1596 want to see many of the medium and small companies which have played a major part in the British economy disappearing just because a large conglomerate wants to gobble them up. In the same way, there is considerable concern in certain areas about mergers which lead to the manufacturer carrying his interest in and his control of his product through to the retail or marketing side. It would be wrong to suggest that the Government are not concerned about this because we are.
To some extent the information is already available in certain ways. Annual reports, Press comments, articles and individual pieces of research, particularly in learned journals, can provide it. The Government accept that there is a need for information on a continuing basis and on the experience of companies after mergers. However, this can best be met by a follow up responsibility placed upon the Director and through research. It would place a very grave burden of uncertainty on the shoulders of the companies concerned if they were to remain indefinitely subject to a reference to the commission. If the merger were suddenly referred back again after a company had been in operation for two or three years, it would be bound to have an adverse effect upon its operations and upon confidence in the company and its products. Therefore, to remain indefinitely subject to a reference to the Commission, or even to a series of references at intervals—as would be possible under the clause, once there had been a merger falling within the scope of the Act—is unacceptable.
We understand the concern to obtain information expressed by the hon. Member for Craigton and by my hon. and learned Friend, but it would not be right to accept the new clause, because it would go much further than is desirable and would put in jeopardy industries which had merged—and that would be particularly deleterious. Therefore, I must ask the House to reject the clause.
§ Mr. MillanI do not accept the Minister's arguments about uncertainty. Those arguments could equally well be made against the whole of the monopoly legislation, because any company in a technical monopoly situation could be referred to the commission at any time. As was made clear by the Minister during 1597 our proceedings, by reducing the monopolies criterion from one-third to one-quarter, as we are seeking to do in the Bill, we are bringing more than 100 new products within that criterion, and therefore we are potentially subjecting about 100 new companies to monopoly investigation.
If all the difficulties arise from companies being exposed to the risk of investigation under the clause, the same difficulties must arise from the Government's own change in the criterion in the Bill. Of course, if people who are not at one time subject to investigation find themselves potentially subject to investigation they are placed in a certain amount of uncertainty. However, it also encourages them to behave in a responsible and respectable manner and to me that is not a disadvantage. It is a considerable advantage. It is not enough to argue against the proposal on the basis of uncertainty, as the Minister has sought to do. The hon. and learned Member for Darwen (Mr. Fletcher-Cooke) raised a valid point. If the clause were passed, what would happen? Would there then be an availability of power for the merged companies to be demerged, and for the divestment of their assets, and so on, or would this simply be producing additional information on which we could more certainly base our merger policy in the future? Basically, I have the second consideration in mind, not because I do not want to see the divesting powers contained in the Bill and in present legislation being used. It is most unsatisfactory that the divesting powers provided in the 1965 Act have not been used in a single instance since then, but they are continued in the Bill and we can always hope for something in the future.
There is another piece of uncertainty which hangs over every technical monopoly in this country. If there is a reference to the commission the result may be a recommendation for the breaking up of the company. However, I should like to see the prevention of undesirable mergers. I am much more interested to see references made before a merger goes through, so that they can be stopped if they are undesirable. That should be the object of the legislation.
1598 Later amendments provide for automatic references to the Monopolies and Mergers Commission in certain circumstances if certain mergers met certain criteria. There is an implication that many of these mergers would be stopped. The basic objective must be to get the references in the first place. I should be happy, if we had the kind of reference policy which we should have, for the clause to be used simply to provide more information and for the various other powers not to be attracted to the clause.
The clause as it stands is uncertain. It could be used one way or the other. If the clause were accepted a considerable number of other amendments would be made. If the amendments were made in a way that did not result in subsequent Government action, I should regard that as a considerable improvement.
I remind the House that the Bill already contains provisions for references of a sort for which no specific action follows. For example, Clause 77 deals with general references to the Monopolies and Mergers Commission. None of the powers otherwise available to Ministers follows from that clause. Clause 78, to which we have strong objections, deals with references to restrictive labour practices. It includes no power on the part of the Minister to act specifically on the commission's report of a restrictive practice. I do not say that I should not like some additional powers to be available. If they made the clause more acceptable I should be happy for the new clause to be accepted on that basis. If the clause were accepted, the necessary amendments to the Bill could provide for that situation.
