Several recent statements by Commissioner Mario Monti, particularly those laid out in Texts of the Week in our 15 June edition, require a few comments. What follows are factual comments that do not imply any value judgements.
1. No Commission decision is final. Reacting on 6 June to the Court of First Instance ruling on the Airtours case, Monti said that the ruling had "vividly shown what some people seem to forget, namely that the whole activity of the Commission as guardian of the treaties, including in the area of competition policy, is subject to effective judicial review by the Courts in Luxembourg and is conducted under their guidance". On other occasions, however, he recognised that the legal procedure was sometimes too lengthy to be effective so the accelerated procedure introduced by the Court of First Instance (that will be applied to the Schneider-Legrand and Tetra Laval-Sidel cases for which the rulings are expected to be issued in October) is to be welcomed. The President of the Court of First Instance, Bo Vesterdorf, was very emphatic: "Les juges, c'est nous" (We are the judges).
Will these statements suffice to defuse the debate over whether to create an independent anti-trust authority? If the political nature of the Commission is strengthened by the institutional reform, it is likely that pressure for an independent authority will increase.
2. A few differences from the Van Miert epoch. Monti said he took full responsibility for the decision to outlaw the Airtours/First Choice merger, while stressing that the decision had been taken "five days after I took office as Competition Commissioner" and had not been prepared under his responsibility. He implied that some of the assessment criteria could be amended and said that he would be unveiling guidelines before the end of the year for assessing market power in merger control (see points 3 and 5).
3. Regulation can apply to "collective dominance" under much tighter criteria. Monti said that the Luxembourg ruling did not question "that the Merger regulation can be applied to operations leading to collective dominance" even if none of the companies in question has a dominant position in its own right. The doctrine of oligopolies was not invented by the European Commission: it "is entirely consistent with that of other jurisdictions in Europe and abroad, including the United States". A change from 3 to 2 competitors on any one market can lead to a dominant position, as can a change from 5 to 4. Monti recognised, however, that the Commission will have to be stricter in its assessment of the risk of collective dominance as a criterion for banning a merger. The Airtours ruling set three criteria for collective dominance: a) each member of the oligopoly must know how the others behave and have the option of aligning with their behaviour; b) the members of the oligopoly have to be dissuaded in the long-term from diverging from the common approach (by sanctions?); and c) smaller competitors and potential competitors (those active on other markets, for example) and clients must not be able to challenge the common approach. If these three criteria are not met and the Commission does not provide proof, the existence of collective dominance is not established and the Commission cannot rule against a merger.
4. How competition policy meshes with other Community policies. This is the heart of the issue since most of the criticisms of Monti's action imply, directly or indirectly, that competition policy does not enough account of the demands of industry, public services, culture, and so on. If I understand him correctly, Mario Monti is openly and clearly in favour of other policies being taken into account and for competition policy decisions to bear them in mind, but this must not occur to the detriment of competition rules which have to be respected in the interest of all citizens, in the interest of consumers and social and technical progress. The level of the other policies must rise, rather than competition policy having to go down to their level. He has explicitly said that a) the EU has to continue towards reform "placing emphasis on the respect of public service and paying more attention to the social and fiscal aspect"; b) "should governments make the political choice of saying that Europe's role is not simply to create an environment favourable to business, but also to support it financially through large projects, I believe that that should be done using the Community budget so as not to perturb the smooth running of the single market". Such aid is part of the EU's industrial policy. The Commission is organising a conference on industrial policy on 10 July 2002 and I will return to the issue in my column (following on from my columns on 19 April and 7 May).
But Monti does not accept the criticism that it is only now that he has come to accept these ideas. He cites various decisions from the past that took account of cultural and environmental aspects - state aid for cinema, the single price for books and aid for renewable energy. To this I would add sport - the Commission (led astray, it is true, but a particularly unfortunate Court of Justice ruling) was virtually totally ignorant of the significance of sport and its principles, making changes to the rules bang in the middle of a competition, for example, and has reached a view that reconciles sporting demands with EU rules.
5. Criticisms and remedies. Industrial and legal circles have criticised, sometimes slammed, various recent Commission decisions to ban mergers. A preliminary comment: protesting heads of industry (and their lawyers) are defending specific interests and one has to be suspicious when they act as if they were defending the common interest or the country's interest. The most spectacular case in which Monti was personally involved was duty-free at airports. The financial gains for the beneficiaries of duty free franchises were such that they spent serious sums of money opposing the scrapping of duty free and even managed to win the support of states (at very high level, in some cases); Mario Monti stood his ground and airports and air travel did not collapse as predicted and Member States coffers are enriched each year with millions of euros that escaped from them in the past. Prudence is required when large sums of money are at stake.
This does not mean that no criticism is justified. There is room for improvement in any legal construct or procedure and Monti did not await specific reactions but immediately launched a process of reviewing a huge rage of rules and other texts. Is it necessary again point out that the changes approved thus far all move in the direction of simplifying and cutting red tape for companies? "De minimis" system, secondary restrictions, looser guidelines for authorising horizontal agreements (particularly R&D agreements), category by category exemptions for aid for training and SMEs, new framework for environment aid, cinema aid and the like…
6. Some changes are possible. But the biggest plans are clearly the new system for notifying and authorising combines (aiming to scrap the centralised system that has existed since the birth of the EEC) and revising the Merger regulation, both of which deepened on the Council. The first has been discussed by Member States since the end of 2000, the second was the subject of a Green Paper (a formal proposal will be unveiled before the end of the year). Member States concerns and reservations cover the division of power between the Commission and national competition authorities, the division of cases between the two and other institutional and procedural areas. Professional circles' criticisms focus on a lack of transparency in the criteria used by the Commission for assessing individual cases, lack of clarity in deciding on the relevant market (a key point since this can determine whether or a dominant position exists), the complicated nature of some procedures and an over-dogmatic view in general. The sometimes bitter criticisms of the Commission and its services has led some analysts to announce a breakdown in relations between economic circles and the Commission, but in reality companies appreciate the European "one-stop shop" that makes it possible to take rapid decisions and gets round the uncertainty of a string of often different national interpretations. But when a company is directly affected by a decision, it does not hold back in its protest and criticism. This is not the good path to take; the facts demonstrate that Monti is not a man who bows to pressure or orders.
Monti does not rule out the option of amending some of his criteria for assessing mergers if the relevant legal instruments are incorporated in texts. Greater account could be taken of the potential benefit of a merger for consumers (synergy sometimes leads to price cuts). The criterion of substantially cutting competition (used in the US) could replace part of the criterion of market share; Monti has said he is "open" to this. I can't cover all the theoretical or practical aspects here of the merger assessment criteria currently under discussion. I would refer those interested in this to the 4 June speech made by Commissioner Monti at the conference on reforming European merger rules at the British Chamber of Commerce of Brussels.
(F.R.)