Staff problems hinder merger task force

Date: 26/02/1998

By Tim Jones

THE first major overhaul of the EU's regulatory regime for large-scale company mergers takes effect this weekend with the body tasked with enforcing the rules seriously understaffed.

From Sunday (1 March), the 1989 Merger Regulation, which handed sole powers of inquiry into most big-money multinational concentrations to the European Commission's merger task force, will be extended.

The task force will now be the single regulatory authority for cross-border mergers involving firms in at least three member states, and for some joint ventures between big companies aimed at coordinating business activities in a particular market segment.

Yet, while the Directorate-General for competition (DGIV) is pleased that more company tie-ups will come under its scrutiny, it is having to fight within the Commission for extra qualified staff simply to deal with its existing workload.

Given that the task force works to deadlines - five months for a full-scale anti-trust investigation, for example - adding to the workload could make staffing problems intolerable. "It's the old story of bureaucracies the world over," said one Commission official. "People are going spare in other DGs while a department which is carrying out real work at the heart of the Commission's competence, like competition, is short of bodies."

The new rules are aimed at preventing 'forum shopping', whereby firms involved in take-overs open 'shell' companies in several member states so that they can choose to be investigated by cartel offices they consider to be less stringent.

Under the new regulations, a merger should be notified to the Commission if it stretches across at least three member states and if annual sales from the combined group exceed 2.5 billion ecu world-wide, or 100 million ecu in each of the three or more member states.

At the same time, 'full function' joint ventures - those that are not stand-alone businesses but act as a vehicle for the parent firms to coordinate operations in a specific market in direct competition with existing local rivals - will fall into the task force's net.

This type of activity is becoming increasingly common in the single European market. The biggest such ventures so far have been seen in the telecommunications and civil aviation markets, led by the Global One alliance between France Télécom, Deutsche Telekom and Sprint. But they have spread far and wide, even into more traditional manufacturing industries.

In his campaign for extra powers, Competition Commissioner Karel van Miert failed to win support for extending the general competence of the task force. More specifically, he wanted to lower the thresholds above which the Commission becomes the sole body responsible for investigating a merger.

It currently has exclusive powers to vet deals when the combined sales revenue of the companies world-wide is 5 billion ecu or more, and that of at least two of the firms involved in a deal is 250 million ecu within the EU. Van Miert wanted these thresholds lowered to 2 billion ecu for global sales and 100 million ecu inside the EU, but this was vetoed by Germany and the UK.

Although there was a strong argument for giving the task force greater regulatory powers within a single market, DGIV's overworked staff will be content that the bid for extra competence failed.