Europe retreats on antitrust
Over the past few decades, one of the major obstacles to consolidation has been the EU's antitrust commission. While US regulators have been more and more lenient about major mergers and acquisitions, their European counterparts have been far stricter.
In most cases, that has meant that multinationals have had to be prepared to make serious divestments in order to get the commission's go-ahead. More rarely, but famously in the case of GE's proposed acquisition of Honeywell in 2002, it has stopped the deal cold, even one that was already accepted by US authorities. Doubtless in other cases, the threat of a veto has kept certain deals from being even considered.
But that independent streak looks likely to change. In a recent speech to a conference of antitrust lawyers in New York, Neelie Kroes, the new European antitrust commissioner declared a chage of approach from that of her predecessor, Mario Monti.
She stated that the governing concern in antirust cases will from now on be "whether the consumer is harmed", which has been the approach of her American counterparts. She said "I don't care if it [a merger] may hurt competitors, as long as it ultimately benefits consumers."
As a Wall Street Journal article ("EU's Kroes Puts Antitrust Stance In Line With U.S.", 9/26/05) notes, since taking over the job last November, Kroes has already reversed Monti's course. The commission has easily passed through big takeovers like Procter & Gamble/Gillette, Sony Music/BMG, and Johnson & Johnson/Guidant, deals which previously might have encountered resistance in Europe. The commission has also backed off from severely punishing Microsoft for its anticompetitive tactics.
One area where Kroes's commission does seem likely to keep active is in terms of energy utility mergers. It recently blocked a Portuguese utility merger, and it has the recent E.On deal on its plate.
But her statements are seen as an encouragement to even more large multinational acquisitions in other sectors. The problem with focusing on consumer affects, most of all pricing, is that most mergers and acquisitions now mean no price rises in the short term. Contrary to received economic theory, price-fixing is not the standard tactic of new oligopolies. In many cases, highly consolidated industries (home electronics or automobiles, for example) prices quite low by historic standards.
As we've argued, new oligopolies tend to have a more radical influence on costs. The usual short-term results are layoffs, outsourcing, and the squeezing of small suppliers, along with the lowered concern for local communities. Reduction in service is often yet another result. Even worse, consolidated industries have a far greater ability to shape public policy, distorting regulations and tax policy, while using influence to minimize competition,
The new EU antitrust direction gets rid of one of the few obstacles to the growth of global oligopolies. EU policy may have been inconsistent under the Monti regime, but Kroes is declaring that she'll not stand the way of most mergers and acquisitions. Let the games begin!.
