New rules ‘criminalize’ lawful mergers

By Peter Chapman

Date: 11/12/03

BUSINESS executives plotting big-ticket company mergers face being treated like criminals by competition watchdogs, the MEP in charge of vetting new European Union merger rules has warned.

Benedetto Della Vedova, Parliament's rapporteur for the merger regulations signed-off by EU governments last month, is concerned that the rules - set to enter into force next year - will give officials the power to raid companies in much the same way as they investigate cartels.

The Radical Party MEP said: "Cartels...are normally illegal while mergers, on the contrary, are 'business as usual'.

"It is my view therefore that the legitimate nature of a merger does not justify this sort of criminalization and some of the envisaged increases in the Commission's powers.

"These include forcing all the members of staff of an undertaking to make statements - without granting the right not to reply or not to incriminate themselves - or sealing any business premises during inspections."

Economists believe some, if not all, company mergers can help to boost economic performance by allowing bigger companies to trim excessive layers of management and exploit economies of scale.

At the same time, they claim the risk that a stronger rival might launch a takeover bid keeps bosses on their toes and helps them to perform better.

However, Della Vedova said the new rules give the impression that mergers and acquisitions are a bad thing, and inevitably harm the markets.

"We must avoid the risk that the European rules - and their enforcement - can be, or can be perceived as, hostile to the dimensional development" of companies, added Della Vedova.

He said the upshot could be a situation in which the European Union ends up with an "excess of small and medium industries" which "creates a handicap for the economic system and for its ability to compete in the international markets".

But Competition Commissioner Mario Monti's aides insist the new rules merely clarify rights that the EU executive's officials already have to visit companies during investigations into mergers.

They insist that merger watchdogs have never launched cartel-style dawn raids on company offices - nor do they intend to do so in future.

At the same time, they insist the Commission has not asked for the power to raid executives' homes - one of its rights under the new anti-trust rules that also enter in force next year.

Amelia Torres, the spokeswoman for Monti, said: "This is necessary [in cartels] because there is a greater awareness of EU competition rules and of the dangers of being caught. Nobody is silly enough to leave hand-written notes, with the prices agreed during a meeting at an anonymous hotel, on the window sill.

"Instead, they are more likely to keep any 'incriminating' evidence in the safes of external lawyers, or at home."

Nonetheless, Torres added, "the Commission has not sought, does not want and does not need those powers in merger reviews".

Under EU rules, MEPs are only consulted on changes to competition policy - decisions on this lie with member states. However, Della Vedova is set to be Parliament's rapporteur for its annual report on the way the Commission has applied the rules.

MEP Benedetto Della Vedova is concerned that new European Union merger rules will give officials the power to raid companies in much the same way as they investigate cartels.