HC Deb 07 February 1979 vol 962 cc509-30

Motion made and Question proposed, That this House do now adjourn.—[Mr. Jim Marshall.]

9.14 p.m.

Mr. Andrew Faulds (Warley, East)

It is not too large a claim to make that Averys is the weighing machine industry of the United Kingdom. Since its beginnings in Birmingham in 1730, and during its long-time production in Smethwick, it has been producing every sort of stampable machine to comply with weights and measures legislation. Over that great span of years Averys has developed into the leading designer and manufacturer of weighing machines for trade purposes in our country and abroad, and is now world renowned.

It has become the largest weighing machine servicing authority in Britain, with an emphasis on preventive maintenance servicing of industrial mechanical, industrial electronic and retail machines. Avery machines are used throughout bodies of Government, in the Armed Forces, in hospitals, by the National Coal Board, by the CEGB, by British Rail and in nuclear establishments and by various other bodies. They are used throughout the major industries of Britain—steel, chemicals, shipbuilding, aerospace, textiles and again countless others. They are used in all sectors of private industry, the motor car industry, food, construction and many, many others. They are used by retailers, from supermarkets to corner shops in every village.

I cite all that just to show the extensive usage of Averys products throughout Britain. Because of its long history and its specialised function as a weighing machine manufacturers, Averys has been associated with consumer protection since its inception. Indeed, there is no other enterprise of similar reputation and authority in the United Kingdom, and Averys claim, and I believe rightly, that any change in the drive of its business, or any derogation from its specialist role, would be detrimental to the nation's industrial and commercial life.

Averys Ltd. controls 32 subsidiary companies, 15 of which are United Kingdom companies, and there are associated companies in a number of countries abroad. The subsidiary companies are grouped in three divisions: the weighing and testing division, the general products division and the international division. The turnover of the company has doubled in the five years 1973 to 1977, and its profit return has run at around 15 to 16 per cent. over those years. There are factories producing Averys products in many constituencies throughout Britain.

But last year, on 30 November, the General Electric Company announced that it had made an approach to Avery to discuss the desirability of an association between the two companies. In such sweet terms are takeovers couched. Avery's response was to declare that negotiations on terms for an offer could only start once the commercial and industrial benefits of such a development had been established.

Since then, Averys has had detailed discussions with GEC. It has visited various GEC factories and research facilities to examine the advantages of a merger and to consider whether the resources of GEC would give Averys a greater opportunity to expand and develop new markets. Subsequently, Averys decided that such a merger would benefit neither the industry itself nor its employees, its suppliers or its customers. Now, it is pretty obvious that the Averys activity which GEC is after is that part of its weighing and metering business where the measuring instrument interfaces with computers, data analysers, control systems and other equipment of various kinds to form a total system tailored by the user to his special needs, Averys believes that GEC has failed to appreciate the importance of the mainstream of Averys activity—the production of standard weighing machines, metering equipment, petrol pumps and so on—and the not unreasonable fear has been expressed that GEC would close or offload all aspects of mechanical weighing and other non-electronic products.

The arguments for Averys rejection of the merger are varied and powerful. It believes that it will he to the detriment of the company and its customers if it is acquired by GEC and prevented from working with GEC's competitors. Assurances to the contrary—that it will be able to continue to supply GEC's competitors—really cannot be satisfactory, because GEC's interests will obviously be paramount. Restrictions on the freedom of Averys to negotiate supply contracts with those competitors—whether it be IBM, Xerox, NCR or Hunting—will mean that those companies will turn to American, Continental or Japanese weighing and metering machine manufacturers, and from the national point of view the adverse effect on the United Kingdom's balance of payments would be serious indeed.

Averys intends to seek commercial arrangements with NCR, which is understood to be moving into Europe, for the supply of weighing machines, both to avoid NCR selling into Britain using Continental machines and to add further to the credit balance of payments which Averys already contributes to our economy with a 40 per cent. export performance.

Again, Averys believes that it is important to remain independent in its specialised field to pursue its policy of developing interfaces suitable for any system supplied by others. Its experience has been that involvement is systems engineering impedes development and marketing of standard products, and it is those standard products which form the basis of its strength.

