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Lord Kingsland: I believe that I am most grateful to the Minister for his response. I believe he is saying that although he is not prepared to put the test on the face of the Bill, in practice he would expect the competition authorities to apply it. On that basis I am happy to beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 21 agreed to.

Clause 22 [Relevant merger situations]:

[Amendments Nos. 113 to 115 not moved.]

Clause 22 agreed to.

Clause 23 agreed to.

Clause 24 [Extension of time-limits]:

[Amendment No. 116 not moved.]

Clause 24 agreed to.

Clauses 25 to 31 agreed to.

Clause 32 [Duty to make references in relation to anticipated mergers]:

[Amendment No. 117 not moved.]

Baroness Turner of Camden moved Amendment No. 118:



"( ) Before making such a reference, the OFT shall consider submissions from appropriate organisations, including those representing consumer interest and the workforces in the relevant undertakings."

The noble Baroness said: Amendment No. 118 stands in my name and that of my noble friends. Unfortunately, the noble Lords, Lord Lea of Crondall and Lord Wedderburn, are unable to be present. At

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the outset I state my interest. I am a member and a former official of the trade union MSF (now Amicus), a union that on previous occasions has raised the whole issue of employee interests in merger and takeover situations.

I find it surprising that there is no reference at all in this part of the Bill to employees. I can understand that in a Bill about creating a fairer environment for competition, there should be some reference to consumers— although there is not much—but I am surprised that there is nothing about employees whose work and skills often lead to success and who are sometimes referred to as an enterprise's biggest asset.

There have been times during the past 20 or 30 years when the whole commercial and industrial scene appears to have been afflicted with "merger mania". One such episode took place shortly after I became a Member of your Lordships' House. In 1987, when I was still a working union official, I introduced a Private Member's Bill designed to protect staff in takeover and merger situations. At that time I was able to quote from British Business to the effect that, in 1986, industrial and commercial companies' expenditure on acquisitions and mergers within the UK reached a record 13.5 billion, almost double the 1985 total. The livelihoods of about 500,000 employees were bound up with those deals.

I said then that,


    "the background to all this is a big rise in profits but stagnant investment in manufacturing industry. The City is finding it easy to provide finance for takeovers, but is still failing to provide investment capital in manufacturing industry".

At that time, I quoted from Sir Gordon Borrie, as the noble Lord, Lord Borrie, then was—he was Director-General of Fair Trading—to the effect that although he strongly held that competition should be the main consideration in merger policy, he did not take the view that everything could be left to market forces. He said,


    "I do not have complete faith in the 'invisible hand' of Adam Smith as the regulator of our economic and social affairs".

In introducing my Bill, I said that I did not believe competition alone was an adequate yardstick. My Bill therefore provided for consideration of other factors. There should be a requirement to consider the interests of employees, to ensure that production and output in the UK are maintained for the benefit of the economy and to ensure some control of strategic industries where those are in the interests of national security. Of course, my Bill did not make any progress at that time, but when I look at the debate again, I am struck by how relevant are some of the statements made not only by me, but also by some of the supporting speakers to the present situation. On 4th July 2002, an article appeared in the Guardian under the heading:


    "Merger Mania Created Millionaires But Made Millions Poorer. How Take-over Frenzy Has Hit Shares Since 1998".

A number of major mergers are listed. In almost every case, the share price had shown a catastrophic drop. GlaxoWellcome Smithkline, Vodafone, Airtouch, CDU, Norwich Union, AOL Time Warner, Deutsche Telekom, One2One and others.

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This has not only badly hit individual shareholders, but also people who are members of pension schemes. And, in most cases, there have been job losses. Often, the employees know nothing about what is in store for them until they read it in newspapers or hear it on the radio in the morning, while getting ready for work. There was one notable case in which members of my union were involved. They did not know that merger talks had been proceeding. It had been a closely-guarded secret until they heard the announcement on early morning radio, accompanied by a statement that there would be 5,000 redundancies. At the time I introduced my Bill, the late Lord Denning supported me. He said:


    "The employees, the servants, are the people who have built up the company and given it its goodwill. Certainly they should be consulted before any take-over of a company is effected".

I turn to a heading of The Times dated 9th March 1987 which states in bold black headlines:


    "The employees are a company's biggest asset and they must always come first. In these days of mergers and take-overs, the employees do not come first or last—they do not come into the matter at all".

