Focus: UK Lobbying - Playing the game/UK lobbyists are having to play by new rules as the Competition Act comes into force

There was much speculation last year that changes to the tone of competition policy under the new Labour government - specifically to the structure of competition authorities when the 1998 Competition Act was implemented - would have profound implications for public affairs consultants.

There was much speculation last year that changes to the tone of

competition policy under the new Labour government - specifically to the

structure of competition authorities when the 1998 Competition Act was

implemented - would have profound implications for public affairs

consultants.



Nine months after the Monopolies and Mergers Commission was abolished by

the 1998 Act, and replaced by the Competition Commission, and two months

before the final stages of the Act come into effect, opinions are mixed

over whether this speculation was justified.



In part it was a simple change of name, with the new body taking on the

key function of its predecessor: to investigate and report on mergers

and acquisitions when the Office of Fair Trading refers them. But it was

also a change of emphasis. The stress on competition was evidence of the

Government’s commitment to the industrial consolidation process being a

means to a different end: better services for consumers rather than just

better prospects for shareholders.



The test to be applied by the CC would be whether a decision benefited

consumers and increased competition in the sector. Since an estimated

1,200 mergers and acquisitions involving British companies take place

each year, any major improvements to the existing regulatory system

would have widespread consequences.



The former chairman of the Monopolies and Mergers Commission and now of

the Competition Commission, Oxford economist Dr Derek Morris, set out

the renewed philosophy of the CC in a speech last November to a

conference on UK competition law, after six months at the helm. He

highlighted four central themes for the work of the commission.



The body would, he said, promote ’intense competition’; it would

prioritise consumer interest over ’all others in society’; it would

drive the necessary shift towards greater independence for competition

authorities and it would be more transparent, making more information

available to companies and consumers alike.



The problem, as far as some public affairs consultants were concerned,

was that traditional techniques of lobbying - putting a case to

ministers or their advisers, lining up MPs in support of a client’s

position - would no longer be viable if politics was removed from

decision-making and all could see clearly what was happening.



The companies involved in competition cases vary and the role of the

lobbyists who work with them is almost always unique. If a rigid test

was established on the principle of consumer interest, the lobbyists who

sought to influence policy or communicate a specific point to decision

makers would need to learn new tricks. Right?



Well, up to a point.



Chris Savage, director of competition and regulation at Shandwick Public

Affairs, anticipated the shift in direction for lobbyists, away from

what he termed an ’old-fashioned’ focus on Parliament and politicians

and towards a much more broad-based approach, ’relying on effective case

presentation and generating support from third parties’.



The key point, Savage says, was that the principal parties in a merger

enquiry were not the only ones affected by its outcome. Certainly, he

argued, their views were important, and the amount of time a CC

investigation spent scrutinising their views would reflect that. However

the positions of third parties would assume extra significance given

that the views of parties to a case can sometimes seem predictable. ’A

key feature of any lobbying strategy in the emerging policy framework

will be the ability to build coalitions and mobilise support. Future

effective lobbying will call for new skills,’ Savage concluded.



Charles Miller at Citigate Public Affairs claims little has changed in

the last year.



’Because the body’s name changed, people assumed the way it would be

lobbied would also change,’ he says. To start with, Miller maintains, it

was never really possible to lobby the old Monopolies and Mergers

Commission, in the sense of approaching its members with an argument

Parties to enquiries, he says, would try to apply pressure by ensuring

the case they had was as good as possible and cajoling third parties

into supporting their position.



In an industry enquiry, for example, groups representing a lobbyist’s

client’s customers, their suppliers, government departments and the

relevant regulator would be lined up to add weight to a case. Only in

occasional instances would the lobbyist urge MPs to enter the fray.



Sometimes, commissioners take into account an MP’s views, but only if

they are intelligent - as opposed to standard or wearisome, in Miller’s

formulation - and only if the MP represented a specific, relevant

constituency of interest.



Miller gives the example of GEC and British Aerospace wanting to buy

Vickers shipyard in Cumbria. The MMC took notice of MPs writing in about

the issue, but ultimately GEC secured the bigger bid. ’That sort of

lobbying has not changed a jot,’ says Miller.



Rod Cartwright, the head of GCI Political Counsel, doubts the new body’s

ability to remain above politics. While on most matters it is fine for

officials to take decisions in line with the organisation’s competition

aims, this is not sustainable on matters where there is a public

outcry.



’It is very difficult for the Government to remain neutral on issues

with a clear political dimension,’ Cartwright says.



The move away from political decision-making may be enshrined in

legislation after the next general election, but a mergers policy White

Paper published last summer spoke of ’reserved powers,’ where the

Secretary of State for trade and industry would retain decision-making

rights and exercise them in cases where there is a ’compelling public

interest’. Supporters of the new approach say this caveat takes the

sting out of depoliticisation, allowing for accountability in delicate

industry issues; critics say it leaves depoliticisation fatally

flawed.