GEC, in its approach to Averys, has made much of the expertise and produc- tion capability that it could bring to Averys. But Averys is already well advanced in the application of electronics to weighing equipment as it has kept abreast of new technologies as they have appeared. Averys produced electrically operated weighing recorders way back in the 1930s, and, since the last war, has introduced advantages such as optical projection and digital encoding and, since 1963, electronic weighing

GEC boasts of its use of microprocessors. But Averys already has scales on the market, and in use, incorporating United States microprocessors, and it intends to research the advantages of Fairchild and NEB microprocessors when they become available from United Kingdom production.

There is another factor. Refined mechanical engineering is an essential element in weighing machine construction. The cost of a microprocessor is only 1.7 per cent. of the material cost of the manufacture of a machine such as the Avery 1750 electronic retail scale.

I hope that that helps to put GEC's preoccupation with electronic expertise into its right perspective.

What about the prospect of an increase in mass production—again a GEC argument? The combined delegation of the management and work force, which has been opposing the takover, argued against such a development because of the effects on workers of boredom and the problems that that brings, that weighing machines need to be adjusted and weighed off individually for weights and measures inspectors and that such machines, therefore, need a high degree of skilled testing and fitting. Mass production does not fit in too well with the essential requirement of refined mechanical engineering.

I believe that we should realise, too, that there is increasing sociological appreciation of the fact that bigger is not necessarily better and that, in most cases, work forces are more content, and industrial performance is higher, in medium-sized firms—firms such as Averys which the workers still think of in this day and age as a family firm. Some of my constituents have records of family involvement in that firm extending over 100 years. This is why they think of it in that familiar sense as a family firm.

Averys argues forcibly that it has never been held back by lack of financial resources. The firm thinks that GEC's proposal has more to do with its need to invest its huge surplus of cash than with sensible commercial reasons. The purchase of an existing and successful company does not, of itself, create new factories or more jobs. We in the West Midlands—and I think that my colleagues will agree with me in this—have suffered gravely from job losses over recent months. About 70,000 jobs have gone in our region where once, because of the special Midland skills, we boasted of our high employment rate.

That brings me to perhaps the most important consideration of all from the point of view of the Member of Parliament for a West Midlands seat. The whole work force of Averys is considerably concerned about job security, and, in view of GEC's track record, who can question that? GEC's numerous takeovers have led to rationalisation and asset-stripping which has caused thousands upon thousands of jobs—men's livelihoods are what we are talking about—to disappear.

To take only one example, when GEC took over the English Electric Company in 1969, that led to a cutback of one-third of the total work force. GEC has actually moved in on about 40 companies in toto, and the outcome has been something in the region of 60,000 jobs lost. In many cases those jobs were livelihoods that were gone for good and were skills lost for ever. To what purpose? It was the pure pursuit of profit—or perhaps I should say the impure pursuit of profit—in the commercial and financial interests of a bidder and of an easy buck for the shareholders of the company.

All the unions in the various Avery factories have risen in opposition to this threatened takeover. I have had representations from the AUEW, UCATT, APEX, TGWU and ASTMS and from members of other craft unions. What I think is very significant is that the management of Averys itself, having examined the prospects and potential of the takeover, has come out strongly in opposition, as was spelt out in the statement of 24 January by the chairman, Mr. Hale, a copy of which I have here.

Such combined work force and management opposition is really a remarkable fact in itself and speaks of the deeply reasoned rejection of GEC's bid for control and absorption. Neither management nor workpeople want GEC, which they see as a vulture of captalist exploitation, to settle on its body industrial and tear apart its livelihood and special skills with its self-seeking talons. The head of that sepulchral creature is, of course, well set in the likeness of Sir Arnold Weinstock, whose commercial bloodsucking capabilities are world renowned.

The combined delegation of work force and management made representations—and very forceful representations they were, because I have read them—to the Office of Fair Trading on 17 January. That combined delegation also had a meeting last Friday with the Secretary of State and my hon. Friend the Minister of State. I think that my hon. Friend the Member for Birmingham, Ladywood (Mr. Sever) was there, as was my right hon. and learned Friend the Member for Warley, West (Mr. Archer), the Solicitor-General, joining in those representations to the Minister with me. I hope that that combined delegation will be coming to the House next week for a meeting with Members of Parliament, when their views can be made known to those of us in the House who care about their future.

