MMC leak inquiry focuses on Offer and OFT

The DTI inquiry into the leaking of the Monopolies and Mergers Commission report on two takeover bids in the electricity industry is focusing on the Office of Electricity Supply and the Office of Fair Trading.

The two regulatory bodies are among only a handful of organisations and individuals that received advance copies of the highly sensitive document.

Fewer than a dozen copies of the confidential report are thought to have been circulated ahead of the Trade and Industry Secretary Ian Lang's announcement last week that he had decided to block the two bids by National Power and PowerGen for regional electricity companies.

Copies of the final report - which included highly sensitive commercial information that does not appear in the published version - were sent to the two regulatory bodies, the five members of the MMC panel that conducted the inquiry and the Department of Trade and Industry.

It is not thought that the report was circulated to any other government departments, with the possible exception of the Treasury.

A political storm blew up when extracts from the report appeared in the Economist magazine. The DTI demanded the return of the document but Adam Raphael, the Economist journalist, refused to comply. The DTI has since obtained an injunction preventing the magazine from publishing further extracts from the report.

Mr Lang was advised to refer the bids to the MMC by the director general of fair trading, John Bridgeman, and the director general of electricity supply, Professor Stephen Littlechild. In evidence to the MMC inquiry, Professor Littlechild said the bids should be blocked because of their potential detrimental effects on competition in electricity supply and generation. "The likely consequence would be less competition, higher prices and less effective choice for electricity customers," he said.

The MMC panel ruled by a majority of four to one that although the two mergers could be expected to operate against the public interest they should be allowed to go ahead subject to certain undertakings.

The dissenting member was Patricia Hodgson, the MMC's director of policy and planning, who argued that competition was insufficient and that if the mergers went ahead there would be less competition and less chance of prices falling.

Whitehall sources said the leak was being pursued vigorously because of its seriousness and because of the highly confidential information in the unpublished version of the report.

"On a scale of one to 10 this leak ranks somewhere near the top in terms of its seriousness," one source said. "Bits of MMC reports or individual pieces of evidence may have been leaked before but never an entire completed report." Ministers are also thought to be concerned about the leaked report being stolen and sold to the highest bidder, because of the commercial information in it.

The leak inquiry is understood to have cleared the DTI and the five members of the MMC panel. In a letter to the Economist's editor Bill Emmott, the head of the DTI's consumer affairs and competition policy directorate Paul Salvidge said the report was "the property of the Secretary of State" and must be returned.