Byers to take politics out of merger decisions
Thursday 11 March 1999
Stephen Byers, the Secretary of State for Trade and Industry, told a post-Budget conference of business leaders: "Just as we have given independence to the Bank of England, so the time has come to remove politicians from the merger regime." It was not the job of ministers to "second guess boardroom decisions," he added.
Mr Byers later told the Commons that business needed stability and confidence and for that reason it was important that decisions on mergers were not based on short-term political considerations.
The Government's proposals could mean that ministers no longer have a say, even in controversial mergers such as the bid for Manchester United by Rupert Murdoch's BSkyB.
Under Mr Byers' plan, an independent competition authority - possibly the Office of Fair Trading - would have the power to decide on mergers by applying a competition test.
The only mergers where ministers would have the ultimate say were those which raised wider public interest concerns such as defence and national security. But even here, Mr Byers said, it would be for the competition authority and not politicians to decide whether the public interest test applied.
The Government is due to issue a consultative document in the next two months. However, Mr Byers said the new regime would not be introduced in the current Parliament since it would require primary legislation. This means the earliest the change is likely to take place is 2002.
Despite this, competition experts said that Mr Byers would now be under increased pressure to accept the advice of the competition authorities in ruling on future mergers. At present he has the power to wave a merger through even if the Monopolies Commission rules it would operate against the public interest. He can also choose to disregard advice from the OFT on whether or not a merger should be referred in the first instance.
One of his predecessors, Margaret Beckett, Labour's first trade and industry secretary since it returned to power in 1997, gained a reputation for surprising the markets by ignoring her own competition authorities on a regular basis.
The Confederation of British Industry said the idea of judging takeovers and mergers against economic and competitive criteria was welcome. However, Adair Turner, its director general, said consultation needed to be thorough and any changes must pass the test of improving predictability.
The overhaul of mergers policy came alongside a raft of other measures to promote enterprise and competition. Mr Byers has launched a review to establish whether British consumers are paying too much for goods and services compared with other countries and whether the root cause of this is lack of competition.
He also announced funding of pounds 100m for a new Small Business Service, which would give small and medium-sized firms a voice in government.
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