There is another most unsatisfactory aspect to this matter. Since Averys rejected the idea of an association in mid-January. GEC has said nothing further. The takeover panel has ruled that since there is no bid situation, as it terms it, there is no requirement on GEC to make any further announcement. This uncertainty is very damaging to Averys, since commercial negotiations and contracts with third parties are obviously inhibited and adversely affected.

The revealing fact, of course, is that GEC is conducting its affairs in its usual aggressive way by not acting within the spirit of the takeover panel's rules, even if it is acting within their wording—behaviour, of course, that the City has learned to expect from Sir Arnold. Perhaps the Minister should look at that aspect of the matter.

But my main appeal to my right hon. Friend the Secretary of State, through the Minister of State, is that when he receives the report from the Office of Fair Trading he should consider, especially and sympathetically, the social effects and job losses of the threatened takeover. I trust that the report will be opposed to the GEC attempt and that the Minister will find in favour of rejection.

If the whole matter has to be referred to the Monopolies and Mergers Commission, one can only hope for rejection of the takeover by that Commission. If not, I do not think that I have to remind the Minister of his powers of making the final decision for himself. For the sake of Avery's excellent industrial record and the livelihoods of its work force, I trust that commercial and compassionate considerations combine to put paid to GEC's avaricious intentions and the effects of those intentions on the life and work of my constituency and those of other constituencies throughout Britain.

9.31 p.m.

Mr. John Sever (Birmingham, Ladywood)

I rise in support of my hon. Friend the Member for Warley, East (Mr. Faulds). I think that the House must concede that he has made a most eloquent and heartfelt speech in support of the people who are working at Averys within his constituency. In a sense, my hon. Friend is very lucky that the factory is not some 200 yards distant from its present location, because he would then not have been able to have involved himself with the splendid people who have come to see us in respect of the problems set before them, for they would have been able to come to see me. I doubt whether they would have had in me a better advocate than my hon. Friend.

None the less, the people working at Averys put to us, at our meeting the other day, two or three central points, upon which my hon. Friend has dwelt. Right up front in the arguments that they put to us was the fact that so many of the families that live in the neighbourhood of the factory are associated with Averys. Many of the people now working there claim lengths of employment that go back for all of their own working lives, and that is associated with lengths of employment of their predecessors which go back throughout their working lives. The record can go back for well over 100 years for very many families who live in the constituencies of Warley, East, Lady- wood and other constituencies in and around Birmingham.

My hon. Friend has touched on most of the matters which we wish the Minister of State to draw to our right hon. Friend's attention, when considering the reports that come to his office on any proposed merger or takeover by the General Electric Company.

The Avery group, which is a very diverse organisation these days, has its roots in industry in the business of weighing machines and measuring devices. In that context it has been operative for a very long time—indeed, throughout all the time that such equipment has been commercially viable.

During the last 15 years the company has kept abreast of all technological developments, both within its own field and in those associated with its areas of activity. This is heartening, because one of the principal arguments which is often advanced for taking smaller companies into the ownership of larger companies is that the smaller company can no longer cope and can no longer manufacture the goods or deliver them or have command of the expertise that is needed for future research and development.

None of these matters can be justifiably argued against Averys. It is in the forefront of its field. Indeed, it is particularly competitive. It has an investment programme, which is now coming to a conclusion, of about £1 million, which has enabled the company to remain in the forefront of its industry. It is not a valid argument to say that the company cannot cope or that it is not viable for the future. I understand that the order books are full, that customers' commitments can be fully met, and that the work force has the skill and expertise to make the products and to deliver them on time.

The technical resources available to the company are considerable. The company appreciated that its business was capable of considerable expansion. It pursued that line of action and was well placed to take advantage of new technology in the form of microprocessing and a new development in the form of total information services.

