Twin threat to Blair as ministers are told to oppose controls on newspaper price war

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Tony Blair is facing the threat of combined Lords and Commons revolt against the government line on Rupert Murdoch's predatory pricing tactics.

Peers vote tonight on a cross-party amendment to the Competition Bill, that would outlaw cut-price campaigns run by newspapers like the Times in attempting to drive competitors out of business.

Lord McNally, the Liberal Democrat peer who has initiated the amendment, warns that if action is not taken in the new Bill, vulnerable newspapers like The Independent and the Daily Telegraph could be put at risk.

That argument is backed today by Lord Desai, a Labour peer and professor of economics at the London School of Economics, who says in today's Independent that a dog-eat-dog culture must not be allowed because it is essentially anti-competitive. "Companies which have resources to last out a long battle can engage in price wars," he says. "Their rivals either have to follow suit and match any cuts in price cut or suffer a loss of market share and go under. After a while, the company with more resources wins the field by driving out the rivals."

If there was a government defeat in the Lords tonight, ministers could be expected to try to use their massive majority in the Commons to overturn the decision. But there are growing indications of spreading revolt in Labour ranks against Mr Murdoch, and the unspoken agreement under which Downing Street appears to be offering protection for the newspaper proprietor.

The Independent has been reliably informed that a "hands-off" order has been passed down to ministers from No 10, which is why the Department of Trade and Industry is resisting the "Murdoch amendment" in spite of pre-election promises that action would be taken.

However, Labour MPs are unlikely to respond with enthusiasm to an instruction to defend Mr Murdoch's interests.

Giles Radice, the loyalist Labour chairman of the Commons Treasury select committee, told BBC television's On the Record yesterday: "It would be wrong for us not to do what is right because of the consequences of not having, say the Sun, or Mr Rupert Murdoch or whatever, on your side. I think it would be unwise of us and in the long run damage our credibility in the country."

Chris Mullin, Labour chairman of the Home Affairs Select Committee, told the same programme: "The power at the disposal of Mr Murdoch is so great that it is unhealthy for a democracy. And the problem is that no political party dare take him on for fear that he will unleash his power against them."

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