Byers' pledge to take politics out of mergers returns to haunt him

NEWS ANALYSIS Despite the Secretary of State's promise to reform competition policy, he is under attack for intervening more than his predecessors

WHEN STEPHEN Byers announced with a great fanfare last August that he had decided to do for competition policy what the Chancellor had done for monetary policy by taking the politics out of merger decisions, he must have known that his actions would be closely scrutinised to ensure they matched his words.

It is worth recalling exactly what the Secretary of State for Trade and Industry had to say as he announced that most merger decisions would become the sole province of independent competition authorities.

"Business is entitled to know that important merger decisions will not be influenced by short-term political considerations," said Mr Byers. The Government's approach, he went on, would "allow companies to plan for and take commercial decisions with confidence and efficiency. This approach has worked for interest rate decisions and I believe it is now time to consider a similar approach to merger cases".

Three months later those words have come back to haunt the Secretary of State as he faces attack for what is regarded in many quarters as the blatantly political decision to refer the pounds 8.5bn cable merger between NTL and Cable & Wireless Communications to the Competition Commission. In doing so, Mr Byers acted against the advice of his own independent competition authorities but very much in accordance with the wishes of Rupert Murdoch's BSkyB, virtually the only party to have lobbied for a referral.

Four days after Mr Byers decided to refer the cable merger (and, in a separate decision, the French group Vivendi's acquisition of a 25 per cent stake in BSkyB) the Competition Minister, Kim Howells, caused amazement by hosting a private lunch at the Department of Trade and Industry for Tony Ball, the chief executive of BSkyB, in apparent contravention of departmental rules.

In truth, Mr Byers' record was already departing from his rhetoric well before the cable decision. In the 10 months that he has been Secretary of State, Mr Byers has publicly disagreed with either the Director General of Fair Trading, John Bridgeman, or the Competition Commission on no fewer than six occasions. As one competition lawyer says: "His capriciousness when it comes to merger and monopolies decisions is beginning to make even the previous government look consistent in its approach."

Angela Browning, the Conservatives' frontbench trade and industry spokeswoman, is particularly critical of Mr Byers' intervention in the monopoly investigation into Milk Marque, the farmers' milk co-operative.

She accuses him of first vacillating over the inquiry, causing immense uncertainty and damage to dairy farmers, then overruling the Competition Commission and finally kicking the report into the long grass.

"Mr Byers does not seem to have a clear strategy, but even if he does have one it does not appear to be guided by principle. He is quite prepared to intervene when there is a political motive," she said.

Mr Byers' officials at the DTI argue that in the vast majority of merger cases, the Secretary of State has gone along with the recommendations of the competition authorities. But this ignores the point that most of these cases are neither controversial nor politically sensitive.

Until last week's NTL/Cable & Wireless referral, Mr Byers had largely been given the benefit of the doubt in the City, where it is assumed, quite wrongly, that his pledge to take the politics out of mergers will be enshrined in law any time now. In fact, there is no chance of any legislation being introduced this Parliament. Even supposing Labour wins the next election, a change in merger policy is not generally thought likely to be near the top of the agenda.

"The Byers strategy is really quite brilliant," says one competition expert. "He has created the perception that he is depoliticising merger policy when actually he has intervened more in the space of the last year than his three predecessors did put together."

Competition lawyers also point to the way in which, unseen by the public eye, successive Labour secretaries of state have begun to undermine the system of confidential advice that the Office of Fair Trading gives to ministers and to companies which are contemplating mergers.

In the past 18 months there are thought to have been four occasions on which the confidential advice of the OFT has been ignored, including at least one of the recent mergers involving electricity utilities.

It does not do for ministers to be seen to be perpetually at odds with the competition authorities. Part of the reason Mr Bridgeman's predecessor as director general of Fair Trading, Sir Bryan Carsberg, quit unexpectedly was said to be his exasperation at being repeatedly second-guessed in Victoria Street. Ministers generally learn, therefore, how to be more subtle about bending the competition authorities to their will. "Rather than overruling the OFT in public, the best solution is to lean on it in advance so that it comes up with the advice that you want to hear," says one seasoned veteran of merger investigations.

