|Series Title||European Voice|
|Series Details||12/07/01, Volume 7, Number 28|
Mario Monti's decision to block the GE-Honeywell merger highlighted major differences in the EU and US approaches to competition control.
PICTURE the scene. It's the year 2010. The global economy is slowing down again, pressure is on companies to cut costs, trim back their workforces... and consolidate.
Mega Giant Corp., the biggest US widget maker, has decided now is the time to launch a friendly take-over bid for Littlegiant Inc, the world's largest manufacturer of gizmos.
Analysts express universal acclaim for the deal's commercial sense.
But European competition chief Buster Kartelski, Poland's first Commissioner, is sceptical about the way Mega Giant could bundle together packages of widgets and gizmos - to the detriment of competition.
He's at odds with US assistant attorney-general Max Profit, who thinks the merger promises compelling benefits to consumers.
If the deal were happening right now, in the aftermath of the GE-Honeywell fiasco, the early warning sirens would be signalling the trade world's equivalent of nuclear warfare. But this is a brave new world of cooperation in competition and merger control.
Instead of ripping each other to pieces, the deal goes to an independent arbitrator - the World Trade Organisation - for final adjudication.
Kartelski is overruled by an appeals panel which says 'no problem' and the deal goes through. Mega Giant's CEO Jack French comes over for an amiable cup of tea with the EU anti-trust buster to discuss undertakings the WTO has imposed.
Is this a glimpse of the near future? Fat chance, say competition lawyers, such as Frank Fine, an American partner with the Brussels practice of UK law firm DLA. “A global romper room where all anti-trust laws are the same? I don't think it's very realistic any time during my career.”
Such comments do not deter real-life Competition Commissioner Mario Monti from having a go. In the same week as he vetoed the all-American GE-Honeywell deal, he was in Geneva telling the United Nations Conference on Trade and Development (UNCTAD) that competition should be on the agenda for November's WTO ministerial meeting in Qatar. US officials met with Commission experts on the fringes of last week's UNCTAD event - and Washington sources say the White House is still weighing up Monti's arguments. But what can we expect if his publicity campaign pays off and competition makes it onto the Qatar agenda? Not a lot, says Philip Marsden, a Canadian barrister specialising in trade and competition issues with Linklaters and Alliance. “If there is agreement it would be very banal. It would be an agreement to continue talking - not an agreement that you could sue on.” So why would it be so difficult to thrash out a workable solution giving the WTO ultimate power to rule on anti-trust? For starters, says Marsden, take the EU and US. The world's two biggest trade blocs actually already operate the “most sophisticated system of competition cooperation on earth” - the 'positive comity agreement', which allows each jurisdiction to flag concerns about the local impact of competition cases to its counterparts across the Atlantic. That the sides totally disagreed on a case such as GE-Honeywell shows how tough it would be to improve bilateral cooperation - let alone set up something on a global level.
And then, says Marsden, you should look at what work has actually taken place at the various world bodies such as the Organisation for Economic Cooperation and Development (OECD) or UNCTAD - not to mention the WTO - where competition has been discussed for years but very little consensus has been reached. “Any self-respecting competition authorities would say stop price-fixing, but they can't agree on pretty much anything else. There is an OECD agreement saying we should prohibit hardcore cartels, but even there, there are different standards,” he says. “In the US you can end up in jail, in the EU you don't. The Canadians have much higher thresholds [for taking punitive action]. And that is something that practically everyone agrees on.”
That doesn't mean efforts to boost cooperation are a waste of time. On the contrary, Marsden believes they could help foster greater coherence in competition issues across the globe. But he says the choice of forum for the talks in the short term is an important one, and it would not be the WTO or the myriad of other institutions from the Paris-based OECD to UNCTAD. “There is a joke that UNCTAD stands for 'under no circumstances take a decision'.” On the other hand, he says the WTO suffers because it is a “serious forum - not a talking shop”. “It is like a new international order. Because of that I don't think it is good for global competition rules because there is not enough agreement on laws.”
The best idea, he says, would be to host future talks at the as-yet-unborn global competition forum manned exclusively by national competition experts and their advisors. “In terms of increasing cooperation all you need is a global competition forum. It could get competition officials in the same room and say, when a GE-Honeywell comes up 'what are we going to do with it?'”
First touted by former US anti-trust chief Joel Klein and now supported vocally by Monti, the aim of the forum is to bring together competition experts from across the world to swap ideas, information, and names and addresses. Most importantly it could foster mutual trust among experts who may have never met before they found themselves examining the same deal from desks separated by an ocean. “Right then, even without a WTO agreement, when a delicate case happens, you would trust them. Before you would not,” says Marsden. In the long run “and we are talking ages”, the forum might, just, be able to pass on the baton to the WTO.
But don't hold your breath. Marsden still fears it is a “pipe dream” that everyone would agree to a set of legally watertight WTO-level rules, allowing firms and governments to appeal foreign competition rulings. So, if the drive for cooperation is not the panacea, is there a solution that would guarantee firms and their lawyers a decent night's sleep when they plan a big deal? Not really, claims DLA's Frank Fine. He says firms should face up to the fact that there are differences in the way jurisdictions handle cases. It's left to them to weigh up the risks and decide whether to proceed. GE and its lawyers must have known its case was politically sensitive, in Europe at least.
They chose to carry on regardless, knowing the deal had little chance of going through unchallenged. “The real story here is not this multilateral cooperation nonsense,” says Fine. “The way to avoid outcomes like this is getting straight that the EU is sovereign, has power and will use it. American companies can't expect to ride rough hod over European law.”
|Subject Categories||Internal Markets|
|Countries / Regions||United States|