EN Official Journal of the European Union CE 78/462

(2004/C 78 E/0488)

WRITTEN QUESTION E-3087/03

by Bruno Gollnisch (NI) to the Commission

(20 October 2003)

Subject: Commission criteria on concentrations

In its assessment of the legality of business mergers and concentrations, the Commission seems opposed to the actual establishment of any European dominant position, and not just abuses of dominant position.

What is more worrying, the Commission has on several occasions in the past (ATR-De Havilland, Legrand-Schneider, …) and event recently (Alcan-Pechiney) given the impression that its decisions systematically sought to penalise mergers in which the dominant company on the world market was European, but were very lenient in the opposite situation.

Will the Commission outline the underlying principles of its policy on concentrations?

Is it clearly opposed to attempts by European companies to become world leaders in their field?

Is it opposed, as a matter of principle, to world-scale industrial poles being run by Europeans?

Will it state whether or not its position is based on a criterion of ‘net benefit’ to the EU or its industrial sectors?

Does its analysis take account of the employment situation in Europe?

Answer given by Mr Monti on behalf of the Commission

(9 December 2003)

In the Commission's view, concentrations (or mergers) are a normal part of business life and, in principle, have a beneficial effect on the economy. Mergers generate economies of scale and increase the competitiveness — and hence performance — of the companies concerned. By virtue of the impact they can have on the competitiveness of industry in the broad sense of the term and on economic growth, mergers are also generally conducive to long-term employment because sustained economic growth provides the best guarantee of high employment. Mergers are, therefore, an essential factor in wealth generation and job creation, contributing to the economic and social dimensions of sustainable development.

However, this virtuous circle presupposes that the productivity gains made by companies as a result of mergers are, at least in part, redistributed to their customers (final or intermediate consumers, the latter being other companies that are often small and medium-sized companies) in the form of lower prices or innovative or better-quality goods or services. In other words, it is most important to ensure that the gains stemming from mergers are not wholly (or largely) retained by the company resulting from the merger for its own benefit.

Only sufficient competitive pressure is capable of ensuring that the company resulting from a merger has the necessary incentives to allow its customers, and consumers in general, to benefit from the productivity and efficiency gains generated by the merger, with the result that these gains are spread throughout the economy.

That is why Council Regulation (EEC) No 4064/89 of 21 December 1989 on the control of concentrations between undertakings (1) (‘the Merger Regulation’) seeks to prevent mergers from resulting in the creation of dominant companies, i.e. companies with such economic strength that they can impose unreasonably high prices on customers, erode their purchasing power and, ultimately, deprive the economy of the efficiency and productivity gains associated with mergers.

In short, the fundamental principle underlying the Merger Regulation is that preserving competitive market structures is the best way of maintaining and improving the competitiveness of industry and of the European economy in general and of ensuring solid, lasting growth and, accordingly, a high level of employment in the European Union.

The state of the labour market in Europe is not, therefore, one of the Commission's immediate concerns when vetting a merger, but this aspect is a consideration in terms of competition policy broadly speaking. Under Article 18 of the Merger Regulation, workers' representatives from notifying companies can make their views known in the course of the merger vetting procedure. The Commission is also planning to include in the notification form a reminder to notifying companies that they must meet their obligations under the Community and national social provisions applicable to merger transactions.

Against that background, it should also be noted that other EU policies, in particular employment policy and enterprise policy, also make a major contribution to maintaining high employment and developing the competitiveness of the European economy in accordance with the objectives laid down in the EC Treaty. These various policies are therefore broadly and naturally complementary.

Accordingly, when exercising its powers to scrutinise mergers, the Commission must consider whether the transactions notified to it create or strengthen a dominant position as a result of which effective competition would be significantly impeded in the common market or in a substantial part of it. When carrying out this analysis, the Commission is required under Article 2(1)(b) of the Merger Regulation to take account of technical and economic progress, i.e. efficiency gains which are the direct result of the merger, provided that they are to the consumers' advantage and do not form an obstacle to competition. In practice, taking these efficiency gains into account may produce similar results to applying a ‘net benefit’ criterion, albeit on the understanding that the existence and scope of those efficiency gains are assessed by the Commission as part of a competition analysis and can therefore be taken into account only in so far as they ultimately have a beneficial effect on competition.

It is true that the Merger Regulation is designed to prohibit the creation or strengthening of dominant positions as a result of which effective competition would be significantly impeded in the common market, and this as opposed to Article 82 of the EC Treaty, which refers only to abuse by companies already in a dominant position. This reflects the different, complementary natures of these two legal instruments: whereas the former introduces a priori checks which are preventive in nature, the latter consists of ex-post checks which are punitive in nature. The attraction of a priori merger supervision lies in the fact that it is more efficient to maintain a situation of effective competitive situation on the markets concerned than to take steps subsequently against anti-competitive abuse by companies which have acquired or strengthened a dominant position as the result of a merger.

In thirteen years of implementing the Merger Regulation, the Commission has examined more than 2 300 merger transactions only 18 of which were prohibited. Many of the mergers authorised by the Commission have allowed powerful European groups to emerge which are themselves world leaders or able to challenge world leaders on their respective markets. Examples include the groups which resulted from the decisions concerning Carrefour/Promodes, TotalFina/Elf Volvo/Renault, Framatome/Siemens, Usinor/Arbed/Aceralia (merged as Arcelor) and Aérospatiale/DaimlerChrysler Aerospace/Centre for Advanced Spatial Analysis (CASA) (merged as the European Aeronautic, Defense and Space Company (EADS)). The Air Liquide/Brin's Oxygen Company (BOC) merger would be another example if that particular transaction had not been abandoned after the US authorities had indicated that it would very probably be banned. Prohibited mergers (or mergers abandoned in the course of in-depth investigations by the Commission) include those designed to establish both European (e.g. Volvo/Scania) and non-European (e.g. General Electric (GE)/Honeywell) groups.

It is thus clear that the Commission exercises its merger supervision powers in a perfectly neutral fashion as regards the identity and nationality of the companies involved or their shareholders and that this is not incompatible with the objectives of making European industry and the European economy in general more competitive, maintaining high employment and guaranteeing solid, lasting growth in the European Union.

(1) OJ L 395, 30.12.1989; corrected version: OJ L 257, 21.9.1990.