Doug Henwood wrote: I just saw the odious Texas Senator Phil Gramm on TV, in a q&a with Alan Greenspan, complaining about European financial regulation. Though he was complaining about the constraints on U.S. banks' European operations imposed by EU regulations, Gramm phrased it as the EU forcing its rigid anticompetitive standards on our boys & girls. ===== A major confrontation is brewing between the EU and US over the EU Commission's divestiture requirements before it sanctions the takeover of Honeywell by General Electric. Jack Welch has been as high profile as he can be in condemning over-zealous anti-trust action by Mario Monti, and there are the usual Chicago suspects lining up behind him to "show" the faulty economics being employed by the EU commission (fair enough -- except if Chicago economics is the better alternative). Phil Gramm is also involved in this issue. Oceans apart on competition policy: Brussels' objections to the GE-Honeywell deal have done little to ease transatlantic relations, says Deborah Hargreaves Financial Times, Jun 15, 2001 By DEBORAH HARGREAVES Jack Welch's timing could not have been better calculated to make an impact. Barely two hours after George W. Bush arrived in Gothenburg to meet European leaders, General Electric declared that its Dollars 42.3bn (Pounds 30bn) bid for Honeywell was in peril - and that the Europeans were squarely to blame. The language was hardly diplomatic. "You are never too old to get surprised," GE's 65-year-old chief executive declared. "The European regulators' demands (for divestitures) exceeded anything I or our European advisers imagined and differed sharply from antitrust counterparts in the US and Canada." For Mr Bush, the outburst could not have come at a worse time. Already struggling to smooth transatlantic conflicts over global warming and missile defence on his week-long European tour, the president now has another dispute on his hands: GE's biggest deal ever, cleared by US competition authorities with minimal concessions, is being stymied by Brussels. For its part, the European Commission appears surprised that a compromise could not be reached. Mario Monti, the EU's competition commissioner, will also be concerned that Brussels' carefully built relationship with US antitrust enforcers is at risk. GE's proposed takeover of Honeywell, an industrial conglomerate, is the first big deal to go before the Bush Justice Department and the European Commission. It comes at a time when the president's nominee to head the Justice Department's antitrust division has yet to be confirmed by the US Senate. "You always like to start out a relationship on a smoother basis," says Ernest Gellhorn, an antitrust expert at George Mason University who is close to several Bush appointees. "The slowness of the confirmation process is really tying up the US's hands." But even before the top officials are in place, US regulators have expressed concern that Brussels' analysis of the GE-Honeywell deal should differ so much from Washington's. Brussels is also concerned, given the implications for other high-profile investigations, such as the Microsoft case. The EU is debating how to proceed with its own inquiry while Microsoft awaits a US appeals court ruling on an order that it must be broken up for abusing its market power. In addition, the European Commission has begun an investigation into whether Intel has abused its market power. Timothy Muris, the new chairman of the US Federal Trade Commission - the Justice Department's sister antitrust agency - has criticised similar cases brought against Intel in the past. It was all meant to be so different. Only last year, Mr Monti and Joel Klein, then his opposite number at the US Department of Justice, launched the idea of a global competition forum. This was meant to be an international body where regulators would forge a united front on merger approval and antitrust issues. At its heart would be a solid relationship between the EU and the US. "This was meant to be a forum modelled on the bilateral relationship between the US and the EU," says Alec Burnside, a partner at Linklaters and Alliance, the law firm, in Brussels. "With that relationship starting to come unstuck, how much more difficult will it be for multilateral relations?" Some officials remain optimistic that the relationship between the US and EU competition authorities, carefully cultivated over the past decade, can survive the falling out over GE-Honeywell relatively unscathed. They point to the dispute five years ago over Boeing's takeover of McDonnell Douglas. After the Federal Trade Commission approved the acquisition, the European Commission threatened to block it, bringing howls of protest from Capitol Hill. Charges of protectionism flew back and forth across the Atlantic and only after intense lobbying by the Clinton administration did Europe back down. But in spite of straining bilateral ties to the point of breaking - indeed, Mr Clinton went over the European Commission's head and called upon European political leaders directly - the two sides soon patched things up. They went on to work very closely on other big cases, including WorldCom's attempted takeover of Sprint, a US telecommunications deal that was blocked in Brussels with the tacit support of Washington. But times have changed. Mr Bush's antitrust appointments - Charles James at Justice and Tim Muris at FTC - are not Mr Klein and Robert Pitofsky, Mr Clinton's activist trustbusters. While the Clinton administration allowed many high-profile mergers to go through unscathed, notably Exxon-Mobil and BellAtlantic-Ameritech, it also came under much criticism from the laisser faire "Chicago School" of antitrust enforcement for its perceived interventionist stance. The Chicago school, which includes Mr James and Mr Muris, was also primarily responsible for discrediting the theory of "bundling" in the US - the idea that a large company could tie its sales of products in an offer to customers. Bundling is central to the EU's analysis of the GE-Honeywell deal. Mr Welch is not impressed: bundling, he says "hasn't really been antitrust law in the US in 75 years and it hasn't really been antitrust law anywhere". The change in approach at the US Justice Department and FTC, from an activist regime in relative harmony with European ideas about market dominance to a potentially less aggressive outlook, will make it harder for the Bush administration to mend fences. Indeed, notes Mr Gellhorn, it may not even want to: "This is an administration that has shown a willingness to take stands that ruffle feathers in Europe." To be sure, both Mr Muris and Mr James have said they value the bilateral relationship that has developed across the Atlantic. "Given the growing number of major transactions subject to multi-jurisdictional review, continuing cross-consultation between the US and (EU) with a view towards harmonising enforcement standards is an important public priority and it will be a particular priority for me," Mr James wrote to Senator Patrick Leahy last month. But given the way the first big chance to co-operate has gone, it remains to be seen how successful the Bush administration can be in that mission. Full article at: http://globalarchive.ft.com/globalarchive/articles.html?print=true&id=010615 001378
