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'the creation or strengthening of a dominant position, as a result of which competition may have been significantly reduced within any market or markets in the United Kingdom for goods or services'.

Amendment No. 52, in page 33, line 26, leave out from "be)" to end of line 27 and insert—

'the creation or strengthening of a dominant position, as a result of which competition may have been significantly reduced within any market or markets in the United Kingdom for goods or services'.

Amendment No. 59, in page 33, line 32, at end insert—

'(10A) The Commission may also have regard to whether the enterprise which is the subject of the proposed merger will become insolvent within the immediate future; the market shares of the enterprise would in any event go to the acquiring party; and there is no less anti-competitive way of selling the company.'.

Government amendment No. 237.

Amendment No. 53, in clause 54, page 39, line 3, leave out "substantial lessening of competition" and insert—

'the creation or strengthening of a dominant position, as a result of which competition may have been significantly reduced within any market or markets in the United Kingdom for goods or services'.

Government amendments Nos. 238 and 239.

Amendment No. 54, in clause 70, page 51, line 5, leave out "substantial lessening of competition" and insert—

'creating or strengthening a dominant position, as a result of which competition may have been significantly reduced'.

Amendment No. 55, in page 51, line 12, leave out—

'substantial lessening of competition and any adverse effects resulting from it'

and insert—

'creating or strengthening a dominant position, as a result of which competition may have been significantly reduced'.

Government amendments Nos. 248 to 251.

Amendment No. 69, in clause 99, page 70, line 30, leave out Clause 99.

Mr. Waterson: I shall set your mind at rest, Mr. Deputy Speaker, by pointing out that this group of amendments is not as fearsome as it might first appear. I shall take the House through at least those amendments for which I claim some responsibility.

Rather than imposing an obligation, amendments Nos. 18 to 20 would give the OFT the discretion to refer completed and anticipated mergers to the Competition Commission. The idea was debated in Committee on 25 April, but it was rejected by the Government on the basic ground that a broad discretion not to refer was appropriate where there is a two-stage referral process. However, as the Director General of Fair Trading would act alone on the basis of a more focused test, there would be less room for discretion. The Minister said that the new test should not result in a greater number of references. It is important to note that, broadly speaking—it is

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impossible to be wholly accurate on these matters—the Government's intention is that the number of references should not rise as a result of the provisions.

However, we are not wholly convinced, which is why we have tabled similar amendments on Report. The Bill introduces a significant change of emphasis. Under the Fair Trading Act 1973, the Secretary of State had the discretion to decide whether or not to refer mergers, acting on the advice of the director general. Since October 2000, the director general's advice has normally been accepted. Taken together, the formulations set out in clauses 21 and 32 require a reference to be made in respect of proposed and completed mergers, except in certain limited circumstances.

Lest anyone think that I am cleverer than I really am, the amendments were inspired by the joint working party of the Law Society and the Bar. [Interruption.] I am grateful that my comment has found favour with the Government Whip. It is therefore clear that concern exists outside this place that there will be almost routine or obligatory pre-clearance for mergers—a point that we made in Committee. It is fair to say that many parties already undertake such pre-clearance, but entirely at their own discretion. We—and others who are perhaps better placed to know—believe that a dramatic shift will take place. It will make practical sense for those who are contemplating a particular merger to obtain pre-clearance, which will in itself involve a major increase in applications.

The Law Society and the Bar also pointed out that there was no consultation on this change of policy, which was not included in the White Paper. I think it fair to say—I have not checked the relevant editions of Hansard—that the Minister gave no reason for her assumption that the provisions will not result in an increase in references. We want to press her hard on that issue.

The other issues—public interest, and the dominant position in terms of the test that should be applied in such cases—fall into two or three categories. You will be relieved to hear, Mr. Deputy Speaker, that many of the amendments in this group make the same point. We had a good debate on these issues in Committee, but some of the arguments bear repetition. Under the 1973 Act, the public interest test was established, and it is generally accepted that that needs revisiting. Some discussion took place in Committee on the merits of the dominance test—which is favoured by the Confederation of British Industry, for example—and what is known as the "substantial lessening of competition" test. One argument in favour of the dominance test is that it is the standard for assessing mergers under the EC regime. There is real concern that businesses operating in this country might face a stiffer test here than they would face under the European regime.

In Committee, my hon. Friend the Member for South Cambridgeshire (Mr. Lansley) pointed out graphically that, during the Standing Committee that considered the Competition Act 1998, Ministers expressed the strong view that there should be no disparity between regimes operating in Europe and in this country. Although not the most significant example, it shows how our system is in danger of drifting away from the European one.

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I repeat the CBI's interesting quote concerning the Competition Act 1998:

That is an important point in principle, and an important point in practice. Like so many of these issues, having a different test—even a subtly different one—involves extra work and extra burdens for those who are trying to make businesses profitable. We do not resile, therefore, from our support for the amendments relating to the dominant position. I shall be interested to hear the Minister justify establishing a separate test from that operating in the European regime.

The other issue, dealt with in amendments Nos. 56 to 59, is one that we tried to import into the Bill from the United States and, indeed, Europe. That is the so-called failing firm defence. In the US, for example, four things have to be shown: that the failing firm cannot meet its financial obligations; that it cannot reorganise itself in bankruptcy; that it cannot find another buyer whose purchase would pose lesser anti-competitive risks; and that in the absence of the merger its assets would exit the market.

In the EU, we have had a fascinating discussion about the case of Kali-Salz/MDK/Treuhand, which is all about potash. In that case, the Commission set out three criteria: that the company would in any event go bankrupt in the immediate future; that the market share of that company would in any case go to the merging party; and that there was a no less anti-competitive way of selling the company. There is a slight difference in approach between the US and the EU tests, but that does not matter for our purposes, because we are trying to persuade the Minister that incorporating the so-called failing firm defence would be sensible.

In fairness, the Minister has not launched a full frontal assault on our suggestion. To summarise, possibly unfairly, her reply to the discussion in Committee, she said that the prospects for a particular company would be taken into account in any event, so it was not necessary to spell that out. I do not wish to labour the point, but if such a defence is good enough for both the US and the EU regimes—albeit with slightly different tests applying—we should seriously consider including it in the Bill for application to our system.

Amendment No. 69 would remove clause 99. Our problem with that clause is that it would give the Secretary of State extremely wide powers to modify clauses 94 to 98 on the mergers regime. The power is too broad and any significant change should be a matter for primary legislation. Again, our arguments did not find favour with the Minister in Committee, but I hope that we will have better luck on Report. I commend the amendments to the House.

Mr. Barnes: I tabled amendments Nos. 202 to 205, which would place the issue of public interest back into the Bill. Amendments Nos. 304 and 305 in the next group also address that issue. The difference between the two sets is that the present ones relate to the director general of the OFT and the later ones relate to the position of the Secretary of State. My remarks about the public interest will relate to both sets of amendments, but I shall try to

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keep in order. I may not need to repeat my remarks when we come to the next group of amendments on the Secretary of State's role because I will have already addressed the issues in relation to the role of the director general.

When the hon. Member for Eastbourne (Mr. Waterson) moved the amendments, he said that they were not fearsome. However, I hope that my amendments will be viewed as slightly fearsome, because I am very concerned about the issue. In Committee, I explained the problems in my constituency associated with the takeover and immediate closure of Biwater, and the loss of 700 jobs. The provisions in the Fair Trading Act 1973 would have allowed that takeover to be referred to the Competition Commission on the ground of public interest, and if that had been done by the OFT or the Secretary of State, it is likely that those jobs would still exist today and that a profitable and viable firm, with its export market, would still be in operation.

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