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Sir Patrick Cormack: The hon. Gentleman is being a little mischievous. I am not a socialist. As he well knows, I am an unrepentant capitalist, as I made plain earlier. However, I believe in responsible capitalism, which has done so much to help the countries of western Europe, including ours, enjoy our present standard of living. In fact, I am involved in an annual award for responsible capitalism, which was presented last year by no less a person than the Chancellor of the Exchequer. We made common cause on that issue and we will continue to do so.
The company is a good example of responsible capitalism, but it is in danger from an avaricious, inhuman capitalism—there is good and bad in everything—and I repudiate that. I hope that those who have the ultimate say will also repudiate it, so that the people whose lives have been so clouded by uncertainty will be able to relax this summer. The bid is not in the best interests of the industry, of the midlands, of those who work for the company or of the consumers who enjoy the products that are produced.
6.28 pm
Rob Marris (Wolverhampton, South-West): I should declare a slight non-pecuniary interest, in that my constituency office is rented at a commercial rate from the brewery and I am currently negotiating a new lease. I find it surprising but pleasing that the hon. Member for South Staffordshire (Sir Patrick Cormack) is coming around to the views of Labour Members about responsible capitalism and, if his current trajectory continues, he may even cross the Floor.
On a more serious note, the hon. Gentleman and I are at one on this issue. The breweries are local institutions and they support other local institutions, namely the pubs of which he spoke so eloquently. Pubs are a fine British, as well as English, tradition.
I am especially concerned about the jobs in Wolverhampton, South-West, as the Park brewery is in my constituency. I may not be as big a beer drinker as
my hon. Friend the Member for Wolverhampton, South-East (Mr. Turner)—few hon. Members are—but I do drink beer and am concerned about the brands made by the Wolverhampton and Dudley brewery.The Campaign for Real Ale has always been very clear that that company—Britain's largest independent regional brewer—does a great job. We must protect the brands that it makes, and the fear is that the pubs will be sold off if the takeover goes through. The brands would then also be sold off, with the result that they would not be brewed in the original breweries. That would be a loss to the nation's taste buds.
I thank the hon. Member for South Staffordshire for raising the matter in this Adjournment debate.
6.30 pm
The Parliamentary Under-Secretary of State for Trade and Industry (Miss Melanie Johnson): I join in congratulating the hon. Member for South Staffordshire (Sir P. Cormack) on securing this debate. He and my hon. Friends the Members for Wolverhampton, South- East (Mr. Turner), for Wolverhampton, North-East (Mr. Purchase), for Wolverhampton, South-West (Rob Marris), for West Bromwich, East (Mr. Watson) and for Dudley, South (Mr. Pearson) clearly all feel passionately about the subject of the debate.
When I realised that I was to reply to the debate, I did not appreciate that it would also be about socialism and capitalism, and about good and bad. Wide new horizons have opened up of which we were unaware when we began. I fully recognise that this is a key concern to the hon. Member for South Staffordshire, and to other hon. Members whose constituents also work for the brewery concerned. I accept that the hon. Gentleman is a passionate consumer.
I am sure that the hon. Member for South Staffordshire will appreciate that I cannot comment in detail on Pubmaster's proposed acquisition of Wolverhampton and Dudley, as the merger is being considered by the Office of Fair Trading under the Fair Trading Act 1973. In due course, the Director General of Fair Trading will advise my right hon. Friend the Secretary of State on whether the merger should be referred to the Competition Commission for further investigation.
What I can do, however, is set out some background to the Government's overall approach to competition policy. I can also sketch out the process for examining mergers such as this, the wider position within the beer market as a whole and the future direction of merger control.
On competition policy, my right hon. Friends the Chancellor of the Exchequer and the Secretary of State for Trade and Industry made it clear when they announced proposals for an enterprise Bill last month that the Government intend to tackle the challenge of enterprise and productivity in the UK economy, of which an effective competition policy is a key part. It is at the heart of the Government's strategy to close the productivity gap between the UK and our industrial competitors. Competition is a key driver for innovation, productivity and growth.
Competitive markets provide the best means of ensuring that the economy's resources are put to their best use by encouraging enterprise and efficiency and
widening choice. Competition policy is used to ensure the efficient workings of markets, and to prevent abuses of markets that lead to less innovation, higher prices, lower choice and lower quality than would result from efficient competition. That may link up with the points made earlier about what capital at its best—as represented by the hon. Member for South Staffordshire—might consist of.Part of the Government's competition policy is the regulation of mergers. The principal provisions for the control of merger in the UK are contained in the Fair Trading Act 1973.
