Examination of Witness (Questions 134-139)
DR WILLIAM
BISHOP
6 DECEMBER 2006
Q134Chairman: Good afternoon. Have you ever
given evidence to one of these committees before?
Dr Bishop: I have indeed, yes, another sub-committee
of this Committee.
Q135Chairman: Then I do not need to tell you
very much about our procedures. As you know, we are live on air,
you get a copy of the transcript and an opportunity to correct
and add to it, as you wish. Thank you very much for coming. I
do not suppose you want to make an opening statement, but, if
you do, please tell us.
Dr Bishop: I do not, no.
Q136 Chairman: You have had a copy of
a number of questions around which we would like to seek your
assistance. We are very grateful to you for coming. Could you
tell us who CRA International are because we do not know anything
else about you.
Dr Bishop: Perhaps a brief opening statement
might make some sense then. You are seized with what is principally
a legal question and questions about legal institutions bearing
on merger controls. I am not a lawyer or at least I do not earn
my living as a lawyer. As it happens, long ago and in a different
life, I did actually qualify at the English Bar, but I have never
earned my living as a lawyer. I ran a consultancy company, an
economics consultancy company called Lexecon Limited and most
people still know me as the Chairman of Lexecon. Last year, I
and the other shareholders sold that company to Charles River
Associates and that is what CRA stands for, the Charles River
being the river which runs beside Harvard-MIT where it was founded,
but in Europe we are still better known under the Lexecon name
than under the CRA name.
Q137 Chairman: That is very helpful.
Can I also thank you for your admirably succinct, crisp and robust
two-page contribution in writing which, for my part, I found very
helpful. I think you have also seen the written contributions
of others who have responded to our call for evidence. Can we
start with the question of whether there is indeed here a need
for action. As you know, the CBI's view of this, and it really
is their proposal which we are inquiring into, is that, "Mergers
and acquisitions are essential for the restructuring of EU industries
and the reallocation of resources. If there is a fundamental flaw
in the mechanism, this can only damage the effectiveness of competition
and EU competitiveness". Now, is that a statement with which
you are in agreement?
Dr Bishop: Yes, it is.
Q138 Chairman: Would you agree that the
present time it takes to get proceedings through the CFI amounts
to a flaw in the mechanism?
Dr Bishop: Yes, I would, although I would put
it slightly differently. I think that in merger control what business
wants, and is, in my view, entitled to, is its day in court, that
is, an impartial adjudication on whether this merger is against
the public interest in some sense. It is that which they sometimes
feel they do not get today because the Commission is too close
to the prosecutorial side and then, to get their day in court,
they need to rely on the appeal procedure and the appeal procedure
takes too long. For many years, in the Commission there was no
rule of law at all in merger control because the Commission felt
that it could destroy any merger simply by prohibiting it—because,
before the fast-track procedure, it would take three years to
do it, which was simply crazy in commercial terms—for a
merger to wait three years. The fast-track procedure eased that
somewhat and the several defeats which the Commission suffered
in the year 2002 had a traumatic effect on the Commission for
the better. The Commission set up devil's advocate panels, it
appointed the Chief Economist and it thoroughly improved its own
procedures. I should say that that mechanism of defeat in the
Court followed by cleaning up their act within the enforcement
institution was paralleled exactly in the United States 13 years
earlier when the American authorities lost six major cases in
a row and they thoroughly overhauled the procedures and basically
became more responsible enforcers. Now, that has improved it,
but the truth of the matter is that there is more rule of law
in merger control today than there was seven or eight years ago,
but it could be improved further and, in my view, should be.
Q139 Chairman: We have been told at some
point that in fact there have only been 10 appeals since 1995
with regard to Commission merger decisions and four have succeeded.
From what you have just said and indeed from what we have read
in your written contribution, I understand that three of those
were in 2002. Was the other one, as a matter of interest, before
or after?
Dr Bishop: Let me see. Going through the four,
there was Airtours, Tetra Laval, Schneider/Legrand,
and what was the fourth successful appeal, does anyone remember?
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