The Enterprise Act will contain the rules by which the OFT will judge mergers and anti competitive behaviour. In its original remit there seemed to be a presumption that it would judge what was in the consumer interest. The clauses within the Enterprise Act, which could have fleshed out what this means, instead seem to focus on structural issues.
The main judgement that is made on mergers is whether or not there would be "a substantial lessening of competition". This is primarily a market power concept that fits with a traditional structure, form and conduct approach to monopoly economics. This is very different from judging something in the consumer interest, as the judgement presumes that monopoly potential is bad and absence of monopoly power is therefore a public good. Whilst there are many examples of monopoly being a disbenefit to consumers, the reverse does not necessarily follow.
The OFT carries out a test to judge the substantial lessening of competition. This covers:
- analysing the competitive
market immediately after a merger
The key to these points is that many of these can be seen as being part of the presumption that a merger has benefits rather than a presumption that it would be against the consumer interest. It is possible that efficiency gains would be too speculative to be of benefit to consumers or that a failing firm is a result of existing monopoly power rather than consumer choice. These rules are too similar to broad presumption in favour of merger rules that tended to dominate UK competition policy during the 1980's.
What is needed is a separate approach based on evidence of firm behaviour and its effects on consumers. This is however subjective. The situation where merger options have either positive or negative effect on consumer benefit is obvoius from the Safeway takeover battle, an ideal example of where a consumer centric approach would produce a quicker and far more equitable result than the above process.