Snap! CBI and Labour play the same competition card

INDUSTRY VIEW

A curious thing happened this week, when Margaret Beckett and Adair Turner accidentally found themselves agreeing on how to reform Britain's competition authorities.

This happy moment may well have surprised both of them, since until recently Labour's shadow trade and industry secretary and the director-general of the CBI appeared to be sitting on the opposite sides of a rather high fence.

The CBI has long said the government should stick to the present system, in which responsibilities for investigation are divided between the Monopolies and Mergers Commission and the Office of Fair Trading.

The Labour Party last year proposed amalgamating the two into a single competition authority, abolishing the present separation of powers between the organisations.

This was billed as creating a powerful scourge of monopolists, cartels and restrictive practices. For the first time, Labour leaders might even be able to turn the dry-as-dust subject of competition policy into exciting manifesto material.

What seems to have happened is that the employers and Labour - whose policy development is followed avidly by business now the party is so clearly the government in waiting - have spent the last few months in separate huddles, consulting experts on the details of their proposals.

When the two sets of plans emerged this week, it proved to have been a game of snap, since they slammed the same cards down on the table. Great minds think alike. Perhaps the views of the experts, whom both sides have been consulting, have been quietly converging.

Both the employers and Labour want a much more powerful competition authority, based on the Office of Fair Trading, which would take over the investigation powers of the MMC. Both want to turn the MMC into a body that hears appeals from the new authority's decisions.

The waters were muddied when the CBI still said it objected to a merger of the OFT and the MMC, which made it sound as if the two were still at odds.

But the actual detail of its proposals would produce virtually the same structure as Labour's plan, which also turns out to have been much modified from last year's published policy documents. The two sides might be said to have met in the middle.

Labour has recognised one drawback to its proposals for a single tough authority - that it would leave too few legal safeguards for those who disagreed with its conclusions. So its new draft document, which may soon become official party policy, came up with the appeals idea.

The employers, meanwhile, exasperated by what they claim is expensive and time-wasting duplication between MMC and OFT investigations, took the view that the system should be rationalised so that inquiries are done once, by a single, beefed-up organisation. That, too, reduced the role of the MMC to an appeals body.

There are still some important differences between the employers and Labour, but not as great, perhaps, as the similarities. The Labour Party is ambivalent about the extent to which ministers will be able to interfere in its new appeals process.

The draft policy says that after setting up a single merged investigatory body, to be called the Competition and Consumer Standards Office, "the MMC, or an organisation designed to replace it, might then be empowered to act in concert with the Secretary of State as a powerful appeals body, capable of reviewing decisions of the CCSO and possibly with additional functions such as the duty to hear appeals on utility regulation matters".

What exactly acting in concert with the Secretary of State means is open to wide interpretation. But Labour is likely to be just as unwilling as the Tory government to take its hands off the most important levers of power in competition policy, especially as it still intends to make companies subject to merger inquiries prove that their deals are positively in the public interest (a plan to which the CBI strongly objects).

The CBI proposal would, on the face of it, reduce the role of ministers in merger and monopoly cases, though they would still set policy.

But given the reality that politicians of either main party are unlikely to hand over too much discretionary power to anyone else, least of all a paid official, the CBI thinks secretaries of state should retain the last word on takeovers, with the right to apply an "overriding public interest test".

Competition experts believe the the CBI and the Labour Party still need to think through much more carefully the remit an appeals body would have. A clear decision would have to be taken on whether it should look at fresh evidence - in effect giving it the power to reopen inquiries - or merely examine the decisions taken by the competition authority to see if they are consistent with policy and with the law.

But the basic proposal makes good sense, for several reasons. It should speed up inquiries, while in time an appeals body could build up a proper set of precedents that should inject more consistency into decisions than an MMC made up of part-time members.

By concentrating efforts in one investigatory body, a new authority should also develop more muscle against cartels and monopolies. This is particularly important because there is another shift under way in competition policy, which many people argue is more important than changes in the organisational structure.

This is a reform of the basic laws of competition in the UK, a subject of still more complexity than the organisation charts. Briefly, there is almost complete agreement between the Government, competition specialists, the employers and the Labour Party that restrictive trade practices and cartels legislation should be made much tougher.

The Government is consulting now on laws that would give the OFT powers to raid and search, to block illegal practices immediately they are discovered and to levy large fines, possibly with an appeals tribunal as a backstop.

At the moment, nothing can be done to actually stop many of the abuses concerned until after lengthy inquiries and court proceedings

The second and more contentious area is to extend this new prohibition approach to the control of monopolies and abuse of market power, which would be a move towards the approach used by the European Commission, under Article 86 of the Treaty of Rome. This is not currently favoured by the government.

But interestingly enough, Labour and the employers appear to be developing a consensus in this area too, that there should be a shift towards the European, approach, but adapted to British conditions (since Article 86 is too much of a blunderbuss).

Given that there is so much common ground between business and the Labour Party, both on a single competition authority and wider changes to the law, these ideas must now have a very strong chance of seeing the light of day. About time too, since reforms are long overdue.