These are important developments in companies such as Averys. I am advised that the information systems to which I have referred are so expertly developed by this company that it has taken a great number of orders over wide areas of competition, including subsidiaries of GEC. That speaks well for a smaller company which, in the face of ferocious international competition, is able to go into a market, put forward its ideas and expertise, and snatch big orders from important customers.

The representations referred to by my hon. Friend come from far and wide—not only from the trade unions with members working in the company and from other groups such as the trade craft unions, but from the directorate and the management of the company. There has been a united effort on behalf of the company to stave off unwelcome creditors. We should do all we can in this House to protect the interests of those who are in need of protection.

In conclusion, I wish to refer to the personal representations which have been made to several hon. Members about the local position.

Mr. Reginald Eyre (Birmingham, Hall Green)

Will the hon. Gentleman accept that his remarks have the support of all Birmingham Conservative Members?

Mr. Sever

I am prepared to accept that from the hon. Gentleman. As the development of Averys' case is put forward, I am sure that we shall see hon. Members on both sides of the House arguing the case for an independent company.

I wish to emphasise the representations which have been made locally. I refer to representations from APEX—the clerical workers' union of which I am a member—which approached me and explained the hardship experienced by many of its Birmingham members and by West Midland families following recent takeovers, mergers and amalgamations.

My hon. Friend referred to the enormous loss of job opportunities following previous GEC takeovers and the fears in many families in the Birmingham area. Such takeovers are difficult to quantify in terms of human disaster. These considerations will weigh heavily with my hon. Friend the Minister of State, and I know that they will be in the mind of my right hon. Friend the Secretary of State for Prices and Consumer Protection, who ultimately will be asked to take a decision.

9.38 p.m.

Mr. Bruce George (Walsall, South)

I wish to support my hon. Friends the Members for Warley, East (Mr. Faulds) and Birmingham, Ladywood (Mr. Sever). One of the great virtues of this debate—when for an Adjournment debate the House is unusually full—is that we are able to discuss issues other than those which are normally dealt with in a takeover or proposed takeover. A company considering whether to take over another company does not always consider the human side, but only the economic and financial effects. However, in this debate we are able to examine more deeply the human effects on Averys, a company which has had a profitable record but which is being taken over by a larger company.

None of us wishes to attack Sir Arnold Weinstock, who has helped to make his company a major force in British and indeed in world industry. Nevertheless, the work force is terrified at its perception of GEC and Sir Arnold Weinstock. That perception may or may not be right, but the situation of companies that have been taken over by Sir Arnold is fresh in people's memories. This does not encourage those working for Averys to think that their future will he secure if they are taken over.

In my constituency a medium-sized company called Driver Southall Limited is part of the Avery group. It is a highly successful company. Although not unique is my constituency, it is a pleasure to see a company that has a good management team, a contented work force and good relations between management and unions. It is a company that is successfully exploiting the market. We have heard frequently of the use of microprocessors. It was reported recently by the Department of Industry that only some 5 per cent. of companies in Great Britain were using microprocessors. But here is a company pioneering what will be a revolutionary process in modern industry. The company came to my constituency two years ago. It is innovative, excellent and has great prospects.

I would not defend a company purely because employment prospects were possibly to be diminished. As a member of the Labour Party I am obviously concerned at the prospect of job losses, but one's justification must be based on something more. We are resisting this attempted takeover not just because people fear for their jobs but because we cannot see how the national interest will be advanced by this highly effective and efficient company being reluctantly brought into association with GEC.

Although I am not a shareholder in Averys, in a letter sent out to all shareholders in the third paragraph the chairman says: Following these discussions the Board of Averys announces that it considers a merger between the two companies would not benefit either the industry in which it operates or its employees, suppliers or customers. As an independent company, Averys has been able to expand into new markets whenever profitable opportunities have arisen and it has not been, and does not expect to be, constrained from expansion by a lack of technical or financial resources. Averys is at present well advanced in the application of electronics to weighing equipment and has the ability to maintain the necessary development. Also its present independent position enables Averys to provide measuring equipment to all suppliers of total information and control systems throughout the world. These days one rarely finds unanimity between management and unions, and not in every case between union and union. But everyone in this company appears to be opposed to the takeover. I am not filled with affection for free enterprise, and it angers me that the shareholders' interests are always considered in a takeover. There are many other people in this company affected apart from the shareholders, and I care rather less about shareholders' interests than about those who work in the company.

