Van Miert to hold fire on electricity monopolies

Date: 21/03/1996

By Tim Jones

THE time is not yet ripe to subject Europe's energy monopolies to a telecoms-style liberalisation onslaught, Competition Commissioner Karel Van Miert has concluded.

However, EU electricity and gas distributors who had feared the Belgian Commissioner and the monopoly-busting powers he can use under Article 90 of the Treaty of Rome, should allow themselves only a short sigh of relief.

In a series of Article 90 directives - which allow the Commission to push through measures without ministerial approval - Van Miert enforced the liberalisation of phone services, mobile telephony and alternative infrastructures.

But he concedes that, unlike in the case of telecommunications, the political will does not exist to allow the Commission to use its powers to push through energy liberalisation without the approval of ministers.

“When you use Article 90, there has to be an appropriate environment,” Van Miert said in an interview with European Voice this week. “You cannot do it out of the blue and I don't think the circumstances, as far as the energy sector is concerned, are such that the Commission could take such general measures.”

Van Miert made it clear, however, that he will not allow energy incumbents to foreclose the market to others. If he sees examples of this, severe measures could follow. “We cannot exclude that, on the basis of individual complaints, and in certain circumstances, the use of Article 90 could be vindicated,” he warned.

The Commission is becoming increasingly frustrated that efforts to open the EU's electricity supply market are going nowhere fast after six years of negotiations and good intentions.

While Germany and the UK are pressing for a liberalisation agreement which includes distributors and producers, France insists that distributors should be left outside its remit.

The Italian presidency is determined to break the deadlock and came up with a compromise plan to open the markets by a fixed amount (from 22&percent; to 40&percent;), but the French would not bend.

Not known for any reluctance to go into battle, Van Miert nevertheless seems content to allow market forces to break down the walls of the energy market.

“Several things are happening in the real world,” he said. “Some member states already have a liberalised energy policy or are committed to creating one, bigger companies are less inclined to accept the conditions put on them by monopolies and have started to move their operations, and there are more and more complaints.”

If he receives a well-documented complaint, Van Miert is prepared to act against ruses by the national monopolies to insure themselves against future liberalisation.

Expecting competition in the coming years, operators in Italy, France, Portugal and, most recently, Belgium have started encouraging their big customers to sign very long-term contracts.

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

Van Miert's unwillingness to fight with fire seems to reflect a growing pessimism about how far the market will be opened in the coming years.

“We are already taking measures to ensure the contract period is reasonable and does not go so far as to neutralise any effect of even limited liberalisation which might happen in the coming 25 years,” he added.

In just the same way, Van Miert is acting as guardian for Europe's slowly emerging multimedia market.

This has set him on a collision course with some in the industry who are trying to counteract the growing global dominance of the US media giants and, above all, Bill Gates' Microsoft.

Even inside the Commission, Van Miert's efforts are sometimes perceived as preventing the creation of European giants capable of taking on the US majors.

But the Commissioner rejects such criticisms, arguing: “It would not be wise to accept the reasoning that, in order to take on the Americans, we have to accept dominance or allow monopolies. We should encourage cross-border developments and, in principle, we favour that, as long as companies don't develop practices aimed at foreclosing markets. In our view, that is the best way to compete with the Americans.”

Van Miert is determined to use his powers to the full to protect national markets from domination by incumbents and intends to continue with the hard-line taken on media concentrations over the past two years.

“We do have a specific problem in Europe that we still have many separate markets roughly along the lines of languages and cultures,” said the Commissioner. “It's no coincidence that most of the cases where we had to say no were in the media.”

His approach to the evolving online services has been vigilant, but has so far not led to a negative decision.

The creation of AOL Bertelsmann Online Management GmbH - a joint venture between America Online, Europe's biggest publisher Bertelsmann and Deutsche Telekom - is still under investigation.

The same is true for Europe Online, which brings together publishing and communications companies, a collection of Luxembourg banks, and is dominated by publishers Burda and Pearson and US telecoms operator AT&T.

“On our own initiative, we started to look into several online services and at the extent to which there might be problems. In the online business, you have strong players coming together. We don't have any objection in principle, but we have to find out whether access to the software will be available to others as well,” said Van Miert.

“It was pre-emptive action to avoid the creation of deals that later on would have to be investigated.”

Both services were set up as a counterbalance to Microsoft. The US group already has a commanding position in the provision of software for personal computers, and is now providing one-button access into Microsoft Network (MSN).

Enthusiasts for the European services feel Van Miert should spend more time looking into allegations from CompuServe, among others, that access to other services via Windows '95 is excessively complex. “It would be absolutely wrong to pretend that we take a favourable view of Bill Gates,” said Van Miert. “If he is trying to foreclose the market and to make life impossible for competitors, then we will act swiftly and with determination.”

Many months into the investigations of Europe Online and AOL-Bertelsmann, Van Miert can now offer hope of an end in sight. “In the coming months, we should be able to give more concrete indications and point out some potential problems that should be addressed.”

At the opposite end of the spectrum is the pharmaceuticals market.

This truly global market is going through a bout of merger fever that has seen the formation of Glaxo-Wellcome and the merging of Pharmacia with Upjohn.

To cap it all, last week saw one of the world's biggest ever mergers when Swiss firms Ciba-Geigy and Sandoz linked up in a 21-billion-ecu deal. With the creation of this new Novartis drugs firm, Van Miert's attention is being increasingly drawn to the sector.

“It happens that the pharmaceutical market is a global one,” he said. “But with mergers going on - and we think there are probably still mergers ahead of us - then it might well be that even if the global market share is not dominant, then in some product markets there could be a problem,” he said.

Van Miert's remarks displayed the mixture of toughness and pragmatism for which he has been renowned since taking over the competition dossier in 1993. He is unafraid of a fight, but continues to display the political skills which propelled him from Commission stagiare to party leader and then into one of the Union's most sensitive jobs.

The energy monopolies should beware. Van Miert may speak softly, but he carries a big stick.