Van Miert puts squeeze on monopolies

Date: 31/10/1996

By Tim Jones and Simon Coss

THE whole idea of liberalisation is to make it easier for private companies to identify gaps in the services offered by existing firms - whether it be on price, quality or specialisation - and fill them.

So if those same incumbent firms try to stitch up a nascent market before it has even learned to walk, they should expect to meet fierce resistance from Competition Commissioner Karel van Miert.

Yet the reaction from the monopolies and their governments when they come up against the Directorate-General for competition (DGIV) has often been one of surprise.

It should no longer be so. After all, the list of victims is growing all the time.

Electricity liberalisation was only agreed in June this year and will not begin coming into force until January 1999, but already the national monopolies are taking steps to safeguard their positions. Companies in Italy, France, Portugal and, above all, Belgium have been enticing their traditional customers into exclusive contracts which will not expire for up to 30 years.

“Even if there is no common policy yet, companies think there is going to be one some day, so they are trying to delay the effects of such a policy far beyond the year 2000, as far as 2020-2025. Obviously, this flies in the face of what should be happening,” said Van Miert recently.

The Commissioner has even stepped into areas where market-opening agreements have not yet been clinched. When small local gas-distributing régies in France requested permission to invest in surrounding local communes, Gaz de France refused, even though it was not present in the region. Van Miert persuaded the French government to lift GdF's veto.

The Commission has so far refrained from using its powers under Article 90 of the Treaty of Rome, which allow it to take unilateral measures to enforce the treaty in the energy market.

Telecommunications monopolies have not been so lucky, with the Commission using the Article 90 crowbar several times to prise markets open.

Van Miert has, however, achieved far more through the use of his standard powers to vet mergers and concentrations. When Deutsche Telekom and France Télécom applied for clearance of their 'Atlas' joint venture, the Commissioner exacted a high price.

The companies needed the deal, and the 'Global One' link-up with US company Sprint, if they were to get into the growing market for 'closed-user group' business communications. Eventually, they and the German and French governments agreed to allow some telecoms services on alternative networks from July this year.

Spanish telecoms operator Telefonica is the latest to have its collar felt by the Commission as it seeks to form a cable-TV venture with French company Canal+. DGIV is worried that this powerful grouping will prevent new cable companies starting up in Spain and, indirectly, undermine the growth of competition in its telephony market.

Meanwhile, the debate continues over how the newly-liberalised utilities will be policed at the national level.

Under current rules, all member states will be obliged to set up regulatory authorities independent of the industry concerned. The exact scope of such authorities will, however, be left largely to national administrations.

The process is most advanced in the UK, where all of the main utilities have been liberalised and government-appointed regulators oversee their industries with the aim of encouraging competition and keeping prices down for consumers.

Many industrialists have complained that the UK regulators are too powerful, behave unpredictably and discourage investment. Earlier this year, the Belgian utility firm Tractabel announced it would not be investing in the UK electricity industry as the political and regulatory hazards were too high.

“Investing big amounts of money when you do not know what will happen is too risky for us,” said Tractabel's chief executive Philippe Bodson.

In member states keen to encourage liberalisation, like the UK, the regulator will generally aim to keep prices down and attract as many competitors to a given sector as realistically possible. However in countries with a tradition of protecting established state industries, the Commission admits there is little to stop regulators imposing so many conditions on potential competitors that all bar the biggest players will be ruled out - although the Commission would, of course, always have the right to investigate cases and call on member states to justify their actions.

An internal Commission report recently examined three possible ways of ensuring the 15 national telecoms regulators acted in concert. Possible approaches include setting up an independent European authority to oversee national regulators along the lines of US federal watchdogs; creating an office with more limited powers to intervene in specific cases; or basically leaving things as they are but beefing up DGIV's powers to coordinate relations between the regulators. DGIV is understood to favour the third option.

In practice, it looks as though common standards will, at least in part, come via the legal route, with companies who complain about regulators restricting their access to markets taking their cases to the Commission and European Court of Justice.