Clause 93 - Period for considering merger notices

Enterprise Bill – in a Public Bill Committee am 12:00 pm ar 1 Mai 2002.

Danfonwch hysbysiad imi am ddadleuon fel hyn

Photo of Nigel Waterson Nigel Waterson Ceidwadwyr, Eastbourne 12:00, 1 Mai 2002

I beg to move amendment No. 286, in page 66, line 20, after `undertakings', insert—

`or that he agrees to give undertakings in terms which he specifies in his notice'.

Photo of Mr Nigel Beard Mr Nigel Beard Llafur, Bexleyheath and Crayford

Order. Is it the hon. Gentleman's wish that amendments Nos. 286 and 287 be taken together?

Photo of Nigel Waterson Nigel Waterson Ceidwadwyr, Eastbourne

No, I beg your pardon, Mr. Beard. I was getting ahead of myself. Thank you for getting

me back on the straight and narrow. I shall deal with amendment No. 286.

The clause gives the OFT the power to extend the normal period of a merger notice where undertakings are being sought. In effect, the extension could continue indefinitely, but the party concerned has a power to give a notice of 10 days for the OFT finally to reach its decision. Subsection (8)(b) permits that, but only if parties are not prepared to give the undertaking requested. In practice, however, the OFT attempts to impose undertakings that are excessively harsh from the point of view of the parties involved.

It would be a shame if the parties had to opt either to refuse to give an undertaking, which would result in an almost certain ban after the 10-day period, or to continue with a protracted negotiation. It would be better if they could give 10 days' notice to specify the undertakings that they wanted to give, so that the OFT could make a ruling that took those suggestions into account. The amendment is minor, but not simply technical, and it imports greater flexibility into the clause. It takes some pressure off parties in such a situation.

Photo of Douglas Alexander Douglas Alexander Minister of State (e-Commerce & Competitiveness)

Amendment No. 286 would have the effect of causing the merger notice period to expire in advance of the parties giving binding undertakings. The amendment envisages a new procedure in which the parties would give the OFT a notice that set out the terms of undertakings that they were prepared to give; the OFT would have only 10 days in which to accept the proposals or make a reference. As I hope that I can explain, we are not convinced that that would work effectively in practice. Under the current system, the OFT will already have received an indication that the parties are, in principle, willing to offer an undertaking before the OFT in turn recommends such a course of action to the Secretary of State. There is then a process of pubic consultation and detailed discussion with the parties.

The current system, which we propose to retain, allows a reference to be made if negotiations fail to reach a satisfactory and timely conclusion. That provides the parties to a merger with an incentive to reach such an early agreement with the OFT, which is in the interests of achieving certainty for all the affected parties.

Amendment No. 286 would undermine a system that we believe works effectively. Parties could give an agreement in principle to give undertakings but subsequently refuse to sign a particular text offered to them. Furthermore, the 10 days before the expiry of the extension period would, we believe, be insufficient for the OFT to consult all the interested parties in all circumstances and determine whether the terms proposed were sufficiently robust and a reference were not required. It would not be in the parties' interests for the OFT to be subjected to such a narrow time constraint. Overall, it seems much more appropriate to retain the benefits enjoyed under the

current system. I ask the hon. Member for Eastbourne to withdraw the amendment.

Photo of Nigel Waterson Nigel Waterson Ceidwadwyr, Eastbourne

I am not wholly convinced, but I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Photo of Nigel Waterson Nigel Waterson Ceidwadwyr, Eastbourne

I beg to move amendment No. 287, in page 66, line 27, leave out subsections (11) and (12).

This is such an exciting amendment that I was falling over myself to propose it a moment ago. Its effect is fairly simple. It would allow the OFT to extend the merger notice period whenever it attempted to refer a case to the European Commission under article 22(3) of the EC merger regulations. The OFT has made a couple of such referrals in recent months, but on the basis that it accepts the need for the agreement of the notifying parties, who then need to withdraw the merger notice formally. The Confederation of British Industry takes the view, with which we concur, that that existing situation is preferable to what is proposed in the clause.

Photo of Douglas Alexander Douglas Alexander Minister of State (e-Commerce & Competitiveness)

Amendment No. 287 would, in essence, undermine the OFT's ability to use the process under article 22 of the European Commission merger regulations. The amendment would prevent the extension of the time limit in a merger notice case to allow the EC to consider and proceed with a request under that article 22 process.

The provision in these subsections is necessary for the OFT to make effective use of that provision of EC law when it considers that, even though a transaction falls below the Community thresholds stated in the European merger regulations, it is more appropriate for the European Commission to consider it—because it would create or strengthen a dominant position, as a result of which effective competition would be significantly impeded in the UK or other member states.

Article 22 requests are not frequent, but there are circumstances in which that process potentially offers the most effective means of examining a case, for example, where a merger appears to raise competition concerns in several member states. In the absence of such a provision, the OFT would be faced with the choice of inviting the parties to withdraw the merger notice, or making a reference to the Competition Commission for fail-safe reasons. Although parties have so far been willing to withdraw a notice, under the new regime they could refuse to do so, requiring the OFT to make such a decision. The amendment would undermine the OFT's ability to use a provision of EC law in appropriate cases.

In the absence of that provision, parties could use the merger notice to avoid the possibility of EC consideration of a case pursuant to an article 22 request. Subsections (11) and (12) are therefore sensible provisions, which avoid the possibility of

nugatory references. I ask the hon. Gentleman to consider withdrawing the amendment.

Photo of Nigel Waterson Nigel Waterson Ceidwadwyr, Eastbourne

I am pleased to hear that the Minister has given the matter thought and that there is a certain logic to that thought, although we do not necessarily accept it. I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 93 ordered to stand part of the Bill.

Clauses 94 to 96 ordered to stand part of the Bill.