EC Merger Control (Hansard, 24 July 1990)

§ Mr. Deputy Speaker (Mr. Harold Walker)
The Question is—

§ Mr. Alan Beith (Berwick-upon-Tweed)
On a point of order, Mr. Deputy Speaker. I am having some difficulty in knowing which motion we have reached.

§ Mr. Deputy Speaker
We have reached the motion on monopolies and mergers, which has just been moved formally.

§ Mr. Nigel Spearing (Newham, South)
Further to the point of order, Mr. Deputy Speaker. The monopolies and mergers motion has been moved formally. Do I take it that that is because it is being taken in Committee? Is it not a debatable motion?

§ Mr. Deputy Speaker
It is not for me to answer that. If the Government choose to move a motion formally, it is their affair, but that does not prevent hon. Members from speaking on it.

§ Mr. Teddy Taylor (Southend, East)
rose—

§ Mr. Deputy Speaker
Order.

§ Mr. Taylor
rose—

§ Mr. Deputy Speaker
Order. The hon. Gentleman must resume his seat when I am on my feet.

§ Mr. Beith
rose—

§ Mr. Deputy Speaker
Mr. Alan Beith.

§ Mr. Beith
It is very odd that the Government should seek to move formally a motion on a matter of such importance. I should not have ventured to speak first in the debate. I should have listened to what the Minister had to say on the matter.
The issues with which the regulations are concerned are of considerable importance for British industry and the British economy. I start from the assumption that it is desirable to have a European mergers policy—

§ Mr. Nelson
On a point of order, Mr. Deputy Speaker. I am sure that the hon. Member for Berwick-upon-Tweed (Mr. Beith) agrees that it would be better if the Minister introduced the regulations and explained what they are all about. Then, by leave of the House—

§ Mr. Deputy Speaker
Order. We have passed that point. The hon. Member for Berwick-upon-Tweed (Mr. Beith) is on his feet.

§ Mr. Nelson
But do you not recognise—

§ Mr. Deputy Speaker
Order. Mr. Beith.

§ Mr. Beith
I should have preferred that, Mr. Deputy Speaker, but were I to stop speaking to enable the Minister to explain the regulations, I should be unable to continue my own speech without the leave of the House. Having 421 started my speech, therefore, I hope that I shall be allowed to finish it and that thereafter the Minister will reply to the points that have been made.

§ Mr. Nelson
On a point of order, Mr. Deputy Speaker. May I suggest that we ought to proceed in a common-sense fashion?

§ Mr. Deputy Speaker
Order. The hon. Gentleman is addressing the House. I cannot stop him and then require someone else to speak.

§ Mr. Nelson
rose—

§ Mr. Deputy Speaker
Order. The hon. Gentleman ignores the fact that I am on my feet. If the Minister subsequently seeks to catch my eye, he stands a chance of being called, but until then the hon. Member for Berwick-upon-Tweed has the Floor. I suggest that we should allow him to get on with his speech without bogus points of order.

§ Mr. Beith
There is no disagreement between me and the hon. Member for Chichester (Mr. Nelson), apart from the fact that I believe that we have now passed the point of no return. Like him, I would have wished the Minister to speak first, but I do not think that the Minister had the slightest intention of speaking first, or even at such an early stage in my speech. Were I to encourage him to do so, I should jeopardise my chances of completing the relatively few remarks that I wish to make. Therefore, we must hope that the Minister will intervene later in the debate and deal with the points that we seek to raise.
I was about to say that I believe that there should be an effective European mergers policy, not least because it is important that British industry should enjoy the same protection from hostile takeovers as may be available in other member states of the Community, and that it should be able to seek to make acquisitions on the same terms in other countries as acquisitions can be made in this country. That is the level playing field argument, which is of considerable importance to British industry.
All hon. Members have views about what should be the general thrust and character of a mergers policy. I begin with the prejudice that the preservation of competition and the discouragement of monopolies call for an aggressive policy on mergers that is likely to make hostile takeovers difficult if they would result in a considerable reduction in competition. There are many circumstances in which takeovers can stimulate efficiency. The absence of any takeover pressure can lead to slack management. I am not sure that takeovers are an ideal tool for the disciplining of management, but they are one of the mechanisms that have that effect. Therefore, I want the machinery for the referral of takeovers to be effective and to be triggered sooner than is at present the case in the United Kingdom.
However, when we seek to have a level playing field, we come across striking differences between present practice in this country and that in other member states of the European Community. The Coopers and Lybrand report produced for the Department of Trade and Industry showed that, in 1988—admittedly, a peak year for mergers —73 per cent. by value of mergers in the European Community took place in the United Kingdom and that 85 per cent. by number of mergers in the European Community took place here. The report also demonstrated that United Kingdom companies tended to acquire 422 companies elsewhere in the European Community that were smaller than those which other member states' industries acquired in the United Kingdom.
That was dramatically demonstrated when French companies acquired the private water industry. Companies such as the Newcastle and Gateshead water company, Sunderland and the South Shields water company and many of the other South Shields water companies were sold to French companies. Characteristically, the previous Secretary of State for Trade and Industry slammed the stable door immediately after the horse had bolted by not referring the north-east takeovers to which I have referred and by not putting in place a procedure whereby such takeovers could be restrained until after French companies had acquired those companies. That is characteristic of what I might describe as the sleeping policeman role of the Secretary of State, who did not aggressively seek to promote competition.

