The CBI said all the investigative work and the key decisions on mergers and monopolies should be made by a strengthened Office of Fair Trading, to be renamed the Competition Authority. The MMC would become the Competition Commission, with High Court status, hearing appeals against the authority's decisions.
Julian Armstrong, chairman of the CBI's competition panel and a lawyer with Esso, denied that the proposal was an implied criticism of the MMC's recent performance, which came under heavy fire in the wake of a report last month on takeovers in the power industry.
A majority of four of the MMC's part-time members recommended conditional clearance of bids by PowerGen and National Power for regional electricity companies, but the Government sided with a minority report by a single commissioner.
Mr Armstrong, whose report is being sent to the Labour Party as well as the Government, said the CBI's intention was to eliminate expensive duplication. Companies have to submit to investigations by the OFT, which can then be followed by a separate inquiry by the MMC.
The CBI's plan is a response to a government consultation document on competition law, which did not, however, call for comments on reform of the MMC or the OFT.
The CBI plan appears on the surface to run counter to Labour proposals for a merger of the OFT and the MMC into a single competition authority - although by reducing the MMC to an appeals body the employers have gone a long way towards meeting the Labour position. Adair Turner, the CBI's director-general, has insisted that the employers remain neutral between the parties and tackle issues case by case.
The CBI said it opposed Labour's plan to make companies show that takeovers are positively in the public interest before they can proceed.
Instead of the present system, under which MMC inquiries into mergers and monopolies are conducted by panels of part-time members, the commission would be headed by the equivalent of a High Court judge, assisted by economic and industrial assessors.
Ministers' powers to intervene would be much reduced, although they would have a right to override in merger cases.