EU Merger Control

Peter Grant Excerpts

Tuesday 3rd November 2015 General Committees

[Nick Boles]

We are probably straying slightly from the subject. In general, I have agreed with everything that the hon. Gentleman has said, but I suspect that there will be a slight note of difference here. There are many fragmented industries in which the merger of two participants would in no way undermine the consumer’s power and might even enable them to become more efficient and productive, thereby lowering costs to the benefit of the consumer. I completely agree with the hon. Gentleman, however, that in cases of relatively concentrated industries—we can all think of many, and they are often where mergers are most frequently proposed—it is important to have a robust regime. I am glad to say that we have such a regime in this country. We should therefore allow most decisions about mergers in the UK to take place under the jurisdiction of the UK authorities.

[Peter Grant (Glenrothes) (SNP)]

For a partial takeover—a minority stakeholding—involving two companies registered in the same member state, I understand the argument that the member state should be able to regulate the proposed purchase of shares. Does the Minister appreciate, though, that although the companies may be registered in one member state their activities might have a significant bearing on other member states? Aer Lingus and Ryanair are good examples. Both companies are registered in one sovereign state, but their activities can impact significantly on passengers and businesses in other member states.

My first question is about a similar merger involving two German or two Italian airlines that would have significant impact on passengers in the UK. Is the Minister satisfied that the Government’s proposals would give adequate protection to passengers in the UK? Secondly, on minority shareholdings, there can be a degree of integration vertically along a supply chain for the best of reasons, but it can be used to move profitability to the company in the group that is least likely to have a tax liability. Is the Minister concerned about that? Is he satisfied that the regulations that the Government propose to support give adequate protection against such mergers being used as a tax dodge, rather than to increase competition in the market?

[Nick Boles]

Those are two excellent questions. On the first, I remind the hon. Gentleman that the Government’s response to the White Paper specifically suggested that the priority should be to ensure that all EU member states should have, as we do already, a domestic regime for the review and, if necessary, control of the acquisition of minority shareholdings. If they did, we could be satisfied that issues relating to the putative purchase of one German airline by another would be covered. Although the hon. Gentleman is of course right to say that consumers in the broader EU might be affected by such a transaction, they are unlikely to be affected more than consumers in the market in which those two companies have their operational bases. I believe that Germany does have a national regime on minority shareholdings, but many other states do not. If such a regime is present, it should be capable of reflecting the interests of consumers from across Europe.

On the second point, the hon. Gentleman is right that tax dodging can be a driving force behind acquisitions, but it is not specifically about competition. Ensuring that the taxes due are received is an important issue of public interest, but it is not for the competition regime, which is about protecting consumers’ interests, to be the adjudicator in such a situation. I am unable to explain the detail to him, but many discussions are taking place at all sorts of levels about the problem of shifting profits around the world. Indeed, the Chancellor has made some fairly robust proposals about how that can be discouraged in the UK.