This company is operating well and cannot see any advantage in being taken over. Indeed, quite the reverse. It is fearful of what Sir Arnold has done in the past. If one reads the book "Anatomy of a Merger" by Jones and Marriot, one is not encouraged in the contrary view. Sir Arnold as an ogre is perhaps somewhat overstated. But if one looks at the history surrounding the incorporation of GEC, AEI and English Electric, one has nightmares as to what might happen to other companies.

The Avery company is competitive, its customers are satisfied, the staff are satis- fied and its shareholders appear to be satisfied. What can GEC offer in the way of know-how? The customers could be frightened away, and that is hardly conducive to future profitability.

A number of unions have approached me on this matter. One union official wrote to me saying: Our concern is based on previous takeovers conducted by GEC which have resulted in widespread redundancies. In fact, a number of Driver Southall employees have suffered redundancies as a result of GEC takeovers at other companies. This is further confirmed by the well known reputation of Sir Arnold Weinstock as being an asset stripper. History has shown that not all rationalisations have been successful. I can think of many companies where the process of amalgamation and accumulation has led to a strengthening of the company, and obviously it is vital for our industrial prospects that industry is viable and efficient. If takeovers are neccessary and the workers comply willingly, I would not oppose them per se.

However, in the past we have seen the debit side of rationalisation. Unemployment is certainly one major factor. Because of the fierce combined resistance of the unions and management in this case, I urge the Minister to pass on to his colleagues the views of hon. Members here and to resist this takeover.

The previous Labour Government played a crucial part in facilitating the merger between GEC and English Electric. That may have been a success, but I hope that the Government will look closely at the social and economic arguments in this case and come to the conclusion that GEC should continue in its own highly profitable way but that Averys should also continue what it has done in the past and be able to develop unhindered by the prospect of incorporation against its will into GEC.

9.47 p.m.

Mr. Giles Shaw (Pudsey)

I do not wish to intervene at length. I respect the views of hon. Members who have spoken who are moved primarily by their substantial constituency interest. Perhaps it will add a little breadth to the debate if I put my point of view. Although I do not have a constituency interest, this suggested merger causes me the greatest possible concern. I have had a substantial involvement with Averys because of my involvement with weights and measures legislation. We shall discuss the Weights and Measures Bill in Committee next Tuesday, so it is highly appropriate that we should discuss tonight the future and prospects of the leading manufacturer of metering equipment in this country.

I make three short observations. First, the public interest must be the main concern. We have had a tradition in this country of extremely effective consumer protection through the correct handling and manufacturing of weighing scales and through their wide distribution and service to the consumer. I see no way in which we can say that the industry has faulted the consumer in failing to provide adequate equipment of high standard to sustain value for money at the point of sale.

Secondly, the Avery company has achieved a worldwide reputation. There can be relatively few sectors of British industry in which a world-wide reputation is still jealously guarded. So many sectors have been undermined by foreign competition or innovation in other directions. But the Avery company has been able to achieve a continued success because it has remained at the forefront of its technological development and has extended the range and acceptability of its products.

Thirdly, and particularly important, there can be arguments in a marketing sense for seeing that a merger takes place. However, there can be no such arguments in a market where, despite its size, Averys has pursued a policy that has allowed many other smaller companies to develop. It is not just the only giant in the weighing scales manufacturing industry. There are many other smaller companies, each of which is a specialist in its own right, and they have been able to survive.

Therefore, we are not talking about the overweening power of one major unit in its market. Averys has achieved market stability through its success.

My hon. Friend the Member for Birmingham, Hall Green (Mr. Eyre) recognised that this is an all-party issue. In my constituency there is a satisfactory subsidiary of GEC, and I feel that if the merger goes ahead it could be to the detriment not only of the weighing scale manufacturing industry but of the public at large.

9.51 p.m.

