November 7, 2002
European competition commissioner Mario Monti said Thursday he will maintain a tough approval test for mergers despite pressure from business to switch to the more flexible U.S. standard. Monti used the European "dominance" test, which centers on whether the joint company will have an excessive market share, last year to block General Electric Co.'s acquisition of Honeywell International Inc.
In the United States, companies can argue that a merger will help consumers by lowering prices or creating new products even if it may reduce competition. The EU so far has focused on the impact on competition. U.S. authorities approved the GE merger and many business leaders and legal experts were lobbying Monti to adopt the U.S. legal standard. But the commission blocked the deal.
Europe's test "properly interpreted, is capable of dealing with the full range of anti-competitive scenarios," Monti told a legal conference in Brussels. He said he will seek to ease tensions with Washington and European governments over the EU's antitrust policy by issuing clear guidelines on how the so-called "dominance" test is interpreted. Until now, the commission focused mainly on market share. If a deal created a "dominant" position, it was in trouble.
Monti said he will listen when merging suppliers argue that buyers still can negotiate favorable purchasing terms. He will carefully consider whether newcomers still can enter a market, even when that market is consolidating. And he will pay attention if merging companies say heightened efficiencies will enable them to offer lower prices.
Monti emphasized that he would look "to consumers' advantage" in assessing mergers. But he insisted that companies will have to make a strong case. He warned that mergers that lead to "monopoly or quasi-monopoly" still would be blocked.
The rival U.S. standard known as "substantial lessening of competition" already incorporates the idea that deals creating high market shares actually can help consumers in some cases. But Monti resisted a full shift from the European test to the American standard. Many EU countries already have adopted the "dominance" test. Attempting to change their legislation could have fueled legal uncertainty and was likely to prove politically unfeasible.
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