§ Mr. William Cash (Stafford)
As is well known, the hon. Gentleman advocates economic and monetary union, political union and all the accompanying paraphernalia. Does he not accept that at the heart of his point is the fact that the figures show that it is German companies that are making the major United Kingdom acquisitions and that their investment in the United Kingdom has increased by 200 per cent. over the last nine or 10 months?
Does he not also accept, despite the strictures that he imposes on the previous Secretary of State for Trade and Industry by his remarks, that it was those very points which, whatever language he may have used, raise some important questions about the manner and extent to which his party, and others on the Opposition Benches, are actively encouraging a state of affairs in which Britain is subordinated to the dominance of that country?

§ Mr. Beith
I thought that that was what the hon. Gentleman wanted to intervene to say, but that is not what the former Secretary of State for Trade and Industry said. He did not criticise individual takeovers that had taken place while he had the power to prevent them: he criticised the success that Germany had enjoyed and the extent to which that placed Germany in a prominent position in the EC, and he did so in language that he was forced to withdraw, but in terms that were echoed in the Chequers seminar. But all that goes rather beyond the terms of the regulations, to which I shall return.
The effectiveness of the regulations and the European procedure is obviously undermined to some extent by differences which exist between practice in the United Kingdom and practice in other member countries. For example, there are differences in the level of information available in Britain and other member countries. Information about shareholdings and the financial state of companies is more readily available here than in a number of other member countries.
Major differences arise from the character of shareholding in Britain compared with other member countries, in many of which there is substantial shareholding by banks, families or the Government. In France, family ownership or Government ownership of substantial tranches of company shares make it much more difficult, and in many cases impossible, for acquisitions to take place on French soil of French companies. The structure of ownership in Germany, with 423 the banks playing such a large part, presents a fairly major limitation to acquisitions in Germany by British companies. The two-tier company structure in Germany and the Netherlands also makes it more difficult.
There are arguments in favour of some of those restrictions, not least the two-tier board structure, but they mean that we must assess whether we are achieving a level playing field in competition policy. The Minister has addressed himself to some of those considerations in all the negotiations that have taken place, but we are not quite there yet. We are not at a level playing field, not are we at the point where we can say that the kind of merger policy that Europe will have will be a significant improvement on present British merger policy, which I would like to see.
In addition, there are practical problems about the measure before us which the Government have sought to reduce over the months of discussion, such as the complexity of the form which companies will have to complete and the possibility of insider dealing because of the processes that will be gone through. There are also anxieties about whether the European Commission directorate involved has the staff necessary to carry out the work.
It is in no sense the view of someone hostile to the existence of European merger policy to say that some of those things are not yet properly in place. Therefore, I address those concerns to the Minister from the standpoint of someone who wants an effective European mergers policy which in time, I hope, will become more effective even than the one that Britain has had so far. I hope that the Minister shares some of those objectives and will address some of the concerns that I have mentioned.

