Mark Mario Monti's words. Now that media attention has cooled down a bit, it's possible to return calmly to the significance and repercussions of the Court of First Instance's (CFI) decisions, which over-rule the two European Commission decisions rejecting some merger plans (see our bulletins of 23 and 26 October). It's important to come back to this because the decisions go beyond legal questions linked to the application of competition rules and have a more general (and fundamental) importance on EU industrial policy and institutional competencies. They are also seen in the context of the attention they deserve, given the observations and explanations of Commissioner Mario Monti. Certain commentators see the affair a bit like a football match (who's won or who's lost?). Yet the Commissioner responsible for competition policy was quite clear during a press conference on 25 October and last week in Brussels in his answers to certain commentaries. Agence EUROPE has taken up the different points he raised (see our bulletin of 8 November p 9 on his speech) and I'll try be focusing on some of these here.
a) The decisions of the CFI confirm the idea that the Commission would be both the authority that formulates the accusations against the companies and has the final decision. In reality, it is the judicial authority that has the last word. The facts demonstrate that the CFI is certainly not bereft of powers and the Court of Justice is still able to intervene in the final instance during appeals:
b) Merger controls only represent one aspect of competition policy and we should not draw "hasty or general conclusions" on the basis of a single feature. Controls of agreements and abuse of dominant market positions, as well as the preliminary authorisation for State Aid are just as important. Mr Monti says that he was "proud" of the results obtained by the Commission in these fields;
c) The Commission had not been expecting negative CFI decisions whereby it would have to begin revising competition policy instruments. The radical re-haul of the agreements/monopolies regulations was put forward at the end of last year when the Parliament had already made its opinion known and the Council is expected to decide before the end of the month. Revision of the "merger" regulation will be presented next month. It will be "ambitious and courageous" and the Commission will be publishing guidelines at the same time, which will clarify its attitude to horizontal mergers and introduce procedural innovations.
Approval of the new "merger" regulation will be preceded by measures on two aspects that have been criticised by the CFI - economic analysis and respect for rights of the defence. Director General, Philip Low will assume direct responsibility for the "merger" task force and an independent "Economist in Chief" will be in charge of economic analyses. As for the "devil's advocate", the origin of which lies in the Catholic church, and whose role was that of protesting during the beatification or canonisation process, the merits of the new saint before his proclamation, in order to stimulate debate. In Directorate General "Competition", these advocates will be in charge of formulating all the possible objections to the decision that has been envisaged before its adoption.
d) Mario Monti does not believe that the autonomy, prestige or authority of the Commission should be questioned. He considers it inevitable that criticism is forthcoming as, "we are working for people who are not aware (the consumers) or abstract entities, such as the general interest", which don't have a voice to make themselves heard, whereas the interests that could be affected have, indeed, this very powerful voice". It would be very difficult not to be in for criticism, it would be enough to rule out nothing and not impose fines. But the Commission has another idea of its responsibilities. The political pressures are both excessive and too many in the opinion of Mr Monti and bear out the independence of the Commission;
e) Mario Monti does not believe that European companies really want the EU to adopt the US system (in which a judge already has the power of decision in the first instance) because they need quick decisions, with legal security resulting from it and are aware that statistically, the majority of judgements are positive (depending on the circumstances). To give up the European system for "short-lived judgements" would in his opinion be a crime". By improving it, as the Commission is currently doing, will be possibly create a system "close to perfection". The problem of deadlines is particularly arduous because it is necessary to keep the ability to make snap decisions and develop economic analysis. Mr Monti indicated in his speech last week how he intended to respond to this double challenge.
We are therefore aware that Mario Monti places CFI decisions in the overall context of competition policy and its consistent adaptation. We now just need to discuss what's essential, namely, the link between this policy and economic and social reality in Europe because competition policy is not simply the mass of applied standards in the abstract, but an instrument in the service of citizens and the economy.
Mergers in themselves are not illegal. Several commentators and perhaps even Commission civil servants (who at the time of the events were still students…) give the impression of not knowing how or why merger control regulation came into being. The Treaty does not ban them: it does not even forbid dominant positions, just their abuses. Neither does it explicitly lay down a preliminary merger approval system. The political and scientific communities have debated at great length the question of whether dominant positions (or their reinforcement) in themselves constitute abuse. After many years of debate and analysis, the answer was in the affirmative. A merger that gets rid of competition in an economic sector or market can indeed be abuse. These observations gave rise to European Commission regulation before mergers went ahead. The starting point, however, must never be forgotten, a merger in itself is legitimate. In order for the Commission to rule it out, it must prove that it constitutes an abuse of its dominant position. The proof has to incorporate two factors: a) the merger creates or strengthens a dominant position; b) this reinforcement will have definite negative effects on competition.
The situation is therefore quite different to agreements, which are banned in the Treaty. An agreement between companies that artificially limits competition is illegal in its very nature.
Also a question of industrial policy. The EU does not have nor does it aim to have an industrial policy structured into regulation and standards and would like even less, a production objectives policy. But it is carrying out industrial policy each time that it defines environmental, tax, social and legal regulation etc., and these regulations influence and sometimes determine decisions in the area of competition. A very recent example is demonstrated by the Commission having just proposed that if State Aid facilitates job creation (if certain conditions are met) it should automatically be accepted. As soon as its proposal is approved Aid meeting the necessary conditions will not even have to be transmitted to Brussels. In the future, the EU could make the application of these competition rules in the telecommunications sector more flexible (France has requested that the Commission comes up with proposals that go in this direction).
Rules that are thus applied, result from political decisions, which impact onto the field of law and its application. But if these decisions are erroneous, judges will reach their decisions based on principles or general guidelines. This would create the risk of a "government of judges", which is unhealthy and which would arise from a confusion of powers. It is therefore indispensable that in the case we're dealing with, namely, merger approval, the institutions outline political guidelines in order for economic analyses to be based upon them. It's all the more necessary because in the Schneider decision, the Court of First Instance did not restrict itself to controlling the legality of the Commission decision but also took into account the economic effects of the merger by examining the affect of the "competition limitation" even more so that the strengthening of the dominant position. Should controlling mergers facilitate that creation of European companies that are big enough to face down the huge US and Japanese corporations? Some are for this but this requires some forethought, as well as legal and economic considerations (the creation of "national champions" which are protected from competition on their own markets could be a loser in a single market, as shown by the case of Fiat, the Italian car manufacturer, which managed to engulf all other national competitors and prevent foreign manufacturers from setting up in Italy. It was a Pyrrhic victory because it was not up to competing with foreign imports and lost a large part of its national market.
We are able to see that competition decisions (of the Commission to begin with, then those of the legal authorities) can tend to be carried out by way of legal policies. Only clear guidelines form the European political authorities can prevent the danger of a "government of judges" (a term that in the field of competition also covers the Commission to a certain extent).
Karel Van Miert suspects. According to Karel Van Miert (Mr Monti's predecessor in competition policy), the CFI used a tone that was over-polemical in is criticism of the Commission ("it is apt to attack the Commission"…) and did not back up is arguments with solid or convincing economic evidence. In Mr Van Miert's opinion, we cannot rule out the possibility that the CFI "took a pot-shot at the Commission" with the aim of obtaining the anti-monopoly powers of the latter. Mr Van Miert has made some serious accusations for which he alone is responsible.
(F.R.)