Tensions set to rise over GE merger case

Date: 15/03/01

By Peter Chapman

THE new President's business-friendly reputation is fuelling speculation that tension will heighten between the US and the EU over competition policy.

George W. Bush and Charles James, the man he chose to lead his justice department's anti-trust division, are raising European eyebrows over their stance on Microsoft.

Asked for his assessment of the software giant's battle against a ruling that it must be split up, Bush said he was "on the side of innovation over litigation" - a popular refrain of Microsoft chairman Bill Gates.

Analysts are convinced that the Bush justice department may choose to settle the case. This will isolate the Commission's inquiries into claims that Microsoft designed its Windows 2000 system so that it would only work properly with its own Internet software.

EU competition commissioner Mario Monti worked hand-in-glove on the case with Joel Klein, James' predecessor in the US trust-busting job. Officials say it is unclear whether he and James will see eye-to-eye.

Last month's decision by Monti to investigate the impending mega-deal between GE and Honeywell won't help matters.

When GE chairman Jack Welch came storming into Brussels last month for an audience with Monti, the meeting ended in harsh words and a decision by the Commissioner to launch an in-depth probe into the €48 billion deal, citing concerns in the market for aviation equipment from engines to avionics.

If Monti and his men continue to drive a hard bargain in exchange for approving the deal, expect relations with Washington to sour and possibly set the tone for the next four years.

Longer term, analysts on Capitol Hill and Brussels will also be checking for cracks in other ongoing EU-US efforts to coordinate competition policy. These include a working committee set up last year to bring together senior officials to study a joint approach to trans-national mergers.

Article forms part of a survey on EU-US relations.