Government right to spurn purist approach to competition rules in credit crisis
Competition lawyers have welcomed the government’s decision to waive competition rules to allow the purchase of HBOS by Lloyds TSB last week and say it has not weakened competition law.
Marc Israel, competition law partner at Macfarlanes LLP, says that the government acted within the scope of existing legislation by invoking various powers that were expected to be called upon only rarely, to ensure that financial stability in HBOS was regained. “If the government had not exercised its powers in this case, amid a global financial crisis not seen since the 1930s, one wonders when the powers would ever have been used,” he says.
Israel adds that national security and media plurality are currently the only specified public interest grounds but says the government has stated that “the stability of the UK financial system” should be added as a new public interest test.
Alan Davis, partner in the EU and competition group at Pinsent Masons LLP, agrees: “The government is undoubtedly right to conclude that the UK consumer—the ultimate beneficiary of competition law—is best served by the preservation of financial stability rather than a purist approach to the enforcement of competition rules.”
“It will be challenging for the government to decide how and whether this new public interest consideration should be invoked in other possible, and likely, cases of consolidation in the financial services sector,” Davis says.
Davis says the Office of Fair Trading is expected to investigate the deal but that it may be powerless to act if competition has been harmed.
“The secretary of state has the final say on whether it should be referred to the Competition Commission and can therefore clear the merger on public interest grounds,” he adds.
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