Public interest or protectionism? Britain vs France redux

 
Pfizer and AstraZeneca tablet boxes Political parties in the UK disagree about foreign takeovers of large domestic firms

The attempted takeovers of AstraZeneca in the UK and Alstrom's power engineering business in France have revived the issue of public interest rules.

But, under what circumstances should a national government have the right to block a proposed takeover, even if it has already been cleared by shareholders and competition authorities?

At present, the law is fairly clear on the issue. Interventions in the name of public interest can only apply on grounds of national security, media plurality and financial stability. Even then these cases are pretty rare.

In light of these attempted takeover bids, there have been calls to extend the public interest test.

Hurdles

In Britain, Prime Minister David Cameron is right when he says the government is bound by the rules and cannot intervene. However, last week the opposition Labour Party stirred things up saying they would be prepared to extend the current public interest rules to include the nation's science and research base, should they come to power next May.

As it is unlikely a Pfizer takeover of AstraZeneca would clear competition hurdles in Europe, US and China by then, Labour's intentions would apply to any proposed deal. In any case, the European Commission could still block any attempted intervention.

Across the Channel, the French Government has been more direct. At the weekend, the government awarded itself powers to block takeovers in essential public services including energy, water and transportation. These actions fly in the face of European law and France has already been put on notice by the European Commission.

The French, though, are unapologetic. The Economy Minister Arnaud Montebourg called it a "choice of economic patriotism" in protecting French jobs and prestige.

Wider interest

There is some hypocrisy in these actions. Extending the public interest rule to include national science and research would mean several British takeovers of European companies could have been blocked. Widening the rules to include energy companies is funny given that the state-owned French energy company EDF owns much of Britain's nuclear energy industry.

While both Labour and the French socialists have talked about the need for wider public interest rules, both have been very keen to emphasise that their respective economies would still very much be open to business and foreign investment.

The current rules on mergers and acquisitions are largely competition-based. Competition authorities, independent of government, will recommend blocking a deal if it results in a substantial lessening of competition and a poor outcome for consumers. Ministers can only intervene in the exceptional circumstances mentioned previously.

The main idea is to take politics out of the equation, making decisions more transparent and predictable. Vaguely written public interest rules could allow governments scope to block deals in the name of the national interest while the real motive was simply protectionism.

Governments could put themselves in the position of picking winners by choosing to protect national champions while allowing other firms to be taken over. Decisions may also be unduly influenced by lobbying from workers and management.

In the case of AstraZeneca, the board have rejected Pfizer's 'final' bid. As my colleague Kamal Ahmed said, they think the pot of jam tomorrow will be larger than the one Pfizer is offering today. This of course, as things stands, would curtail any public interest intervention and the behaviour of AstraZeneca's board may be the best lesson to take from all of this.

 
Linda Yueh Article written by Linda Yueh Linda Yueh Chief business correspondent

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  • rate this
    0

    Comment number 24.

    Occasion to consider how 'we in Europe' - IF we had equal partnership democratic self-rule - could or should allocate our own capital, as well as how we could or should influence inward flows of capital, balancing the capitalisation needs of regions and Member States, and balancing the environmental pros & cons involved. One thing is certain: people & alliances will be empowered for fair contest.

  • rate this
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    Comment number 23.

    21.anotherfakename

    Sorry, but it is not called Road Fund Licence but "vehicle tax" (eg see form V149) It is a tax not for using roads but ownership - nothing to do with going anywhere!

    Taxes like National Insurance & PAYE are used to hide reality, just as fuel duty and vehicle tax do. So that the State can lie to you! You seem to have a band G vehicle. Get a band A vehicle and pay zero!

  • rate this
    0

    Comment number 22.

    Ohhh, the moderators didn't like my comment, maybe because I said the EU and Pfizer should go away. Maybe because I said the French had the courage of their convictions and were doing the right thing in contrast to the wet and pathetic behaviour of our government. Maybe they thought the language (no more than you hear in every playground and east enders) was a bit shocking for you all.

  • rate this
    0

    Comment number 21.

    @13. John_from_Hendon
    what about the motorways/autoroutes - British free to use French pay to use!

    er... no, the French don't pay annual road fund licence, our motorways cost me £180+ a year to use - even if I don't use them. Plus the highest fuel duty in Europe, plus tax on my insurance, and the car, and the car repairs, and the MOT each year and the VAT on the fuel and duty... etc

  • Comment number 20.

    This comment was removed because the moderators found it broke the house rules. Explain.