§ Mr. Andrew Hargreaves (Birmingham, Hall Green)
I declare an interest, having worked for some time for, and still being a consultant to, one of the banks that is most interested in and affected by merger policy in Britain and in Europe. I have worked on many mergers in France, Germany and other European countries.
I share with the hon. Member for Berwick-upon-Tweed (Mr. Beith) the concern that we should attach importance to the concept of the level playing field. I should not go as far as the hon. Gentleman in saying that my right hon. Friend the previous Secretary of State for Trade and Industry was a sleeping policeman. However, I emphasise that I share the hon. Gentleman's concern for the concept of a level playing field.
There is also room to look in the regulations for some evidence that we are also considering reciprocity. When we consider United Kingdom companies being acquired by foreign companies or being merged into foreign companies, we are struck by how difficult it is for United Kingdom companies to buy into, for example, Swiss or non-EC companies. French companies have also made that comment to me: it is equally difficult for United Kingdom companies to inquire into the finances of a French company.
I hope that my hon. Friend the Minister will take the opportunity to say a few words to us, because I am sure that people whose business it is to work on mergers would be instructed by his remarks.

§ Mr. Nigel Spearing (Newham, South)
I am not sure whether it is because it is the end of term, but I sense that the importance of the issues that the House is debating becomes greater as the night grows longer. I suppose that to any hon. Member, the prospect of a new underground railway in his constituency and the success in obtaining an instruction on the same are major events. That debate lasted three hours and many hon. Members voted. We then moved on to the European Bank for Reconstruction and Development, on which I am sure that we shall hear a great deal more. We now come to regulations which may, in the course of time, prove to be even more important than the previous debate on the bank.
I should explain the background to this debate, which has not yet been described. If I get it wrong, I am sure that the Minister will correct me in his winding-up speech. I want first to make a small suggestion on the future of draft statutory instruments. We know, of course, that draft statutory instruments have to be placed for approval before this House—and sometimes before the other place—under various Acts of Parliament. However, one of the disadvantages of chasing these bits of paper is that they do not have a number on them. A number is allocated to them only after the draft has been approved—as, no doubt, this order will be approved tonight.
My modest suggestion is that such drafts could be issued with a D in front of their number, which might not be the same number as they would eventually receive as statutory instruments. That would at least be a means of identification other than the date on which they were issued. Important instruments such as this one could therefore be found more easily.
The background to the order is that we have now undertaken, in various treaties, to cede the control of mergers from the Secretary of State for Trade and Industry to the Commission in Brussels. The irony is that Sir Leon Brittan, the relevant Commissioner in Brussels, is a former Secretary of State for Trade and Industry. I understand that these regulations are the bit of paper that passes that into British law. I am not sure that anyone would gain that impression through reading the statutory instrument. Unless he was expert in these matters, he would not understand what it was about at all.
I shall address my remarks to the explanatory note, and I think that that is in order. In my submission, the explanatory note does not explain the regulations. Over my years of membership of the House, I have pointed out this lacuna from time to time. Nothing seems to be done about it. In respect of the regulations, the Select Committee on European Legislation has had a part to play. I will sketch in the background and then make a constructive suggestion.

§ The Parliamentary Under-Secretary of State for Corporate Affairs (Mr. John Redwood)
Perhaps I can help the hon. Gentleman. The proposal before the House does not implement the merger system agreed by the member states into British law. It is already in British law by the merger regulation itself, because it is a regulation, not a directive. This is a technical matter relating to our fair trading legislation, as the explanatory memorandum makes clear, designed to protect two modest powers in our 425 merger control procedures, consequential on the imposition of the merger regulation system from Europe, and in addition to our normal legal system.

§ Mr. Spearing
I am grateful to the Minister for intervening. It seems that I was on the wrong track. Although I understand that this EC regulation, when it comes into force on 21 September, is the definitive instrument, even in British domestic law, it is a consequential statutory instrument which adjusts various provisions and may be helpful.
The main provision that seems important in that context is that which changes section 75 of the Fair Trading Act 1973. It says, in effect, that if a matter has a Community dimension, the Office of Fair Trading cannot look at it. Do I see the Minister shaking his head in dissent, meaning that I have got it wrong? I understood that matters with a Community dimension were excluded from his remit, at any rate up to 21 September.

§ Mr. Redwood
The idea is to give the director general power not to operate the pre-notification procedure, so that the time limits are not exceeded by the process in Europe, thus preserving the British jurisdiction.

