Outlook: Competition

WHILE GORDON BROWN was busy handing out sweeties to the entrepreneurial classes in Tuesday's Budget, another arm of government was preparing to get tough with big business. As ever, we wait to see whether the rhetoric is matched with action. But if Stephen Byers is as good as his word, then the vested monopolies which continue to run significant chunks of industry and our public services are in for a rough time.

Along with the Chancellor, the Secretary of State for Trade and Industry has decided that part of the malaise afflicting the British economy is that there is not enough competition. In order to treat that malaise, he has opted for a two-pronged attack.

On one flank, the prices that are charged on the high street will be held up for comparison with those which consumers in other countries pay. If they are too large to be explained away by factors such as wage and transport costs, or the burden of regulatory compliance, Mr Byers will conclude it is because of a lack of competition. Having established the cause of the problem, the Office of Fair trading will then be invited to seek a remedy which normally requires divestment of assets or changes in behaviour.

From the other flank, Mr Byers has promised to overhaul mergers policy so that it operates akin to monetary policy. Ministers can no longer meddle with interest rates for short-term political gain and Mr Byers has decided the same should apply to takeover bids. Instead an independent competition authority will be the final arbiter, testing mergers against their effect on competition. The only exceptions will be where there are wider public interest concerns - something that will need to be strictly defined to prevent backdoor political intervention.

It is easy to see why the big battalions of industry were not exactly ecstatic at the prospect yesterday. Gone will be the chance to sway a decision by whispering sweet nothings into a minister's ear.

It is a measure of how far New Labour has travelled that it should now want to hand over merger control lock stock and barrel to an independent body. When it came to power, it favoured blocking all mergers unless the parties involved could demonstrate they were in the public interest - a definition which would have encompassed everything from jobs to regional impact.

Unfortunately, Mr Byers' ideas have some way to travel yet. There are no plans to introduce the necessary legislation this side of a general election and, even if the law were changed, Brussels these days is the arbiter on most big and contentious mergers. Mr Byers should nonetheless stick to his guns and in the meantime show willing by practising what he preaches. He could kick off the new era by standing aside when the monopolies report on BSkyB's bid for Manchester United hits the streets.

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