How easy that would prove in practice is less clear. In terms of its size and the proportion of turnover generated in the UK as opposed to Europe and elsewhere, the deal falls squarely under the remit of the European Commission's mergers task force. Mergers are referred automatically to Brussels if the combined turnover of the parties exceeds 5bn ecu (pounds 3.5bn), each of them has EU sales of at least 250m ecu and not more than two-thirds of sales are within one member state.
There is a clause in the legislation, however, which allows a member state to ask Brussels for jurisdiction to be handed back to national competition authorities if it can demonstrate that a merger would pose competition problems in a distinct market. This clause was successfully used to permit the Office of Fair Trading and the Monopolies and Mergers Commission to vet the rival bids by Gehe and Unichem for Lloyds' Chemists.
Yesterday Guinness and GrandMet both said they were confident that there was no case for the merger being examined by the UK authorities as opposed to those in Brussels. There were similar indications coming from the OFT. Less that 10 per cent of GMG's combined sales are within the UK. Even so, its dominance of some distinct markets would be significant. The combined group would account for 51 per cent of all the gin sold in the UK, 41 per cent of all the vodka and 22 per cent of all the Scotch whisky consumed. Given the wider employment considerations and the even bigger concentration in manufacturing that would stem from the merger, Margaret Beckett, President of the Board of Trade, could make a strong case for wresting authority back to London.
How would Labour handle such a merger? The ink is not yet dry on its competition policy. Nigel Griffiths, the minister responsible for competition, has only just been handed his portfolio and Lord Borrie, the former Director- general of Fair Trading, who is leading a panel of three wise men advising Labour on how its competition policy should be formulated, has yet to report.
However, Mrs Beckett had a reputation, in opposition at least, for being something of a hawk on mergers policy. Mr Griffiths, her junior minister, also had a penchant for backing referrals and then aksing questions later.
At Mrs Beckett's behest, Labour had intended to reverse the burden of proof in hostile takeovers so that the bidder would be required to demonstrate that a merger was in the public interest. The onus now is on the competition authorities to prove that a merger would be against the public interest. Although this commitment was ommitted from Labour's business manifesto in favour of a promise that Lord Borrie would "review" the public interest test, there seems little doubt that the climate for hostile bids is going to become more difficult.
It is likely to be several weeks before GMG discovers where its fate is to be decided. If it is London, then it should get some clue as to the kind of treatment it can expect from Mrs Beckett's rulings on the three big merger deals piled up in her in-tray awaiting clearance: Bass- Carlsberg Tetley; P&O-Stena; and British Airways-American Airlines.Reuse content