  • rate this
    0

    Comment number 19.

    The trains cost 12 billion Euros. Narrowing the platforms will cost 50 million Euros and be ready by the time the trains are delivered or else will be run on those lines which are ready.

  • rate this
    0

    Comment number 18.

    Just like the UK has Dounreay, up in the wilds of Caithness, the French have their equivalent out in the wilds of Normandy.
    Cap de la Hague is up wind of the UK of course and readily leaks.

  • rate this
    +1

    Comment number 17.

    The French have this right. It is unacceptable, especially for takeovers with the intention to close them down. (Man trucks-ERF-Heinz-HP Sauces etc etc) Just because some companies have more money in the bank is no reason to put others out of work. Competition is healthy, throttling competition because you have more money is corrupt.

  • rate this
    +1

    Comment number 16.

    I think there is a case for national interest. The case of Cadbury is the one often quoted. If this had not happened Cadbury would be a larger company paying wages in the UK. On the other side you have Tata s hugely successful takeover of Jaguar Landrover which has benefited us. Tricky..

  • rate this
    +1

    Comment number 15.

    13.John_from_Hendon


    The French have also purchased & built 2000 new trains at a cost of 50+billion Euros, unfortunately, someone didnt measure the right platforms & the trains are too wide to enter approx 1000 train stations.

    It will take years & MEGA $£$£ to change 1000 train stations before the trains can be used as intended

    France is not a bastion of perfection

  • rate this
    +1

    Comment number 14.

    Existinal survivability access to & manufacture of medication is actually a national security issue, especially if it becomes endangered.

    There are many vitally important sectors of industry/commerce that are national security issues.

    In UK, we have sold out & lost control of so much that is vital to our existance, maintained now by appeasing tax affairs of new corporate controllers

  • rate this
    0

    Comment number 13.

    11.alan "British model won, and the French one, lost"

    You need a more nuanced view...

    CF:

    French Railways, their prices, services etc with British Railways and what about the motorways/autoroutes - British free to use French pay to use!

    The French managed to build and run nuclear power stations whereas the British are floundering in indecision.

    The French banned Fracking as it is dangerous ..

  • rate this
    0

    Comment number 12.

    Remember the Suez Canal nationalisation in national interest that the French and Brits nearly went to war over? A bit ironic to see these countries now scared of American and Chinese companies taking over 'their' companies

  • rate this
    0

    Comment number 11.

    The French have always been protectionist and the British have always been free-traders, at least since the repeal of the Corn Laws.
    In world historical terms, the British model won, and the French one, lost.
    Alan

  • rate this
    0

    Comment number 10.

    With the world awash with QE's funny money seeking investment opportunities at every turn there can be little surprise that targets big and small will be lined up for bagging. JfH is right big business does corrupt but big government corrupts absolutely as it seeks to justify its greedy growth and grip on power. Sadly the West is bankrupt both morally and financially. The pain will come.

  • rate this
    0

    Comment number 9.

    The unbridled market often produce perverse results! This is because pure markets do not exist - the more so at the bigger and more strategic level.

    Every large business corrupts government and people at some level - the bigger it is the more it does it. Marx's analysis of the essential relationships was spot on and still applies.

    France is being rational, but Britain is doctrinally stupid!

  • rate this
    0

    Comment number 8.

    vive la France...vive la liberte, etc etc etc
    Alors, c'est une bonne idee, 'protectionism' est un mot Anglais, 'savoir faire' sont deux mots Francais..........Alors Alors

  • rate this
    0

    Comment number 7.

    "they (the board) think the pot of jam tomorrow will be larger than the one Pfizer is offering today". I agree with the board, after all, if you can nearly double the price of all pharmaceuticles across the board, then AZK's future looks very healthy indeed.
    https://twitter.com/AndyBiotech/status/413664719715983360/photo/1
    But bad for some/all.
    http://www.bbc.co.uk/news/uk-england-bristol-27501772

  • rate this
    0

    Comment number 6.

    As a share holder, let us forget MY opinion! The government has engineered things so that I have no voice.

    My shares are in a ISA, and hence, while I can contribute to AZK to enable them to buy Phizer, I can't vote to sell my shares to the same!

    Does anyone else question this state?
    Why dose Ed M get a vote (with no cash), but not ME?

    Ps for the record, I would have voted no.

  • rate this
    +1

    Comment number 5.

    The European Commission can only block interference in the national interest if we remain in the E.U. We should block the fire sale of UK assets which has been going on for so long and that only serves the interests of the vultures in the city of London.

 

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