The Commission reconsiders its merger rules

Written by Chris Huhne MEP and published in the Evening Standard on Thu 28th Mar 2002

The Commission's decision to stop the merger of two US companies with big EU operations - General Electric and Honeywell - caused a political outcry in Washington last July, but Commissioner Mario Monti is quite capable of stirring up debate on this side of the water too. London's competition lawyers are working overtime.

Mr Monti has been making particular enemies in some of the small member states. In Sweden, his veto of the mergers of Swedbank with SEB and of Volvo trucks with Scania caused uproar because the resulting combinations would have had a small share of the EU market (but a large share of the Swedish one). Arguably, the advent of the Euro for twelve member states (though not yet Sweden) means that the Commission should be less sensitive about individual national markets: it is the single market that matters.

Partly as a result of the debate, the Commission will bring forward this year some amendments to the merger regulation, following a consultation period that ends this weekend. With luck, the proposals will serve to align the approach of US and EU anti-trust authorities more closely, and avoid GE-Honeywell accidents (though watch out for the Commission's decision on Microsoft, which will not be easy).

Concern about EU procedures centres on some key issues. The first is that the Commission's test for a merger includes whether it will 'create or strengthen a dominant position' in a market. This definition is out of line with that in the US, Canada and Australia, which rely solely on a concept of 'significant lessening of competition'. Highly competitive big players arguably find it easier to get merger approval under the US test, and in a globalised world market that may be sensible.

The differences should not be exaggerated. In almost all cases where mergers are notified to both US and EU authorities at the same time, coordination means that they come to the same conclusions. And the EU has blocked only 18 mergers outright from the total of 1,850 mergers notified over the last eleven years. Moreover, there is now a senior working group of the Commission and the Justice department trying to align their approaches.

A second issue is whether companies should have more time to negotiate asset disposals when they are in the second phase of a review with the Commission, and it has identified problems in particular markets. One possibility is that companies should be able to stop the clock for 20 or 30 days to come up with remedies that might satisfy the Commission.

A third and more fundamental issue arises from the nature of the procedures on both sides of the Atlantic. Critics say that the Commission is judge and jury in its own cause, because it does not (unlike the US Justice department) have to apply to a court to stop a merger or enforce remedies.

In reality, though, any Commission decision can be taken to the European Court of Justice on appeal, and currently 7 of the outstanding 15 prohibitions are before the court, including the GE-Honeywell case. True, the court grinds exceedingly slowly. It is not yet clear whether the reforms that it introduced last year will substantially speed up its deliberations, but that may take some of the heat out of the complaints.