COMMONS AMENDMENT (Hansard, 9 November 1989)

§ Lord Trefgarne
My Lords, I beg to move that the House do agree with the Commons in their Amendment No. 188.
With the leave of the House, I should like to speak also to Amendments Nos. 189, 190, 191, 193, 194 and 197. Perhaps I may also respond to Amendment No. 190A, tabled in the name of the noble Lord, Lord Peston, which is an amendment to Amendment No. 190.
The key amendment in this grouping is Amendment No. 189, which limits to two the number of extensions that may be made to the initial 20-day period for considering a merger prenotification: the first an extension of 10 working days, and the second of 15 working days. All the remaining amendments in the group stem from this change.
At present, the Bill provides for an unlimited number of 10-day extensions to the period for considering prenotifications. The purpose of this provision was, of course, to provide adequate time for the Director General of Fair Trading to consider the most complicated or difficult cases. Our firm intention was that, in practice, the vast majority of cases would be considered within the initial 20-day period. However, the noble Lord, Lord Williams of Elvel, asked us to reconsider this because of the indefinite timescale it would present to the companies concerned. My noble friend the then Secretary of State agreed to look again at this point, and further comments from practitioners have convinced the Government that the technical possibility of unlimited extensions would create unnecessary uncertainty for business.
The other amendments in the group, which are consequential upon limiting the number of extensions, may be briefly described. Your Lordships may have noted that the second extension 1047 is to be five days longer than the first. That is because limiting the number of extensions creates the theoretical possibility that the Director General of Fair Trading will not be able to advise the Secretary of State on a merger in time for the Secretary of State to refer it to the Monopolies and Mergers Commission before the end of the prenotification period. To cover this possibility, Amendment No. 193 provides that the Secretary of State may, during the last five days of the second extension, refer the merger even in the absence of the director general's advice. This extra five days is built in to the 15-day second extension to give the Secretary of State time to reach a decision. We think that he could probably do this anyway, but the amendment puts the point beyond doubt.
Now that there is to be a maximum limit on extensions, negotiation of divestment undertakings under the new provisions in Clause 118 could go beyond the time limit for considering a prenotified merger. In such circumstances, we would need to retain the power to refer the merger because the negotiations fail, and this will also provide an incentive for bidders to give undertakings.
Amendments Nos. 188 and 190 therefore preserve the power to make a reference while undertakings are still being sought. However, if a bidder formally declines to give undertakings, the clock starts again and a reference must then be made within 10 days or the power to refer will lapse.
Finally, Amendments Nos. 191 and 197 deal with the giving and receiving of notices for that purpose; and Amendment No. 194 provides that the periods concerned are to be measured in working days (leaving out weekends, and so forth) just as for the prenotification period.
I now turn to Amendment No. 190A, tabled by the noble Lord, Lord Peston. It appears to propose that cases where the Secretary of State is seeking undertakings, in lieu of making a merger reference to the MMC, the Director General of Fair Trading should be able to make a reference if the parties decline to give suitable undertakings and if the European Commission is investigating the merger under the competition provisions of the EC treaty.
I suspect that that is not the effect intended by the noble Lord, but it is in any event an unnecessary amendment. It is not the place of the director to make merger references. His role is to provide advice on the matter for the Secretary of State. Nor would it be necessary to reserve to the Secretary of State the power described in the amendment. We do not consider it likely or desirable that the decision to make a reference should be affected by the knowledge that a merger was also being investigated by the European Commission under Articles 85 and 86 of the treaty as they are currently applied.
There will be nothing to be gained from keeping open in that way the option of making a merger reference some time after the prenotification period had expired. If a reference is warranted, it should be made straight away. Any conflict with the European Commission's conclusions can be resolved after the MMC has reported; otherwise the Secretary of State 1048 should announce his decision not to make a reference.
I hope that I have clearly expressed the Government's view on that matter, including our reaction to the amendment tabled by the noble Lord, Lord Peston.
Moved, That the House do agree with the Commons in the said amendment. —(Lord Trefgarne.)

