Corporate bully-boy behaviour poses a danger to consumers

By Lorraine Mallinder

Date: 10/11/04

Business has never been so big. Mighty mergers that threaten to stamp out competition, predatory cartels that carve up markets and fix prices, and all-round corporate bully-boy behaviour are all potential dangers to the consumer in a world that keeps getting smaller.

In today's intertwined global markets, EU-US cooperation on competition plays a substantial role in keeping such trade-distorting forces in check.

Over the past five years, transatlantic cooperation has moved up a gear. The European Competition Commissioner, Mario Monti, introduced reforms in areas such as leniency and decentralization of anti-trust enforcement that have brought the EU closer to US policy. There have been notable successes, particularly in the coordination of investigations on international cartels, often resulting in simultaneous cross-border raids.

But it has been a bumpy ride at times. Certain EU decisions - in particular the blocking of the &036;49bn ( €38bn) GE-Honeywell merger in 2000 and the Microsoft anti-trust case, which resulted in a record €497m fine and several measures that the software giant is now appealing against - highlighted differences between both sides of the Atlantic that spilled over into the political arena. Charges of excessive interventionism, protectionism and even anti-Americanism were laid at the door of the Commission.

In a recent Centre for European Reform pamphlet, Alasdair Murray, director of the think-tank's business and social policy unit, addresses the possibility of a transatlantic rift. His advice is: "The Commission must stand firm in the face of such criticisms. If it cedes ground to its opponents, the Commission risks undermining the coherence and effectiveness of EU competition policies."

In cases where the EU has overruled US courts on decisions regarding American businesses, hackles have been raised. But, moving away from the more controversial headlines, a less alarming picture emerges.

Veronica Roberts, a partner at the Brussels office of law firm Herbert Smith, told European Voice: "People will rely on cases like GE-Honeywell to form opinions. But things have changed significantly over the past 6-12 months in terms of cooperation and dialogue. The EU and US now debate ideas much more openly than before. There is much more behind-the-scenes cooperation now. Over the next 24 months, we should start to see the fruits of that dialogue."

A recent example of close cooperation between EU and US competition regulators was the Oracle-PeopleSoft case. Last month, the Commission gave the green light to Oracle's &036;7.7bn (€6bn) hostile takeover of rival PeopleSoft. The US Justice Department had reached the same conclusion as the Commission last year, namely that the takeover would not hurt competition.

Romano Subiotto, a partner at the Brussels office of law firm Cleary Gottlieb, explains that the EU intervened in this case out of concern for the impact the takeover would have on the market, "not because they were both US companies".

Concerning the charges of excessive interventionism, he says: "If [the Commission] is interventionist it's because it has an aim to achieve and it does that on an objective basis. Ultimately, cases will be seen on their merits."

With the Republicans back in office, it looks as if it will be business as usual for EU-US relations on competition. Although, in Roberts's view, politics is not really as relevant as we might think.

"Economics is playing a much greater part. Chief economists are playing much more of a role in policymaking on both sides of the Atlantic," she says.

Apart from continued convergence in terms of written law, a key challenge for the future of transatlantic cooperation could reside in the application of law. Subiotto warns that, "governments need to be as consistent as possible in order to ensure that the public does not call their practices into question".

Application of the modernization reforms that came into effect last May is a case in point. EU competition enforcement has been decentralized to national authorities and courts, and individuals can now bring antitrust actions against companies that breach EU laws.

Roberts emphasizes how important it will be for the next competition commissioner to develop close working relationships with key individuals in the US, something that Monti seems to have managed very successfully during his five years in office.

The Italian ends his five years as "the most powerful man in Europe" on a good note, having cleared his in-tray of the recently settled Oracle-PeopleSoft and Coke cases, leaving a tidy desk for his successor, Neelie Kroes.

Kroes, whose wealth of business experience proved a stumbling block with the European Parliament, has been through the mill of late. She has gone to great lengths to assuage doubts over potential conflicts of interest, offering to sell investments and step back from cases that involve companies she was once involved with. She has also promised not return to the private sector when her term is finished.

One of the tests of her independence will be whether she is able, like Monti before her, to take a tough line with US companies, whilst maintaining transatlantic cooperation.

Article discusses the prospects of EU-US relations in the field of competition during the second term of US President Bush and a new European Commissioner for Competition.