Enterprise Bill

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The Chairman: With that we may discuss amendment No. 255, in clause 49, page 34, line 27, at end insert—

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

Mr. Waterson: As members of the Committee will appreciate, clause 37 introduces a fixed time limit of 24

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weeks for the Competition Commission to prepare and publish its report on a merger reference. Subsection (3) allows it to extend that timetable by up to eight additional weeks.

The CBI has expressed its concern that any such extension should take place only with the consent of both parties to a merger. The Competition Commission may not be able to reach an agreement on an extension with both parties to a merger. One can envisage a hostile bid going ahead, and an agreement not being allowed because of the damaging effect of a protracted investigation on the potential victim company. If one of the parties were not prepared to agree, the period for the second stage investigation should remain at the maximum stipulated in clause 37 of 24 weeks.

This is perhaps presumptuous, but it might the assist the Under-Secretary in giving her answer to the Committee if she were to deal with where the 24-week figure came from in the first place, because I am sure that there is an internal logic to it. An even greater onus will be placed on those who want to create the situation in subsection (3), whereby one or both parties can be forced against their wishes to extend that period.

The CBI should also like to pass on that it would have preferred the adoption of the maximum 16-working-week time limit, which would mirror the European Commission merger regulation phase two timetable. To stray slightly outside the terms of the amendments, which might obviate the need for a stand part debate, it would be helpful if the Under-Secretary, in describing the logic behind the 24-week provision, could tell us why the 16-week time limit was discarded at an early stage, when it would otherwise have neatly mirrored the ECMR timetable. That is the reason for the amendments. The subsection is clearly causing concern in the business community, so I shall be interested to hear its justification.

Miss Johnson: First, I shall deal with the hon. Gentleman's points on the 24-week period, although I think that the amendment principally relates to the eight-week extension. We consulted on options that related to several issues—such as time, transparency and thoroughness—and they all had trade-offs. The hon. Gentleman will be aware from his familiarity with the Fair Trading Act 1973 that it states 26 weeks; the Bill reduces the period slightly. We did not feel it appropriate to use the ECMR figure having considered the practicalities.

The period is extendable by up to a further eight weeks if the Competition Commission thinks that there are special reasons for extension. I understand to some degree the sentiment that underlies the amendments because, in general, it is right that parties have certainty about the timetables that apply to a merger. However, the Competition Commission should have discretion over when to make an extension for special reasons. One reason for which an extension might be required is illness of members of the reporting groups which might seriously impede the Competition Commission's work. Reasonable parties

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would probably consult on an extension in such circumstances, but that cannot be relied on, so it seems unwise to give the parties the final say over and above the Competition Commission.

I reassure the hon. Gentleman that the Competition Commission's decision to extend the timetable is not supposed to be an easy option. It must consider that there are special reasons why the 24-week period should be extended. Clause 103(4) requires it to publish its reasons for any such extension, and only one such extension is possible. For example, it cannot opt for a four-week extension and then decide that a further four weeks are needed.

The clause is intended to impose a discipline on the Competition Commission that is strong enough to ensure that the vast majority of cases are completed within the 24-week deadline. The flexibility of the Fair Trading Act regime means that the Secretary of State is currently able to grant an extension of up to three months for special reasons. Hon. Members will see that we have been much more rigorous in our approach.

I take comfort from the fact that the remarks of the CBI in response to the July competition White Paper suggest that it thinks that the approach that we have adopted is right. In response to the proposal that the Competition Commission should have a power to extend the maximum timetable by eight weeks in exceptional circumstances, the CBI said:

''We need to appreciate the need for this, and also welcome the need for published reasons to be given for the extension.''

In light of my explanation, I hope that the hon. Gentleman withdraws his amendment.

Dr. Vincent Cable (Twickenham): Why did the Under-Secretary reject the European Union precedent? She said that the Department had considered and rejected it, but it is not entirely clear why. At first sight, cross-border merger and its implications in the European Union appear to present more complex problems and, in general, would mean dealing with larger mergers. It is not clear why that can be dealt with sooner. Many people would argue that the European Commission is not the world's most efficient institution. Why is it able to deal with such matters so much more quickly?

Miss Johnson: I agree with the hon. Gentleman in some regards. Under ECMR procedures, one single body carries out both stages. When the process reaches its second stage, it is already fully up to speed, so is more likely to hit the deck running than our two-stage UK process, where the OFT handles the first stage and the Competition Commission carries out the in-depth investigation. The measure gives the Competition Commission the opportunity to be a fresh pair of eyes—a feature strongly supported by business. We therefore felt that the four-month maximum timetable under the ECMR arrangements was not appropriate; we felt comfortable cutting back from the FTA timetable.

