I know it’s scarcely credible, but I was wrong in my guess that the government would legislate to avoid competition procedures entirely in the LLoyds TSB-HBOS merger: an anonymous commenter here, and Angelo Basu at ConservativeHome’s CentreRight blog, were right in thinking the government intends to extend the public interest grounds on which ministers can issue an “intervention notice”, essentially taking over responsibility for making the competition decision themselves. Interventions are dealt with under Part 3, Chapter 2 of the Enterprise Act 2002; the government must be intending to make an order under section 58(3), at which point John Hutton will be able to intervene, although both Houses of Parliament will need to pass resolutions approving the order within 28 days, under section 124(7).
I’ve had qualms about this approach: it raises questions about how the procedure will work, how the government will decide whether to clear the merger, and coneivably even about whether it has power to make the amendment. But it looks as though government think no one will want to question it all too closely – and they’re probably right about that.
The procedural qualm is what to do about the need for an OFT report into the merger, which is normally required under section 44(2), following an intervention notice. One option is to require the report as normal – the problem being that this means formally that the merger is not yet cleared and competition procedures are being gone through. I wonder if there’s a slight potential for the government to look yet again as though it’s announced something that turns out not quite to be what it appeared. The other option is to rely on a riskier interpretation of section 44(2), reading it as giving ministers merely a discretion to require a report. If John Hutton doesn’t ask for an OFT report then he avoids the embarrassment of having to wait for one and read it. On the other hand, rule-of-law purists might wonder on what basis he ultimately makes the decision to clear, if he has no advice from the statutory body which exists to report to him on such things. And whether he can lawfully dispense with the report.
Finally, I wonder a bit about whether there’s power to make this amendment at all. If you look at Part 3, Chapter 2 it’s pretty clear that what this intervention notice procedure is really intended for is to deal with mergers which may well be cleared by the OFT and Competition Commission on pure competition grounds, but which ministers may want to prevent in the public interest, because of national security concerns or worries about media ownership. To use this process to ensure a merger is cleared is arguably distorting or abusing Parliament’s intention, and to make an amending order under section 58 to achieve a result that appears not to have been Parliament’s intention – to make sure a merger goes through because of the need for financial stability – seems to me arguably ultra vires. There’s no real problem about that if no one’s ever going to make a legal challenge – law bloggers rarely cause trembling in the corridors of power or even in the bars of power at Manchester’s G-Mex – but I do wonder what Parliamentary scrutiny committees will say about it. I think the JCSI will fall down on its job if it does not at least publish correspondence querying BERR on its justification for this use of the power.
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