Precedent makes policy
I SEE signs that in a quiet, backdoorish wait-until-Parliament-goes-on holiday sort of way, we are getting a new policy on mergers. We could use it. The law is so widely drawn that the answer can be what ministers choose, and they have divided into those who lay down rules and those who make up their minds case by case as they go along. The rule laid down by Norman Tebbit, and at first picked up by Lord Young, was that competition was the test — if a merger or takeover might be anti-competitive the Monopolies and Mer- gers Commission should look at it, and if not, then the markets should decide. It is not, as Lord Young's decisions demons- trate, as simple as that. No question of competition arose when the Kuwait Invest- ment Office was gobbling up British Pet-
roleum shares, but Lord Young referred it to the Commission just the same. No evident question of competition arises from the bid from an Australian group for Ranks Hovis McDougall, the bakers, but Lord Young has sent that to the Commis- sion, too. He seems to have been con- cerned about the bid's financing. That was what worried the Bank of England about an earlier Australian bid (for Allied- Lyons, from Elders), the Bank made itself heard, the bid was referred to the Commis- sion and lapsed. That was before Lord Young's time, and when he took over he said it would not be a precedent — it was for the markets to decide whether a bidder had the money. Not this time, though. Are we going back to a case-by-case approach, or are we, as I hope, seeing new precedents to define a new policy? The job which the law gives to the Commission is to say whether a proposed merger would tend to operate against the public interest. I have argued here that what the Commission needs is clear tests of the public interest, competition being one but not the only one. Others should be reciprocity (the right to do as you would be done by), financing (as with Ranks Hovis), the effect on companies which are leaders in their fields (as with BP), and beneficial own- ership — if this bid goes through, who will really own the business? Financing and beneficial ownership were the questions posed by the Department of Trade and Industry inquiry into the takeover of House of Fraser, and the report is now smouldering in Lord Young's in-tray. Safer and better, next time, he may decide, to let the Commission ask the questions before the bid can go through.
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