§ Mr. Spearing
I am grateful to the Minister for that explanation. I had hoped that some of what we have discovered in this brief dialogue could have been included in the explanatory note. Although the note says that the regulations make provision consequent upon Council Regulation EEC 4064 concerning the control of undertakings, it might have been useful for it to have gone on to say—this is my constructive suggestion—"But, of course, it has direct effect without further enactment." It could then even have spelled out the criteria, which I believe have been adjusted.
The Select Committee had Lord Young before it some time ago. He explained that Britain was trying to ensure that the threshold of reference to Brussels would be different from that in the original regulation. I understand that success was achieved on that, and we debated the matter some months ago. It might have been useful for the explanatory note, without being too definitive, to have explained that and the need for British law to be adjusted.
I am not sure whether the law is being adjusted to make it clear what the criteria are. Would somebody looking the matter up in the Library find that the law on merger control was being changed? Perhaps the Minister will explain the position. The note could have gone on to say, for the avoidance of doubt and in view of the time scale to which the Minister referred, that it was advantageous to have an additional piece of paper which changed British law in certain respects, and those changes could then have been described.
Perhaps even now, as what is before the House is but a draft, the explanatory note, which is also but a draft, could be expanded—there is plenty of space—so that an ignoramus such as I am not misled by an extraordinary note that is not as clear as it otherwise might be.

§ Mr. Teddy Taylor (Southend, East)
All that I should like to say briefly is that it would be helpful if we stopped talking about this altogether. This debate shows how absolutely ludicrous, pointless and wasteful is our consideration of such measures. First, it is now 11.54 pm; 426 secondly, only a handful of hon. Members are present; thirdly, we are considering complex regulations affecting mergers. In addition, this is basically a small amendment to section 79B of the Fair Trading Act 1973. If an hon. Member went to the Vote Office to ask for the Fair Trading Act, he or she would be told that, sadly, the Vote Office does not have it. In fact, even if one did find the Act, it would be an utter waste of time because the section that we are discussing is not in the Fair Trading Act, but in the Companies Act 1989. If an hon. Member tries to see a copy of the Companies Act—

§ Mr. Tim Smith (Beaconsfield)
They will get it.

§ Mr. Taylor
Yes, as my hon. Friend says, they will get it, but sadly, we cannot get the Fair Trading Act.
The provisions refer to a proposal as regards the Community undertaking in Council regulations 4064, which are the merger control regulations. Although, because of their busy lives, not all hon. Members will have had time to read those regulations, they will have seen that one of the principles of the merger control regulations is that, before the director-general or anyone else can take action, they are under an obligation to have full consultation with management, supervisory organs, and recognised worker representatives of the undertaking concerned, together with third parties shown to have legitimate interests. In my understanding, these are not the measures put forward by Her Majesty's Government.
I therefore suggest that we are bringing forward a consequential United Kingdom measure to a complex series of regulations, which are a load of rubbish, as we also know from the figures that have been published, which show that 84 per cent. of mergers that have been permitted within the Community over the past year have been in the United Kingdom. We also know that it is almost impossible to buy a public limited company in Germany, and difficult in France. Therefore, I ask you, Mr. Deputy Speaker, why on earth we are discussing this regulation on a minor technical point, on which the papers are not available, when major regulations are not being adhered to in the European Community.

§ Mr. Cash
Does my hon. Friend agree that there is a problem in relation to 1992, in that, if the Germans manage to acquire a sufficient number of our companies before the deadline of 1 January 1993, and we are not allowed in there, there will be substantial problems in relation to the single market thereafter, because they will have acquired the domination in advance and we shall never be able to catch up?

§ Mr. Taylor
It may indeed be a problem, but it could be an advantage, because if the Germans owned all the British companies, we might be able to get access to the German market for the products of those German-owned British companies and they would have more success than the Japanese-owned British car firms. I wonder whether we shall one day have an explanation of what deal is presently being negotiated for those firms that were assured that they would have open access to the Community when we know that a complex deal is now being undertaken that will ensure that we get rather more of their products going to the continent in exchange for a reduction in the Japanese quota. Nothing more bogus in terms of free trade could ever be envisaged.
427 I apologise sincerely to the Minister for taking up time in what I know is a busy day, especially when we were hoping to get away early, but I honestly suggest that this discussion has shown the utter pointlessness of the so-called supervision of EEC documents and of United Kingdom documents such as this, which are related to Community documents.
Finally, the regulations are being made under the powers of section 2(2) of the European Communities Act 1972, a copy of which I have with me. I ask the Minister and the clever Clerks whether they can find any way in which this could be placed within section 2(2) which relates to Community obligations or to things related to Community obligations; that is not the case.
We are wasting our time. We are insulting the British public by giving the impression that we are playing a meaningful role in this. We should admit that, on such issues, the House is completely wasting its time in trying to pretend that we control anything at all.

