Merger Regime (Hansard, 26 October 2000)

§ Mr. Byers

In August last year the Government published proposals for reforming the UK's system of merger regulation and invited interested parties to comment on them.

When I launched the consultation I set out key principles which a reformed regime should reflect. In particular, it needed to provide effective and proportionate control of mergers which had harmful effects; be clear, transparent, consistent and fair; and impose minimum burdens on those using it. I proposed two fundamental reforms to the current regime. First, the framework for decisions should be clarified, focusing it more clearly on competition; and secondly, ministerial involvement in merger decisions should be minimised. In addition, I put forward a number of more detailed proposals for reform covering issues such as the status of the independent competition authorities, exceptional interest cases and timetables.

We received 60 representations from a broad range of companies, competition lawyers, trade unions, business and consumer organisations, regulatory bodies and a number of individuals. There was a broad support for minimising ministerial involvement and moving towards a competition-based test. Respondents also provided useful views on other aspects of the regime.

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I am publishing today the Government's response to this consultation, which summarises the views received and sets out proposals for the future.

In summary: responsibility for making decisions in merger cases should be given to the independent competition authorities; the Secretary of State should only become involved in the small minority of cases which raise defined exceptional public interest issues; decisions should be made by the competition authorities against a competition-based test rather than against the current public interest test; the division of responsibility between the Office of Fair Trading (OFT) and the Competition Commission (CC) should remain unaltered: the OFT will conduct the first stage, preliminary investigation into a merger and the CC will carry out a second-stage, in-depth inquiry if merited; the system of voluntary notification for all mergers, which business clearly values, should be retained; wherever possible timetables for investigations should be tightened.

We intend to define national security in the legislation from the outset as an area raising issues of exceptional public interest. In addition, we intend to give the Secretary of State a reserve power to define further specific exceptional public interest criteria where ministerial involvement in the mergers process may be necessary, although there are no current plans to make any such orders. This power will be subject to the approval of Parliament.

There are a number of more detailed issues set out in the document, including the specific form of the competition test and of the qualifying thresholds, and alternative approaches to develop the Competition Commission's procedures for identifying remedies. The Government would welcome further views on aspects of these. While the principles underlying the reforms are clear, today's announcement represents a further stage in consultation, not the end of the process. We will continue to develop the detail of the proposals, consulting with interested parties where appropriate.

The Government intend to introduce legislation designed to implement the measures set out in the document as soon as parliamentary time permits.

However, in light of the broad support among consultation responses for the thrust of the reforms, I have been examining ways of making progress towards operating the current regime consistently with the principles underlying the reforms, so far as is possible within the existing framework. I am now, therefore, adopting a new policy in relation to the advice I receive from the Director General of Fair Trading.

First, I confirm I will continue to refer cases to the Competition Commission primarily on competition grounds.

But I wish to go further, in advance of legislation.

My policy from today will be to accept the advice I receive from the Director General of Fair Trading on whether or not to refer merger cases to the Competition Commission, save in exceptional circumstances.

I do not expect exceptional circumstances to arise often. It may be appropriate for me to intervene, for example, where a merger raises national security issues or where 155W there are other unusual circumstances, such as where there is a material change after the submission of the DGFT's advice, or where the advice of the DGFT conflicts with the views of sectoral regulators.

I think that it is right that the role of the Director General of Fair Trading should be emphasised in this way. This policy currently covers only my decisions following the advice of the DGFT on reference decisions (including undertakings in lieu). I intend to review in 12 months time the position in relation to my decisions following advice from the Competition Commission after a full inquiry into a referred merger.

Today's announcement reflects my view that the Director General is best placed to assess competition issues in individual cases. As previously, it will be for the Director General to decide on the process he thinks best serves him in the formulation of his advice. Departmental officials will continue to assist in this process where the Director General of Fair Trading considers this appropriate.

Lastly, I want to take what action I can to reduce the burdens of the current system on business. To this end I propose to exempt small firms from paying merger fees. I am publishing draft proposals for doing this today and seeking interested parties' views on them.