Our amendment does not go anywhere near as far as Lord Denning indicated. We simply ask that the OFT should receive submissions on behalf of employees. We have also included consumer interests, since these are not referred to in this part of the Bill either. Indeed, NACAB makes that point in its extensive briefing. Incidentally, it is sometimes forgotten that trade unionists are consumers too.

What we are suggesting is not uncommon. In the Netherlands, for example, a merger code gives unions more extensive rights than we seek. There, the unions' rights are consultative only, but they can give their views on the likely impact on employee interests before a merger agreement is finally signed. Works councils can appeal to the courts if companies act unreasonably.

I hope my noble friend the Minister will agree that it is right that a Bill concerned with enterprise—and ensuring that there is fair competition—should have some regard to the employees whose lives may be very adversely affected in a merger or take-over situation. Often they are likely to lose not only employment, but pension rights. These are very serious matters affecting sometimes thousands of people. Those who actually make the decisions, as the newspaper article points out, often become millionaires, but life is likely to become much more difficult for the employees who may have worked hard for the enterprises concerned. Our very modest amendment seeks to give such people a right to be heard. I beg to move.

7 p.m.

Lord Hoyle: I rise to support Amendment 118. I must declare an interest as member and past president of MSF, the section of Amicus.

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In some cases it is far too narrow to regard the position as merely one of competition. My noble friend was right to say that there is no mention in this part of the Bill of consumers. Often competition is just looked at in the short term, rather than the long term, ignoring what effect it might have on consumer choice.

I am surprised that, in a Bill on enterprise, there is no mention in this part of employees or their rights. Let us look at unemployment. The company concerned may be a major or even dominant employer in a region, so any job losses have an effect not only on directly employed workers but also on sub-contractors, who are mostly from the same locality. This has an effect on the business community, particularly small businesses dependent on this employer and on the spending power of those who are their employees. So it has a major effect on many people and their families.

The other aspect to mergers is that while shareholders may benefit from a merger in the short term, very often mergers are shown to be a failure. Many mergers collapse after 12 months. But the damage has been done to those people who lost their jobs and the damage left on the area.

I hope that the Minister will consider this point. Having looked at the Bill, it seems that only competition is mentioned. There is a reference later on in Clause 57 to national security—whatever that may mean. I would prefer the Minister to look very carefully at our amendment with a view to accepting it. The amendment has some teeth that will benefit consumers and particularly employees affected by a merger. When a merger takes place, it is not known that a plant is to be closed, but very often that occurs within a short period. I hope the Minister will look at this amendment from a social point of view and will accept what I believe to be a very reasonable amendment.

Lord Sainsbury of Turville: The amendment seeks to ensure that the OFT will consider the views of consumer groups, employee representatives and other organisations before referring an anticipated merger to the Competition Commission.

The Government's intention has been to create a regime that will operate transparently and one which will allow interested parties to feed their views into the process. Where the OFT is considering whether to make a reference, Clause 102(1) requires the OFT to take action to bring information about the investigation to the attention of those it considers might be affected by the merger. In practice, the OFT intends to continue its current practice of publishing an invitation to comment notice. That will give all interested groups—including employee representatives and consumer groups—an opportunity to submit views. Administrative law requirements will then ensure that the OFT takes account of representations that it receives.

However, we need to say that the OFT will, of course, assess all mergers against the tests set out in the legislation. This is primarily about whether the merger may be expected to result in a substantial lessening of competition. The views of employee representatives

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will be helpful where they relate to the specific criteria set out in the legislation. However, specific employment issues will not factor in the OFT's decision in whether to refer the merger. That is because we believe that safeguarding competition is vital to delivering increased productivity which will in turn improve employment prospects overall. In addition, it is worth pointing out that the OFT will be required by Clause 104 to give full reasons for its decision—both to refer and to clear mergers.

Finally, Clause 117 gives any person aggrieved by a decision of the OFT scope to appeal to the competition appeal tribunal, for example, if the appropriate procedures have not been followed. We believe that these arrangements, taken together, are sufficient to ensure that the OFT will obtain and consider the views of third parties where relevant.

The noble Baroness and the noble Lord who put forward the amendment are looking for something more. If it were what the amendment says, that is already covered by current practice of the OFT. My noble friends were looking for other criteria against which mergers could be measured. It is absolutely fundamental to this Bill that we are talking strictly about competition—a test. We are not seeking for politicians or others to impose their judgment as to whether or not the merger makes sense economically.

I hope, with that explanation, my noble friend will withdraw her amendment, though I realise that what I have said only partially meets the point being raised.


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