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5.45 pm

Mr. McWalter: I am sad not to share the view of my hon. Friend the Member for North-East Derbyshire (Mr. Barnes). However, I believe that it is important to present a counter-argument. The Bill deals with fair trading and makes a substantial contribution to its development. Loading it with goals and burdens that such Bills cannot tolerate goes further than is reasonable.

My hon. Friend mentioned the boring position in Scottish football because of the domination of Celtic and Rangers. That is an interesting example because the reason for it is the wealth of both clubs compared with that of all the others in the league. They have the dominance that comes with wealth. I was keen for Manchester United not to be taken over by BSkyB because we would otherwise end up with one football club so rich that it was worth all the others put together. Absolute dominance in the market means that the consumer gets cheated and has less of the commodity to purchase and less of a service to enjoy.

The Bill tries to make it easier for small businesses to start up and consolidate so that, over time, the position of even the wealthiest and most dominant suppliers is challenged. I am a member of the all-party small business group, and the Bill's aim is laudable and important to achieve.

Sometimes the methods that large and wealthy companies use to dominate the market mean cheating workers and consumers. In Committee, I said that I was introduced to such matters when my father tendered for a small-scale contract to paint some houses in Hemel Hempstead and found that others were tendering at an extraordinarily low price. After he had lost the contract, he was told that others had stolen the paint and could therefore put in an unfair bid. That meant that those who made fair bids were put out of business and out of work.

Dominant companies and suppliers can consolidate their position through cheating their workers, not recognising trade unions, paying low wages, adulterating the environment and a host of practices that are vital components of unfair trading. The Government are not Thatcherite because they have tried to introduce measures apart from the Bill to counteract the effects of such

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practices through, for example, environmental protection and trade union recognition. It is not the job of this Bill to incorporate those measures, because they can be dealt with elsewhere. This Bill is about trying to provide an environment in which, if there is a dominant supplier in a particular trade, there is strong potential for the activities of that supplier to be called into question—notably, the activity of forming cartels or mergers, which are often a way of cheating workers and customers alike.

Mr. Barnes: I hope that my hon. Friend does not misunderstand my position. I have been supportive of all the measures in the Bill concerned with insolvency, establishing consumer rights, and helping small businesses. I am not opposed to the Bill in general, but there are matters relating to public interest and producer concerns that I would like to see incorporated in it. From what my hon. Friend has said, there might also have been a misunderstanding about my attitude to BSkyB. I supported the decision of the Competition Commission on that issue, because it took it partly on the ground of public interest.

Mr. McWalter: I understand where my hon. Friend is trying to get to; I am just not convinced that his amendment will get him there. That is partly because he wants there to be powers that it is difficult to imagine being operated. To return to the Scottish football example, one way of ensuring that other Scottish teams had much more say than they do now would be to impose a maximum wage on footballers, so that the benefit of certain organisations being massively rich compared with others would be counteracted by very strong regulations that made it more difficult for wealth to dominate.

Another way of achieving that aim would be to have a fantastically powerful wealth tax to appropriate huge resources from the very wealthy football clubs and redistribute them among the others. There is a variety of ways of achieving that, and perhaps this is the time to ask why those clubs have such a dominant place in the market. I also agree with the hon. Member for Southport (Dr. Pugh) when he said that local monopolies and local dominance lead to consumer and employee impoverishment. The fact remains, however, that these matters can be returned to.

My hon. Friend the Member for North-East Derbyshire should accept that the Bill makes a contribution to addressing the problems that we face in trying to ensure that consumers have a genuine choice, and that workers have a genuine opportunity to work for companies that do not violate the environment or systematically violate workers' rights. I hope that he will not divide the House on this issue, and I look forward to working with him on this agenda on other Bills, because there is important work to be done.

Miss Melanie Johnson: In responding to what has been a lengthy and wide-ranging debate, I should like to thank hon. Members for their contributions.

I shall deal first with amendments Nos. 18, 19 and 20, which are uncontentious. They would provide the opportunity for discretion on the part of the OFT, rather than a duty to refer. The Bill already gives the OFT discretion in certain circumstances, when that is appropriate. A variety of such circumstances is listed in subsection (3) of clauses 21 and 32. Amendments Nos. 18

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and 19 would extend the OFT's discretion in completed merger cases, and amendment No. 20 would do so in proposed mergers, beyond the particular circumstances set out. The Government believe that the exceptions set out in the two clauses cover all the circumstances in which discretion is appropriate, and do not anticipate any other circumstances in which such discretion will be needed. We do not believe, therefore, that the amendments have any value.

We do not believe that the number of references will increase as a result of the duty to refer. I reiterate what I said in response to the hon. Member for Eastbourne (Mr. Waterson) and other hon. Members: we do not think that that duty will lead to a situation in which pre-clearance is almost obligatory. Those who have raised such concerns seem to be ignoring the fact that the OFT will apply a competition test to determine whether it has a duty to refer. Only cases that could lead to a substantial lessening of competition will be referred. That is the basis on which the OFT currently advises Secretaries of State, so we do not anticipate or accept that the incidence of references will increase because of the new arrangements. I hope, therefore, that I can persuade hon. Members not to press the relevant three amendments.

I turn now to amendment No. 21 and associated amendments that deal with the question of the substantial lessening of competition test versus the dominance test. First, the Opposition have tabled a large group of amendments on this matter, as the hon. Member for Eastbourne commented. The amendments would replace our substantial lessening of competition test with a European-style dominance test. That is a slight turn up for the books, because the Opposition are not frequently taking the European route these days.

I should like to stress at the outset that the Government have consulted carefully and extensively on the choice of competition tests for the new mergers regime. The question was first raised in our consultation document on reform of the merger regime in August 1999, and a further consultation occurred subsequently. In addition, officials have met lawyers, economists and other experts to discuss the new regime and the most appropriate competition tests to apply.

A very large majority of those who responded to the consultation favoured a substantial lessening of competition test. They believe that that represents a better economic test than the dominance test that is currently used in the European Community merger regulation. One of the responses that we received came from the City of London Law Society, whose members are obviously experts on competition. It stated:

Indeed, the substantial lessening of competition test comes closest to the competition analysis that is currently applied by the UK authorities. It has the key advantage of allowing the authorities to concentrate on the overall effect of a merger on competition rather than on the structures, and will allow them to act wherever there is an increase of sole, joint or collective market power resulting from a merger.

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The key concern about the dominance test is the uncertainty about allowing the authorities to take action where a merger will not lead to one firm having a substantial market share of 40 per cent. or more, but will nevertheless increase the likelihood of firms remaining in the market and acting in an anti-competitive way. To use economic terms, there is considerable uncertainty about whether a dominance test is effective in dealing with the creation of non-collusive oligopolistic markets. European law has developed the concept of collective dominance to try to bridge the gap, but its application is uncertain and the concept strains the normal meaning of dominance.

The substantial lessening of competition test is superior in alluding to the impact of a merger on the whole market, rather than concentrating on the position of a particular market participant. It was because of concerns that the dominance test did not satisfactorily cover collective dominance cases that both Australia and New Zealand recently switched from a dominance test to a substantial lessening of competition test. That happened in Australia in 1993 and in New Zealand last year. Among our European Community colleagues, the Irish Government have recently adopted a similar test, and Spain also has such a test. It is also noteworthy that the Green Paper on reforms to the ECMR raises a substantial lessening of competition test as a possible option to replace dominance. The issue is also well understood in a number of other jurisdictions: the United States, Japan, Canada, Australia and New Zealand.

I could speak at considerable length on this subject, but I will not do so, as time is of the essence. I believe for all the reasons that I have given that we have got the right test.

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