EU-US competition deal on horizon

Date: 12/12/1996

By Chris Johnstone

THE European Union is on the verge of sealing a deeper cooperation accord with the US which would allow each side to let the other take the lead in key competition cases.

Competition officials say a deal is possible within a few months, but warn that more time will be needed to get it through the European Parliament and US congress.

The proposed agreement would defuse possible friction between the two sides if both were dealing separately with the same case - and avoid the risk of them coming up with different solutions.

It would call on competition watchdogs on both sides of the Atlantic to agree which market was most affected by a competition or cartel case, in order to decide which of them should consider it.

“If the centre of gravity was in Europe, it would be dealt with by the Commission. If it was in the US, we would take a back seat,” said an official.

The practice has already begun unofficially. Washington competition authorities, for example, allowed their European counterparts to lead a probe into US-based retail sales analysts AC Nielsen for an abuse of a dominant position because the Union was the market most affected.

Even with such an accord, the EU and US might still have to carry out parallel investigations in a handful of cases, and officials stress there would be no question of the Commission relaxing its vetting of large cross-border mergers and joint ventures.

At the moment both the EU and US can, in theory, conduct competition investigations on each other's territory if they think they are being affected. However, in practice, they often run into problems when they try to pursue investigations overseas.

The success of an existing transatlantic information-sharing deal on competition cases has spurred the latest bids to improve cooperation. Canada and the EU are also close to signing an accord on data exchange between their competition authorities.

But, against the backdrop of this imminent achievement, there is mounting concern within the Directorate-General for competition (DGIV) about the ability of countries applying for membership of the Union to comply with EU competition rules.

Competition Commissioner Karel van Miert has warned that central and eastern European countries are dragging their feet over the adoption of Union rules and this could damage their chances of EU membership.

One of the less-publicised hurdles to be overcome as the Union contemplates expansion eastward is the need to bring into line the competition and state aid policies of applicant countries such as Poland, Hungary, the Czech Republic and Slovakia, Van Miert told a recent conference.

“This is a big challenge. Most of these countries have very little experience of the market economy and competition rules. If they do have that experience, it is another matter enforcing those rules. They are so used to state aid,” said Van Miert. “Countries wanting to become members [of the EU] must adapt themselves to its competition rules.”

Applicant countries are obliged to bring their competition regulations into line with those of the Union under the terms of their association agreements.

“It is a difficult and long-term task. It will take decades,” warned one EU official.