Van Miert proposes tough new accounting laws

Date: 08/01/1998

By Chris Johnstone

COMPANIES which receive public funds or carry out public services face the prospect of tougher accounting laws under European Commission proposals due to be presented in the first half of this year.

Competition Commissioner Karel van Miert's officials will propose that firms break down their accounts to reveal the flows of public money coming into the business and flowing between various units.

The planned revision of the transparency directive would allow Commission officials for the first time to vet companies across the board for cross-subsidies between areas of business where they have protected monopolies and those where they compete on the open market.

Cross subsidies are among the most common causes of complaints from private firms, but it has been difficult for the Commission to rule on them. "At the moment, we do not have the tools to get a clear picture of financial flows. We just do not have the figures," said an official.

The requirement to come clean on such cash flows would apply mostly to state-owned companies, but it would also extend to private firms which have been given the exclusive right to carry out some activities protected from competition with or without the help of public subsidies.

These new rules have already been earmarked as crucial for the Commission's scrutiny of the flows of local and national aid to Europe's ports, which are currently involved in a cut-throat price war.

Private postal companies have been waiting for a notice on how competition laws apply to the postal sector to be able to press for the same type of financial disclosure.

One question which Commission officials have still to answer is where the line should be drawn on such declarations of cash flow. Should local authorities, for example, open up their books if one part of their empire competes with the private sector? "It is going to be a difficult job to get the right balance," said the official.

Despite the transparency directive's turbulent past (it was the target for heated attack by Europe's public companies after it was introduced in 1980 and strengthened in 1985 and 1993), competition officials are fairly confident that the latest proposals for revision will not be savaged by national governments following early consultations.

The lobby for Europe's publicly-owned companies, the Brussels-based European Centre of Enterprises with Public Participation (known under its French acronym CEEP), said it was aware of the revision but was not yet ready to comment on it.

It was CEEP which led attacks on past revisions, claiming that they discriminated against public companies by calling them to account more than their private counterparts.