Government clarification on HBOS/Lloyds TSB merger control

UK Government notice (2 paragraphs) stating that the Government intends, subject to Parliamentary approval, to add something related to the “stability of the UK financial system” to the list of grounds under which ministers can intervene in the merger control process and take the final decision instead of the OFT or Competition Commission. The Government intends to invoke these new provisions in relation to the possible merger of HBOS with Lloyds TSB.

There would still be an independent review of the transaction by the OFT and, if referred, by the Competition Commission, with a published report advising ministers on both competition and public interest aspects.

There is no reason to doubt that the ministerial decision would be subject to judicial review (at the Competition Appeal Tribunal) under section 120 of the Enterprise Act 2002, in the same way as a merger control decision made by the independent competition authorities. The only ministerial decision that has been made under the Enterprise Act 2002's public interest regime for mergers (which the new proposals would extend) is the order for Sky to reduce its shareholding in ITV, and this is currently under appeal at CAT.

The right of appeal ensures that, if the grounds for the eventual ministerial decision are not clear and well reasoned, any aggrieved customers or competitors will be able to overturn the decision, or to force the Government to establish publicly its exact purposes about financial stability and the proportionality of any decision that it might make to allow a lessening of competition in order to meet these purposes.

Comment. There is a big gap between this proposal and the Chancellor's statement (or audio from BBC radio, 5:07-5:20) that the Government “will waive the competition requirements in relation to these two banks”. This discrepancy does not reflect a difference between Government departments: HM Treasury's press notice is consistent with the announcement reported above, not with the Chancellor's words. Franck

For further information or advice please contact Franck Latrémolière.

Filed under CAT, Competition Commission, DTI/BERR, HM Treasury, Merger control, OFT.

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