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reference. FCO Ministers have advised that they expect Hong Kong's financial system to remain sound up to and beyond the transfer of power in 1997, to the benefit of HSBC, and they see a decision to seek to return the bid to UK jurisdiction as being interpreted in Hong Kong and elsewhere as a lack of confidence by HMG in the colony's future, with damaging political and economic. consequences at home and abroad. also, as with the prudential aspect, difficult to see how the MMC would be better placed to judge this point.
It is
25 On the "evenhandedness" argument, Lloyds Bank has indicated that it will not proceed with its proposed bid if it is referred to the MMC unless the bid by HSBC is also referred. Lloyds consider that Midland Bank shareholders would be deprived of choice by a reference only of a Lloyds bid because this would effectively leave only the HSBC on the table for the foreseeable future. I accept that Midland shareholders are likely to accept "a bird in the hand" but they would have a choice to await the verdict of the MMC. is a matter for Lloyds to consider whether to persist with a bid through the time needed for an MMC investigation and whether to tempt shareholders to wait by an increased bid. In my view there is no justification for going against established policy (followed in other cases) not to make a reference of a rival bid on "evenhandedness" grounds.
It
26 It is difficult to see what issue of public interest there would be for the MMC to investigate if the bid by HSBC were referred to the MMC. Similarly, it is difficult to maintain that "evenhandedness" is a valid reason for an Article 21 exit when there are no substantive concerns about the bid itself. The EC Commission could be expected to take this view strongly. It is also arguable that equality of treatment has been maintained - albeit by different authorities. If for example the jurisdictions in each case were reversed, I suggest that the UK would be likely to clear the HSBC bid and the EC would open competition proceedings on Lloyds. I advise therefore that you do not seek an Article 21 exit and you should so inform the Commission.
VIEWS OF THE MERGERS PANEL
27 The Lloyds/Midland case and the arguments relating to an Article 21 exit on the HSBC/Midland case were discussed at a meeting of the Panel, under my chairmanship, on 15 May. Competition Policy (CP) Division of your Department commented that Lloyds' proposal appeared to raise a number of significant competition concerns, especially in the relation
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