Lloyds TSB's failed attempt to buy Abbey National wasn't all in vain. It has taught companies and their advisers a painful lesson: to mind their language.
Unlike most of its publications, the Competition Commission's report into the proposed merger is a spicy read, thanks to the disclosure of embarrassing extracts from Lloyds internal documents. One paper talked of the "virtually unassailable" position in financial services that a combination with Abbey would deliver. Another described banking customers as "price-insensitive". It was not in tune with Lloyds' contention that the merged company would face vicious competition in the market for current accounts.
The identity of the Lloyds employee who penned the words remains a mystery, although the person is said to be an ambitious hotshot who got a little carried away in preparing a punchy boardroom presentation.
"Normally an adviser would remove silly words like 'unassailable' and 'dominant' from any document," one investment banker said yesterday. "It's not even true: No company is unassailable – look at Microsoft. Some chief executives ask investment banks not to prepare papers for the board, and instead to circulate papers described as 'background reading'."
However, while companies are accustomed to taking care over documents that might affect legal proceedings, they tend not to consider whether other internal memos might one day appear on the Competition Commission's website. It was only recently, under a commitment to greater transparency made by Stephen Byers, the previous Secretary of State for Trade and Industry, that the commission has padded out its lengthy reports with detailed submissions from companies being investigated.
Investment bankers warned yesterday that companies would have to choose their written words more carefully if they are to avoid suffering Lloyds' embarrassment this week. Forget shredding documents when a commission referral looms on the horizon: it is illegal for companies to destroy anything presented to the board in the last seven years. Ms Kingsmill used her power of subpoena to obtain every Lloyds board presentation from the last two years.
"Sometimes it's better to destroy something before a litigation starts, or to have a policy of never holding papers on file. But I confess I'd never thought about that in relation to a possible anti-trust investigation," one banker said yesterday.
A spokesman for Lloyds said: "Any organisation has to strike a balance between storing straight and proper records and keeping paper to a minimum. We believe we strike this balance well."Reuse content