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Thu, Jul 24, 2003 - Page 12 News List

EU is not `tough' on mergers, says new antitrust economist

BLOOMBERG

The European Commission's handling of mergers hasn't been "too tough," even after vetoing deals worth more than US$200 billion in four years, the commission's newly appointed chief competition economist said in an interview.

Berlin university professor Lars-Hendrik Roeller, who takes up the newly created post Sept. 1, also cast doubt on cost savings claimed by companies to justify mergers and said a greater voice should be given to consumers.

"You can't say that European competition authorities have been too tough," Roeller said in a televised interview in Berlin. "It's less a matter of changing course than of using economic arguments to underpin decisions in individual cases."

Competition Commissioner Mario Monti created the post as part of an antitrust revamp amid criticism that the EU's regulatory arm abused its powers in vetoing mergers including General Electric Co's US$47 billion bid for Honeywell International Inc, the first time the EU killed a US-approved takeover.

Roeller's appointment comes amid a pickup in merger activity worldwide, including aluminum producer Alcan Inc's hostile 3.4 billion-euro (US$3.9 billion) bid for Pechiney SA -- an attempt to revive a takeover that regulators scuttled in 2000.

The appointment of the 45-year-old US-trained professor is part of a response by the commission to charges that it bungled the market analysis in blocking takeovers including Schneider Electric SA's 7 billion-euro bid for rival French electrical equipment maker Legrand SA.

Three European vetoes -- of Schneider's bid for Legrand, Tetra Laval's 1.7 billion-euro purchase of packaging-equipment maker Sidel SA and of MyTravel Group Plc's ?850 million (US$1.4 billion) bid for First Choice Holidays Plc -- have since been overturned in court. General Electric's appeal is pending.

In voiding the Schneider ruling in October 2002, the European Court of First Instance said the commission's economic analysis was "vitiated by errors and omissions" in a "serious infringement" of the company's rights.

Roeller cast doubt on claims by companies about "synergies" associated with mergers, saying they were "often prey to a certain amount of wishful thinking."

Nevertheless, Roeller said the acceptance by the commission of the need to assess so-called "efficiencies" in mergers brings the EU merger-review model closer to the US.

"The job of the new chief economist is to make this concrete," said Roeller.

Roeller wants to see a greater focus on consumers when assessing mergers. That's in line with Monti's plans to give special access to consumer groups to antitrust reviews.

"We're not setting policy for companies, we're setting it for consumers," he said. "Mergers only make sense if the consumer benefits, and that only occurs if there are synergies."

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