§ Mr. Anthony Nelson (Chichester)
With due deference to my hon. Friend the Member for Southend, East (Mr. Taylor), there is a substantive point of issue—not a major constitutional point, but nevertheless important. The regulations amend a provision in the Fair Trading Act 1973. Those of us who took part in the proceedings on the Companies Act 1989 will recall the importance attached to the pre-notification procedure. The whole idea behind those provisions was to expedite or enable certain takeovers to go ahead without having to go through all the paraphernalia of references where pre-notification was given.
To the extent that any amendment to the law prevents those takeovers from going ahead or denies the shareholders or owners of an asset the right to determine the future of that asset, it is proper that the House should consider it. We should be reluctant to endorse any restriction on the rights of shareholders or owners of an asset to decide how best to dispose of that.
The regulations will enable the director-general to dismiss or reject a merger notice if it appears that there is a concentration with a Community dimension. I make no complaint about that, but we should not let it go through on the nod. We should pass it on the basis that we are satisfied with the procedures under European law, both for time and for scrutiny of such matters. Employees of companies will be affected, as will shareholders, debtors and so on.
When the House and the Committee considered the Companies Bill, it was on the basis that the pre-notification procedure would expedite matters. If there is a good case for change, the House should endorse it. I am sure that my hon. Friend the Minister will make that case, albeit at the end rather than at the beginning of the debate.

§ Mr. Alun Michael (Cardiff, South and Penarth)
I apologise for the unavoidable absence of my hon. Friend the Member for Redcar (Ms. Mowlam), who had to leave the House because of illness. I am sure that we all hope that it is not serious. I know that she would want me to 428 apologise for any embarrassment caused to the Minister, who moved the motion formally in her absence. His courtesy is appreciated and he should not be embarrassed.
My hon. Friend the Member for Newham, South (Mr. Spearing) seeks the truth and wants the Minister to explain why the issue is being approached in this way. I am sure that my hon. Friend would have welcomed the opportunity to discuss the matter in its wider sense, but it is a technical measure relating to the policy agreed for safeguarding the position in British law.
Hon. Members who said that the matter was important were correct. The significant point about inequalities between different countries and the need for a level playing field is very important, and is especially important when British law applies. There is a British regional dimension. Those in Wales and the north of England have experienced head offices, often in the manufacturing industry, moving away from their regional base, where they have been greatly valued, because of mergers or takeovers.
I ask the Minister to recognise that there are occasions when the European merger policy allows Britain to take into account a number of factors, such as the research and development being carried out by a company and the way in which the regional dimension is affected. There is a question about how much that policy is implemented to the full.
Will the Minister explain to the House not only the technical nature of the statutory instrument but how it falls within Government policy on mergers and how they intend it to operate within the system? What view do the Government take of mergers, both in the European context and under British law? Following GEC, Ferranti and the takeover of ICL, what is the Government's policy?
I am sure that the Minister and you, Mr. Deputy Speaker, will appreciate the short notice that I had of this debate, but I understand that this statutory instrument and British law become relevant to mergers and takeovers involving less than £5 billion. Those mergers are particularly relevant and important to British regional policy.
Will the Minister do more than simply say that there are technical regulations implementing minor measures that have already been agreed? As questions have been asked by several hon. Members, will he explain the context in which the statutory instrument is being enacted, the practical policies that the Government intend to follow and the use to which they will put the statutory instrument?

§ The Parliamentary Under-Secretary of State for Corporate Affairs (Mr. John Redwood)
I am grateful to the hon. Member for Cardiff, South and Penarth (Mr. Michael) for stepping in to give the Opposition's view. As he said, I felt that, as the hon. Member for Redcar (Ms. Mowlam) was ill and had to go home, and as this is a technical matter, it was reasonable to move it formally. I told Opposition Front-Bench spokesmen that it is the right of hon. Members to make points and that I would reply to them because I strongly believe in Members' scrutiny of legislation.
The statutory instrument is technical and is designed to produce two cases where the United Kingdom can continue to use its jurisdiction in mergers. It was thought 429 that there was European jurisdiction, but process discovered that it does not apply and we wish therefore to preserve our jurisdiction.
The general context of the statutory instrument is the merger regulation, which was debated in Europe over many months. My predecessors and I made available explanatory memoranda. The scrutiny process was undertaken and a debate was held so that the House could express its views in good time before the final Government negotiating position was arrived at and before we finally agreed with our partners.
As my hon. Friend the Member for Southend, East (Mr. Taylor) implied, the time has long since passed when the House can make a useful contribution to the debate on the merger regulation. That was discussed and we negotiated it in good faith, taking into account the feelings of the House. We agreed it with our partners and it is now good law in this country, which will come into effect on 21 September.

