Enterprise Bill

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Mr. Waterson: My request for some examples has been vindicated. The Minister has been very helpful and it is easier to grapple with specific examples. On the innovation point, let us assume that two pharmaceutical companies want to merge. There will often be a critical mass argument to have the research and development focused on a new product or a combination of two existing products, but at what point is the balance struck between the domination—we do not have a dominance test, sadly—of the market by the new company and its one very successful product? Again, that is a difficult example to conjure with, but it is important that we understand the way in which the Under-Secretary's mind works. How strong will the innovation argument within this exception clause be in such a context?

Miss Johnson: That will depend on the circumstance of the case. That balance should not be disregarded; it must be weighed up when considering substantial lessening of competition. The circumstances described are ones in which that issue will have to be examined, but it will vary from situation to situation. That is shown in the examples that I gave and we could construct many examples, under each main heading.

The competition authorities will have to examine that balance as they go through each case. They will also have to examine the economic significance of customer benefits and the competition issues that arise. The core of our response is to ensure that we get the balance right. Competition can be balanced in the context given, but only in the way that we have set out in the Bill.

Question put and agreed to.

Clause 28 ordered to stand part of the Bill.

Clause 29

Information powers in

relation to completed mergers

Question proposed, That the clause stand part of the Bill.

Column Number: 334

Mr. Djanogly: This clause deals with the provision of information on a proposed investigation relating to a completed merger. The clause is worded as one would expect. However, in previous debates, such as those on the new cartel and criminalisation provisions, my hon. Friends and I and others commenting on the Bill, in particular the Confederation of British Industry, have consistently raised fears about the fact that the nature of the OFT will change. Instead of being just an investigator, it will now be an investigator and prosecutor. As a result, companies, in general, may be less willing to supply information about themselves and their markets.

Of course, this clause states that companies have to provide information, but the Minister will surely appreciate that in the normal course of the OFT's running, the effective provision of information in investigations to a large extent works on the basis of mutual respect between business and the OFT and on everyone's desire to deal with the situation as swiftly as possible, usually so that the deal in hand can be done. The clause may make that process more formal and legalistic, which might increase costs and slow down the process. What comfort can the Minister give to business that, with all the extra sticks in the Bill, companies will not feel threatened, or be inhibited in the way that I have described, in the provision of information as envisaged by the clause?

Miss Johnson: Our reasoning is that we want mergers to be dealt with as efficiently as possible. There is always a danger that parties may face a reference if the OFT does not have enough information. We want to ensure that there is enough information so that that does not happen unnecessarily. The OFT must be able to make an informed decision, so it needs to get information easily and quickly. If the parties need some time to compile information, they may benefit from an extension of the deadline for reference. That is catered for.

We expect the new power to make the regime operate much more effectively. Pre-reference, we expect that the threat and risk of the delay or reference that people will otherwise face will be adequate to ensure that the companies provide the information. Where companies refuse to co-operate and a merger is referred, obviously, the stage two information powers carry tougher penalties. However, there is no statutory limit for the reference decision on anticipated mergers, and the absence of a statutory time limit means that formal investigative provisions are not required. We believe that that is the right balance. We do not want unnecessary reference, but we want information to be supplied. A tougher provision relates purely to the post-reference situation and we believe that the consequences of not supplying information will meet the needs of the competition authorities as well as business to deal with matters swiftly and efficiently.

Question put and agreed to.

Clause 29 ordered to stand part of the Bill.

Clause 30 ordered to stand part of the Bill.

Column Number: 335

Clause 31

Duty to make references in

relation to anticipated mergers

Amendment made: No. 177, in page 19, line 27, after ''outweigh'' insert—

    'the substantial lessening of competition concerned and'.—[Miss Melanie Johnson.]

Mr. Waterson: May I have your guidance, Mr. Conway? Amendment No. 177, which I am sure is totally estimable and will make the world a thoroughly better place, does not seem to feature in the selection list. Did we deal with it earlier?

5.15 pm

The Chairman: Perhaps I might help the hon. Member, in case he gets in deep water. The matter has previously been debated. Obviously, the Committee has covered a lot of ground, and memory fails us all from time to time.

Mr. Purchase: On a point of order, Mr. Conway. I was also somewhat stunned by the procedure but recalled your earlier words. I wonder whether you would help the Committee by mentioning that an amendment has been previously debated but the question on it not put. That would be enormously helpful and save a scramble through the papers.

The Chairman: That is certainly possible. As I mentioned earlier, if an hon. Member indicates a wish to divide the Committee on amendments that have been previously debated, I will put the question formally. Government amendment No. 177 was previously debated, but the Under-Secretary must formally move Government amendments. That is part of our quirky, wonderful procedure.

Clause 31, as amended, ordered to stand part of the Bill.

Clauses 32 to 35 ordered to stand part of the Bill.

Clause 36

Investigations and reports on

references under section 20 or 31

Mr. Djanogly: I beg to move amendment No. 229, in page 22, line 38, at end insert—

    '(2A) In making or preparing any report under this section, the Commission shall not disclose any information of a confidential nature.'.

It must be appreciated that in a merger situation, particularly a non-contested one, in which both parties feel that the enlarged group would be of real benefit to them, the question of competition clearance—the possibility of a referral—would be the main risk factor that could delay and add a lot of additional costs to the transaction. I am certainly not saying that the requirement is wrong. However, if the companies' advisers were to tell them that there was a risk of referral, they may be put off the deal, because of the possibility not just that money will be wasted but that confidential information might enter the public arena, perhaps unnecessarily. Such non-public information would then be available to the companies' competitors. In the worst case, that could hinder the transaction or even put it off altogether, although the

Column Number: 336

merged companies may be much better together than standing alone. It is vital that information released by the Competition Commission in its report, or indeed elsewhere, should not include information that could be damaging.

Miss Johnson: I agree with the hon. Gentleman about the importance of adequately protecting confidential information, and we have tried to achieve that throughout the Bill. A blanket ban on disclosing information, however, is not appropriate. A balance needs to be struck between protecting confidential information and ensuring that an adequate explanation is given, which is an assessment that needs to be made case by case.

The amendment would remove the Competition Commission's ability to find the right result when publishing its reports on references. Businesses have told us that it is important for the new regime to operate transparently, which it will. For example, we expect the Competition Commission to produce provisional findings part of the way through its inquiries, the Bill provides for authorities to consult parties on proposed decisions and we are introducing duties to give reasons for decisions. Those measures add up operational transparency, which will be good for business.

However, greater transparency means that more information will be made available. Occasionally, information that one party would argue was confidential would be an essential part of the reasoning in a case of which another party would need to be made aware, which, to a degree, is a problem now. We have therefore proposed a test for the disclosure of information that would apply to all merger information. Clause 235 sets out a test that will ensure that the authorities have regard to all of those issues.

I hope that I have reassured the hon. Gentleman that in many ways we are with him on the matter and are seeking to strike the right balance.

Mr. Djanogly: The Under-Secretary makes the fair point that the amendment is, in effect, a sweeper that does not look at particular circumstances. Given that I want to come back to the general issue under later clauses, I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 36 ordered to stand part of the Bill.

Clause 37

Time-limits for investigations and reports

Mr. Waterson: I beg to move amendment No. 230, in page 23, line 14, at end insert—

    'such extension of time only to be granted with the consent of the parties.'.

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