Examination of Witnesses (Question Number
720-734)
WEDNESDAY 31 OCTOBER 2001
THE RT
HON PAUL
BOATENG MP, MR
RICHARD SUMMERSGILL,
THE RT
HON BARONESS
SYMONS OF
VERNHAM DEAN,
MR ANDREW
WHITE, MR
TONY METCALFE,
MS RHONA
BRANKIN MSP, MR
MICHAEL KELLET
AND MR
ROBERT CROWHURST
Mr Lazarowicz
720. Baroness, you will recall we had a discussion
earlier about the discrimination faced by whisky producers in
India and India is not the only example of discrimination against
whisky and other producers. The Scotch Whisky Association have
identified 130 countries where there are barriers of some sort.
I was pleased to hear your reference to the issues that the government
will be pursuing in the next WTO negotiation but I wonder if you
could give us an indication of the specific action the government
is taking to overcome the difficulties faced by whisky in particular
when trading in international markets.
(Baroness Symons of Vernham Dean) There are a number
of ways in which the government is able to help when these incidents
are brought to our attention. Reference has already been made
to the fact that one of my colleagues, Douglas Alexander, will
be making a direct approach in India today. In incoming visits—i.e.,
officials or ministers from countries where we believe some sort
of discrimination is being practised—the discrimination
may be very varied according to different countries. Indeed, some
countries may practise more than one type of discrimination. Equally,
when ministers or officials from this country go overseas, we
can make representations. Our posts are regularly in touch. As
I hope I made clear in my opening remarks, we believe that there
is a strong relationship between our people in posts and I made
a point of speaking about BTI, British Trade International, who
are able to make representations. We can also make demarches which
we do with our colleagues in the European Union. India in particular
has been the subject of such a demarche and that might be one
form of approach. Lastly, we can also seek action through the
WTO where the country practising any alleged discrimination is
a member of the WTO if we do not believe that they are performing
their obligations. There are a number of paths that we can follow
in trying to help the industry where it believes it is a victim
of discrimination.
Chairman
721. We have a new witness. Could you identify
him, please?
(Baroness Symons of Vernham Dean) I have two colleagues
with me who deal with competition issues which are outside my
ministerial remit because I understood you might have one or two
questions on this: Mr White and Mr Metcalfe. I have also asked
Mr Crowhurst to join us. He is an expert in trade policy and if
you have any detailed questions on trade policy with which I am
not as yet conversant he will be able to help us out.
Mr Lazarowicz
722. Have there been any instances to date in
which the government has made use of the WTO GATT mechanisms for
raising examples of discriminatory practices and are there any
intentions to use those in the future?
(Baroness Symons of Vernham Dean) We have started
to try to use the proceedings in a number of instances. We try
to do this through our EU membership so that we do so with the
full weight of the European Union around us. I am sure we can
give you a full list. I believe we have a list in annex B, which
was sent to the Committee, which goes through in some detail a
number where we have been pursuing these issues. We have some
successful outcomes using the WTO procedures. You will find those
in relation to Japan, Korea and Chile. If you would like further
information on any of those—we have tried to err on the
side of brevity in giving you these rather quick, thumb nail sketches
of what is happening country by country—and if there are
specific instances in which you are particularly interested, I
can give you a fuller account. I suggest it might be more suitable
to do that in writing if there are particular countries that are
causing concern. I know that India obviously will be one and indeed
India is one of the countries where I would say that we are not
just dealing with issues around particularly heavy tariffs but
also in relation to such things as very heavy interest on warehousing
charges for imports which of course also adds very considerably
to the cost of whisky, for example.
723. I am sure that information would assist
the Committee but there is one country which has also been identified
by the Scotch Whisky Association as presenting a particular problem
and that is Turkey and the relationship between Turkey and the
European Union. I understand the Trade and Industry Committee
was told by the government in the last investigation that the
government had taken up the question with the Commission and I
wondered what response the Commission had given to those invitations
from the government.
(Baroness Symons of Vernham Dean) The problem with
Turkey is again a fairly complex one. We believe a lot of this
is about protecting their own particular spirits distributor which
I believe is called Tekel. The main concerns there are not only
questions of imports; it is also about import permits, about certificates
and about labelling. We have been lobbying very heavily on this.
We have done so through our own embassy in Ankara and also through
the EU. We are making progress slowly over this. This is one of
the issues obviously that we will want to resolve with Turkey
given their status as a would be applicant country for EU membership,
but I am afraid at the moment we are making progress rather slowly.
We are going to continue to liaise with our colleagues in the
Scotch Whisky Association but our main problem is going back to
the monopoly industry which Tekel is in terms of being a Turkish
monopoly distributor. It is the Turkish government's desire to
protect that industry which we believe lies at the heart of our
problems here, but we will continue to liaise with the industry
and to do all we can to pursue our concerns, not only bilaterally
but through the Commission in the way that we are.
Chairman
724. I want to look for a moment at Interbrew.
I understand this area may be outside your responsibility but
Mr White and Mr Metcalfe might be able to help us. Would the suggestion
that Scotland might be identified as a separate beer market be
a reasonable interpretation of one of the proposed options concerning
the Interbred acquisition which were considered by the DTI?