Mr. Eric Ogden (Liverpool, West Derby)

The W. and T. Avery company should be proud that hon. Members from the Midlands have recognised the quality, efficiency and good will of the company in all the tributes that have been paid to it here tonight. Would that every hon. Member could say the same for every other industrial or manufacturing company in this country. The tributes are deserved and should be recognised as such by the House.

I do not intervene simply to show that Liverpool Members have the motto "Ubique", but my hon. Friend the Member for Warley, East (Mr. Faulds) said that W. and T. Avery is not only a Midlands-based company—and I was delighted to hear that there is more unanimity among Midlands Members tonight than there was at this time last night. W. & T. Avery has subsidiaries, service companies and associations in many other parts of the country.

On Merseyside, we have a division of the company called the Ashworth Ross Division, of 50–56 Fox Street, Liverpool 3—a first-class company. It is not situated in my constituency and therefore I have not a direct constituency interest. However, for a Merseyside Member of Parliament, anything that happens in Liverpool is of interest, just as anything that happens in Birmingham is of interest to Midlands Members of Parliament.

The Minister and my hon. Friend the Member for Warley, East know that every Merseyside Member of Parliament received a letter this morning from the office staff of the Ashworth Ross division. The staff wrote to tell us of their deep anxiety and concern at the proposed merger or takeover of "their company", as they called it—with or by GEC. The letters have been passed to the Minister.

Mr. Faulds

In my speech I forgot to mention that my hon. Friend the Member for Portsmouth, North (Mr. Judd) had asked me to say that he has had strong representations from constituents who work in the Havant factory of Averys who, along with the management, are concerned about the threat to their jobs and their livelihood from the threatened takeover.

Mr. Ogden

I am grateful for that intervention, and I am certain that the Minister has noticed that this is not only a Midlands matter—important as that would be—but has ramifications all over the country wherever there is a factory or associate factory of Averys. The workers and the management in those factories are opposed to the merger, and their opposition has been made clear.

The office staff in Liverpool say that their company has real and proper regard for the need to be effective, competitive and viable. They also have regard for the need to maintain present employment and retain maximum employment on Merseyside, to support Government regional policies and to do everything possible to increase employment opportunities within the company. That is not merely a short-term measure—no feather-bedding, carrying or false work-sharing there—but applies to the long term.

It is not for me to judge from outside the relative efficiency or viability of Averys or GEC or to say whether the merger would be good or bad. I do not have the qualifications to do that.

However, there is a major GEC factory in West Derby and regularly over 14 years —too often at times—I have been involved in the affairs of the three GEC companies on that one complex. I have been involved officially, unofficially at union and management level, and all along the line. The factories have had their share of troubles, and only a small part has been of their making. Certainly, the considerable financial losses of parts of the factory complex have been carried for many years, as a conscious decision, by Sir Arnold Weinstock and his company. If I disagreed with anything said by my hon. Friend the Member for Warley, East, it was with some of the adjectives that he used to describe Sir Arnold. He may be firm and hard, but he can have a soft heart and he has directed a great deal of company money to Merseyside, to Northern Ireland and to other parts of the country to maintain employment there.

However, I have to put on record that in 1964 there were 10,000 people working at the GEC factories on East Lancashire Road, Liverpool, and there are now only 2,500 working there. Had it not been for rationalisation and reorganisation, we may not even have had those 2,500 still in work, but, despite everything that has been done, the overall result has been a reduction in unemployment.

We hope that that disastrous trend has been halted. The GEC company has shown its faith in Merseyside. The GEC—Fairchild microchip factory is coming to Merseyside. GEC plans to move to a new start in new factories close by. We have the new GEC-Shreiber factory at Runcorn coming along. We have a new start for GEC on Merseyside.

My only reason for intervening is to confirm that the problem is not just a matter for the Midlands. Averys-GEC concerns many other parts of the country. We have now put on record that the workers on Merseyside support the representations of their colleagues in other factories. Above all, we ask the Minister—though, with his reputation, we have no need to ask—to have regard to the security of employment, not just in the short term but in the long term, and to bear in mind the representations made by workers on Merseyside and, in other factories.

9.56 p.m.

