EU merger policy damaging to business, say Swedish CEOs

Date: 07/02/02

By Peter Chapman

COMPETITION chief Mario Monti and his merger watchdogs are failing European companies and consumers alike with their baffling approach to deals, two of Sweden's most powerful businessmen claim.

In an interview with European Voice, CEOs Leif Johansson of Volvo and Michael Treschow of Electrolux said firms are fed up with doing deals only to be surprised by how Brussels reacts from one merger to the next.

'To come through the whole process the whole time and come to a different decision is not efficient and does not attract business,' said the Volvo chief, in charge of the truck and coach business that is separate from the Ford-owned car unit.

'The challenge for Monti is to produce case law...that is so clear, transparent and well-argued that companies can actually see or understand what will be the outcome,' he added.

The two CEOs, who were speaking after a meeting with the Italian commissioner about reforms to the EU's merger regulation, said the way the Union executive defines 'relevant markets' often leads to judgements that eliminate potential benefits to consumers across the Union.

A case in point was truck-maker Volvo's failed merger with fierce rival Scania - blocked two years ago because the deal would have hampered competition in the small Scandinavian market even though it would have barely registered on the Richter scale elsewhere on the continent.

The decision stoked fears that big businesses in small EU member states would find it almost impossible to merge because they would lead to a strengthening of dominant positions in local markets.

This would make it harder for them to compete internationally with US rivals or firms from less concentrated countries elsewhere in the EU.

The Swedish CEOs said this was a clear example of why the Union should move into line with the US system - in which investigators give more consideration to consumer benefits than to the effects of a deal on competitors.

Convergence would also solve the nagging fear that Brussels and Washington will disagree over the merits of a deal - as they did in the infamous GE/Honeywell case.

'Bigger businesses are very concerned about having two opinions on mergers and acquisitions,' said Treschow, adding that Monti should 'try to harmonise' the two opinions.

Monti has sought to play down warnings that the EU and US approach to mergers are totally out of synchronisation, insisting officials from both sides of the Atlantic reach the same decision in the vast majority of cases.

The Commissioner discussed the issue with his US counterpart, Assistant Attorney-General Charles James, on the fringes of last weekend's World Economic Forum in New York.

European Commissioner for Competition Mario Monti and his merger watchdogs are failing European companies and consumers alike with their baffling approach to deals, two of Sweden's most powerful businessmen claim.