EU shake-up to merger powers

Commission angered executives from the US GE when it turned down take-over of Honeywell

Mario Monti, the European Competition Commissioner, has proposed an overhaul to existing competition laws.

Under consideration is whether the Commission should bring its standards for judging mergers in line with the United States.

Europe's policy on mergers diverges from the US, a fact highlighted this summer when it blocked the General Electric/Honeywell merger after it won clearance from US competition authorities.

In the US, the test is whether a merger would cause a "significant lessening of competition", whereas in Europe it looks at "market dominance".

"A review of the regulation text in this respect may be desirable, mainly to ensure that major jurisdictions will be working on the basis of the same test or to create a more explicit basis in the law for assessing efficiency considerations," Monti's paper says.

The proposals by the EU executive might also let companies "stop the clock", allowing more time for concessions to be made and considered.

"What we are doing is launching a debate on all aspects of merger control and all the procedures concerned in the merger regulations," Amelia Torres, a spokeswoman for the European Commission told the BBC's World Business Report.

Up against it

Predictably, though, the companies who will be subject to the new powers are not happy about it.

Mario Monti's Merger Plans

More time for companies to make their case

Widen net to include more mergers

"dawn raids" on merging businesses

The thing they are most worried about is not the timing, although GE and Honeywell executives made it clear that the rigid timetable had made the talks much more difficult.

Neither is the plan to give the Commission powers to take over any antitrust investigation when it affects three or more European states - rather than being limited to those affecting the whoel 15-member EU as at present.

What bothers some companies is Monti's belief that his investigators should have the right to carry out dawn raids on businesses planning to join forces.

Time's up

Accused of trying to introduce excessive new powers

"I don't think they'll be particularly pleased at the idea of the Commission being able to come and do a dawn raid, even at their home, and ask to see papers and computer documents, emails and so on, in relation to mergers that they may have been working on," says Adrian Magnus, Competition Lawyer, Berwin Leighton Paisner.

"They may well feel that that is unnecessary and excessive."

Softly softly

The Commission itself is furious about the talk of dawn raids and says it already has such powers and they have only been used twice in the last 11 years.

It says it simply wants such powers consolidated into any new act of law, but whether businesses will see it that way is quite another matter.

The British record company EMI, which counts Kylie Minogue amongst its artists, is unlikely to be amongst Monti fans.

Its last two attempted mergers have been blocked by the Commission and the worry in some quarters now is that the more extensive rules could discourage future merger activity.

"The difficulty would be if this suddenly becomes bureaucratic and legalistic with a lot of politicians involved for a very long period, that would be a very bad thing indeed for European business," explained Dr. Eamonn Butler, Adam Smith Institute.