Two situations might be relevant and could affect the decision of the competition authorities in relation to consumer benefits. In the first situation, one of the circumstances in which the OFT might decide not to refer is where it expects customer benefits to outweigh the competition concerns. The second situation relates to a reference. If a merger is referred, the Competition Commission has the task of deciding whether a merger will result in a substantial lessening of competition. The Competition Commission can have regard to customer benefits and will have discretion to apply lesser competition remedies than would otherwise be the case in that second scenario. The discretion would extend from the Competition Commission clearing the merger without applying any competition remedies, if it decided that nothing could be done about competition problems without eliminating the relevant customer benefit, to taking those remedies into consideration.

The challenge in identifying the framework, as the hon. Member for Cities of London and Westminster (Mr. Field) remarked in his contribution, was to identify a framework that would allow such benefits to be taken into account without undermining the central importance of the competition analysis. That is certainly true and we believe that we have such a structure. At stage one, the OFT can choose not to refer a merger where it believes that the customer benefits outweigh the competition concerns, but to reach such a belief, we expect that the benefits will have to be significant and certain. To some degree that deals with the question of my hon. Friend the Member for Wolverhampton, North-East (Mr. Purchase), but not entirely. I accept that the certainty is important, as it covers time as well as existence.

Where there are doubts, a reference would always be made so that the issues could be studied in depth. At stage two, the Competition Commission will always have to reach a decision on the substantial lessening of competition test. It will have to take into account customer benefits at the relevant stage of setting remedies.

The hon. Member for Eastbourne asked for examples. I have quite a few. I will not detain the Committee long in giving them; I will just run through a couple. For example, a network benefit in mobile telecommunications is that the more users who join a particular mobile network, the more valuable the network becomes to those users—they can contact more people, in more locations, at lower cost as the network increases in size. In the case of large economies of scale, where the effect of scale economies on prices is sufficient to outweigh that of a substantial lessening of competition, such circumstances could lead to an overall reduction in prices—provided that the authorities were satisfied

that the economies of scale would be realised in spite of a significant reduction in competition and prices after the merger would remain lower than they were pre-merger.

My hon. Friend the Member for Wolverhampton, North-East made a point about ''reasonable time''. That can be interpreted by lawyers, who will decide whether the OFT or the Competition Commission are doing things properly. My third example is that of a merger producing more innovation through research and development benefits. The hon. Member for Eastbourne mentioned that in his remarks. Investment in research and development often involves large fixed costs and there may be circumstances where critical mass is needed—in terms of research expertise or capital or both. Under those circumstances, that can be secured only through a merger, although substantial benefits may be gained from that.