An unexpected star. A personal and rather (I admit) empirical survey has enabled me to make one observation: these last few weeks, the general media (I'm not referring to specialised press) has given over more space to Professor Mario Monti than to any other star in the news. Likewise in the number of photos, the European Commissioner comes on top, in all categories, including aces of sport and entertainment. In furthering the exercise to the reading of an appreciable number of articles that accompanies these texts and photos, one could also observe that almost all stances were laudatory; even American journalists who criticised the European Commission's decision prohibiting the General Electric-Honeywell merger made a point of expressing their respect and esteem for the Commissioner who lay behind it. Something never seen before, if you choose to believe a long-term chronicler of European affairs.
The institutional workings of the sector under Mr. Monti's responsibility no doubt plays a role in the media attention: EU decisions regarding competition are taken by the Commission (in the framework of the rules set out by the Council) and the role of Member States is purely advisory (opinion of an ad hoc committee). It is obvious that the Commission's services act in contact with national competition authorities, but the basics remain: it's the Commission which decides, under the control of the Court of Justice and Court of First Instance. The press, and to a certain extent, public opinion are sensitive to the immediate operational nature of the decisions; it's different for projects born of a Commission proposal and that then disappear for several years, for the often double reading in Parliament and deliberations in Council. Competition even escapes the mysterious rituals of the committee procedure, and decisions have a direct effect on the conduct of companies and thus on economic life in general.
An example of "controlled globalisation". It may be said: but the Commission takes these types of decision almost every day, and most go by unnoticed. True. Other elements therefore came into play in the GE-Honeywell case, such as: the financial and economic size of the two companies concerned; that fact that both are American; the fact that the operation had been authorised by the American anti-trust authorities and that it was the European "no" that foiled it; rumours, that have now become certainties, of pressures up to the level of President Bush. All this leads to two essential considerations that explain the press' agitation and that of part of public opinion:
- an EU decision foiled the largest operation ever undertaken by two American giants, in the name of European law. No isolated State, whatever its size, would have been able to have put a block on an American concentration due to its repercussions on the European market, no intergovernmental cooperation between the Fifteen could have secured what is exclusively the outcome of the "Community method" and the supranational powers of the Commission;
- we are faced with an example of "controlled globalisation". The world activity of GE and Honeywell is not being placed into question, but the two American giants must respect the rules of countries in which they intend to do business.
It would be ridiculous on my part to try to express an opinion in this section as to the substance of the decision that was the outcome of several months of investigation and in-depth studies that produced thousands of pages of analysis and evaluation and in which the companies concerned had the possibility of expressing themselves and negotiating "remedies" that could have rendered the operation licit. I shall, therefore, simply put forward some considerations of a general nature.
A. A protectionist goal? Some American senators insinuated that Professor Monti's intention was in fact protectionist: protect the European aeronautical industry from its competitors in the United States. But this more or less latent accusation in practice collapsed on its own, not so much due to Mario Monti's firm reaction - who ruled out any political influence in a case exclusively based on technical and economic analyses - but especially because in the United States the most qualified press and the most listened-to politicians considered it inconsistent, stressing the intellectual honesty of the European Commissioner and observing that different American firms had reacted strongly to the plan. It's true that one member of the American Government, the Secretary to the Treasury, Paul O'Neil, seems at one time to have lost control of his words and spoke out in an inadmissible fashion. He claimed that the Commission was taking on powers that did not belong to it, that it was an autocratic organization made up of unelected civil servants whose decisions were not subject to judicial control, to conclude that situations of this type had to cease and that they soon would; but Mr. Monti did not react, following the maxim by which "all that's excessive doesn't count".
B. A difference of doctrine? The objection maintained by the Americans (and widely echoed in the European press) is based on a claimed difference of doctrine between the EU and the United States. To approve a concentration, the Americans are said to be less concerned in ensuring that rival companies remain, and more with consumer interests; if by increasing its size a company becomes more efficient and offers better and cheaper products, so much the better, the deal will not be prohibited a priori and the assessment is made afterwards. The priority criteria for the European Commission, on the other hand, are said to be ensuring that the operation allows for a sufficient number of competitors to remain; in other words, it gives more importance to economic theory than the actual conduct of companies.
As far as I'm concerned, this presentation of the situation has been too easily taken on board in Europe without being contradicted or at least challenged. It's true that Art. 82 of the EU Treaty (former Art. 86) concerning monopolies does not in itself prohibit the existence of a dominant position; it is based on the prohibition of "abuses" of such a position. But, following a debate that extended over many years, the EU arrived at the conclusion that the fact of eliminating or absorbing a competitor can in itself constitute a illicit abuse of a dominant position. This is the principle that lies at the root of the specific regulation over mergers. It's not therefore a Commission opinion, and even less a personal idea of Professor Monti: it's the Council that thus decided through unanimity, with the backing of the European Parliament. In practice, it's not hard to see that a very large majority of mergers notified to the Commission are approved, and that in case of doubt, the Commission is always prepared to discuss "remedies" that allow to rule out the risk of abuse; but the principle has been established according to which the elimination of a competitor may already constitute an abuse.
As for consumer interests, it is curious to hear that Commissioner Monti doesn't care too much about that, as consumer defence is the leitmotiv of all his doctrine. There is no address before the EP, no conference, address in a colloquium where Monti does not reaffirm this, with examples at hand. In the absence of an advantage to the consumer, no merger is authorised. Economic theory and experience prove that, in fact, the elimination of competition always leads to practices harmful to the consumer; it's thus consumer defence that demands that competition remains.
C. Other elements not to be neglected. Several press reports state that:
- among the opponents of the GE/Honeywell merger heard by the Commission, were several American firms, and they were not the least vociferous in pointing to the negative aspects of the operation from the point of view of real and effective competition;
- a few days before the Commission's decision, the president of Honeywell declared expressis verbis that the measures requested by Professor Monti and which would have rendered the operation acceptable could be agreed upon. There was even the question of the possibility of Honeywell taking legal action against GE which, by rejecting the suggested remedies, was said to be responsible for the failure;
- some American journalists even claimed that Jacques Welch, the boss of GE, no longer wanted the operation and that he was delighted at the opportunity offered him not to go ahead.
The rebound of this affair led a certain number of commentators to draw some general conclusions. According to the Chicago Times, Professor Monti now represents the main obstacle multinational must take account of when defining their merger strategies. According to the Wall Street Journal, Professor Monti and his "merger task force have become the most prominent symbols of the rising importance of something called Europe". Some journalists have also tried to draw a portrait of the person, but, in seeking the picturesque, some commentators have sometimes been led to use a tone that is not that of the Commissioner, at times in texts ("the Gary Cooper of globalisation"), at times in headlines ("this is how Super Mario beat the Giant USA"), whereas Mr. Mario's style is better reflected by his phrase: "Europe is not flexing its muscles with the United States", and that he always underpins sound cooperation with the American anti-trust authorities. Personally, had I been asked to engage in such an exercise, having, like everyone, stressed his intellectual rigour and the way he sticks to his principles, I would have highlighted what we see least: his sense of humour and his way of "smiling with his eyes" (what's more, behind glasses, which at times makes it hard to see his ironic smile)
(F.R.)