Mr. Julius Silverman (Birmingham, Erdington)

W. and T. Avery has been part of the Birmingham area scene for many years and is an integral part of Birmingham industry. Its passing as a separate unit would be regretted by almost all Birmingham citizens.

My experience of GEC has not been as fortunate as that of some of my hon. Friends. One of the orginal GEC plants was located at Witton, in my constituency. It once employed 15,000 people, but, over the years and under the new GEC regime, it has been dismantled and for a time the site was almost a desert. That is known throughout Birmingham and Smethwick, and when Averys employees look at what has happened at Witton they are naturally fearful not only for the continuation of their company but for the security of their jobs.

I do not doubt that Sir Arnold Weinstock is a competent business man who looks after the interests of his shareholders and perhaps sometimes goes beyond that, but the record of his company in Birmingham does not inspire confidence. My hon. Friend the Member for Birmingham, Ladywood (Mr. Sever) and the hon. Member for Birmingham, Hall Green (Mr. Eyre) will know about what has happened at Witton. It is one of the main reasons why the workers at Averys are alarmed, and I hope that the Minister will bear in mind the representations made by hon. Members on both sides of the House.

9.58 p.m.

The Minister of State, Department of Prices and Consumer Protection (Mr. John Fraser)

This is the first Adjournment debate that I have answered in which there have been eight speakers. Seven hon. Members have risen, but the Government Whip tonight is my hon. Friend the Member for West Bromwich. East (Mr. Snape) and he has been whispering in my ear.

The speeches have shown the widespread geographical nature of Averys' business. Every hon. Member has argued strongly and expressed forceful concern about the employment of constiuents and the possibility—I put it no higher than that—of a take over of Averys by GEC. I have listened carefully to all the points made on this subject, which is of critical importance to hon. Members and their constituents.

My right hon. Friend the Secretary of State and I have also listened closely to representations from both companies concerned and to the delegation of hon. Members from the Midlands. In addition to those representations, the debate will be of great value in focusing attention on some of the problems that will bear on my right hon. Friend's eventual decision.

I feel that this is rather like a case where there have been resounding speeches by counsel and then there is a reserved judgment. It would be improper if I anticipated the decision which eventually my right hon. Friend will take on this case. Mergers prior to decisions are matters—

It being Ten o'clock, the motion for the Adjournment of the House lapsed, without Question put.

Motion made, and Question proposed, That this House do now adjourn.—[Mr. Snape.]

Mr. Fraser

I was saying that it would be improper if I anticipated in any way the eventual decision of the Secretary of State.

Decisions about references to the Monopolies and Mergers Commission are matters where the uttermost degree of confidentiality should be observed and where Ministers and officials should always act with the greatest degree of discretion.

In responding to the debate, therefore, I cannot speak about this case in detail as a result of the quite proper legal and administrative constraints placed upon me, but I believe that it would be helpful if I outlined those legal and administrative constraints and the overall policy in the context of which my right hon. Friend will formulate his decision.

Successive Governments have recognised the possible dangers to competition from a company or group of companies gaining a position of such dominance that they are able to exercise monopoly powers to the disadvantage of the consumer. This does not mean that large is necessarily evil, that small is necessarily good, that medium is necessarily beautiful. Indeed, considerations of wider industrial strategy have led the Government to conclude that from time to time certain mergers were in the public interest to enable an effective United Kingdom company to gain the economies of scale which would allow it to compete successfully with foreign multinational giants. But the dangers are there, and it has long been recognised that there is a need to consider whether the creation or strengthening of a monopoly position would indeed bring about this improved efficiency and, if so, whether the disadvantages in other areas outweighed any industrial advantages that might accrue.

For a merger which creates or increases a share of more than 25 per cent. of a particular market in the United Kingdom or in a substantial part of the United Kingdom, or—this is a separate test—where the enterprise to be acquired has assets of more than £5 million, the Fair Trading Act 1973 requires that the Director General of Fair Trading makes recommendations to my right hon. Friend on whether the merger should be referred to the Monopolies and Mergers Commission for investigation.

