Bid to reopen debate on EU vetting rights

Date: 27/02/1997

By Tim Jones

MEMBER states are considering an extension of the European Commission's powers to investigate company take-overs where more than three countries are involved.

Having put the question of whether to increase the Commission's overall merger-vetting powers on ice, national anti-trust authorities are nevertheless prepared to make their lives easier by passing some big-money multinational concentrations on to Brussels.

“We are now looking at the possibility of the Commission handling cases which have repercussions for several member countries,” said Dieter Wolf, president of the German cartel office. “We are not against this, but it must not raise the possibility of 'forum shopping'.”

Companies involved in take-overs could opt to open bogus subsidiaries in a number of member states in order to ensure they were investigated by the Commission rather than by national authorities.

This kind of forum shopping could be stymied, however, if sufficiently high thresholds for company turnover in each relevant country were set before deals qualified for consideration at the European level.

Officials from the member states will meet tomorrow (28 February) in an attempt to move forward a debate which has hardly progressed since Competition Commissioner Karel van Miert launched his consultative Green Paper on reform of the EU's eight-year-old merger regulation a year ago.

Then, Van Miert pressed for a lowering of the thresholds above which the Commission became the sole body responsible for investigating a merger. At the moment, the Commission has exclusive powers to vet deals when the combined sales revenue of the companies world-wide is 5 billion ecu or more, and the turnover of at least two of the firms involved in the deal is 250 million ecu within the Union.

This already has the effect of netting deals for regulatory supervision even if the companies involved are not based in Europe, as the recent high-profile 10-billion-ecu merger of US aircraft-makers McDonnell Douglas and Boeing showed.

In January last year, Van Miert called for the thresholds to be reduced to 2 billion ecu for global sales and 100 million ecu inside the EU.

But his proposal ran into fierce opposition in several Union capitals, especially in Bonn, where politicians already complain that Commission merger vetting is too easily influenced by political considerations.

As a result, in July, Van Miert lowered his sights as well as his thresholds, and made it clear he would accept a global sales threshold of 3 billion ecu and 150 million ecu for intra-EU turnover.

Since then, the issue has been left on the back burner.

“This will be the first time we have discussed this issue under the Dutch presidency to see how far the dossier has moved forward,” said one diplomat. “They are testing the water.”

This will prepare the ground for a meeting of member states' directors-general for competition policy during March.

Early indications suggest that the Dutch are not pushing the question of the overall thresholds too hard, but are keen to come up with a formula for dealing with multiple notifications by the time Luxembourg takes over the EU presidency at the beginning of July.

“If the issue drags on for longer (ie into the British presidency), it could run out of steam,” said a diplomat.

In an attempt to break the deadlock, the presidency is putting greater emphasis on the alternative reform set out in the Green Paper.

One option to be considered by member states will be that put forward by the Commission itself, supported by the European employers' organisation UNICE.

This would ensure that all multiple notifications falling between the existing thresholds and lower floors of 2-billion-ecu combined sales revenue and 100 million ecu for at least one of the companies involved could be forwarded to the Commission.

Officials in the Directorate-General for competition (DGIV) will present the member states with figures showing the number of multiple notifications made over the past few years. Of these, a third were notified to more than two national competition authorities and some to as many as ten.

They also warn that the number of these cases will grow significantly in the coming years with an increase in cross-border merger and acquisition activity as companies get used to the single market and become more sophisticated in their notification techniques.

Once official-level negotiations are complete, industry ministers will try to reach a tentative agreement at their April meeting.