City: Slapped down

Click to follow
The Independent Online
POOR Sir Bryan Carsberg. With little more than six months under his belt as Director-General of Fair Trading, he has twice had his advice on whether to refer a takeover to the Monopolies and Mergers Commission rejected by Michael Heseltine, the President of the Board of Trade. If that's not a slap in the face, I don't know what is. It used to happen all the time when Lord Cockfield was secretary of state for trade, and a bad thing it was, too. It gave the impression that mergers policy was dictated not by impartial competition criteria but by political whim and favour. Since then, ministers have tended to follow the Office of Fair Trading's recommendations. In the last 20 years, the Government has overridden the director-general's advice on only 11 occasions, and many of these were during Lord Cockfield's eclectic reign. Now the bad old ways seem to be back.

The latest example is Airtours' pounds 225m bid for its package holiday rival, Owners Abroad. By overruling Sir Bryan, Mr Heseltine has almost certainly delivered Owners Abroad into Airtours' hands. The takeover battle is not yet over, but provided Airtours is prepared to raise its offer a bit, it should win comfortably. Admittedly, this was a difficult case for Mr Heseltine. Even Sir Bryan, who recommended that the bid be referred, would no doubt concede the issues were finely balanced. The decision could as easily have gone one way as the other. Though the takeover will give Airtours more than the 25 per cent market share technically regarded as the benchmark for a monopoly, barriers to entry in this business seem to be minimal and there is already, in the shape of Thomson, one operator with more than 30 per cent of the market.

I actually agree with Mr Heseltine's view that the takeover is unlikely to be damaging to competition in the package holiday market, but his decision to go against the OFT's advice is still hard to understand. Why bother? What's in it for him? All it's done is bring about unnecessary controversy. If there were great policy issues of public interest involved it might be easier to comprehend, but there are not. This is only a tinpot little bid in the package holiday sector.

It's hardly surprising that in these circumstances, accusations of improper political influence are beginning to fly. The minister who would normally have taken the decision is Neil Hamilton, who holds the consumer and corporate affairs portfolio at the DTI. It just so happens that one of his constituents is David Crossland, the wealthy Lancastrian who runs Airtours. Mr Crossland assures me he has never met Mr Hamilton in his life. Nor has he ever given money to the Tory Party.

The DTI likewise claims that this is a 'non story' and certainly refuses to countenance any form of independent inquiry into the episode. Owners Abroad could seek a judicial review, I guess, but shareholders are hardly going to thank it for that. And in any case, I dare say that all Owners would discover is that this is just another example of cack-handedness by the DTI and Mr Heseltine; no conspiracy, no corruption. Mr Heseltine might be made to look stupid and politically inept but, unfortunately some might say, there's no law against that.