The key consideration is who determines when there is a compelling

public interest. If there is ministerial involvement in this decision,

independence will be damaged. The current proposals will require the

minister to consult Parliament if he or she wishes to use ministerial

discretion.



With a massive Labour majority, this may seem little impediment to

ministerial interference, but Chris Savage thinks it will act as a

useful deterrent, if only because of the attendant media interest if a

minister wishes to get involved in an ostensibly legal decision.



Other areas where ministers will become involved are defence matters -

on national security grounds - and the newspaper industry, for less

distinct reasons of real politik.



Cartwright admits the tactics of lobbying have changed slightly, backing

Savage’s predictions. ’Our role has always been to help clients build a

groundswell of support for an issue. That remains intact. But the

importance of support from third parties has grown. The emphasis has

moved away from Office of Fair Trading officials and the Competition

Commission to a support role offering strategic advice,’ Cartwright

says.



The increased importance of building grassroots coalitions has forced

the media relations part of lobbying centre stage. In short, the set of

audiences - the publics - to whom public affairs consultants must

communicate, has expanded. There may now be more room for lobbyists,

since people trained in investor relations, public affairs, change

management and straight PR will all be involved in the work. ’It would

be foolhardy for people to think the market is now closed. Strategic

message delivery needs more work than before,’ Cartwright says. As if to

emphasise the point, GCI is now looking to appoint a ’big hitter’ in the

competition lobbying field.



Chris Savage says the real shift in the situation is not the name change

to the CC, which he dismisses as just that. True scope for change lies

in the Government’s commitment to making the workings of the competition

authorities more open and transparent. ’Greater openness is good from a

public policy perspective and it changes the lobbying position. It used

to be discouraged to publish the contents of representations to the MMC.

Now they encourage publication and are happy for the various parties to

see what each other are putting forward,’ he says.



The CC has held public hearings to encourage openness. The first example

of this was the hearing on price-fixing in the motor industry, held in

London last July. While members of the public were not invited to make

submissions to the investigating panel, they were allowed to attend

hitherto private meetings, and those lobbying on behalf of parties to

the enquiry - much of the motor trade - could see what others were

arguing and take up points raised by opponents when making their own

submissions.



Further public hearings were held in November concerning retail

competition issues and alleged retail market dominance by some

supermarkets.



Savage warns against going down the US route of total transparency,

highlighting the argument that it can lead to unnecessary and costly

litigation and obscure the purpose for which companies and other

interested parties make submissions. He does, however, spot a lobbying

opportunity in the new openness.



As well as companies, charities, public sector bodies and consumer

groups being able to communicate with each other and not having to

submit their material ’blind,’ he says, ministers and civil servants

from other government departments can make their views known to the CC

or the Office of Fair Trading, (which refers cases to the CC.) They can

also be lobbied and built into the coalitions of support which are so

vital to successful competition lobbying. The scope for growth in the

field, he claims, is vast.



This view is supported by Simon Nayyar, director at Citigate Public

Affairs and chairman of the PRCA’s public affairs committee.



He welcomes the Competition Act, and the tougher powers it gives to

mergers and acquisitions authorities, including a fine of up to ten per

cent of turnover on companies violating the new competition laws.



Suggestions that bread will be removed from the lobbyists’ table through

depoliticised decision-making is firmly put to rest by Nayyar.

Describing the whole idea as a ’nonsense,’ he says: ’There will always

be a role for public affairs professionals since many of the decisions

the competition authorities make - concerning job losses, pricing

differentials or whatever - have huge political implications.

Politicians rightly think they have a duty of care to their constituents

in certain areas.’



Because the 1998 Competition Act is being implemented piecemeal,

opportunities to assess the legislation’s impact on lobbying are rare.

The various provisions in the act - establishing the Competition

Commission, giving teeth to regulators, prohibiting certain

anti-competitive practices and creating an appeals function within the

CC to hear appeals from those alleged to have infringed the new

competition laws - dribbled into force at different times. Some applied

from when the Bill became an Act, receiving its Royal assent in November

1998. Other sections became law last January, others still will come

into force in March.



Assessing the effects of changes to the institutional architecture of

competition at this early stage does yield some insights, however. A

respected leader in the competition lobbying field is Andrew Gifford,

the GJW chief executive who has lobbied extensively for Vodafone

AirTouch on the pounds 80 billion Mannesmann takeover deal.



Gifford believes that the greatest area of growth for the lobbying

industry will be in aspects of competition issues which do not concern

mergers and acquisitions. Areas such as fair trading, anti-competitive

practices and predatory pricing have the potential, Gifford argues, to

open up new areas of work for lawyers, and, ’by association, for public

affairs consultants’.



