Just a regulator type of guy

February 13, 1998

The government has bypassed the business community and appointed academic Derek Morris (above) to chair the Monopolies and Mergers Commission. He talks to David Walker

Ya boo," the City commentators said - I paraphrase, but only slightly - when it was announced that an Oxford economics don rather than a businessman was to take over the Pounds 120,000-a-year chairmanship of the Monopolies and Mergers Commission. Even the Financial Times, usually fair-minded, was sniffy.

The replacement for Sir Graeme Odgers, formerly of BT, who resigned last autumn, is Derek Morris, fellow of Oriel College and a member of Oxford's group of applied economists. Members of the group resist the notion they constitute a school but have certainly made a lot of the running recently on regulation and privatisation.

But for The Daily Telegraph it was "Derek who?''. "He's the chap who gave the world those unputdownable bestsellers Industry: Economic Theory and Evidence and State-owned Enterprises and Economic Reform in China 1979-87," the paper sneered. And The Independent said: "The business community would probably have liked a regulator with a little more commercial experience".

The chairmanship of the MMC is unquestionably an important job, especially as Labour's competition bill - due to be enacted shortly - will reshape the regulatory landscape. The City is bracing itself for a wave of mergers, in addition to ongoing marriage proposals linking the pharmaceutical giants Glaxo and Smithkline and the big grocery chains Asda and Safeway.

But the idea that to check and monitor competition you need to have been a competitor is surely to mistake the nature of regulation. You do not, for example, need to be Quentin Tarantino to make an effective chairman of the British Board of Film Classification. Is regulating competition so different?

It is not, Derek Morris says emphatically, as if there were a model of perfect competition for which one need only supply the empirical details. Regulating competition involves the exercise of judgement, of reasoning which has to be based on the specifics of the market sector. You do not even need to be an expert, provided you can draw in expert advice and relevant experience. "The only thing the law specifies about the chairmanship of the MMC is that the chairman must choose the members of the panels which report on proposed mergers. It is up to me to ensure that the necessary accounting, legal, industrial, consumer experience and perspective are marshalled."

Not that he is anything but an expert, having been a member of the MMC for the past six years, whose real-world experience includes attempting to sort out the industrial base of Kirghizstan and demerging giant state enterprises in China.

Perhaps the business page commentators were right in one regard. In picking him for a highly sensitive job, Margaret Beckett, president of the board of trade, has indicated that no longer are business people the automatic choice for business-related jobs. Labour governments were once wont to reach into academe for their quango appointments and perhaps are now again. With a number of other big jobs in the offing (the chairmanship of the Audit Commission, the directorship of the Office of Telecommunications) Morris's appointment may signal the end of the Conservatives' preoccupation with business experience as the sole valid qualification for running a quango.

Besides, Morris, university reader in economics, has business experience. He helped set up Oxford Economic Forecasting, a consultancy with, he says proudly, 100 major clients. His work abroad confronted "issues every bit as complex and bruising as anything you find in business". He is not, in other words, an ivory-tower economist. In the 1980s he took leave of absence from Oriel on becoming a director of the National Economic Development Office. Nowadays this sounds like something out of Jurassic Park but in its day it was valued as a means of promoting productivity and competitiveness - its day lasting until governments gave up on the idea that they could intervene to improve corporate performance.

Does this make Morris a man of the corporate state - Nedo ran under tripartite representation, including unions as well as business and government? No, he says, that was then and this is now. "Nedo is not an appropriate body now ... It belongs to a certain type of corporatist approach to management of economy which does not exist now.'' Would Margaret Beckett not love to recreate something similar? Morris is clearly uncomfortable with any suggestion that he has political views, especially views of a kind that might have made him a more acceptable candidate to a Labour as opposed to a Tory trade secretary. (His appointment was of course entirely kosher under the Nolan rules, which now also apply to membership of the 41-strong MMC.) It is almost as if on the wall of his office he had that famous second world war poster saying careless talk costs lives. In his case, his delicacy about on-the-record statements stems from a fear that careless talk, even about the principles of competition policy, might endanger the probity of MMC reports. They are, he emphasises, highly wrought examples of reasoning about the operation of the public interest in the shaping of companies and market sectors and he is clearly very anxious to avoid any suggestion that extraneous considerations (eg politics) play any part. MMC reports go to the government: it is the politicians who account in the political arena for their decisions on what to do with them.

"Yes, there is a political element in what gets referred to us. And the secretary of state has the discretion to implement remedies other than those we recommend. But I do not see myself as having anything remotely like a political input. Members of the MMC jealously guard their independence and resent any hint of political reasoning influencing their judgements," he says.

So what then is competition policy? If not a science, is it an art or just a bundle of contemporary prejudices? Morris replies that reasoning, at least in his experience at the MMC, is based on broad principles that one can infer from examples around the world about the operation of markets in the public interest. "It is, if you like, informed common sense."

He personally believes that government intervention in markets, for the sake of their better operation, is justified. "Government, for good or bad,can affect the framework within which private companies are productive. Government can increase exports. Government, in the shape of the MMC, holds the ring, intervening to protect not individual companies but the process of competition."

In his view, the case for regulating competition in one country is not diminished one jot by the globalisation of the economy or the development of regional trading entities such as the European Union. He sees nothing anachronistic in the idea that a regulator sitting in London can make a difference, even in the context of companies trading internationally. But how much of a difference? There is, he admits, no formal procedure for judging the effectiveness of the MMC. In many cases you simply cannot measure the effect, say, of an order prohibiting a merger between companies and what would have happened if they had been allowed to merge. Nor has there been a "rigorous appraisal'' of the MMC, though an institutional history is being prepared in time for its 50th anniversary in 1999.

Case law can, however, be assessed. "Virtually all the cases referred to us are different, unique, complex I if they weren't difficult they would not be passed on by the government. What I have learnt is that every single case has idiosyncratic characteristics ... in many cases, any attempt to have a view at the beginning of the case is counter-productive. You've got to reserve judgement until you have seen the data, had the arguments, talked to the third parties. It is therefore very important when commentators want to opine on MMC judgements that they read the reports....'' From Derek Morris's office at the MMC you look out over the roof of the Royal Courts of Justice in the Strand. There is, he says, a judicial element in the commission's work and you get a sense that he would like his tenure there to be judged almost as a judge's might, by reference both to the practicability of the verdicts and the intellectual quality of the reasoning behind them. But in addition to the work of regulating competition, Morris is charged with bureaucratic reconstruction.Under the terms of Labour's competition bill, the MMC and the Office of Fair Trading are being absorbed into a new Competition Commission - which he is going to chair. The OFT arm will have a brief to go out there into the market place and seek instances of anti-competitive behaviour. Businesses are none too keen on this new activist role, despite the proposed creation of a new appeals procedure with an independent president.The MMC will continue as the reporting arm of the new commission.

It is unlikely, then, that Derek Morris will find much time to write or research, though he does intend to keep up with developing views in economics. He will miss the undergraduates but not the intellectual stimulus: "This is the most challenging and interesting work I have ever done."

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