When, and indeed if, Mr Byers' reform of merger policy actually becomes law, he will still have the scope to intervene in two specific areas - defence mergers and those involving newspapers.

But, crucially, he will also retain the reserve power to intervene on grounds of "exceptional public interest" above and beyond competition concerns. The Secretary of State will have the right to determine what constitutes exceptional public interest but so far he has not enlightened anyone as to the circumstances in which he might use his powers.

As one jaundiced observer notes: "Even if they get around to reforming the system, I wonder whether anyone will notice the difference."

Start your day with The Independent, sign up for daily news emails
ebooks
ebooksAn introduction to the ground rules of British democracy
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
SPONSORED FEATURES
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Guru Careers: Account Manager / Membership Manager

£35 - 38k + Benefits & Bonus: Guru Careers: We are seeking an Account Manager ...

SThree: Trainee Recruitment Consultant

£20000 - £25000 per annum + OTE £45K: SThree: At SThree, we like to be differe...

Guru Careers: Associate Director

£50 - 80k: Guru Careers: We are seeking an Associate Director for the Markets ...

Guru Careers: Associate Director / Director of Sound Practices

£60 - 100k: Guru Careers: Our client is looking for an Associate Director of S...

Day In a Page

Giants Club: After wholesale butchery of Idi Amin's regime, Uganda’s giants flourish once again

Uganda's giants are flourishing once again

After the wholesale butchery of Idi Amin's regime, elephant populations are finally recovering
The London: After 350 years, the riddle of Britain's exploding fleet is finally solved

After 350 years, the riddle of Britain's exploding fleet is finally solved

Archaeologists will recover a crucial item from the wreck of the London which could help shed more light on what happened in the vessel's final seconds
Airbus has patented a jet that could fly from London to New York in one hour

Airbus has patented a jet that could fly from London to New York in one hour

The invention involves turbojets and ramjets - a type of jet engine - and a rocket motor
10 best sun creams for kids

10 best sun creams for kids

Protect delicate and sensitive skin with products specially formulated for little ones
Tate Sensorium: New exhibition at Tate Britain invites art lovers to taste, smell and hear art

Tate Sensorium

New exhibition at Tate Britain invites art lovers to taste, smell and hear art
Ashes 2015: Nice guy Steven Finn is making up for lost time – and quickly

Nice guy Finn is making up for lost time – and quickly

He was man-of-the-match in the third Test following his recall to the England side
Ashes 2015: Remember Ashton Agar? The No 11 that nearly toppled England

Remember Ashton Agar?

The No 11 that nearly toppled England
Turkey-Kurdish conflict: Obama's deal with Ankara is a betrayal of Syrian Kurds and may not even weaken Isis

US betrayal of old ally brings limited reward

Since the accord, the Turks have only waged war on Kurds while no US bomber has used Incirlik airbase, says Patrick Cockburn
VIPs gather for opening of second Suez Canal - but doubts linger over security

'A gift from Egypt to the rest of the world'

VIPs gather for opening of second Suez Canal - but is it really needed?
Jeremy Corbyn dresses abysmally. That's a great thing because it's genuine

Jeremy Corbyn dresses abysmally. That's a great thing because it's genuine

Fashion editor, Alexander Fury, applauds a man who clearly has more important things on his mind
The male menopause and intimations of mortality

Aches, pains and an inkling of mortality

So the male menopause is real, they say, but what would the Victorians, 'old' at 30, think of that, asks DJ Taylor
Man Booker Prize 2015: Anna Smaill - How can I possibly be on the list with these writers I have idolised?

'How can I possibly be on the list with these writers I have idolised?'

Man Booker Prize nominee Anna Smaill on the rise of Kiwi lit
Bettany Hughes interview: The historian on how Socrates would have solved Greece's problems

Bettany Hughes interview

The historian on how Socrates would have solved Greece's problems
Art of the state: Pyongyang propaganda posters to be exhibited in China

Art of the state

Pyongyang propaganda posters to be exhibited in China
Mildreds and Vanilla Black have given vegetarian food a makeover in new cookbooks

Vegetarian food gets a makeover

Long-time vegetarian Holly Williams tries to recreate some of the inventive recipes in Mildreds and Vanilla Black's new cookbooks