Merger Control (Hansard, 3 March 1988)

§ Mr. Maude

The details of the proposed legislative changes in merger control are being published today as part of a DTI paper on the policy and procedures of merger control. Copies of this paper are being placed in the Library of the House and in the Vote Office.

The paper sets out the present policy towards mergers; that the main consideration for determining whether a merger should be referred to the Monopolies and Mergers Commission will continue to be its potential effect on competition. However, the law will continue to give the Secretary of State discretion to refer mergers on other public interest grounds. The paper discusses some of the concerns expressed about this policy and restates the underlying rationale for the Government's view. We believe that intervention by public authorities in lawful commercial transactions should be kept to a minimum, since broadly speaking the free commercial decisions of private decision-makers in competitive markets result in the most desirable outcomes for the economy as a whole. The paper goes on to look at this rationale in more detail and to set out how the potential effect on competition is assessed.

While the broad thrust of merger policy remains unchanged, the Government have always considered there is room for improvement in merger procedures. A particular consideration is the length of time taken by the procedures; but the Government also want to ensure that the system is as flexible and efficient as possible.

The paper sets out three major legislative changes directed towards improving the procedures; a new formal, but voluntary, procedure for pre-notifying mergers; a new provision for legally binding undertakings to be given in some cases without an MMC reference; and a new statutory charge to cover the costs of the merger control process.

Prenotification.

Those who choose to prenotify a proposed merger will need to submit answers to a standard questionnaire about the transaction and businesses involved. In simple cases, this information will allow a proposed merger to be automatically cleared within four weeks provided it has been publicly announced. In more complex cases, the OFT will need more detailed information and in those cases the parties will be informed that the right to automatic clearance has lapsed. I would expect companies to see considerable advantages in using this prenotification system. If a merger is not prenotified, it will generally take 643W longer than four weeks to decide whether or not a reference to the MMC should be made. Moreover, mergers which are not prenotified will remain liable to reference to the MMC for a period of up to five years. Firms therefore have much to gain in certainty and speed under the new procedure.

Statutory Undertakings

Some mergers pose a threat to competition which is obvious even from a cursory examination, but which may nevertheless be capable of being removed by some modification of the merger arrangements. The parties to such mergers are often willing to promise such modifications. At present, however, there is no means by which such undertakings can be given statutory force except by invoking a full Monopolies and Mergers Commission investigation. Therefore, we propose to introduce new provisions for statutory undertakings to be given to the Secretary of State by the parties, as a possible alternative to a full Monopolies and Mergers Commission investigation. These undertakings may cover such possibilities as divestment of some of the assets of the merging enterprises or the post-merger behaviour of the new group. This new provision will give the Director General of Fair Trading an enhanced role in negotiating modifications to a merger proposal and will provide a quicker and more flexible mechanism for dealing with competition problems in certain cases. The paper goes into the proposal in more detail.

Charging

All these improvements in speed and quality will involve resource costs at the Office of Fair Trading and the Monopolies and Mergers Commission. The Government propose to introduce a statutory charge to cover the costs of the merger control process. Details remain to be settled: one possibility is a charge payable by the acquiring company and leviable on mergers where a controlling interest is acquired and where the assets test is satisfied. The charging structure will be kept as simple as possible.

Apart from these three major changes, the paper suggests a number of other changes in procedure aimed at speeding up and improving the present process such as closer integration between the Office of Fair Trading and the Monopolies and Mergers Commission. It is the Government's aim that the Monopolies and Mergers Commission investigations should in most cases last no more than three months.

Newspapers

Gross bilateral aid to SADCC countries at 1986 prices
£ thousand
	1979	1980	1981	1982	1983	1984	1985	1986
Angola	74	17	120	66	81	160	170	317
Botswana	13,790	16,661	13,199	9,111	15,207	17,530	9,090	12,805
Lesotho	11,457	6,648	8,236	5,116	5,373	5,742	2,467	3,784
Malawi	43,153	23,872	20,705	20,440	16,730	14,220	14,511	15,019
Mozambique	11,020	6,680	6,961	2,316	2,066	4,589	8,666	7,424
Swaziland	14,449	9,339	5,363	7,661	6,483	6,174	3,497	7,722
Tanzania	41,657	46,348	38,877	32,889	34,769	36,248	18,612	12,715
Zambia	50,451	29,864	31,214	17,134	17,720	36,104	26,469	35,366
Zimbabwe	8,772	52,532	64,771	25,832	22,261	16,528	24,484	12,242

644W

Cm. 278 in January announced that legislation will be introduced to enable the Secretary of State to specify the period within which the Monopolies and Mergers Commission investigations into newspaper mergers should be completed. The Monopolies and Mergers Commission has said that it will complete future inquiries into the general run of newspaper mergers within two months.

The Department of Trade and Industry has also examined its own procedures for handling cases and will issue a guidance note giving details of the procedures and specifying the information required by the Department in considering all applications for consent to a newspaper transfer. Early contact between the Department and parties to transfers will be encouraged and the streamlining of procedures within the Monopolies and Mergers Commission and the Department will make it more difficult for companies to argue that an Monopolies and Mergers Commission inquiry is ruled out by financial urgency.