Enterprise and Regulatory Reform Bill

Lord Mitchell Excerpts

Tuesday 18th December 2012 Grand Committee

[Viscount Eccles]

My Lords, I very much support my noble friend Lord Hunt of Wirral’s amendment. Key to this is the definition of “market”. You can dance on the head of a pin and end up with a single supermarket in the Scilly Isles or somewhere and say that that is a market. First, this is a very good amendment and I hope that the Government will take it up. Secondly, the key is to be clear in the publications that are put out what a market is. I can remember occasions when we sat down and argued extensively over whether something that was said to be a market really was one. That is key to coming to the right judgment about whether something should be referred.

I doubt that there will ever be a market where a company has less than £5 million turnover and the anti-competitive effects are such that it should be referred. It comes back to one thing only. Are the public paying higher prices than they should reasonably expect to pay? The rest is fluff and twitter. It is the prices that the public are paying that matter. If there were examples, maybe there would have to be a review of a figure of £5 million, but £5 million is pretty safe on the basis of an accurate definition of “market”.

[Lord Mitchell]

My Lords, I have listened with great interest to the words of the noble Lord, Lord Hunt of Wirral, and the noble Viscount, Lord Eccles. We, too, are always looking for reasonable ways to ensure that SMEs—or SEs, small companies, in this respect—are not subject to too much regulation.

Perhaps I am confused on this, but currently in the 2002 Act there are two criteria as to whether competition authorities should take an interest in a merger. The first, which we have spoken about today, is whether the turnover of the business is in excess of £70 million. This is a considerably higher level than what is being proposed today, so it is unlikely that any company with a turnover of £5 million being taken over would be investigated.

The second criterion, though, the one that we are paying most attention to today, stipulates that where two merging businesses have an effective market share of over 25%, that becomes a relevant merger situation for the competition bodies to consider. That 25% is an important threshold as to whether some form of monopoly is taking place and therefore, as the noble Viscount said, the value to the consumer is affected prejudicially.

At present, it appears that the only effect of Amendment 25 is to exclude the possibility of the CMA looking into a merger if the turnover of the business being taken over was above the £5 million threshold, even if the combined market share were to be more than 25%. Those are scenarios in which we might not wish to tie the CMA’s hands in this fashion. A tech company, for example, could have a low turnover but a high market share, particularly in a locality, and as a result the CMA might want to take a look at a merger between it and a dominant company in that market, or there could be some form of geographical dominance.

I find myself sympathetic with the thinking behind this because, as far as I am concerned, the more competition the better at all times, and I am also sympathetic with keeping red tape away from small businesses. However, it appears that when it comes to mergers, such protections are already offered, and this amendment could damage something even more important to SMEs—a strong competition environment. We definitely want to think about what has been said today; some important points have been raised. We will wait for the next round at Report.

[Lord Marland]

My Lords, the amendment is interesting; on the one hand, the noble Lord, Lord Berkeley, has made a compelling point, as indeed, on the other hand, did my noble friend Lord Hunt. Both points, although they differ, are things that we all want to safeguard against. The other point that was not made is that the amendment would not safeguard against the big company buying the small company, which we also want to safeguard against. I think that we are all talking the same language and, on that basis, if my noble friend Lord Hunt of Wirral, will allow us, I think we ought to take this issue away, roll our sleeves up a little more with some hot towels—or cold, if he prefers; some days I prefer cold, I must say—and look at it a bit further. If he is happy on that basis, I ask him to withdraw his amendment.