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Lord Kingsland moved Amendment No. 35:
The noble Lord said: Amendment No. 35 refers to paragraph 2 of Schedule 1 to the Bill. Its simple intention is to include in paragraph 2 the identical
Amendment No. 38 applies to paragraph 4 of Schedule 1 and the discretion it gives to the director general not to apply a particular agreement if a direction is given under that paragraph. I ask the Minister to look in particular at paragraph 4(2)(b), which states:
I have noted that the Minister has tabled his own amendment, Amendment No. 40, which defines protected agreements. I welcome that on behalf of the Opposition. However, it does not completely satisfy our objectives.
Perhaps I may ask the Minister to turn to heading (c) of his Amendment No. 40, beginning with the words,
Our difficulty here is that part of the heading in the ultimate and penultimate sentences in brackets,
Those subsections refer to the Fair Trading Act 1973.
That Act allows the director general in some circumstances to investigate mergers where the control aspect is as low as 10 or 15 per cent. The effect of the exception in the brackets would be to continue to allow the director general, in certain circumstances where he wished, to look at mergers where the control factor was as low as 10 or 15 per cent. In the Opposition's respectful submission, that is too onerous a burden for mergers carrying that level of control to bear. We ask the Government to give an absolute exclusion.
The final amendment refers to what I think is an unintended, rather technical, point which is contained in paragraph 5(2). I quote:
Paragraph 9 of the merger regulation gives member states the authority to request that their national competition authority should look at a merger which has a Community dimension, so that to that situation the word "exclusive" does not apply. The way to cover the problem posed by paragraph 9 is simply to remove the word "exclusive" altogether, so that the ultimate and penultimate lines would read:
Lord Simon of Highbury: In Amendment No. 38 Members of the Committee seek to take away the ability of a director under certain circumstances to remove the benefit of the general mergers exclusion from an
An approach was therefore developed, in consultation with the practitioners, in which the exclusion was widened, but with the provision for the director to be able, with notice, to claw back the benefit of the exclusion where he considers that it would infringe the prohibition and would not merit an unconditional exemption.
The claw-back is not to apply to certain categories of agreement. In the Bill as introduced these were to be prescribed by order. Government Amendments Nos. 39 and 40 will now set out these categories on the face of the Bill. I believe that it is right that where we can reasonably and properly widen exclusions we would and should do so. If it is necessary to provide safeguards in order to be able to widen such an exclusion, I believe that that is the right balance. I shall refer to a further example in relation to a later amendment where we hope to provide an exclusion, but with an appropriate safeguard provision.
However, if I were to accept the amendment we would lose all the safeguards. We would then have opened up a significant loophole in the prohibition as a result of the width of the exclusion. I believe that the better approach is to limit the claw-back powers to what is necessary and not to remove them altogether.
Amendment No. 35 would exclude ancillary provisions from Chapter II prohibitions as well as from Chapter I prohibitions, as the noble Lord mentioned. The purpose of the exclusion from mergers is to leave them to be dealt with as now under the merger regime of the Fair Trading Act to the extent that they fall within its jurisdiction, and not to subject them to new controls to the extent that they do not. Hitherto we have seen the risk of a merger being caught wrongly by the Chapter II prohibition as being a matter of the formation of the merger itself. We have viewed any ancillary restriction as being part of an agreement to which the Chapter I prohibition might apply, hence the exclusion from the Chapter I prohibition.
The noble Lord prompts the question whether we are quite sure that ancillary provisions which should properly be scrutinised as part of the merger regime can never fall foul of the Chapter II prohibition. That is a point on which I would like to reflect further. I am grateful to the noble Lord for drawing it to my attention.
Amendment No. 41 would delete the word "exclusive" in paragraph 5. The word is included in order to target the exclusion on EC concentrations to the extent that the Commission has exclusive jurisdiction. In so far as the UK may have competition jurisdiction because part of the concentration is referred back to it
We were talking about the level of a shareholding acquired and whether it will be defined as a merger or whether, if I can express myself in that way, it would be there for loophole purposes. The words in brackets in the new provision make agreements where a low level of control is acquired capable of being looked at as anti-competitive agreements. It does not affect their treatment under merger control. The issue is whether one can apply the anti-competitive agreement in order that one can test the loophole theory. The worry was that anybody taking small participations might claim merger and then avoid the competition clause. So it is effectively not to be looked at in the merger section but rather to be taken in the competitive section.
As I say, I would like to reflect further on the point made under Amendment No. 35. In the light of the points I have made, I hope that for the present the noble Lord will be prepared to withdraw the amendment while that particular point is considered.
Lord Kingsland: I thank the Minister for responding so sympathetically. In those circumstances, I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Lord Simon of Highbury moved Amendment No. 36:
On Question, amendment agreed to.
Lord Haskel moved Amendment No. 37:
On Question, amendment agreed to.
Lord Simon of Highbury moved Amendments Nos. 39 and 40:
Page 39, line 27, at end insert--
("(1A) The exclusion provided by sub-paragraph (1) extends to any provision directly related and necessary to the implementation of the merger provisions.
(1B) In sub-paragraph (1A) "merger provisions" means the provisions of the agreement which cause, or if carried out would cause, the agreement to have the result mentioned in sub-paragraph (1).").
"the agreement is not a protected agreement".
"the agreement does not fall within paragraph (a) or (b)".
"otherwise than as the result of subsection (3) or (4)(b) of that section"
"the Chapter II prohibition does not apply to the conduct if the Merger Regulation gives the Commission exclusive jurisdiction in the matter".
"the Chapter II prohibition does not apply to the conduct if the Merger Regulation gives the Commission jurisdiction in the matter".
9 p.m.
Page 39, line 31, leave out from beginning to second ("transfer") in line 32 and insert ("The Chapter I prohibition does not apply to an agreement to the extent to which it constitutes, or would if carried out constitute, a").
Page 39, line 33, at end insert--
("( ) The Chapter II prohibition does not apply to conduct to the extent to which it constitutes such a transfer.").
Page 40, line 4, leave out from (" 4(3)(a)") to end of line 6.
Page 40, line 10, at end insert--
. An agreement is a protected agreement for the purposes of paragraph 4 if--
(a) the Secretary of State has announced his decision not to make a merger reference to the Competition Commission under section 64 of the Act of 1973 in connection with the agreement;
(b) the Secretary of State has made a merger reference to the Competition Commission under section 64 of the Act of 1973 in connection with the agreement and the Commission has found that the agreement has given rise to, or would if carried out give rise to, a merger situation qualifying for investigation;
(c) the agreement does not fall within paragraph (a) or (b) but has given rise to, or would if carried out give rise to, enterprises to which it relates being regarded under section 65 of the Act of 1973 as ceasing to be distinct enterprises (otherwise than as the result of subsection (3) or (4)(b) of that section); or
(d) the Secretary of State has made a merger reference to the Competition Commission under section 32 of the Water Industry Act 1991 in connection with the agreement and the Commission has found that the agreement has given rise to, or would if carried out give rise to, a merger of the kind to which that section applies.").
On Question, amendments agreed to.
Schedule 1, as amended, agreed to.
Schedule 3 [General Exclusions]:
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