§ Mr. Teddy Taylor
It is bad law.

§ Mr. Redwood
I can tell my hon. Friend that it is good law because it is effective law, whatever he may think of it.

§ Mr. Tim Smith
One or two of my hon. Friends seem to think that it is bad law, but there was a satisfactory consultation process involving a debate in the House. Points were made on the content of the statutory instrument and as a result the outcome is quite satisfactory for the United Kingdom.

§ Mr. Redwood
Indeed.
The United Kingdom had four principal negotiating objectives. The first was to ensure that if we reached agreement there was clarity on whether EC jurisdiction or United Kingdom jurisdiction applied, and we have achieved that.
The second objective was that the system should be driven with competition as the criterion. The aim should be to create competitive marketplaces in Europe and to protect them from predatory mergers that might damage them. Again, that was accepted by our partners, and it is written into the mergers regulation.
The third goal was that the merger regulation should introduce a system that was timely and fair. We have certainly got the timeliness into the system, in that a maximum of five months can be taken up by the European Commission in settling its views on a particular merger, and in most cases it would take one month for the Commission to decide that there is no case to be answered.
Fourthly, we wished, along with several other member states, to have certain national interests protected, in that there could be a reversion to national jurisdiction in important cases involving defence, public scrutiny, prudential control of financial institutions and the media. Again, they are written into the merger regulation.
By any standard, this was a successful negotiation with our partners, and our thinking and the views of the House are well reflected in the final text of the regulation which was adopted some time ago.
The hon. Member for Cardiff, South and Penarth asked me about the regional dimension. He suggested that that was important in terms of the statutory instrument because it involves the smaller mergers. I fear that it is the other way round. The regulations are concerned with larger mergers which were thought to have European 430 dimensions: those with aggregate turnovers of more than 5 billion ecu and with—this is the other criterion on EC turnover—at least two of the merging parties having more than 250 million ecu turnover within the EC. Therefore, the hon. Gentleman's point is not quite fair.
We have frequently stated our general attitude to mergers in documents and in debates in the House. The position remains the same. We believe in pursuing a vigorous competition policy. The main criterion that we use when receiving advice from the Director General of Fair Trading and deciding on merger references is competition. Reference policy in recent years demonstrates that well.
My hon. Friend the Member for Chichester (Mr. Nelson) made a relevant point when he asked whether it is right to modify the pre-notification procedure in the Fair Trading Act 1973, as laid down in the Companies Act 1989, in the way that we suggest. I urge the House to accept this modification because it is the only way that, in those circumstances, we can work as intended. I can see no other way of doing it. That is the reason for it.
My hon. Friend the Member for Southend, East thinks that a larger issue is important—whether we can buy companies in Germany, France or other European states. That question was asked by the hon. Member for Berwick-upon-Tweed (Mr. Beith). The Government believe that this is important. That is why, over the past year, my colleagues and I have persistently raised it at Council meetings in the European Community. We have made it clear that, if our markets are to remain open and other European companies take advantage of that, we expect reciprocation in market-opening measures in those other European member states. [HON. MEMBERS: "Hear, hear."]
I shall tell my hon. Friend the Member for Southend, East what progress we have made and how he can help us to make further progress. We raised the issue and obtained a Commission statement that it was important. We then got a Commission statement that there should be a work programme. Action is being taken to put suitable provisions into the draft fifth and 13th company law directives to address some of the legal problems that were identified in the Coopers and Lybrand report, which the Government commissioned and took to our partners in Europe to show the seriousness of the problem.

§ Mr. Cash
Given the importance of these matters and knowing that I would make a helpful intervention, would it be possible for my hon. Friend to encourage enforcement proceedings to ensure that our friends and colleagues in Germany and elsewhere in the EC realise that we are not making a negative, obstructionist point, but that there is not much point in having a European Community if there is no level playing field? Could they not take that on board?

