Changing the rulebook for competition referrals

The rapid creation of Lloyds HBOS has highlighted the role (or non-role in this case) of the competition regulators in the UK…

The Board of Lloyds TSB was able to move so quickly to save HBOS after it had been given assurances by the Government that the takeover (sorry, “merger”) would not be referred to the Competition Commission or Office of Fair Trading.

You may recall that the UK’s competition regulators have been fighting hard in recent years to increased the amount of competition in the retail banking sector. In normal times, a merger between HBOS and Lloyds TSB would have been unthinkable, given their combined market share in key markets such as household mortgages and consumer savings.

But, as we know, these are not normal times. Something so significant was happening to the financial markets this week that the normal rules of competition were thrown out of the window.

The Government is now moving to change the law dealing with when potential mergers or takeovers cannot be blocked by the regulators.

At present referrals can only be blocked if they affect national security or the plurality of media ownership. The new regulation will extend this on public interest grounds to ensure the stability of the UK financial system.

This week, a momentous week in many ways, will also be remembered as the week when the competition goalposts were well and truly shifted.