5.30 pm

Mr. Waterson: I have expressed the concerns that the CBI expressed and heard the Minister's comments.

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I cannot take the matter further at this stage, so I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 37 ordered to stand part of the Bill.

Clause 38

Section 37: supplementary

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

Mr. Djanogly: This clause deals with the release and use of information relating to the preparation of the reports. We have discussed how the reports should be prepared and published and, under clause 36, I mentioned my concerns about the damaging effect of the release of confidential information through that process.

In her reply, the Under-Secretary mentioned that the OFT and the Competition Commission should be answerable to their decisions—hence the reports. I fully support that and have no problem with it but, under the Bill as it stands, it will simply be possible to release the information, and the damage will then be done. There is no way of speaking formally to the company before the release of the information so that it has a chance to object to the disclosure of particular parts which might damage its business. Why can a company not have the right to receive a copy of the full report before it is released to the public?

The Competition Commission would, of course, make its findings public in summary form, without the company having the chance to look at it in advance, which is quite right and proper. However, between the release of the preliminary findings and that of the full report, why should the company not be given a few days to review the full report, to ensure that the information in it will not damage its business? It should at least have the chance to discuss with the Competition Commission the damaging effect of any such information, with a regard to limiting that damage.

Miss Johnson: The balance is difficult to strike, but we think that we have found the right balance in all the measures covered in this clause and the earlier clauses relating to it. The 1973 Act is relevant to this clause, but companies will be required to undertake review by the Competition Commission. They will have to put forward their comments, which will be provisional findings, not conclusions. I trust that I have reassured the hon. Gentleman that we have the balance right.

Question put and agreed to.

Clause 38 ordered to stand part of the Bill.

Clause 39 ordered to stand part of the Bill.

Clause 40

Intervention by Secretary of State

in certain public interest cases

Mr. Waterson: I beg to move amendment No. 66, in page 26, line 7, leave out from ''56'' to end of line 8.

The amendment is quite important and it raises two issues. One is of principle and the other of uncertainty.

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The amendment was raised by the joint committee of the Law Society and the Bar, which was examining the legislation, and it raises wider concerns. As one can tell at a glance, subsection (3) refers to a ''public interest consideration''. Our next major debate—with your acquiescence, Mr. Conway—will be under clause 56, which is a convenient place to tackle the issues of principle relating to public interest.

The narrow point is in the words following ''section 56'' in subsection (3):

''or is not so specified but, in the opinion of the Secretary of State, ought to be so specified.''

As a matter of principle, we think that it is quite wrong to pass primary legislation that leaves a door wide open for the Secretary of State, should he experience esprit de l'escalier later, to think of some other basis to intervene. If such a door is left even ajar, it would make nonsensical the care that we lavish on Bills in these Committees. In this case, one could drive the proverbial coach and horses through it, if one were so minded.

It is wrong in principle to say that the Secretary of State should have the power to consider public interest considerations that are not listed in the legislation. Given the care and work that has been directed at drafting the Bill, and the extra care that must be attached to anything that has the phrase ''public interest'' in it, I would be surprised if the draftsmen had not already thought of other possible situations that could have been included. However, as it stands, the Secretary of State will be able to add a new public interest consideration, and will be able to do so in response to a specific or proposed merger, which brings me to my second area of concern.

In essence, a merger could be referred on new grounds that did not exist when the merger was conceived. That is the point about uncertainty. Companies in all good faith will start negotiations to merge their companies and spend a lot of time and money doing so without being sure that the goalposts will not be moved at some subsequent date by the Secretary of State. In other words, they could agree to merge on the basis of the provisions in the clause but, after expending a great deal of time, money and effort, discover that the Secretary of State has said that there will be an intervention on public interest grounds on the basis of something not set out in legislation.

I do not want to be repetitive, so I will not get into the definitions of public interest involved—we will come to that under clause 56. We think that the power is a dangerous one to give any Secretary of State, and that such uncertainty is bound to cause problems in the business community. The Under-Secretary has said more than once, in a number of different contexts and quite justifiably, that we need certainty in the way that the provisions are applied. The clause leaves an enormous lacuna in the legislation that can be filled at any time by any Secretary of State, possibly part of the way through a merger. We feel strongly about the provision, and for us to be satisfied, the Under-Secretary is going to need a pretty good justification for it.

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Prepared 30 April 2002