The appeals function of the new CC takes effect this March, from when

decisions on unfair trading can be appealed to a special panel within

the commission’s 90-strong staff of academics, lawyers, business people

and accountants. Charles Miller is doubtful that lawyers will grasp this

opportunity.



Despite the existence of lobbying units within three major London law

firms - Clifford Chance, Dibb Lupton Alsop and Lovell White Durrant -

Miller thinks legal reluctance to share this work is due less to

professional snobbery than to the residual tarnishing of lobbying’s

image by successive scandals. ’Scandals have inhibited the willingness

of lawyers to embrace a discipline complementary to their own,’ he

says.



While Miller credits this reluctance to a lack of people in the public

affairs industry of sufficient calibre, and agrees with Gifford that the

opportunities for expansion are there, he says, ’lawyers have had years

to do it and in the main they haven’t wanted to get involved,’ he

says.



Perhaps because Gifford spots opportunities for an increased public

affairs workload, he is sceptical of the depoliticisation argument. ’The

Secretary of State has overturned a couple of OFT decisions already, so

there is no evidence that the whole process has become less political,’

he says.



He is also wary of the view that open hearings are themselves a sign of

greater transparency. ’If there was more openness you would expect to

see the reasoning of the director general of fair trading published, but

it’s not. The right to see third parties’ submissions is of limited use

because they become more circumspect if they know their comments are to

be on the public record,’ Gifford adds.



The current referred takeover by NTL of Cable and Wireless

Communications - not subject to the openness principle since it is a

mergers inquiry - has highlighted a degree of confusion at the CC.



The head of the inquiry, Denise Kingsmill, invited journalists to give

evidence and is reported to have told them that the CC was minded to

allow the merger on the condition that the merged entity allowed other

media networks to use its cable infrastructure. When this sort of

material emerges into the public domain, it does not inspire confidence

that the competition authorities are at the top of their game, and this

was not the sort of openness Derek Morris had in mind.



Lobbying changes all the time. The discreet, indeed hush-hush,

activities of elderly Tory gents in the Thatcher years were a far cry

from the brash young suits of the Millbank generation, although this may

just be a symptom of a profession in the early stages of

development.



In competition lobbying, the changes wrought by the Blair Government and

the 1998 Competition Act do not constitute a revolution, but taken

together - greater openness, ostensibly apolitical decisions,

authorities working for consumers’ interests - they represent a modified

terrain in which the UK lobbying industry is picking up new skills.





SHANDWICK HELPS BA BID FOR CITY FLYER EXPRESS TAKE OFF



Shandwick’s involvement on behalf of CFE was led by Chris Savage, the

agency’s director of competition and regulation. Savage’s team advised

CFE executives on the procedures of the MMC and its successor body, the

Competition Commission. They also analysed a range of issues the MMC

would look at in the course of the investigation, and advised on how the

ongoing reform of competition policy would affect the Secretary of S

tate’s thinking on the proposed merger.



’There was talk about taking the politics out of merger decisions. We

advised therefore that the minister would be reluctant to overturn the

decision of the commission, and would allow the merger subject to

undertakings,’ says Savage.



Shandwick’s team suggested that Byers would want assurances that other

competition principles would be satisfied, such as there being real

benefits for consumers. It is possible the consultation period following

his initial announcement is a reflection of this. It also had the effect

of giving those opposed to the merger, such as Virgin’s air operations -

represented by Politics International - a chance to have their say.



In line with the spirit of openness in competition matters, the CC

published for the first time the ’issues letter,’ in which it outlined

the issues it was considering having seen written submissions but before

hearing oral evidence. In the course of Shandwick’s work, the importance

of generating third party support came to the fore, as groups

representing Jersey airports (where many CFE flights ended), CFE’s 700

employees and the local authorities affected, were lined up to support

the bid.



TIMETABLE



Autumn 1998 British Airways indicated it wanted to buy its franchised

operation, City-Flyer Express. CFE was until then owned by a group of

venture capitalists and its own management, and flew from Gatwick

airport to various destinations across continental Europe.



January 1999 The Office of Fair Trading thought this bid may be against

the public interest, since it would place in BA’s hands a larger share

of flight slots at London’s second airport. The three-month

investigation by the Monopolies and Mergers Commission began in January,

and when the MMC reported back at the end of March, it was followed by

the protocol - determined four weeks of consideration by the Secretary

of State for Trade and Industry, Steven Byers.



June 1999 The four weeks had stretched into almost three months by the

time Byers announced he would allow the merger to go ahead, subject to

conditions. He was prepared to ignore BA’s new and increased share of

overall slots, but he insisted the airline should not increase its share

of slots in the peak hours of early to mid-morning. This was acceptable

to both sides, since it did not unduly disrupt the business plans of

either BA or CFE.



July 1999 In making his announcement, Byers urged a further consultation

period on the conditions he had suggested.



November 1999 The pounds 75 million sale of CFE to BA finally went

through.



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