I am absolutely sure that the kind of power which the clause would provide need not be used frequently with a more active merger policy. Nevertheless, it should be part of the armoury available to the Government and to the commission in dealing with mergers.
As the Government are obviously not willing to accept new Clause 7, and as I do not consider the arguments which they have put forward to be valid or substantial, I recommend my hon. Friends to press the new clause to a Division.
§ Question put, That the clause be read a Second time:—
1600§ The house divided: Ayes 159, Noes 177.
1601| Division No. 138.] | AYES | 17.58 p.m. |
| Archer, Peter (Rowley Regis) | Forrester, John | Morris, Alfred (Wythenshawe) |
| Armstrong, Ernest | Galpern, Sir Myer | Moyle, Roland |
| Ashton, Joe | Gourlay, Harry | Murray, Ronald King |
| Barnett, Joel (Heywood and Royton) | Grant, John D. (Islington, E.) | Oakes, Gordon |
| Bennett, James (Glasgow, Bridgeton) | Grimond, Rt. Hn. J. | O'Halloran, Michael |
| Bishop E S. | Hamilton, James (Bothwell) | O'Malloy, Brian |
| Boardman, H. (Leigh) | Hamilton, William (File, W.) | Orbach, Maurice |
| Booth, Albert | Harrison, Walter (Wakefield) | Oswald, Thomas |
| Bottomley, Rt. Hn. Arthur | Hattersley, Roy | Owen, Dr. David (Plymouth, Sutton) |
| Boyden, James (Bishop Auckland) | Heffer, Eric S. | Paget, R. T. |
| Brown, Hugh D. (G'gow, Provan) | Hooson, Emlyn | Palmer, Arthur |
| Buchan, Norman | Horam, John | Pardoe, John |
| Butler, Mrs. Joyce (Wood Green) | Huckfield, Leslie | Parry, Robert (Liverpool, Exchange) |
| Callaghan, Rt. Hn. James | Hughes, Robert (Aberdeen, N.) | Pavitt, Laurie |
| Campbell, I. (Dunbartonshire, W.) | Janner, Greville | Prentice, Rt. Hn. Reg. |
| Cant, R B | Jay, Rt. Hn. Dougias | Radice, Giles |
| Carmichael, Neil | Jenkins, Rt. Hn. Roy (Stechford) | Reed, D. (Sedgefield) |
| Carter, Ray (Birmingh'm, Northfield) | John, Brynmor | Rhodes, Geoffrey |
| Castle, Rt. Hn. Barbara | Johnson, James (Kston-on-Hull, W.) | Roberts, Rt. Hn.Goronwy (Caernarvon) |
| Cocks' Michael (Bristol, S.) | Johnston, Russell (Inverness) | Robertson, John (Paisley) |
| Coleman, Donald | Jones, Rt. Hn. Sir Elwyn (W.Ham,S.) | Rose, Paul B. |
| Concannon, J. D. | Jones, Gwynoro (Carmarthen) | Ross, Rt. Hn. William (Kilmarnock) |
| Conlan, Bernard | Jones, T. Alec (Rhondda, W.) | Rowlands, Ted |
| Cox, Thomas (Wandsworth, C.) | Judd, Frank | Sandelson, Nevllle |
| Crawshaw, Richard | Kaufman, Gerald | Sheldon, Robert (Ashton-under-Lyne) |
| Cronin, John | Kelley, R'chard | Short, R, Hn.Edward (N'c'tle-u-Tyne) |
| Crosland, Rt. Hn. Anthony | Kerr, Russell | Silkin, Hn. S. C. (Dulwich |
| Cunningham, G. (Islington, S.W.) | Kinock, Neil | Smith, John (Lanarkshire, N.) |
| Cunningham, Dr. J. A. (Whitehaven) | Lambie, David | Spearing, Nigel |
| Davidson, Arthur | Lamborn, Harry | S oddart, David (Swindon) |
| Davies, Denzil (Lianelly) | Lamond, James | Stonehouse, Rt. Hn. John |
