Memorandum submitted by the Department
for Business, Innovation and Skills
MERGERS: PUBLIC
INTEREST INTERVENTION
AND FOOD
SECURITY
During our discussion at the committee hearing
on Tuesday 12 January, members referred to the power Ministers
have under the Enterprise Act 2002 to intervene in mergers on
public interest grounds.
The reforms to competition and merger policy over
the past two decades have focussed it on promoting competitive
markets and applying a competition test. The 2002 Enterprise Act
does however recognise that there are public interests which may
not be adequately protected by the application of a competition
test. It therefore includes a reserve power to allow some mergers
to be examined additionally on the basis of their impact on the
public interest.
There are presently three public interest considerations
specified in the Enterprise Act as legitimate bases for Ministerial
intervention. These are:
— media plurality, quality and standards;
and
— the stability of the UK financial system.
It is also possible to intervene in mergers
that fall to be regulated under the EC Merger Regulation; generally
being those larger merger cases that affect trade in more than
one EC member state. European law currently specifies two grounds
on which public interest interventions are possible: public security
(equivalent to national security) and plurality and quality in
the media.
While every case needs to be considered on its
merits, it is not clear that wider interests such as the concern
expressed by some Members at the hearing about food security would
be considered to fall within the scope of any of the existing
public interest considerations.
It is, of course, possible to specify additional
public interest considerations. However, as the aim of the Act
is to secure consumer interests through effective competition
between enterprises, the policy intent was that the reserve power
should be used sparingly to avoid inconsistency, uncertainty and
a dilution of this aim.
Any proposed new consideration to be specified
in the Enterprise Act would need to be approved by a resolution
of each House of Parliament. In addition, if it was to be relied
upon also in European merger cases, it would need clearance by
the European Commission. They would have to be satisfied that
the consideration was legitimate and compatible with the objectives
of the European Treaty, in particular in relation to the free
movement of capital. Anyone making a case for a new public interest
consideration would need clear evidence that this power was necessary,
meaning that the only way to achieve the relevant public policy
objective was to be able to intervene in possible mergers, as
opposed to adopting other measures such as, for example, appropriate
sectoral regulation. It may be noted that where governments have
previously sought to use the powers, available under merger control,
to intervene in merger cases in the food sector that action has
been blocked by the European Commission.
Further, merger control is a highly transparent
process. Any decision to intervene and take action in relation
to a proposed merger on public interest grounds is open to legal
challenge. Even assuming a suitable public interest consideration
had been specified that enabled intervention in a relevant merger,
it would remain possible to intervene only where there was a defensible
case for doing so. It would need to be a proportionate measure
that was demonstrably necessary in order to achieve a specific
public policy benefit.
I hope this helps clarify the position on this
matter.
January 2010
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