POLITICIANS backing a legal bid to halt the merger of HBOS and Lloyds TSB today accused Business Secretary Lord Mandelson of trying to force the challenge to be dropped.
The MSPs accused Lord Mandelson of "undemocratic bully-boy tactics", saying his lawyers had threatened to sue the Merger Action Group (MAG) for legal costs if they did not halt their court action.
But the Department for Business, Enterprise and Re
gulatory Reform (Berr) insisted an offer extended to the group to withdraw their challenge was "neither an ultimatum nor a threat".
The offer was aimed at saving the group costs, a spokeswoman said.
MAG has formed to mount a last-ditch legal challenge to the deal.
It has taken its case to the Competition Appeal Tribunal (CAT) – a specialist legal body whose function is to decide appeals on competition issues.
MAG claims that Lord Mandelson's decision to allow the merger to go ahead without referring it to the Competition Commission was unlawful.
The appeal hearing is set to be begin on Monday.
Today, the politicians backing the bid accused Lord Mandelson of issuing an "extraordinary ultimatum" to MAG yesterday afternoon, demanding they withdraw their appeal that day.
"Lawyers acting for Lord Mandelson have threatened to sue MAG's six core members individually for legal costs unless they halt their court action," MSPs Margo MacDonald and Alex Neil, who have backed the action, said in a statement.
Independent MSP Ms MacDonald said: "I find it breath-taking that a group of responsible people whose only motive in taking this legal action is what best serves the public interest can be subjected to such threats and intimidation by a member of the UK Government."
She added: "I would be very surprised if the pursuit of the MAG members for legal costs is a matter for Peter Mandelson.
"I would have thought that it is for the tribunal to decide on costs."
SNP MSP Mr Neil added: "Prime Minister Gordon Brown should call off the attack dogs, because these kind of tactics offend our ideas of decency and fair play."
A Berr spokeswoman confirmed the department had written to MAG offering them the chance to withdraw their offer – but said this was to allow them the chance of calling off a costly legal action.
"The Department for Business wrote to the Merger Action Group yesterday offering them the opportunity to withdraw their case in light of the strength of evidence against it," she said.
"The letter was intended to give the appellants a chance to save costs before pursuing their legal challenge further.
"It was neither an ultimatum nor a threat to individual members."
MAG's legal bid was fast-tracked last week, with the tribunal deciding the challenge would begin on Monday. It is hoped the appeal hearing could be completed by the following day.
Although the case is being heard in London, it will be conducted under Scots Law.
MAG has claimed it has raised more than £50,000 for its fight to save Scotland's oldest bank.
The group claims to represent more than 500 shareholders, account holders, businesses and politicians.
The UK Government overruled competition concerns raised by the Office of Fair Trading when it gave the merger between HBOS and Lloyds TSB the green light.
Lord Mandelson said at the time that the public interest of "preserving the stability of the financial system" outweighed any potential anti-competitive effects.
However MAG claimed the due legal process had been ignored.
The group's case is based on three points.
It argues Lord Mandelson was obliged by law to keep an open mind in reaching his decision but was "fettered" by statements made by the Prime Minister and the Chancellor of the Exchequer.
Secondly, instead of using the legislation in place at the time, new laws were promoted to approve the merger.
And the merger was said to be needed to avoid the collapse of HBOS and a loss of stability in the financial system, but this argument was superseded by the Government's wider rescue package for the banking sector.
HBOS spokesman Shane O'Riordain has already insisted that the legal bid by MAG has "no merit whatsoever".
MAG spokesman Malcolm Fraser said: "I can confirm that our lawyers did receive a letter from Lord Mandelson's legal team on Friday, inviting us to withdraw our appeal. The invitation was declined.
"We are committed to our case and, in the public interest, we are determined it should go ahead.
"Given that the appeal is due to be heard by the Competition Appeal Tribunal this week, we do not feel it appropriate to comment any further on this matter."
The full article contains 780 words and appears in Edinburgh Evening News newspaper.
