AstraZeneca, Pfizer and the public interest test
Sir, Politicians and others prompted to think about the public interest by Pfizer’s offer for AstraZeneca would do well to consider a long-ago report of the Monopolies Commission which reported in 1972 on the hostile bid by Beecham for Glaxo Group.
Put briefly, Beecham and Glaxo were both medium-sized pharmaceutical companies with some overlapping research interests. Glaxo was considered to be the stronger force in pharmaceutical research whilst Beecham had a stronger (and more profitable) business in over-the-counter remedies and consumer products. There was widespread concern that the combined group would wind down scientific research and put greater effort into proprietary products.
Applying the public interest test, the commission found that there were no significant competition concerns. It nevertheless blocked the merger on the ground that it would reduce the number of independent centres for research and that the “adverse consequences of the merger in the field of R&D would affect the future size of the British-owned pharmaceutical industry”. Given the contempt in which industrial policy is now held it is interesting to note that within a few years, Glaxo’s research team yielded a series of blockbuster drugs. Beecham languished by comparison, later merging with Smith Kline and being subsequently subsumed within the GSK group.
The postscript to this is that some 30 years later, the Labour government abolished the public interest test in the Enterprise Act 2002, except in narrow circumstances. During consultations on the Bill I drafted submissions for the Labour Finance and Industry Group in which we argued for retention of the public interest on a “you-never-know-when-you’ll-need-it” basis. We cited (some might say presciently) Beecham/Glaxo and BSkyB/Manchester United as cases in point. It is my opinion that competition lawyers and economists adopted then (and continue to adopt) the view that competition is the universal panacea and any non-competition criteria such as the public interest are anathema. The government acceded to this universal wisdom and the result is the competition legislative test which Mr Miliband now belatedly deplores.
After the dust has died down (whatever the outcome) on the proposed AstraZeneca takeover it would be timely if politicians of all parties were to do some hard thinking about the public interest.
Laurie Elks, Former Competition Commission member