EU Merger Control

Jacob Rees-Mogg Excerpts

Tuesday 3rd November 2015 General Committees

[Nick Boles]

Certainly, we have not suggested that in our response to the White Paper, and I do not believe that it is a position that we would want actively to promote, but if the hon. Lady wants to make representations to me or to the Government generally on the issue, I will be happy to consider them.

[Mr Jacob Rees-Mogg (North East Somerset) (Con)]

It is a pleasure to serve under your chairmanship, Mr Hanson, for, I think, the first time in one of these European scrutiny Committees, of which I have had much experience over the past six years. My hon. Friend the Minister has missed a great treat in not being able to come to more of them. I want to ask about his letter of 21 July 2015, in which he states:

“If a proposal does emerge from the White Paper, we think Articles 103 and 352 TFEU provide the likely legal base”.

If it is article 352, that requires an Act of Parliament to be brought into effect, as indeed is being debated at the moment, so I wonder whether he can give us an assurance that if the minority shareholder requirements remain, the Government will not give their consent, which will be fatal to the EU’s proposal.

[Nick Boles]

That was a long question, and I am happy to give a short answer: yes, I can give my hon. Friend that assurance.

--- Later in debate ---

[Mr Rees-Mogg]

Unusually in a European debate, I merely wish to provide paeans of praise for Her Majesty’s Government, who are doing things absolutely correctly. My hon. Friend the Minister will know that paeans of praise were sung to the god Apollo by the priestesses of Delphi; I am therefore putting myself in the role of the priestesses. [Laughter.] I am putting the Minister in the role of Apollo, which I hope he appreciates.

My purpose, of course, is to encourage the Government to remain robust. In the White Paper, the EU—the Commission—says that it currently does not have the powers to deal with the minority shareholders issue. It refers to articles 101 and 102 of the treaty on the functioning of the European Union, and says that they are not sufficient.

As Opposition Members, particularly the hon. Member for Luton North, will be only too well aware from discussions in the European Scrutiny Committee, the legal base issue comes back again and again. The EU, or the Commission, is quite good at saying at an early stage that it is not quite sure which legal base it will use and that it may not be certain of its legal base. Then it finds that there is a legal base that it can use under qualified majority voting rather than unanimity, and almost invariably finds that the Court of Justice of the European Union supports it.

Therefore, I was particularly pleased with my hon. Friend the Minister’s answer in relation to his letter, because article 352 is the catch-all provision that allows things to happen that are necessary to help the European Union to carry out its business but which are subject to unanimity. That gives the Government an absolute veto on this issue—indeed, it gives the House of Commons an absolute veto on this issue, if necessary. It is important that that is not given away in horse-trading around other issues. The Government’s response to the White Paper—in the name of the Minister’s predecessor, Jo Swinson—is very powerful in explaining why we should not be doing this; the Minister referred to the question of proportionality.

However, the statement, on page 36 of today’s bundle, is quite strong. It says that the proposal is

“unnecessary, highly burdensome and disproportionate.”

The proposal really is something that would be damaging to our merger regime, and it is worth bearing in mind that what it aims to address never actually happens. The paper says:

“Notification of minority shareholdings under the UK merger regime is rare and in the more than four decades that merger control in the UK has covered acquiring ‘material influence’ over another business only two cases have ever been referred for second stage investigation.”

Many people will remember those two cases: the BSkyB-ITV issue and the Ryanair-Aer Lingus one. The proposal by the EU may lead to many more notifications, not least on precautionary grounds, than the Commission seems to envisage.

That is an important point. Anyone in business will notify in respect of a regulation that they might get tripped up by, just in case; in that way, they are exempt from all the significant possible penalties and it is up to the regulator to look at the issue. That leads to lots of unnecessary but burdensome reporting by businesses, which, in the end, is more than the regulator can cope with. The existing system has worked so far. The Ryanair-Aer Lingus case covered two EU member states and was dealt with effectively by the UK competition authorities, which used its authority as a domestic regulator to require Ryanair to sell its stake in Aer Lingus.

We have a situation where things currently work, where the EU has no jurisdiction and where the proposals from the European Commission would be bureaucratic. That brings me back to a point alluded to by my hon. Friend the Minister about the EU looking to extend its powers. As he rightly said, there is a small note at the end of the White Paper:

“However, as set out above, there is room to further improve EU merger control.”

There is a little superscript “47” indicating that there is a footnote, which seems to me to be a classic of the EU ratchet:

“The scope chosen for this White Paper is without prejudice to additional evaluations of other important aspects of EU merger control by the Commission.”

There we have it! The Commission says, “We’re not going to do very much now, and the first bit we are going to do is actually very sensible.” No one can disagree with it. It is very mild and modest; even someone like me will happily go along with it. Then there is another bit, which is a bit more contentious and risky for the Commission given that it does not have the legal power, and then that lovely little footnote says that there might be more coming along a little later.

That is why I am so pleased with the Minister’s exceptionally robust and clear answer. It might be his first visit to a European Committee, but it has been a model of how such things should be done. We actually got an answer to a question, which is highly unusual and will probably get him into all sorts of trouble with Downing Street. I commend the Minister for his forthright answer, the position he has taken and the alertness he is showing.