Monti vows to iron out errors after Airtours merger ruling

Date: 13/06/02

By Peter Chapman

COMPETITION Commissioner Mario Monti has pledged to ensure that errors by officials which resulted in last week's decision by the European Court of First Instance (CFI) to veto a key merger ruling will not be repeated.

But the Italian has shrugged off criticism from legal experts who have portrayed the CFI ruling as a hammer blow to the way his department handles cases.

The decision to overrule the 1999 veto of the merger between UK holiday firms Airtours and First Choice is seen by some as a huge setback to the Commission's philosophy that deals that lead to 'collective dominance' in a market by a few firms should be blocked.

The reliance on this argument assumed that the three remaining big UK tour operators would behave as an oligopoly - controlling supply and cranking up prices - even though there was no direct suggestion that they would collude.

After digesting the ramifications of the CFI decision, Monti has emerged as cool as ever.

He denied that the decision questioned the principles applied by the Commission in adjudicating on mergers. It merely showed the need for officials to collect more evidence to prove that competition would definitely be harmed in cases of collective dominance.

'From a first reading it appears that the Court has upheld the Commission's market definitions and has not questioned the use of collective dominance theories. In fact it has brought very useful clarification,' said Monti.

'The Court has however found that the Commission failed to find convincing evidence necessary to prove it.'

He and his team would work to ensure the 'errors' highlighted by the CFI were not repeated in future.

The Commission was already committed to improving its procedures to 'make sure they remain fair and objective' as part of an ongoing review of the way it examines mergers, he said.

The fact that the CFI had ruled against the Commission also showed there were effective legal controls on his powers, he added, undermining the arguments of those who claim his department acts as prosecutor and judge in competition cases.

However Monti admitted that the three years it took for the CFI to reach its decision highlighted the need to speed up judicial reviews of cases.

And in an apparent reference to the transatlantic row that followed his veto of the GE/Honeywell merger last July, the former economics professor was at pains to point out that the CFI decision was not a reason to doubt the way that competition is policed in the EU.

Collective dominance, known in the US as 'coordinated effects', was a key piece in the armoury of American watchdogs, said Monti, adding that US regulators actually outlawed more mergers of firms with market shares of less than 40 than the Commission does.

Trevor Soames, a Brussels-based lawyer with US firm Howrey Simon Arnold & White, predicted that the Airtours ruling might boost convergence between EU and US merger decision-making.

'A greater possibility now exists in matters before the Commission, as in the United States, to present facts and analysis beyond basic market structure to convince the Commission not to challenge a proposed concentration,' he said.

'The likelihood also is enhanced for coordination and cooperation between the US and EU merger authorities in these types of cases.'

• Monti has vetoed just 18 out of more than 2000 mergers the Commission has reviewed since 1990.

Only nine of those blocked were appealed to the CFI, and of those one appeal was withdrawn and three were rejected.

The Airtours decision is the first court defeat for the Commission. Four other appeal cases are pending.

These are: GE/Honeywell, Schneider Electric and Legrand, Tetra Laval and Sidel (all 2001), and MCI/WorldCom and Sprint (2000).

Competition Commissioner Mario Monti has pledged to ensure that errors by officials which resulted in the decision by the European Court of First Instance to veto a key merger ruling will not be repeated.