Ministers give up last influence on mergers as panel is scrapped

The Government is to remove the last vestige of ministerial influence over merger decisions by scrapping the mergers panel, the ad hoc committee of Whitehall officials which advises the competition authorities on whether deals should be referred.

From next month, when the power to decide whether to refer mergers passes from secretaries of state to the Office of Fair Trading under the Enterprise Act, the job of examining contentious deals will be carried out by an in-house case review team made up entirely of senior OFT officials.

The final decision on referral to the Competition Commission will be taken by the chairman of the OFT, John Vickers, except in cases where he absents himself from the process as in the current case of the competing Safeway bids. The Commission's ruling will be determining, in most cases.

The mergers panel typically consists of about 10 officials drawn from government departments and, if necessary, sectoral regulators such as Ofgem. In the past, the panel has acted as the "eyes and ears" of ministers to help shape merger decisions in the 30 or 40 cases each year that raise competition concerns.

When merger authority passes to the OFT on 20 June, the test it will use in assessing deals is whether there would be a "substantial lessening of competition". This will replace the current and more loosely-defined "public interest" test.

Mr Vickers said he thought that the effect on mergers policy and the number of deals being referred would be neutral, arguing that the regulatory authorities had been applying the competition test anyway for some time now.

When the OFT reaches its decision, it will have to publish the reasoning for it. Mr Vickers said this would be a "very powerful and healthy discipline" for the OFT to operate under, particularly when it would be open to the parties concerned or any third party to lodge an appeal with the new Competition Appeal Tribunal. The appeal process will normally take three months. Once an appeal has been lodged, the regulatory process is frozen until a decision has been reached.

Ministers will be able to intervene where mergers involve newspapers, water companies or a "public interest" criterion.