My Lords, I have listened with great interest to the words of the noble Lord, Lord Hunt of Wirral, and the noble Viscount, Lord Eccles. We, too,
are always looking for reasonable ways to ensure that SMEs—or SEs, small companies, in this respect—are not subject to too much regulation.
Perhaps I am confused on this, but currently in the 2002 Act there are two criteria as to whether competition authorities should take an interest in a merger. The first, which we have spoken about today, is whether the turnover of the business is in excess of £70 million. This is a considerably higher level than what is being proposed today, so it is unlikely that any company with a turnover of £5 million being taken over would be investigated.
The second criterion, though, the one that we are paying most attention to today, stipulates that where two merging business have an effective market share of over 25%, that becomes a relevant merger situation for the competition bodies to consider. That 25% is an important threshold as to whether some form of monopoly is taking place and therefore, as the noble Viscount said, the value to the consumer is affected prejudicially.
At present, it appears that the only effect of Amendment 25 is to exclude the possibility of the CMA looking into a merger if the turnover of the business being taken over was above the £5 million threshold, even if the combined market share were to be more than 25%. Those are scenarios in which we might not wish to tie the CMA’s hands in this fashion. A tech company, for example, could have a low turnover but a high market share, particularly in a locality, and as a result the CMA might want to take a look at a merger between it and a dominant company in that market, or there could be some form of geographical dominance.
I find myself sympathetic with the thinking behind this because, as far as I am concerned, the more competition the better at all times, and I am also sympathetic with keeping red tape away from small businesses. However, it appears that when it comes to mergers, such protections are already offered, and this amendment could damage something even more important to SMEs—a strong competition environment. We definitely want to think about what has been said today; some important points have been raised. We will wait for the next round at Report.