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Mario Monti

European Commissioner for Competition Policy

Convergence in EU-US antitrust policy regarding mergers and acquisitions : an EU perspective

UCLA Law First Annual Institute on US an EU Antitrust Aspects of Mergers and Acquisitions

Los Angeles, 28 February 2004

It is a real privilege for me to have been asked to speak to you today on the occasion of this conference on the antitrust aspects of M&A. As I will not be at the Academy Award ceremony at the Kodak Theatre tomorrow night, I am proud to have the next-to-hottest speaking engagement in town this weekend !

I know that the success of this event is attributable in large part to the vision and dedication of Prof. Sam Thompson, whom we had the good fortune of having in our midst for several months last year. I hope that he found his time at the European Commission as rewarding as we found it instructive.

I would like to devote my short intervention today to saying a few words about what I believe is one of the most important (and perhaps least heralded) success stories in EU-US relations in recent years: our increasingly convergent approach to antitrust and to merger control policy. Convergence that is even more evident after the recent conclusion of our Merger Review process, about which I will also say a few words.

This phenomenon owes much to the quiet and business-like cooperation that we and our US counterpart agencies, the DoJ and FTC, have been engaging in for many years now. And I want to pay tribute to the excellent co-operation I have had over the years with Hew Pate, at the DoJ, and with Tim Murris and his fellow Commissioners, Mozelle Thompson among them, at the FTC.

At first glance, the EU and US approaches to merger control might appear quite divergent. Our laws are phrased in different language, and our enforcement regimes may contrast in many respects: the US agencies prosecute mergers in the federal courts, while we have an administrative system. Moreover, in the minds of some (numerous in the media world, dare I say) there is a perception that the EU and US have divergent philosophies when it comes to antitrust policy, and to merger control in particular. A single, but highly publicised case of divergence, has contributed to spread this perception.

But if you look at the record, you will find that nothing could be further from the truth. Put simply, the EU and US agree on what competition policy should be all about. We share a common fundamental vision of the role and limitations of public intervention. We both agree that the ultimate purpose of our respective intervention in the market-place should be to ensure that consumer welfare is not harmed.

The fact that we see eye to eye on the rationale for antitrust intervention is reflected in the detail of our respective approaches to merger control, which over the past decade have been closely convergent. A European competition lawyer who picks up the US federal antitrust agencies' Merger Guidelines, or who delves into one of the US federal courts' recent merger control judgements, will - I think - be struck by how much common ground is shared between the US and EU approaches to merger analysis.

What enables us to see eye to eye in this way? The answer - I believe - is a straightforward one: we are both grappling with the same evolving economic realities and are both exposed to the same evolution in economic thinking. Indeed, in a practical sense, one of the keys to this convergence has been the fact that the EU and US agencies have, in spite of the different legal instruments at our disposal, been using the same micro-economic analytical tools.

This focus on ensuring that competition enforcement in Europe is grounded in sound economics is one that I cannot over-emphasise. It is fair to say that the far-reaching policy shift which occurred in US antitrust enforcement during the 1980s - namely, the shift towards a focus on the economic welfare of consumers - has been mirrored in the policy priorities of the European Commission during the 1990's. During my term as Competition Commissioner, I have taken several steps aimed at further reinforcing this trend as well as the economic capabilities of DG Competition.

First, we have just amended our Merger Regulation to clarify, among other things, our substantive test. Now, it is clear that the Regulation covers all mergers that "significantly impede effective competition". I believe this renewed focus on the effects of the operation should be welcomed from an economic point of view and facilitates convergence with those jurisdictions, like the US, that have an SLC test. If there was ever a gap between both systems, it will disappear on 1st May 2004, the date of entry into force of our new Regulation.

Second, just before Christmas, the EU Commission, for the first time, adopted comprehensive guidelines setting out its approach to the analysis of the likely competitive impact of merger between competing firms: in substantive terms, there is little to distinguish the approach we set out to that of our US counterpart agencies. Let me stress, in particular, that for the first time the Commission has set out levels of concentration as preliminary indicators of anti-competitive effects of mergers and has explicitly indicated that, under certain restrictive conditions, efficiencies will be taken into account to counteract the anti-competitive effect of notified operations.

Finally, last summer I appointed the first Chief Competition Economist at the Commission, L-H Roeller, who, together with his team, is already contributing successfully to enhance the economic soundness of our policy and enforcement practice.

From the point of view of procedures, the Merger Review has focused in consolidating the clear benefits of the existing system: a fast-track administrative procedure which ensures that mergers of a certain size benefit from a "one-stop-shop" service, dispensing with the need to file in any of our (soon-to-be-25) Member States; that grants certainty as to the duration of the investigation and that, at the same time, provides transparency, by ensuring that all decisions are fully reasoned and published and that merging parties have an opportunity to respond to the Commission's concerns in advance of any adverse ruling.

Of course it is not a perfect system (none is), and we are not complacent about its potential shortcomings. An important aspect of the reform are the steps that we have taken to strengthen the internal workings of our procedure, in particular by putting in place measures designed to guarantee even further our due process as well as providing a real check on our administrative powers. Of course, all of our decisions remain subject, in addition, to extensive judicial review in the Community courts.

We are pleased to see that, in the area of procedures, the exchange of "best practices" across the Atlantic is also contributing to further convergence. In particular, we welcomed the newly adopted practice of our US counterparts to publish the motivation of their decisions to not challenge some particularly relevant operations.

All this process of convergence, both in substance and procedures, has been greatly facilitated by a close cooperative relationship between expert staff on the two sides of the Atlantic, both in the examination of individual cases, and in the discussion of policy more broadly. This cooperation has been particularly intensive in the area of merger control, where the EU Commission and its US counterparts are frequently called upon to examine, more or less contemporaneously, the likely competitive impact of the same merger. Our cooperation substantially reduces the risk of divergent or incoherent regulatory intervention in relation to such transactions. To give a very recent example, our staff cooperated closely with its DoJ counterparts in the examination of the merger between Air France and KLM Royal Dutch Airlines, a deal which would result in the creation of Europe's largest airline. Neither agency decided to challenge the transaction in view of the substantial remedies provided by the parties.

One of the main reasons for the success of EU/US cooperation in the field of competition policy is sometimes over-looked. And that is that the EU and US carry comparable global weight in the area of competition law enforcement, especially in the area of merger control. This is a reality because, when it comes to scrutiny of large cross-border mergers for example, Europe acts as one, and not as 15 (soon to be 25). So, like in the area of trade policy, Europe carries a global weight which corresponds to the importance of its economy. As a result, Europe matters and is listened to in matters of competition policy. It means that, as Henry Kissenger might put it, you know who to phone if you want to speak to Europe about competition policy (!). Moreover, as a leading player, the EU has a real influence on the shape of antitrust policy more globally, an influence which is exemplified by the leading role we have played in putting competition policy high on the global agenda, including in various multilateral fora such as the OECD, the WTO, and more recently in a new multilateral forum dedicated to competition policy: the ICN.

There is much to be gained from the EU and US focusing on finding common policy ground in relation to issues of common global importance. Antitrust policy, and merger control policy in particular, is a shining example of that - and I believe that the benefits are being felt by both of our economies in this ever more inter-dependent world. That is something I think we can both be proud of.

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