In practice, the Office of Fair Trading will keep itself informed about actual or prospective mergers qualifying for consideration under the Act and will undertake initial inquiries. The Office of Fair Trading will then put its assessment of the merger proposal in a paper to the mergers panel. This is an interdepartmental committee of officials from interested Departments under the chairmanship of the Deputy Director General of Fair Trading. This enables all interested Departments to put their views before the Director General makes his recommendation to my right hon. Friend.

I might mention here for the sake of completeness that in some cases a company may approach the Office of Fair Trading asking for confidential guidance on whether a proposal which it has in mind but has not yet made public is likely to be referred to the Monopolies and Mergers Commission. However, such guidance normally is given only in straightforward cases, because it is not possible for the Office of Fair Trading to undertake inquiries as extensive as would have been undertaken were there no approach, including seeking the reactions of other interested parties. Whether the confidential guidance is that on the basis of available information it seems unlikely that my right hon. Friend would wish to refer a proposed merger to the Commission or that a reference would seem likely, it is possible to give only a conditional decision. The giving of confidential guidance does not make the eventual decision a formality.

A decision on whether to refer a merger to the Commission resides with my right hon. Friend. He will reach his decision after considering the Director General's advice and all the representations which have been or may be made by interested parties, including, not least, the representations which have been made tonight.

It is very important to note here that a decision to refer a proposed merger to the Monopolies and Mergers Commission does not necessarily imply that the Government disapprove of the merger. However, it does imply that the Government consider that there are sufficient matters of significance to merit consideration by the Commission on the ground of public interest. The aim of the procedure is to enable those mergers which raise genuine doubts about their likely impact on the public interest to receive detailed independent investigation.

In determining whether a merger, or any particular aspect of a merger, may be against the public interest, the Commission is required to take account of all matters which appear to be relevant in the particular circumstances of the case. This will include, in particular, the effects of the merger on competition, including whether or not it will increase the efficiency, the innovative ability and the export potential of the eventual company. It will include the effects on regional policy and the effects on employment in the United Kingdom or a particular area of the United Kingdom. Once there has been a reference to the Commission, any person or any group of persons is free to make representations to the Commission in the course of its consideration.

The Commission is normally expected to report within six months of the making of a reference. If, and only if, the Commission finds that a merger is against the public interest, my right hon. Friend, after taking account of any advice from the Director General, may decide to take action under the Act to prevent the merger from taking place. I know that I have not given any hint of a response. My hon. Friends and hon. Members will understand the reason, which I have explained. But I hope it will have been helpful to have given a brief summary of the context in which the proposals which are the subject of tonight's debate will be considered.

The particular proposal which has been raised tonight meets both the size of assets and the market share criteria which I explained earlier

Mr. Faulds

Am I wrong in thinking that the Secretary of State has final power in the resolution of these matters to overrule whatever decision the Monopolies and Mergers Commission makes?

Mr. Fraser

No. That is not so. The Secretary of State may prevent a merger under the Fair Trading Act only if there has been a report of the Monopolies and Members Commission which finds against the merger. A finding against the merger, if my recollection is correct, must be by a two-thirds majority.

As I say, the particular proposal which has been raised tonight meets both the size of assets—that is the £5 million test —and the market share criteria. My right hon. Friend has now received the advice of the Director General of Fair Trading and has heard the views of representatives of interested parties. The views expressed here tonight will also be put before him. I expect that his decision on this matter will be announced quite shortly.

In conclusion, I stress that nothing I have said this evening should be taken as implying a preference for any particular option open to my right hon. Friend, but I assure the House that the views expressed tonight and the views expressed previously in representations to my right hon. Friend and myself will be given the fullest consideration before a decision is announced.

Mr. Faulds

Before the Minister sits down, will he comment on the point I raised in my speech? The uncertainty created in the "no bid" situation, in view of the takeover panel's ruling, should perhaps be examined to see whether there is some way of removing that element of uncertainty and to know whether or not there is a bid in the offing.

Mr. Fraser

I would rather not comment on that, but I shall think about what my hon. Friend has said. It would be unwise to say something off the curt where stock markets are affected. I shall certainly think about it.

Question put and agreed to.

Adjourned accordingly at eight minutes past Ten o'clock.