Commentary: Radical chance for Heseltine

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The Independent Online
This week Michael Heseltine will begin digesting submissions on last November's Green Paper on overhauling Britain's cumbersome competition law. So it is neatly ironic that barely a week ago the President of the Board of Trade was busy doing one of the things that underlines its need for reform - exercising his right to interfere.

Almost unnoticed, Mr Heseltine for the first time overruled Professor Sir Bryan Carsberg, his new Director General of Fair Trading, who wanted him to refer a proposed acquisition by GEC, the giant defence and electronics group, to the Monopolies and Mergers Commission.

Admittedly, the decision was a borderline one - GEC, one of three companies that produce high-technology imaging systems, is buying a business that makes an intermediate component used in all three of their systems. Clearly there is a potential risk that GEC will favour its own supply needs over those of its competitors, yet arguably an MMC reference is a large hammer to crack this nut. But it is nevertheless deeply unsatisfactory that it should require two layers of decision-making to choose between these courses of action. It wastes time and effort and introduces an unnecessary dollop of uncertainty into the result. It seems equally absurd that a reference should have been necessary. Sir Bryan, after all, was not opposed to the takeover itself. He merely wished to introduce some form of structural safeguard to ensure any attempt by GEC to disadvantage its competitors would be punished.

Which brings us back to the Green Paper. At its most radical it could lead to a dramatic switch from a system that works retrospectively - behave badly and you will be referred to the MMC, as a result of which you will be told what you can no longer do, and only if you carry on and do it will you be punished - to one where we would move to a prescriptive structure a la Treaty of Rome.

Article 85 of the Treaty outlaws restrictive practices, and Article 86 condemns the abuse of dominant market positions (whether through cross-subsidy, predatory pricing or other means). Breach of them is automatically a punishable offence, and the European Commission has wide powers to investigate and discipline companies. It also has the power to negotiate safeguards.

One sensible option in the Green Paper is that the United Kingdom should also introduce general offences to outlaw abuses of market power, with the Office of Fair Trading playing a similar role to the Commission. Such a streamlined procedure makes sense. Too many of Britain's markets are inflexible and uncompetitive, and even this President of the Board of Trade cannot do everything.