§ Mr. Redwood
When we meet our opposite numbers in Europe, my colleagues and I make the point that we need market-opening measures of all kinds, including measures relating to the market for company control. Our companies often enlarge their businesses by acquisition, and it is important that they should be able to grow them in European Community countries as well as in the United States. In the past four years, it has been very noticeable that United Kingdom companies have engaged in a massive programme of corporate acquisition and 431 expansion in the United States: they have found it easier to buy companies there than in France and Germany, where the markets have been less open. That is why we take our work so seriously.
We are making progress with our partners on the legal issues. There are, however, many other barriers—cultural barriers, for instance—which the study has identified. This is where hon. Members on both sides of the House can help, as can businesses and other opinion formers.
We believe that a more open market for corporate control will benefit our European partners. There are already signs that in France, for instance, business interests want a more active takeover market in their country and are beginning to support the British position. Any help that hon. Members can give by arguing the case, both in this country and with our partners in Europe, will be very helpful. We are trying to change the climate of opinion in Europe—to direct it towards the nature of the takeover market, and the way in which companies can grow and increase their business.

§ Mr. Teddy Taylor
Will the Minister tell my hon. Friends and me what real progress has been made by all these massive steps forward, and all these commissioned reports? If he could find time to tell us how many German plcs have been acquired by British companies—say, over the past year—that would give us some idea. Even if he gave us the figure for two years ago, that would be a great help.

§ Mr. Redwood
My hon. Friend did not listen quite carefully enough. I said that we were making progress in forming the directives that were needed to change the law; we have not yet completed the process. More progress is required, which means more pressure and more debate with our partners. Such things work by gathering momentum: the more the House expresses its view, and the more others throughout the Community do the same, the more likely we are to make progress in securing the new instruments that will surmount the legal barriers.
The hon. Member for Berwick-upon-Tweed mentioned not only the level playing field—which I have just addressed—but the structure of the procedures that will be entered into by British companies and others when the new EC regulation comes into effect on 21 September this year. He is right that the British Government have been worried about the length and complexity of the form to be sent to merging parties; we have made some progress with the Commission, which has welcomed our suggested amendments intended to simplify it.
The hon. Gentleman also asked about staffing. We and other member states are seconding staff with expertise in competition and merger policy to the Commission, to give it the assistance and strengthened staff resources that it will definitely need when it has sole responsibility for very large mergers.
I must stress, however, that there is another side to the merger regulation itself, which hon. Members have not taken fully on board tonight. Although the regulation clearly gives sole main powers to the European Community for the small handful of very large mergers with cross-border business involved, it also suspends regulation 17—the regulation that enforces articles 85 and 86 of the treaty of Rome on all other mergers. That means 432 that, in the case of all the smaller and medium-sized mergers, there is no longer doubt about whether United Kingdom jurisdiction could be exercised wholly and solely, or whether the Commission also had jurisdiction under those two treaty articles.
It is not possible to give an entirely accurate forecast, but our calculations at the time of the negotiation suggested that, of about 300 potentially referrable mergers in this country in any given year, perhaps 10 or 12 would fall to be decided solely by the European Commission. The other 280-odd would fall outside that, and would therefore be entirely within the jurisdiction of the United Kingdom.
Our negotiations on the merger regulation took place against the background of the Commission's statement that, if member states did not agree to the division of jurisdiction under the new merger regulation, it would become more interventionist in its use of treaty articles 85 and 86—which it seemed to be entirely entitled to do, according to the legal advice available to us.
My hon. Friend the Member for Birmingham, Hall Green (Mr. Hargreaves) asked about reciprocity for those in countries outside the Community. He will find that article 24 of the merger regulations sets out a procedure on reciprocity which gives the Commission some modest rights and duties when member states believe that states outside the Community are not reciprocating and opening their markets in the way in which we would like and in the way in which we are opening ours in the Community.
The hon. Member for Newham, South (Mr. Spearing) was right to stress the need for a clear explanatory note. I sympathise with him. The explanatory note could be clearer and I will draw the hon. Gentleman's points to the attention of those who write explanatory memoranda to see whether in future we can have more helpful ones. This one has foxed some of us at this late hour.
Perhaps the explanatory memorandum should have made it clearer that the proposal has nothing to do with implementing the merger regulation itself into United Kingdom law. That would be a major item were that the way we proceeded, and it would have warranted a major debate. As I have tried to suggest—I hope that I have satisfied hon. Members about this—the regulations are a minor matter concerned with our powers under the fair trading legislation.