- The Washington Times - Tuesday, November 19, 2002

Europe's task force on mergers and acquisitions M&A; has been so summarily harsh in some judgments, it could appropriately be dubbed the S&M; team. The unwilling masochists, in some cases, have been U.S. companies attempting to merge with European counterparts.

The head of the task force, Mario Monti, has wielded so much unchecked antitrust authority in the past, he has acted as Europe's judge, jury and executioner of mergers. But Europe's arbiter of M&As has been scathingly rebuked by the court that reviews its decisions. This has prompted Mr. Monti to propose reforms of Europe's merger evaluations, a change U.S. business have long been lobbying for.

Three times in the past five months, and twice in one week, the European Court of First Instance overturned the task force's vetoes of high-profile corporate mergers and described, in humiliatingly vivid language, the team's patchy analysis. On Oct. 25, the court reversed the blocking of a $1.67 billion bid that Tetra Laval, a Swiss-Swedish packaging group, made for Sidel of France, citing "insufficient evidence and some errors of assessment." A few days earlier, the court reversed the commission's rejection of a merger between two French electrical manufacturers, Schneider and Legrand. And in June, the court struck down the 1999 veto of a takeover by Airtours (now MyTravel) of UK tour operator First Choice, saying, the task force's analysis was not based on "cogent evidence" and was "vitiated by a series of errors of assessment."

In a bid to bolster the task force's flagging prestige, Mr. Monti has recently proposed several reforms. He appointed a chief economist to review his staff's findings, installed a devil's-advocate panel to counter the team's arguments and added four extra weeks to negotiate settlements with companies. He said the changes could help enhance the task force's performance. But most importantly, Mr. Monti has also recommended the creation of a special competition court, which would fast-track reviews of blocked mergers. If mergers are allowed to proceed pending the decision of the new court, as is currently being discussed, this change would substantively improve business conditions in Europe.

Still, the creation of an independent antitrust court will take some time and has to be approved by the EU council of ministers. In the meantime, Europe should expand its current efforts to fast-track merger decisions at the court that currently reviews merger decisions.

And the court's ruling on the Tetra Laval case also augurs well for a potential reversal of the blocked $42 billion bid General Electric made for Honeywell. Mr. Monti vetoed the acquisition last year, even though the Justice Department had already approved it. In the Tetra ruling, the court made it more difficult for the task force to use "bundling" theory, which the task force cited in blocking General Electric's bid, to block M&As. Under this theory, two merging companies bundle their products together to gain a dominant position in another market. The court found that mergers couldn't be vetoed if companies could bundle their products, only if the task force could prove that they would have a financial incentive to do so.

The Court of First Instance has proved an able watchdog of Europe's M&A task force. Thanks to a year-old effort to fast-track the court's decisions, Mr. Monti and his team have come under swifter scrutiny that could well lead to welcome change. The reforms underfoot could make attempts to merge a less painful undertaking for U.S. companies.


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