United Kingdom Internal Market Bill — House of Lords, 2020-11-04
Topic: Domestic Commerce
Dianne Hayter (Labour, Centre-left): My Lords, before I speak to the amendment, I will slightly cheekily ask something about the previous group. At the very end the Minister said that the Government would not commence the powers unless they felt they needed to, or some words like that. As he indicated, each bit of the Bill can be brought into force on different days, as the Secretary of State may by regulation decide. When the Minister responds could he say whether that would be by the affirmative procedure and whether the House would consider the commencement date at that point? He could have some assistance if he does not know. How such things are done is beyond my understanding. It would be quite interesting to debate at that point whether the powers should be taken. I am sorry to ask the Committee’s indulgence to deal with the previous group, but I am sure that everyone is very forgiving Amendment 153 seeks to insert into the CMA’s powers a clear and specific reference to the need, when regulating takeovers in the new and initially demanding internal market, to promote research and development and innovation in new and existing industries and enterprises, as well as the need to act in the interests of UK public policy. The latter point is key to attracting long-term investment, as the CMA needs enhanced tools to intervene against hostile takeovers There has been a catalogue of such hostile takeovers, such as of GKN by Melrose in 2018—surely a bleak day for British industry, with perhaps 6,000 jobs with the UK’s third-largest engineering company suddenly in the hands of new owners following a very narrow vote by shareholders in favour of the takeover of a 250-year old company. That vote was swung by hedge funds and arbitrageurs who owned 25% of the shares, which had been very recently acquired. Their short-term interest in making a quick profit came at the expense of the jobs, skills, research and development of this major industrial company, to the detriment of UK plc. Needless to say, the result has not been good. Not all takeovers are bad, but when Melrose’s own website describes its strategy as "Buy Improve Sell", with its objective to achieve a significant increase in shareholder value often in as little as three to five years, one has to ask whether this is in the interests of UK plc Last year, Unilever, our third-biggest company by market value, only just escaped a hostile takeover bid from Kraft, which took over Cadbury in 2010. Unilever’s proposed move of its registered office to Rotterdam, which did not actually take place, would have meant that Dutch law, which provides a public interest defence for the company from predators, would have been available. Sadly, we do not have that in UK law. We must now strengthen our laws against hostile takeovers and takeovers generally that are not in the public interest, not just because it is the right thing to do but to encourage long-term UK and overseas inward investors that their investment is safe from short-termism Until recently, the law provided only three grounds on which the Business Secretary could refer a takeover to the CMA, which then decides whether it should be blocked. The first is media plurality, the second UK financial stability, and the third national security. The addition of a fourth—public health—earlier this year was most welcome, as it allows for, in its words: "The need to maintain … the capability to combat, and to mitigate the effects, of public health emergencies" Ideally we should add a fifth—the need to foster and promote research and development and innovation in new and existing industries and enterprises—and a sixth: to act in the interests of UK public policy As the Business Secretary I think accepts, there remains a concern about foreign takeovers of British companies on the cheap. We need to ensure that, in considering relevant takeovers, the Business Secretary can refer a takeover bid, and the CMA should be able to consider whether the bid is in the interests of research and development or science and technology, or in the public interest generally. That would cover cases where the national interest should be considered, but where the definition happens not to fit neatly into one of the existing categories I acknowledge that any such new grounds for referral by the Business Secretary are outwith the Bill’s scope, but as the CMA now stands more alone in the world of competition regulators outside the EU family, we need to give it the tools, as it oversees the development of the internal market, to put the national interest and support for research and development clearly into its thinking and terms of reference. This will help UK plc to build back better after Covid, in the national interest. This is something the Bill allows us to do, adding a useful tool to what the CMA will do. I beg to move.