Mergers and Acquisitions: Public interest sparks new lobbying growth - Under Margaret Beckett companies are finding it hard to predict which takeovers will be referred to watchdogs, which in turn has meant more opportunities for lobbyists

Despite Labour’s much-vaunted pro-business offensive during the election campaign, its attitude to competition, under President of the Board of Trade, Margaret Beckett, has taken the business community by surprise. Lobbyists say they are increasingly being drafted into mergers, acquisitions and unfair practice cases, and are having to adapt to the ways of the perhaps uncharitably nicknamed ’Mrs Blockitt’.

Despite Labour’s much-vaunted pro-business offensive during the

election campaign, its attitude to competition, under President of the

Board of Trade, Margaret Beckett, has taken the business community by

surprise. Lobbyists say they are increasingly being drafted into

mergers, acquisitions and unfair practice cases, and are having to adapt

to the ways of the perhaps uncharitably nicknamed ’Mrs Blockitt’.



Michael Burrell, managing director of Westminster Strategy, whose

clients include US group Texas Utilities - currently preparing a bid to

take over Energy Group - says: ’There is a feeling that under the

Conservatives, whether a case would be referred or not was predictable,

so it was less necessary to employ lobbyists. But Labour’s approach is

seen to be less predictable, so companies are playing it safe and

including lobbyists in their teams. We do have a vested interest in

change.’



Beckett’s official line on competition was summed up by the consumer

affairs and competition minister Nigel Griffiths last week: ’Her general

policy continues to be to refer mergers primarily on competition

grounds, but where, as part of a wider public interest scrutiny,

important regulatory issues are raised, she may decide that a reference

is warranted.’



Most lobbyists agree that the main difference between the Government’s

policy and that of the previous Tory administrations is Labour’s

emphasis on the public interest alongside purely competitive concerns.

This means that lobbyists must argue that their clients’ merger plans

are in the public, as well as the business community’s interest.



So far, the public interest argument has come to the fore in

politically-contentious cases - those involving vote-winning matters

like household brands or the environment.



Beckett earned her nickname in such a case last June, when she

confounded stock market expectations and blocked the proposed merger

between brewing giants Bass and Carlsberg-Tetley, despite conditional

clearance from the MMC. The merger would have given the new company a

market share close to 40 per cent and, perhaps more importantly, have

cost 2,000 jobs and potentially pushed beer prices up.



Competition policy is regulated by the Office of Fair Trading (OFT) and

the Monopolies and Mergers Commission (MMC). The OFT investigates

takeovers and allegations of anti-competitive practices, and recommends

what action should be taken. With the DTI’s approval, cases can be

referred to the MMC for closer investigation - seven have been referred

since May’s election.



The President of the Board of Trade has the right to veto a conditional

clearance from the MMC, but has no say in unconditional clearances.



Several lobbyists believe that Beckett’s emphasis on public interest has

led to more cases being referred from the OFT to the MMC since May than

would have been under the Tories. Rory Chisholm, a competition

specialist and director of lobbying firm GJW, says: ’The difference

between Labour and the previous government is that, in cases involving

doubt or a dispute between the OFT and the government, the previous

government would water down the OFT’s recommendations whereas this

government takes a tougher line than that recommended by the OFT’.



Lobbyists have also had to adapt to the breadth of opinion likely to

influence the new Government. Because Labour politicians do not have the

established network of links to business which existed under the Tories,

lobbyists must use other networks to influence policy-making, such as

environmental and consumer groups, trade unions, backbenchers and

special advisers.



On top of adapting to the Government’s ways, lobbyists will soon be

working within a new institutional framework. The draft Competition

Bill, now in its final parliamentary stages, will bring UK competition

law in line with the Treaty of Rome, whose underlying competition

principle is that all forms of market agreement are prohibited unless

specifically authorised.



The OFT’s powers will be beefed up to include halting suspected breaches

of fair trading pending investigation and imposing fines of up to 10 per

cent of a company’s UK turnover if a breach is proved. The MMC will be

replaced by a diminished Competition Commission, which will hear appeals

against OFT decisions.



Opinions differ as to how the new law will practically affect

competition lobbying. While its contents directly concern

anti-competitive practice cases only, takeovers may be inextricably

linked to these. A prospective bidder may be discouraged from launching

a takeover for fear of being forced to partially shut down corporate

activity by the superpowered OFT.



This could in turn mean fewer competition cases available to be lobbied,

but longer-term lobbying activity for those companies which do decide to

take the plunge.



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