| Davies, G. Elfed (Rhondda, (E.) | Latham, Arthur | Strang, Gavin |
| Davies, Ifor (Gower) | Lawson, George | Summerskill, Hn. Dr. Shirley |
| Davies' Clinton, (Hackney. C) | Lee, Rt. Hn. Frederick | Taverne, Dick |
| Davies, Terry (Bromsgrove) | Leonard, Dick | Thomas, Jeffrey (Abertillery) |
| Lestor, Miss Joan | Tope, Graham | |
| Deakins, Eric | Lewis, Ron (Carlisle) | Tomney, Frank |
| Dell, Rt. Hn. Edmund | Lomas, Kenneth | Tuck, Raphael |
| Dempsey, James | Loughlin, Charles | Varley, Eric G. |
| Doig, peter | Loughlin, Charles | Varley, Eric G. |
| Douglas, Dick (Stirlingshire, E.) | Lyins, Edward (Bradford, E.) | Walker, Harold (Doncaster) |
| Douglas, Dick. | McBride, Neil | Wallace, George |
| Douglas-Mann, Bruce | McCartney, Hugh | Weitzman, David |
| Duffy, A.E.P. | McElhone, Frank | Wells, William (Walsall, N.) |
| Dunn, James A. | Mackenzie, Gregor | White, James (Glasgow, Pollok) |
| Dunnelt, Jacl | Maclennan, Robert | Willey, Rt. Hn. Frederick |
| Eadie, Alex | McMillan, Tom (Glasgow, C.) | Williams, Alan (Swansea, W.) |
| Edwards, Robert (Bilston) | Mallalieu, J. P. W. (Huddersfield.E.) | Williams, W. T. (Warrington) |
| Edwards, William (Merioneth) | Marsden, F. | Wilson, Alexander (Hamilton) |
| English, Michael | Marshall, Dr. Edmund | Wilson, William (Coventry, S.) |
| Evans, Fred | Meacher, Michael | Wool, Robert |
| Ewing, Harry | Melllsh, Rt. Hn. Robert | |
| Fernyhough, Rt. Hn. E. | Millan, Bruce | TELLERS FOR THE AYES: |
| Fletcher, Ted (Darlington) | Milne, Edward | Mr. Joseph Harper and |
| Foot, Michael | Mitchell, R. C. (S'hampton, Itchen) | Mr. Ernest G. Perry. |
| Ford, Ben | Molloy, William | |
| NOES | ||
| Allason, James (Hemel Hempstead) | Bullus, Sir Eric | Finsberg, Geoffrey (Hampstead) |
| Atkins, Humphrey | Butler, Adam (Bosworth) | Fisher, Nigel (Surblton) |
| Awdry, Daniel | Chapman, Sydney | Fletcher-Cooke, Charles |
| Baker, Kenneth (St. Marylebone) | Clark, William (Surrey, E.) | Fookes, Miss Janet |
| Baker, W. H. K. (Banff) | Clarke, Kenneth (Rushcliffe) | Fowler, Norman |
| Balniel, Rt. Hn. Lord | Ciegg, Walter | Gardner, Edward |
| Batsford, Brian | Coombs, Derek | Gibson-Watt, David |
| Beamish, Col. Sir Tufton | Cormack, Patrick | Glimour, Ian (Norfolk, C.) |
| Biffen, John | Costain, A. P. | Godber, Rt. Hn. J. B. |
| Biggs-Davison, John | Crowder, F. P. | Goodhart, Philip |
| Blaker, Peter | d'Avigdor-Goldsmid, Sir Henry | Gorst, John |
| Boardman, Tom (Leicester, S.W.) | d'Avigdor-Goldsmid, Maj.-Gen, Jack | Gower, Raymond |
| Boscawen, Hn. Robert | Deedes, Rt. Hn. W. F. | Grant, Anthony (Harrow, C.) |
| Bossom, Sir Clive | Dixon, Piers | Gray, Hamish |
| Bowden, Andrew | Eden, Rt. Hn. Sir John | Green, Alan |
| Brinton, Sir Tatton | Edwards, Nicholas (Pembroke) | Griffiths, Eldon (Pury St. Edmunds) |
| Brocklebank-Fowler, Christopher | Elliott, R. W. (N'c'tle-upon-Tyne, N.) | Grylis, Michael |
