§ Mr. David Nicholson
To ask the Secretary of State for Trade and Industry if he will make a statement on competition policy.
§ Mr. Lilley
In deciding whether to refer merger situations to the Monopolies and Mergers Commission, I shall in future pay particularly close attention to the degree of state control, if any, of the acquiring company.
One of the Government's fundamental policy objectives has been to allow market forces to determine the most efficient allocation of resources in the interests of industry, commerce and the consumer. We have taken many important steps towards this objective over the last decade including an extensive programme of privatisation, deregulation, and the vigorous application of competition policy. This objective could be undermined by nationalisation by the back door. State-controlled companies are not subject to the same disciplines as those in the private sector. They tend to have the assurance of Government backing for their business activities and consequently do not compete on even terms with private sector companies which operate under the threat of financial failure. Their managements may be motivated to make non-commercial decisions. They may not deploy resources efficiently; and an increase in the resources they manage may well reduce competitive forces. It is important that the MMC should have the chance to consider in detail mergers involving state-controlled companies.
All bids by state-controlled companies, whether United Kingdom or foreign, will be treated evenhandedly. I shall of course continue to exercise my discretion in deciding whether to refer any particular case to the Monopolies and Mergers Commission, after receiving advice from the Director General of Fair Trading. But among the factors to which I shall give particularly close attention will be the degree of state control, if any, of the acquiring company.
The Monopolies and Mergers Commission will, of course, continue to weigh up each case on its merits. Referring a merger to the Monopolies and Mergers Commission does not prejudge whether it may be expected to operate against the public interest.