COMMERCIAL-IN-CONFIDENCE
(previously there were only two suppliers) retailers were still concerned at the level of charges and the rate of increase, small retailers had little bargaining power, and any further concentration among suppliers would seriously reduce what little competition there was.
47. HSBC strongly deny that there is any case for their bid to be referred to the MMC. They argue that the proper authority to consider issues of prudential regulation is the Bank of England, not the MMC, and that in any case the Bank are satisfied on those issues. They consider that the change in tax status has been properly allowed for in their listing particulars and would not lead to any diminution in UK tax receipts. They deny that their management record outside of Hing Kong gives any cause for concern; aside from their overall profitability, they point out that the credit rating agency Moody's confirmed HSBC's top rating immediately their 1991 results were published. On employment, they observe that since there is little duplication of activity, and since they aim to expand and develop Midland as a component member of the HSBC "family" of banks, there should be additional employment opportunities lacking in the Lloyds bid. They conclude that it would be improper to refer them to the MMC since there are no competition or other public interest issues to justify such action, and in consequence there is no basis for an Art. 21 "exit" under the ECMR.
VIEWS OF MIDLAND
48. Midland have not, so far, either formally endorsed the HSBC bid or opposed the Lloyds proposal. They have advised shareholders that a merger with HSBC would constitute the right strategy for the future, and intend to recommend it, provided that to do so would not prevent shareholders from considering a firm offer from Lloyds. They have left open their position on Lloyds, saying that although they recognise it may have price advantages for shareholders, they need to clarify various aspects before deciding whether or not to recommend it. But in their submission to OFT on the Lloyds proposal, they argue that it should be referred to the MMC, primarily on competition grounds.
49. Their concerns and arguments in this area are broadly similar to those of HSBC. On small businesses (same defintion as used by Lloyds) they estimate their combined market share with Lloyds as around 30 per cent of current accounts. They too suggest that "unbundling" of services is only a limited option for most small business customers, that the proximity of a branch is of great importance to them, and that the market for unsecured lending to these customers is largely confined to the "big four" banks. They note that even though Abbey National is no longer subject to the legal constraint which prevents building societies from undertaking significant unsecured lending to business customers, it has not entered this market. They also suggest that, although the cost in money terms of transferring an account may not be great, it is
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