| Bruce-Gardyne, J. | Emery, Peter | Gummer, J. Selwyn |
| Bryan, Sir Paul | Eyre, Reginald | Gurden, Harold |
| Bucharun-simith, Allck (Angus, N&M) | Fanner, Mrs. Peggy | Hall, John (Wycombe) |
| Harrison, Brlan (Maldon) | Maude, Angus | Roberts, Wyn (Conway) |
| Harrison, Col. Sir Harwood (Eye) | Mawby, Ray | Scott-Hopkins, James |
| Haselhurst, Alan | Maxwell-Hyslop, R. J. | Shaw, Michael (Sc'b'gh & Whltby) |
| Hastings, Stephen | Meyer, Sir Anthony | Shelton, William (Clapham) |
| Havers, Sir Michael | Mills, Peter (Torrington) | Shersby, Michael |
| Hawkins, Paul | Miscampbell, Norman | Sinclair, Sir George |
| Hayhoe, Barney | Mitchell,Lt.-Col.C.(Aberdeenshlre,W) | Skeet, T. H. H. |
| Hicks, Robert | Mitchell, David (Baslngstoke) | Sorel, Harold |
| Higgins, Terence L. | Moate, Roger | Speed, Keith |
| Hiley, Joseph | Money, Ernle | Spence, John |
| Hill, John E. B. (Norfolk, S.) | Monks, Mrs. Connle | Sproat, lain |
| Hill, S. James A.(Southampton,Test) | Monro, Hector | Stainton, Keith |
| Hornby, Richard | Montgomery, Fergus | Stewart-Smith, Geoffrey (Belper) |
| Howe, Rt. Hn. Sir Geoffrey | More, Jasper | Stokes, John |
| Kowell, David (Guillldford) | Morgan, Geraint (Denbigh) | Stuttaford, Dr. Tom |
| Howell, Ralph (Norfolk, N.) | Morrison, Charles | Sutcliffe, John |
| Hutchison, Michael Clark | Murton, Oscar | Tapsell, Peter |
| Irvine, Bryant Godman (Rye) | Nabarro, Sir Gerald | Taylor,Edward M.(G'gow,Cathcart) |
| James, David | Neave, Airey | Taylor, Frank (Moss Side) |
| Jenkin, Patrick (Woodford) | Normanton, Tom | Taylor, Robert (Croydon, N.W.) |
| Jessel, Toby | Nott, John | Tebbit, Norman |
| Jopling, Michael | Onslow, Cranley | Thomas, John Stradling (Monmouth) |
| Kaberry, Sir Donald | Oppenheim, Mrs. Sally | Thomas. Rt. Hn. Peter (Hendon, S.) |
| Kellett-Bowman, Mrs. Elaine | Owen, ldris (Stockport, N.) | Thompson, Sir Richard (Croydon, S.) |
| King, Evelyn (Dorset, S.) | Page, Rt. Hn. Graham (Crosby) | Trafford, Dr. Anthony |
| Kinsev J. R. | Parkinson, Cecil | Trew, Peter |
| Kitson, Timothy | Pike, Miss Mervyn | Tugendhat, Christopher |
| Knight, Mrs. Jill | Poounder, Rafton | Turton, Rt. Hn. Sir Robin |
| Lamont, Norman | Powell, Rt. Hn. J. Enoch | Waddington, David |
| Lane, David | Price, David (Eastlelgh) | Walder, David (Clitheroe) |
| Langford-Holt, Sir John | Proudfoot, Wilfred | Ward, Dame Irene |
| Le Marchant, Spencer | Pym, Rt. Hn. Francis | White, Roger (Gravesend) |
| Lewis, Kenneth (Rutland) | Raison, Timothy | wilkinson John |
| Loveridge John | Rawlinson, Rt. Hn.Sir Peter | Woodhuse, Hn. Christopher |
| Luce, R.N. | Rees, Peter (Dover) | |
| McCrindle, R. A. | Rees-Davles, W. R. | TELLERS FOR THE NOES: |
| McLaren, Martin | Renton, Rt. Hn. Sir David | Mr.Tim Fortescue and |
| McNair-Wilson, Michael | Rhys Williams, Sir Brandon | Mr. Marcus Fox |
| Mather, Carol | Ridley. Hn. Nicholas |
§ Question accordingly negatived.