Mergers qualify for investigation under the Fair Trading Act if they either pass an assets test—if more than £70 million of assets are being acquired—or a share-of-supply test. The latter applies if a share of 25 per cent. or more in the supply of a particular good or service in the United Kingdom is created or enhanced.
Under the Act, the independent Director General of Fair Trading advises the Secretary of State for Trade and Industry whether qualifying mergers should be referred to the Competition Commission for full investigation; the Secretary of State then decides whether to refer or not. The Commission investigates whether a merger is against the public interest and reports its conclusions to the Secretary of State. If the commission concludes that a merger may be expected to operate against the public interest, the Secretary of State may prohibit the merger, allow it to proceed subject to conditions or allow it to proceed unconditionally. There are no powers to block or impose conditions on non-newspaper mergers unless the commission reaches an adverse finding.
As I said earlier, the proposed acquisition of Wolverhampton and Dudley is being considered by the Office of Fair Trading. It might be useful, therefore, if I explain in a little more detail the analysis that the OFT undertakes. Where a merger qualifies for investigation under the Fair Trading Act, in the first instance it is the officials of the DGFT who undertake an analysis of the merger. The main aim of their evaluation of a merger is to establish its potential effect on competition, although other possible public interest issues are assessed where they may be relevant.
Ever since the monitoring process was first introduced in 1965, a primary concern of the reference policy of successive Governments, Conservative or Labour, has been the control of mergers that would have an adverse effect on competition in the United Kingdom. It is the policy of this Government to refer merger cases to the Competition Commission for further investigation primarily on competition grounds.
It is open to the DGFT and to Ministers to consider other issues, which can be broadly categorised as public interest issues and could include, for example, the effect on employment, regional development, or national security. As the DGFT's own published guidance states, however, it would only be in exceptional circumstances that such considerations might be a decisive factor. The primary purpose of our merger control policies is to consider and, if necessary, block or amend those mergers that are identified as having adverse effects on competition in markets.
As I am sure the hon. Member for South Staffordshire will appreciate, no two merger cases are identical, but the DGFT's assessment follows a similar pattern. In the first place, he will identify the markets in which the parties to the merger are involved. Where markets directly overlap, there is the most obvious possibility that there might be a reduction in competition, but competition issues may also arise where the merger involves markets that are linked vertically—where the parties are involved in different stages of the production or supply of the same goods or services.
Secondly, the structure of the markets affected by the merger is analysed so that the likely effects of the merger on the nature and degree of competition in those markets that are relevant can be assessed. Factors that may be taken into consideration include the extent and impact of any barriers to market entry and the buying power of customers. The judgment that the DGFT then makes is whether the merger would give rise to a degree of market power that would allow the merged company to raise prices or reduce quality to the detriment of its customers, or to operate in some other way that could be against the public interest.
Once the OFT has assessed the merger, the DGFT advises the Secretary of State whether the merger should be referred to the Competition Commission for further investigation. I listened to what the hon. Member for South Staffordshire and my hon. Friend the Member for Wolverhampton, South–West said in this regard. In October last year, my right hon. Friend the Member for Tyneside, North (Mr. Byers)—the then Secretary of State—announced that he had decided to accept the DGFT's advice on reference in all but exceptional cases. This remains the Government's policy.
Such exceptional cases are not expected to arise often. It may be appropriate for Ministers to intervene, for example, where a merger raises national security issues or 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.
Should the Secretary of State decide, in the light of the DGFT's advice on a merger case, to refer it to the Competition Commission, the commission will assess whether the merger will operate against the public interest. The Fair Trading Act requires it to take into account all matters that appear to it to be relevant in the circumstances in determining whether a merger operates or may be expected to operate against the public interest.
With that background in mind, I will deal briefly with the case raised by the hon. Gentleman. Pubmaster is a pub landlord with about 2,000 pubs throughout England and Wales. Its proposed acquisition of the Wolverhampton and Dudley was notified to the OFT in June. The merger is still being assessed by the OFT and the DGFT has not yet advised Ministers whether it should be referred to the Competition Commission for further investigation. In view of the Secretary of State's role as statutory decision maker, I am sure that the hon. Gentleman will appreciate that I cannot comment on the substance of the case.
The OFT has issued a public invitation for third party comments on the merger. I will, of course, ensure that the OFT is aware of the views that the hon. Gentleman and my hon. Friends have expressed today. If anyone has any comments that they wish to make, they should contact the OFT directly as soon as possible so that their views may
be taken into account in the consideration of the case and so that the DGFT can reflect them in his advice to the Secretary of State.
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