(Mr White) We have not identified Scotland as a separate
market. We have left the question open. When the Director General
advised the Secretary of State on whether or not this should be
moved into a second phase investigation by the Competition Commission,
he said it was not necessary to reach a conclusion on this before
it went to the Competition Commission. The Competition Commission
also left the question open after its report. It looked to the
market as if it were a Scottish market or a series of regional
markets and as a GB market.
725. When the Interbrew acquisition was originally
being reviewed, what consideration was given to the public interest,
including the prospect for employment and regional economic development
that was implied?
(Mr White) It was not possible to look at the public
interest in this case because the Interbrew /Bass merger originally
fell under the aegis of the European Community Merger Regulation
and we asked for it back, as we can under Article 9 of the Regulation,
and the Commission agreed. When you have a case back, you cannot
look at anything but the competition issues.
726. Can I go back to a previous question concerning
the successful appeal by Interbrew against the original decision
by the then Secretary of State for Trade and Industry concerning
that company's acquisition of Bass Brewers? Belhaven Brewery Company
suggested that one of the options proposed seemed to suggest that
Scotland could be identified as a separate beer market which "could
effectively set a precedent for the future regulation of other
industries in Scotland."
(Mr White) I am not conscious that Belhaven have suggested
that we have defined the market separately. That is not the case.
We avoided the issue when making reference to the Competition
Commission. The Competition Commission avoided the issue in making
its report and we have not since then had to redefine the markets
again.
Mr Weir
727. Can I take it that the option is still
open and has not been closed off? No one has grasped the thistle,
so to speak, of deciding the issue rather than just rejecting
it?
(Mr White) It has not been necessary to reach a conclusion
in order to take the action we have taken and it is a very difficult
issue which is why we have avoided it. If it is not necessary
to reach a conclusion, you do not do so.
728. Is it perhaps not in the interests, particularly
of the beer industry in Scotland, that such a decision be reached
because it can protect this situation arising again in a subsequent
takeover?
(Mr White) Whether you need to reach a conclusion
is going to depend on what is happening. I am only talking at
the moment about the consideration of the Interbrew/Bass merger
and the fact that we made reference to the Competition Commission
who made an adverse report. If it was necessary to reach a conclusion,
we would do so.
729. Is it not an argument to pre-empt that
situation if it is considered to be appropriate and helpful to
redesignate Scotland at this stage to avoid using this pass the
parcel situation in the future?
(Mr White) You have to re-examine the situation every
time you examine a new merger situation and decide then, at that
time, whether or not there are distinct markets. These things
are fluid and can change.
730. Do I take it that even if it was designated
as a separate market now, that may not be the case in the future,
depending on the type of acquisition or takeover that was proposed?
(Mr White) It would depend on a number of factors.
In reaching a conclusion on the geographic definition of a market,
you take a number of different factors into account. You will
take the players in the market into account; you will take prices
in those markets into account. All those factors can change over
time. To reach a conclusion one day that the Scottish beer market
is distinct from the English beer market does not necessarily
follow.
731. Are you saying that each time there is
such a merger the whole issue has to be re-examined? You cannot
designate a market and leave it designated?
(Mr White) Yes.
Mr Carmichael
732. You have identified already that there
are economic development issues at stake here. That is something
which has now devolved to the Scottish Parliament. What interaction
is there between your Department in London and the relevant department
in Edinburgh, which I think would probably be Enterprise and Lifelong
Learning, when an issue like this comes up as it did in relation
to Interbrew?
(Mr White) We invite comments from any other relevant
government department in any merger situation. They will be taken
into account. We also have within the Office of Fair Trading a
mergers panel which is a committee that meets if we think there
are serious issues arising on a merger. Other government departments
which have an interest in that merger will be invited to the meeting.
They have quite an extensive involvement if they wish.
733. Do you recall what you got from the Scottish
Executive?
(Mr White) I cannot offhand recall.
Chairman
734. Can you give us a note?
(Mr White) Yes, but of course it was not a purely
Scottish merger.[34]
It was a merger in England and Wales as well.
Chairman: Thank you very much for your attendance
this morning. I can assure you your evidence will be of great
value to us when we come to make our report which we hope will
be fairly soon.
34 I can confirm that in considering the initial assessment
of the potential competition effects arising from the merger of
Interbrew and Bass Brewers, and whether these justified reference
to the Competition Commission, the Scottish Executive were invited
to a meeting of the Mergers Panel on 30 August 2000 but were unable
to attend. The merger was, of course, subsequently referred (on
7 September 2000) to the Competition Commission and the Scottish
Executive made representations at this stage-these are recorded
at paragraphs 6,412 and 6,413 of the Commission's published report
(Cm 5014). In response to the OFT's consultation document on potential
remedies issued on 4 July 2001 (following the reference back of
this matter by the court to the Secretary of State for Trade and
Industry) the Scottish Executive confirmed that its views remained
as set out in the Competition Commission's report. Back
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