§ Lord Peston
My Lords, I am a trifle lost on the procedure but I shall talk until someone tells me that I am out of order. I am doubly lost because I wanted to talk about the Government's amendments. I take it that I am still in order when I say how much I approve of them. They represent an important step forward. That is stage one.
I am rather puzzled that the Government have decided to reply to my amendment before I have moved or argued it. I am disappointed that it has been rejected before I have argued it. That implies that even my brilliant powers of persuasion will not persuade the Government. It may well be that we are all a bit tired. Having said that, let me say what my amendment is about. Essentially what lies behind my amendment —I was advised that this was an acceptable way to do it —is that I wish to raise the European dimension and remind your Lordships of it when considering not merely the present but the future state of mergers.
I should like to make two or three points. First, I remind your Lordships that, separate from the current debates on the European dimension on competition policy, I strongly believe that he Commission has a great many powers under Articles 85 and 86 and that it has been wrongly persuaded that it cannot use them in competition policy. I have expressed that view before, as have other noble Lords. I want it to go on the record.
Having read, mostly in the newspapers, about what is happening with regard to the European dimension, I am worried about the way in which the Commission may interfere with our approach to competition. The logical point, which I have made before —and having made it, that will be enough for me this evening —is that if any kind of competition or merger problem is dealt with at the European level and is regarded as unacceptable there, that is the end of the matter so far as I am concerned. The problem which worries me, and which the amendment seeks to address, arises when a merger is regarded as acceptable at the European level. It seems to me that the director or the Secretary of State should still remain able to say that it may be acceptable at the European level but it is not acceptable at the British level. That is the other way round, as it were.
I do not remotely believe that at this stage the Government will say that they agree with that. I am merely pointing out that it is a serious problem that will affect company law in the future. I tabled the amendment to remind us of that matter. The noble Lord, Lord Lloyd of Kilgerran, may wish to say a few words, and I shall say no more until he has spoken.

§ Lord Lloyd of Kilgerran
My Lords, I should like to make it clear that we on these Benches accept the general theme of the amendment tabled by the noble Lord, Lord Peston, to Government Amendment No. 190.
I tried my best at the earlier stages of the Bill to obtain some references to Articles 85 and 86. I have been involved with them since the middle 1960s in a professional way and in other capacities. I am always disappointed when we receive a somewhat technical answer from Ministers about the value of considering the principles of those articles in relation to merger questions. Beyond saying that I want to have that point on the record, I strongly support the amendment tabled by the noble Lord, Lord Peston, and the direction in which he is proceeding in his speech. That is all I wish to say.

§ Lord Airedale
My Lords, this is the second day running that an amendment tabled by a noble Lord who is not a member of the Government has been spoken to in advance by a Minister in the course of moving one of his earlier amendments. It caused confusion yesterday and it has caused a little confusion today. Surely it is also undesirable that a noble Lord's amendment should be anticipated before he has had a chance to move it. I hope we can establish a firm rule that Ministers will not speak in advance of amendments tabled by other noble Lords before those noble Lords have had a chance to move their amendments.

§ Lord Trefgarne
My Lords, I ask your Lordships' permission to make a further intervention on this matter because I owe it to the noble Lord, Lord Peston, to respond to him. I wish to respond also to the point made by the noble Lord, Lord Airedale.
Articles 85 and 86 have been used by the European Commission from time to time, although there are some doubts about the occasions when it can intervene, and we believe that the Commission should be thinking of a wider, more comprehensive arrangement. We have reserved our position on whether we shall agree to what is proposed until we see in detail what is proposed. We shall be looking for improvement in the present situation. Until we see that, we are maintaining a reservation on the principle of regulation, but if it represents a measurable improvement on the present situation we shall want to be in favour of it.
As I understand it, the present draft allows member states to prohibit certain mergers, intervening on grounds of legitimate interest. As currently drafted, those include public security, media diversity and prudential rules. Other non-competition interests may be permissible so long as they are consistent with the member states' Community obligations. Those for the moment are all matters for discussion and no new regime has yet been agreed.

§ Lord Lloyd of Kilgerran
My Lords, before the noble Lord sits down, I apologise, but could he give an indication what directive he is referring to? He 1050 has the most charming habit of referring generally to many matters. Perhaps he could particularise.

§ Lord Peston
My Lords, I believe that it is the competition directive. I do not know what number it is and I do not think it is difficult to specify which directive I am talking about, but I assume that it is the same one as the one which the Minister mentioned.
Subject to that, perhaps I may thank the Minister for his reply, which I found most encouraging. I accept that these are early days and hope that when the time comes your Lordships will have a chance to become more involved in what happens next at the European level. We are broadly in agreement on the lines on which we ought to go and therefore I shall not move the amendment.
On Question, Motion agreed to.