|Vol.7, No.26, 28.6.01, p23
US leaders have been outspoken in their criticism of Mario Monti's handling of the GE/Honeywell merger talks.
Former EU anti-trust chief Karel van Miert tells Peter Chapman that they risk undermining the credibility of competition policy
FOR the EU's former competition tsar Karel van Miert, the recent high-profile attacks on Mario Monti from across the Atlantic must resemble déjà vu.
But the man who four years ago fought a bloody battle with Boeing over its plans to merge with McDonnell-Douglas has some tough advice for America: shut up and let Monti and his team do their job.
Van Miert admits he is perplexed by the US response to the apparent failure of the country's biggest industrial corporation, General Electric, to win European acceptance of its €51 billion merger with Honeywell.
It is clear that GE and its chief executive Jack Welch thought "they should get their way", he says. When it was obvious that Monti was not goiung to play ball, "...then immediately the White House is called in".
The US response amounted to a denial of the "very essence" of the competition policies developed by America which it "rightly" spread across the world. "One can really be astonished...that from time to time we get these really awkward reactions. In doing so they [the Americans] are undermining the credibility of competition policy," said van Miert.
Monti's handling of the GE-Honeywell saga has been pilloried for weeks by Wall Street commentators and senators such as Republican Phil Gramm (Texas) and Democrat Jay Rockefeller (West Virginia).
But anger reached its peak as President Bush was flitting between European capitals on his way to the EU-US summit in Göteborg, in the same week as Jack Welch was Brussels in a final effort to save the deal.
When word reached Bush that Welch's negotiations with Monti's merger task force were all but sunk, the President said he was "concerned". Commerce Secretary Donald Evans went further, describing Monti's decision to reject Welch's overtures as "very, very troubling".
Even trade chief Robert Zoellick, normally a man to choose his words carefully, accused Monti of relying on concepts which US economists had "given up on a long time ago". He was referring to the century-old theory on 'bundling' - which holds that the newly-merged company would have had a competitive edge by packaging together related products at a cheaper price than rivals could match.
Fortunately for the EU, van Miert says such comments will never wash with Monti - a man he describes as "even handed, pro-business" and "coherent". He added: "He does not bow to all kinds of pressure. Competition policy is safe in his hands."
In the Boeing case, the Commission and the company finally came to an agreement on concessions under the threat that the deal would be blocked - but not before a barrage of criticism and abuse, in person and via the press, from Bill Clinton downwards.
The deal was saved - and a trade war averted - only after van Miert got Boeing to promise to relinquish exclusive supply deals with airlines. Ironically, van Miert says all the rancour about Boeing actually led to increased cooperation across the Atlantic which was formalised in a formal accord between the two sides a year later.
He said: "At the time of Boeing there were press articles, comments and reactions, saying that the very fact that the Commission was pursuing a different policy from the US was going to damage cooperation. In the real world it was the other way around, because from that moment on, cooperation became that much more intensive and systematic." As seen with GE/Honeywell, there are subtly different approaches taken by merger and anti-trust watchdogs on opposite sides of the Atlantic.
Put simply, the Commission looks more at foreclosure of markets and the squeezing out of competition; the US examines the effects on prices in far greater detail. In spite of this the end result has, in most cases, been the same.
The two sides have exchanged reams of information on mergers and anti-trust cases such as WorldCom's abortive attempt to merge with telecoms rival Sprint and Bill Gates's stranglehold on the computer software market. "It has been very successful because since that time the only case where there have been differences of opinion is GE/Honeywell," said van Miert. "In many other cases, even if at the beginning there had been differences in the analysis and how to approach things, both sides learned to cooperate in a very intensive way."
The former Commissioner, now the dean of Nyenrode University in the Netherlands, believes the GE-Honeywell controversy need not stop the two sides talking overnight. "I am not convinced that after what happened with GE, cooperation will lessen or derail. It might well be that even more increased efforts are made to get things done in a more coherent way."
Rules or methodology are unlikely to be harmonised. But the World Trade Organisation could be used as a forum for ensuring countries sing from the same hymn-sheet - a move thus far greeted with little support in Washington. "We always felt that the best available place was the WTO. It is not ideal; perhaps one should look for a different forum, but for the time being it is the best one, and a global one," says van Miert.
But he fears President Bush and his new administration might still scupper the entente cordiale if their enthusiasm wanes - which it might if Brussels steps in to tamper with a forthcoming large US merger. "The big question in my mind is what the new administration is really going to do [about cooperation]."
If they don't want to cooperate, he says "...that might complicate the situation. But the GE case as such can't be the reason for derailing cooperation".
Although Monti has issued a draft report blocking the merger, the final deadline for a decision on the deal is 12 July.
US leaders have been outspoken in their criticism of Mario Monti's handling of the GE/Honeywell merger talks. Former EU anti-trust chief Karel van Miert says they risk undermining the credibility of competition policy.
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