Outlook: BAe/Marconi

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The Independent Online
STEPHEN BYERS produced his bazooka again yesterday and blasted John Bridgeman out of the water. The Director General of Fair Trading is getting used to being used as target practice. The latest recommendation to be shot down is that the British Aerospace-Marconi merger be packed off to the Competition Commission.

Initially the Government was lukewarm about the deal as well. But that was because this all British get together threw a large grenade into Tony Blair's carefully laid plans for a pan-European defence consolidation embracing the Germans and French. The pincer movement executed by Lord Simpson and Sir Dick Evans effectively put paid to that by creating a Cold War climate across the Continent.

As it happens, Mr Byers's decision to disagree yet again with his own competition officials does not conflict with his stated intention of taking the politics out of merger decisions, since one of the exceptions to the rule will be cases involving national security.

Having decided that a national champion in the defence world is after all a good thing, Mr Byers was understandably loathe to allow a Competition Commission referral to put that at risk. Suddenly he has become a convert to the argument that vertical integration of Britain's biggest prime contractor with its principal weapons supplier will produce better value for the taxpayer. Mr Byers has asked Mr Bridgeman to devise a series of tank traps to make sure the resulting monopoly is prevented from exploiting the MoD. Thus, Marconi's warship yards and avionics businesses will have to be constituted as separate subsidiaries and made to offer their services to bidders other than BAe on identical terms.

Just in case BAe is tempted to pull a flanker, Mr Byers has told it to appoint a compliance officer whose job will be to ensure his employer is abiding by all the undertakings agreed with the OFT. If that sounds like Mission Impossible, it is because it almost certainly is. As usual it will be left to the US cavalry to ensure that the MoD has some decent competition for its business.

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